Assoc.Alcohols

Associated Alcohols & Breweries Limited reported a net revenue of Rs. 276 crores in Q1 FY26, marking a 6% year-on-year increase. EBITDA grew significantly by 32% year-on-year to Rs. 37 crores, with the EBITDA margin standing at 14%. Profit After Tax (PAT) was Rs. 24 crores, achieving a 9% PAT margin for the quarter, reflecting a solid start to the fiscal year.

The company achieved a gross margin of 40% in Q1 FY26, a healthy improvement attributed to stabilized prices of key raw materials like rice and maize, which remained high last year. Additionally, packaging costs, particularly for glass, have decreased. Management anticipates key raw material prices to hold steady, contributing to sustained gross margins, though Q-on-Q gross margins saw a 3% reduction from Q4 FY25's 43%.

AABL continues its focus on premiumization with recent launches such as Hillfort Blended Malt Whiskey and Nicobar Gin, which collectively sold 2,000-2,500 cases in Q1 FY26, targeting 15,000-20,000 cases for FY26. Central Province Vodka has shown a promising start in Madhya Pradesh with a 5-6% market share in its first month. The company is also preparing to launch a new RTD brand, Culture, in Madhya Pradesh within a month, and plans to enter new premium segments like brandy (by Diwali) and tequila/agave spirit (in 2-3 months).

The company is strategically expanding its presence into key IMFL markets, including Maharashtra and Uttar Pradesh. While Maharashtra saw an initial setback due to new MML policy changes, AABL is now actively onboarding distributors and plans to cover Mumbai, Pune, and Nagpur soon. Goa distribution is also targeted to start in the first week of next month, with the tie-up plant already operational, positioning the company to tap into significant market demand.

A new malt plant is nearing full operationalization, expected to be running within a month. This facility is a crucial step for backward integration, aiming to improve quality control, manage costs, and support the production of premium whiskeys. The company also noted improved operating expenses due to efficiencies and full utilization of its turbine, leading to reduced power costs, which are expected to be sustainable.

The company's topline growth in Q1 FY26 was impacted by a reduction in external ENA sales, with volumes dropping from 5 million liters in Q1 FY25 to 4 million liters in Q1 FY26. This ENA is now being increasingly consumed internally for the company's own products, reflecting a strategic shift towards strengthening its proprietary brand portfolio rather than selling ENA externally. The company expects to achieve full ethanol allocation of 9 million liters per quarter going forward^⏳.

AABL employs a 'bottoms-up' approach to brand promotion, focusing on direct engagement with consumers at fixed shops and bars, particularly in the lower-end market segment. This includes CSM schemes for salesmen and bar promotional/education activities, avoiding large-scale advertising. While current marketing spend is 1% of proprietary sales, it is projected to increase to approximately 5% in initial years as the company expands into new, competitive states like Maharashtra, UP, Goa, and potentially Orissa.

The contract terms with Inbrew have shifted from an IMFL license to contract manufacturing. This change will have a slight impact on AABL's reported topline as revenue will now be booked by Inbrew. However, AABL will gain job-work manufacturing revenue and increased focus on its own premium brand portfolio, with ongoing discussions for other partnerships with Inbrew to compensate for the revenue shift.