Som Distilleries & Breweries Q4 FY26 earnings call

Som Distilleries reported a challenging FY26, with consolidated revenue declining 14.8% to INR1,233 crores. EBITDA stood at INR89.7 crores and PAT at INR10.2 crores. This downturn was primarily attributed to operational disruptions at the Bhopal facility and subdued demand in Karnataka and Odisha. Beer volumes saw a 20% decline to 187.19 lakh cases, while the IMFL business demonstrated resilience with a 32% volume growth to 15.03 lakh cases, resulting in a total volume decline of 17.7% to 202.22 lakh cases.

The company's performance was significantly impacted by the temporary license-related disruption at its Bhopal facility, which historically contributed roughly 50% of its total volume. Management is confident of a favorable resolution for the license within weeks, expecting to recover market share in Madhya Pradesh within 6 months of reopening. Additionally, the industry faced inflationary pressures from rising costs of glass bottles, aluminum cans, barley, and logistics, impacting overall margins, though the company is focused on cost optimization and premiumization.

A major strategic milestone was the continued development of the greenfield brewery project in Uttar Pradesh, with approximately INR250 crores invested in FY26. Trial runs are currently underway, and commercial production is expected to commence from June 2026. This facility, with a capacity of 1 crore cases per annum, is projected to contribute 15-20 lakh cases and INR120 crores in revenue for FY27, significantly strengthening the company's North India manufacturing footprint and is expected to ramp up to full capacity in 2-3 years.

Despite the challenging year and ongoing capital expenditure, the company maintained healthy operating cash flows and a comfortable balance sheet. Consolidated gross debt increased by INR43 crores to INR211 crores in FY26, resulting in a gross debt-to-equity ratio of 0.30x, up from 0.25x in the previous year. The company has INR400 crores of sanctioned credit lines, which have not yet been drawn due to a conservative approach pending the Bhopal plant's operational status.

Management provided an optimistic outlook for FY27, projecting consolidated revenue to recover to INR1,440-1,450 crores, aligning with FY25 levels. The EBITDA margin is expected to be around 10% for FY27. This guidance is predicated on the resolution of the Bhopal license issue and the successful commissioning and ramp-up of the Uttar Pradesh facility. The company anticipates improved performance in Karnataka due to excise duty rationalization and continued market share growth in regions like Tamil Nadu.

Following the Bhopal license disruption, management emphasized its commitment to better compliances and is in the process of appointing a dedicated compliance officer to prevent similar issues in the future. They acknowledged the complexity of navigating regulations across 30 states with numerous authorities but expressed confidence in resolving the current situation and strengthening internal controls. The credit rating downgrades were attributed solely to the temporary license suspension, with expectations for them to revert once operations normalize.