The Indian alcoholic beverages industry is set for margin improvement and higher sales in the fiscal year 2025, as reported by ICRA, a credit rating agency.
ICRA anticipates a revenue increase of 8-10% for the sampled domestic alcohol beverages (alcobev) companies in FY2025. IMFL companies are expected to undergo revenue expansion ranging from 11-13%, driven by the increasing demand for premium offerings and an estimated volume growth of about 3-5%.
Beer companies are anticipated to witness a year-on-year revenue growth of 9-11%, chiefly attributed to a 4-6% increase in volumes.
“In addition to the healthy demand, the industry is expected to benefit from the moderation in input costs, especially packing material (such as glass bottles), which accounts for ~60-65% of an alcobev manufacturer’s cost, even though grain prices, particularly non-basmati rice, are not depicting a favourable trend,” said Kinjal Shah, Vice President and Co-Group Head – Corporate Ratings, ICRA.
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ICRA anticipates a favorable season ahead for beer in Q1 FY2025, expecting warmer weather compared to the previous fiscal year, which was marked by unexpected rainfall.
“The OPM for ICRA’s sample set companies is expected to increase by ~50-100 bps in FY2025, owing to moderation in packaging material costs, coupled with price hikes approved by the state governments, partly offset by the increase in grain prices,” Shah added.
Despite potential challenges such as the rise in minimum support price (MSP) and increased procurement rates for recent crop arrivals, ICRA forecasts a steady outlook for barley prices, a crucial raw material for beer production. Nevertheless, factors such as the diversion of grains towards ethanol production could maintain elevated prices for extra neutral alcohol (ENA).
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In terms of packaging materials, ICRA observes that while there were spikes in aluminium and soda ash prices in previous periods due to increased demand and coal price hikes, there has been a slight decline in aluminium prices and a correction of about 20% in soda ash prices on a year-on-year basis in the first nine months of FY2024.
Additionally, ICRA predicts a decrease in working capital needs for the companies sampled in FY2024 and FY2025, mainly due to lower input costs and diminished funding requirements. This optimistic trend is likely to uphold robust credit metrics for ICRA’s sample companies, fueled by sound earnings and minimal debt accumulation in the absence of substantial capital expenditure initiatives.
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