Cheers to Growth: Indian Alcohol Beverages Industry Outlook for FY2025

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Cheers to Growth: Indian Alcohol Beverages Industry Outlook for FY2025

Team FS

20/Mar/2024

Key Points:

Promising revenue growth projections of 8-10% for domestic alcohol companies in FY2025.
Indian-made foreign liquor (IMFL) expected to lead with 11-13% revenue expansion, while beer companies anticipate a 9-11% increase.
Factors driving growth include moderation in packaging costs, favorable climate forecasts, and stable raw material prices.

The Indian alcohol beverages industry is set for a robust performance in the fiscal year 2025, according to projections by ICRA, a leading credit rating agency. Anticipating a revenue growth of 8-10% for domestic alcohol companies, with Indian-made foreign liquor (IMFL) companies leading the charge with an expected 11-13% expansion, the industry is poised for significant advancement. Beer companies are also forecasted to experience a revenue increase of 9-11%, largely attributed to a rise in volumes.

Driving Factors for Growth:

Mr. Kinjal Shah, Vice President and Co-Group Head – Corporate Ratings at ICRA, highlights the potential for margin improvement within the industry. This improvement is driven by a moderation in packaging material costs and price adjustments by state governments. Despite challenges such as fluctuating grain prices, the industry stands to benefit from a favorable climate forecast for beer consumption in the first quarter of FY2025.

Stable Raw Material Prices:

ICRA maintains a stable outlook for barley prices, a key raw material for beer production, despite potential challenges such as increased minimum support prices and higher procurement rates. However, factors like grain diversion towards ethanol could impact prices of extra-neutral alcohol (ENA). On the positive side, the agency observes a marginal softening in aluminum and soda ash prices, offering some relief in input costs.

Moderation in Working Capital Requirements:

Furthermore, ICRA foresees a moderation in working capital requirements for industry players, supported by lower input prices and reduced funding needs. This positive trend is expected to maintain strong credit metrics for ICRA's sample set, bolstered by healthy accruals and limited debt addition amidst minimal capital expenditure plans.

Conclusion:

The outlook for the Indian alcohol beverages industry in FY2025 appears promising, with growth expected across various segments. Factors such as moderation in packaging costs, stable raw material prices, and a favorable climate forecast for beer consumption contribute to the optimistic projections. Despite challenges like fluctuating grain prices, the industry is poised to leverage opportunities for revenue expansion and margin improvement. With careful management of input costs and working capital requirements, industry players can navigate the landscape effectively, ensuring sustained growth and resilience in the years to come.

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Cheers to Growth: Indian Alcohol Beverages Industry Outlook for FY2025

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