RADICO - Radico Khaitan Ltd. Share Price

In the earnings conference call held on May 7, 2025, Radico Khaitan's management provided an optimistic outlook driven by the strong performance of their whiskey portfolio and significant upcoming developments. The company is projecting its scotch imports for FY26 to exceed INR 250 crores, which, alongside anticipated reductions in import duties due to the UK Free Trade Agreement, is expected to enhance profitability.

Management highlighted that FY25 was the best year in the company's history, achieving a turnover of INR 4,851 crores, EBITDA of INR 668 crores, and PAT of INR 341 crores. They reported a remarkable 28% volume growth in Q4 FY25, which is the highest quarterly growth in the past three years. The Prestige & Above category specifically grew by 17%, indicating a robust demand for premium products.

Looking ahead, two new luxury brands are set to launch in the first quarter of FY26. Management expressed confidence that the luxury portfolio will surpass INR 500 crores this fiscal year, building from last year's INR 340 crores, a growth of 32%. In terms of market expansion, they have successfully captured a 23% market share in Andhra Pradesh, leveraging changes in the regulatory environment.

On the financial side, they aim for a 35%-40% reduction in current debt by FY26, with a target of becoming nearly debt-free by FY27. Gross margins improved to 43.5% in Q4 FY25, up from 41% a year earlier, reflecting the benefits of premiumization strategies in the IMFL segment.

Overall, the management is optimistic about strong growth trajectories across various segments, a focus on innovation, and effective cash flow management to sustain long-term value creation for shareholders.

Key Q&A from Radico Khaitan Q4 FY25 Earnings Call Transcript

Question 1: "So, wanted to understand this, it is a competitive market. For example, in Karnataka, where the state Government has cut taxes in the premium spirit... could some state Governments in compensation... increase taxes on their own?"

Answer: "The FTA with the UK is a progressive and favorable step. A customs duty reduction will result in a 6% to 8% price reduction. However, premium brands are unlikely to cut prices significantly, as it could dilute their image. So, we see no changes in our pricing strategy. Regarding state tax changes, it's state-dependent, but revenue collection is crucial, and excessive tax increases can adversely affect brands."

Question 2: "When is the earliest date when your raw material becomes cheaper in terms of scotch?"

Answer: "The timeline depends on when the government's notification comes out, which is still unclear. We don't have significant stock that would delay price adjustments once duties reduce."

Question 3: "In Andhra, if you could tell us in terms of the overall industry scale-up post the new reform, anything you want to highlight there? How do you see FY26 in Andhra?"

Answer: "The new excise policy in Andhra is stabilizing the market. We've gained market share, going from 10% in H1 to 23% in Q4. With ongoing reforms, we expect continued growth, benefiting from an increased preference for organized players."

Question 4: "So, just wanted to get a sense on your raw materials scenario, has the broken rice from the Government... started?"

Answer: "Yes, we've seen a dip in raw material prices, with broken rice now around INR 25,000 per ton, down from INR 27,500. This development has positively affected pricing for other materials like maize."

Question 5: "In light of the recent developments... do you believe that FY26 target of INR 500 crores for luxury and semi-luxury portfolio can be achieved?"

Answer: "In FY25, we achieved INR 340 crores in our luxury portfolio and grew 32%. With ongoing growth in brands like Royal Ranthambore, we're confident we'll surpass INR 500 crores."

Question 6: "So, we are up to about close INR 600 crores of net debt... is there a target that you'll half this number?"

Answer: "For FY26, we expect to reduce our debt by around 35% to 40%. We are targeting to be nearly debt-free by FY27."

Question 7: "In the current context, did you see bulk scotch has obviously become cheaper... on ENA and glass... do you see a stable environment for the next 6 to 12 months?"

Answer: "We don't foresee pressure or inflation on ENA in FY26. Glass prices have also seen corrections, indicating a stable environment moving forward."

Question 8: "So, as far as Andhra is concerned... any further opportunities where to improve the market share from here onwards?"

Answer: "With new luxury whiskeys and strengthened distribution, we believe there's a good chance our market share will improve further above the current 23%."

Question 9: "How do you see the potential in the luxury segment after the FTA with the UK?"

Answer: "We are optimistic, anticipating a significant margin uplift from importing malt scotch worth INR 250 crores in FY26. This will bolster our luxury presence without affecting our pricing model."

Question 10: "So, the previous participant's question on Telangana... how are we placed in Telangana in terms of sales and outstanding receivables?"

Answer: "We're paid on time for current supplies, and our past dues are the lowest in the industry at below INR 100 crores. We expect improved performance as outstanding payments are being settled."