Is India's Alcoholic Beverage Industry Ready for 10–12% Revenue Growth in FY26?
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Synopsis
India's alcoholic beverage market is on the brink of significant growth, with projections indicating a 10-12% revenue increase for FY26. Factors such as unwavering demand and premiumisation trends are driving this growth, making it an exciting time for industry stakeholders. Discover the trends shaping this dynamic sector in our latest report.
Key Takeaways
- Projected revenue growth: 10–12% YoY in FY26.
- Beer vs Spirits: Beer segment to lead with 4-6% growth.
- Capital expenditures: Expected to rise to 4-5% of operating income.
- Operating profit margins: Stable at 13-14%.
- Tax impacts: Increased tax on packaging and logistics.
New Delhi, Oct 1 (NationPress) The alcoholic beverage sector in India is projected to witness a 10–12 percent year-on-year (YoY) revenue expansion in FY26, fueled by consistent demand, trends of premiumisation, and price hikes implemented by various state governments, according to a recent report.
Volume growth for the sector is anticipated to be between 1 to 2 percent in FY26, as highlighted by the ratings agency ICRA.
Notably, the beer segment is expected to exceed the spirits category, with volume growth anticipated at 4-6 percent during the same timeframe, maintaining the positive trend from the previous year due to sustained demand, the report indicates.
Conversely, the spirits sector, which includes Indian-made foreign liquor and country spirits, is likely to see a decline attributed to elevated taxation and increased selling prices.
ICRA has forecasted that the operating profit margins for its sample of companies will stabilize at 13-14 percent in FY26, aided by relatively stable input costs, following a 100 basis point increase to 13.9 percent in FY25.
In FY25, price adjustments sanctioned by various state governments helped alleviate the impact of rising non-basmati rice prices, a crucial input in spirits production.
Capital expenditures, currently at 3–4 percent of operating income in FY25, are expected to rise to 4–5 percent in FY26 and FY27 as companies work to expand their capacities, the report noted.
Despite the anticipated growth in capital expenditures, leverage and debt coverage metrics are expected to remain robust, with a total debt/OPBDITA ratio of 0.5-0.7 times and an interest coverage ratio of 19-21 times for FY26, supported by strong cash accruals, the report observed.
Though alcohol remains exempt from the GST framework, modifications under GST 2.0 have impacted associated inputs. Packaging materials such as bottles, caps, labels, and cartons are now subject to an 18 percent tax, a rise from the previous 12 to 15 percent.
Likewise, transportation and logistics services have also been included in the 18 percent tax bracket.
Point of View
I firmly believe in the resilience and growth potential of India's alcoholic beverage industry. The anticipated revenue growth reflects not only a recovery but also a shift towards premium products. It's an important sector that requires attention and responsible consumption.
NationPress
01/10/2025
Frequently Asked Questions
What is the projected revenue growth for India's alcoholic beverage industry in FY26?
The industry is expected to achieve a revenue growth of 10–12 percent year-on-year in FY26.
Which segment is anticipated to grow more, beer or spirits?
The beer segment is projected to outperform spirits, with volumes forecasted to grow by 4-6 percent.
What factors are influencing revenue growth in this sector?
Key factors include steady demand, premiumisation trends, and price increases by state governments.
How are capital expenditures expected to change in FY26?
Capital expenditures are projected to increase from 3-4 percent of operating income in FY25 to 4-5 percent in FY26.
What tax changes have affected the industry recently?
Packaging materials and transportation services are now taxed at 18 percent under the revised GST framework.
