Despite the divestiture of several brands by one of the companies in the sample set, ICRA expects its sample set to show healthy growth of 18-20% in revenues in FY2023 and 5-10% in FY2024. 

While the impact on the Indian made foreign liquor (IMFL) players was minor, beer players suffered volume losses because their peak summer season coincided with the first and second waves of Covid.

Following the end of the pandemic, the Indian alcohol beverage (alcobev) industry seems to be in good spirits, with substantial revenue growth expected in FY2023. Despite the divestiture of several brands by one of the companies in the sample set, ICRA expects its sample set to show healthy growth of 18-20% in revenues in FY2023 and 5-10% in FY2024. 

MythriMacherla, Assistant Vice President & Sector Head – Corporate Ratings, ICRA Limited said: “The alcobev industry was impacted in FY2021 and FY2022 owing to the pandemic-induced disruptions and the discretionary nature of products. While the impact on the Indian made foreign liquor (IMFL) players was minor, beer players suffered volume losses because their peak summer season coincided with the first and second waves of Covid. With a revival in demand and a growing trend of premiumisation, ICRA’s sample set of alcobev companies witnessed a 40% YoY growth in revenues in H1 FY2023.

An early onset of summer in many parts of the country, which was hotter than usual, augured well, particularly for beer sales. Consequently, the growth of beer players is predicted to be higher than that of IMFL players in FY2023.”

However, the operating profit margin (OPM) for the sample set is  expected to moderate by 100-150 basis points (bps) in FY2023 due to substantially higher input prices in recent quarters combined with limited pricing power. That said, the OPM will continue to remain healthy at 13–14%. In FY2024, the OPM for the sample set is expected to improve to 14-15% largely on the back of operating leverage benefits. 

Sheetal Sharad, Vice President & Sector Head – Corporate Ratings, ICRA Limited adds: “Extra neutral alcohol (ENA) prices began to rise since Q3 FY2022 (an increase of 11% since March 2022), after being suppressed in FY2021 due to the pandemic, and are expected to remain high in the near term. ENA and glass typically account for more than 65% of raw material costs for IMFL operators, who are requesting price increases from state governments to mitigate the impact. On the other hand, the prices for barley, a major ingredient in beer, have risen substantially by ~50% since February 2022, a result of the Russia-Ukraine conflict, and are expected to remain elevated in the near term. Amidst such a scenario, the ability of industry players to get price increases from state governments in a timely manner remains critical from a profitability perspective.”