The Indian alcohol beverages industry is poised for a significant boost in profitability in the fiscal year 2025, as forecasted by ICRA, a leading credit rating agency.
According to ICRA’s latest analysis, the industry is expected to witness a notable expansion in both revenue and operating profit margin (OPM) in the upcoming fiscal year, driven by favourable demand dynamics and a moderation in input prices, particularly packaging materials like glass bottles.
The projections indicate a robust growth trajectory for the industry, with revenues anticipated to surge by 8-10% in FY2025. This growth is further bolstered by a surge in demand for premium products, particularly in the Indian-made foreign liquor (IMFL) segment, which is expected to see revenue growth ranging from 11-13%. Similarly, beer companies are expected to register revenue growth of 9-11%, primarily fueled by an uptick in volume sales.
Ms Kinjal Shah, Vice President and Co-Group Head – Corporate Ratings at ICRA expressed optimism regarding the industry’s outlook, stating, “In addition to healthy demand, the industry is expected to benefit from moderation in input costs, particularly packaging materials such as glass bottles, which account for approximately 60-65% of an alcobev manufacturer’s costs, notwithstanding unfavourable trends in grain prices, particularly non-basmati rice.”
The projections are supported by ICRA’s analysis of market trends and input cost dynamics. Despite challenges posed by rising grain prices, the industry is expected to navigate through with a focus on cost optimization and strategic pricing decisions.
The anticipated margin improvement is expected to be driven by various factors, including moderation in packaging material costs and approved price hikes by state governments. This, coupled with stable barley prices, a key raw material for beer production, is likely to contribute to the industry’s profitability.
ICRA also expects working capital requirements for companies in the sector to ease in the coming fiscal years, primarily due to the correction in packaging costs. Consequently, funding requirements may see a reduction, further enhancing the financial health of industry players.
Overall, ICRA predicts a positive outlook for the Indian alcohol beverages industry in FY2025, with strong credit metrics expected to be sustained by healthy accruals and limited debt addition. This optimism underscores the industry’s resilience and adaptability in navigating through evolving market dynamics.
The anticipated growth and margin improvement in the sector is poised to drive investor confidence and contribute to the continued expansion of the Indian alcohol beverages market.
Photo courtesy: niir.org
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