CRISIL Ratings: Spirits high for organised liquor makers, revenues seen up 13%

Profitability to recover and credit profiles to remain strong supported by strong balance sheets

Strong demand and premiumisation will lead to India's organised liquor industry revenues growing 12-13% this fiscal to ~Rs 4.45 lakh crore, after a 15-16% growth last fiscal.

Blended operating profitability of distillers and brewers is expected to increase 100-150 bps with softening of input costs. Credit profiles will remain strong with leaner balance sheets on back of significant deleveraging in last three fiscals.

A study of 33 liquor companies, accounting for ~15% of the organised liquor segment revenues, indicates as much.

The liquor industry can be broadly segmented into distillers and brewers. Distillers produce Indian-made foreign liquor (IMFL), accounting for ~65-70% of the industry's revenues while brewers produce beer, that accounts for ~25-30% of the industry revenues.

Says Rahul Guha, Director, CRISIL Ratings, "The growth will be driven by a rebound in tourism and hotel industries, rising disposable incomes and premiumisation trend. The premium segment which is over Rs.1000 per 750 ml bottle, is expected to grow at over 20%, albeit on a lower base. On the other hand, the price sensitive mass consumer segment comprising of liquor priced below Rs.700 per 750 ml bottle and contributing to over 3/4th of the liquor industry revenues will see volume growth of 5-7% as prices in this segment have remained largely unchanged."

Says Jayashree Nandakumar, Director, CRISIL Ratings, "With the favourable input costs coupled with a strong revenue growth, brewers will see profitability expand ~250 basis points (bps), while distillers will clock 70-80 bps improvement this fiscal. Overall, the industry will toast a blended 100-150 bps expansion in operating profitability this fiscal."

Source : Equity Bulls

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CRISIL INE007A01025 Spirits LiquorMakers