In Q4, revenue grew, but profitability declined sharply. What drove the drop?

In Q4, we laid out an agenda around premiumization, investment in backward integration, and our CapEx program, leading to gross margin expansion and an increase in P&A salience. This is reflected in our P&A growth of over 25 per cent, and our highest-ever EBITDA of ₹182 crores. Q4 was on track in terms of the guidance provided.

The profitability bit was a one-off in Q4. We have taken a provision for past taxes and some interest of about ₹45 crores. The growth impact of this was almost 35 per cent.

Industry players have said the West Asia conflict is impacting input costs. How is this situation affecting business as usual?

There is some short-term stress due to the West Asia conflict because most glass bottles use gas as a source of energy, while plastic caps and PET materials are linked to crude oil prices. So there are margin and cost-related stress over the short term. However, if the conflict is resolved over the next few months, we expect to maintain FY26 margin levels for the full financial year. Over the next nine months, we should be able to improve our gross margin, which will fairly offset the three-month impact due to the war.

Which segments contributed the most to volume growth during the quarter?

The growth was entirely driven by our P&A segment, which grew over 20 per cent. We could maintain our overall sales in the mass premium segment at a flat volume growth. We had a bit of a Q3 blip, largely due to the license reauction in Telangana. So in Q4, we saw growth returning, and so we are back to single-digit growth in the mass premium.

Karnataka recently implemented policy changes, while Tamil Nadu announced the closure of many state-run liquor outlets. Which states are performing well, and where are you seeing headwinds?

Most states have announced price increases, which is good. The only big state remaining is Telangana, where the price committee is already formed, and information has been requested by all marketers. We are hopeful that over the next few months, if the Telangana price increases come in, we’ll see a significant positive impact, both in terms of margins and free cash.

Second, policy changes will fundamentally bring in greater premiumization. In Karnataka, we see one such policy where the new excise structure will bring in lower excise duty on the P&A segment and the luxury segment. It’s a bit of a wait-and-see, but it is a positive step.

We do not have a significant presence in Karnataka, largely because 90 percent of the market is dominated by lower-priced segments. However, ICONiQ is performing well there, and if the new excise changes play out as expected, we should see accelerated growth for it in Karnataka.

We are currently not present in Tamil Nadu and plan to re-enter the market in the second half of this financial year. As a result, the recent developments do not have any immediate impact on us. Once we re-enter, this is 100% headroom. It’s all about what market shares we can get in Tamil Nadu.

With consumers becoming more cautious about discretionary spending amid rising prices, will the liquor industry face a disproportionate impact?

Over the last few years, the industry’s value growth has been higher than the volume growth, which is an indication of premiumization. Do we expect lower consumption? No. Do we expect premiumization to stop? Not at this point

The key reason is that if the West Asia war is resolved over the next few months, customer sentiment will be back on track. Early April numbers suggest that it was a month as usual. But if it persists for longer, there could be some cutbacks. But everybody’s hopeful that this issue will be resolved soon..

How many new countries have you expanded into recently, and which are your largest markets outside India?

We’ve gone from 23 countries in FY25 to 36 countries in FY26. Our go-to-market strategies are broadly divided into three kinds -- strong legacy markets like the GCC region, high headroom markets like Africa, where we have added 10-12 countries, and Western economies. We’re shipping to Canada, the US, Australia, and a few European countries. Slow but sure growth will come from this market.

We’re also evaluating setting up a hub in Europe, for instance, to feed the European market. With the India-EU and the India-UK FTA, many such opportunities will emerge. Broadly, we continue to grow in the legacy markets, see accelerated growth in the Africa market and some Latin American markets, and seed our P&A and luxury portfolio in Western economies.

Our international revenue has grown over 15% year on year for the last two financial years. We will continue to grow at this pace, if not higher, over the next two or three years.

How does the Kion Blenders acquisition strengthen ABD’s portfolio and growth strategy?

The Kion investment is in Andhra Pradesh, which is a large market for us. We expect our sales to nearly double there. Therefore, from a raw material security perspective, Kion allows us to produce our captive E&A, of which we will need close to 25-30 million litres in AP. On top of that, we are also setting up our own bottling unit. These developments will significantly impact the gross margins in the large and already profitable AP market.

Any more pressure on the margins going ahead?

Other than due to the war, we do not expect any other cost pressure. We have to be vigilant about forex because the rupee has depreciated both against the dollar and the pound. However, we have a robust hedging strategy.

What’s the growth outlook for FY27?

Volume growth will continue to be in double digits, and value growth will be in the mid-double digits. We expect the issue related to gross margins to resolve over the next few months. If it does, we’ll hold on to our gross and EBITDA margins. P&A will continue to be a significant growth driver.

ICONiQ, as a brand, reached a milestone of nearly 11 million cases sold last year. It is now at a run rate of 12-13 million cases on an MRR basis. We’ve got our approvals in CSD, which opens up a large market for ICONiQ. We’re already shipping it to six countries and plan to expand this footprint. ICONiQ will remain a big volume growth driver.

We are all expecting the India-UK FTA to come in Q2 of FY27. We are the largest importer of bulk scotch from the UK and expect that once this policy is fully implemented, it should have a 200 basis point positive impact on our margins. On the back of that, we have revised our FY28 margin guidance from 17 per cent to 18 per cent.