Radico Khaitan Ltd (RADICO) Q2FY27 Concall Transcript - Sep-2026 Qtr
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Moderator: Ladies and gentlemen, you have been connected to Radico Khaitan Limited Q2 FY '27 earnings conference call. Please stay connected, the conference will begin shortly.
Moderator: Ladies and gentlemen, good day, and welcome to Radico Khaitan Limited Q2 FY '27 earnings conference call hosted by ICICI Securities Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing "*" then "0" on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ashutosh Joytiraditya from ICICI Securities Limited. Thank you, and over to you, sir.
Ashutosh Joytiraditya (ICICI Securities): Thank you, Anam. Hello and good afternoon, everyone present on the call. On behalf of ICICI Securities, I welcome you all on
Ashutosh Joytiraditya (ICICI Securities): Khaitan Limited's Q2 FY '27 earnings call. I would like to thank the management for giving this opportunity of hosting the call. From the management, we have Mr. Abhishek Khaitan, MD, Mr. Dilip Banthia, CFO, Mr. Sanjeev Banga, President International Business, Mr. Sudheer Upadhyay, Chief Sales Officer and Mr. Saket Somani, Deputy CFO. I will now hand the call over to Mr. Abhishek for any opening remarks. Thank you, and over to you, sir.
Abhishek Khaitan (Radico Khaitan Ltd): Good afternoon, ladies and gentlemen, and thank you for joining us on Radico Khaitan's Q2 FY '27 earnings conference call. The second quarter of FY '27 has been the strongest in our history with record volumes, revenue and profitability. During the quarter, IMFL volume stood at over 10 million cases, revenue at 1,746 crores and EBITDA at 356 crores, with an EBITDA margin of 20.4%. Two quarters in, the consistency of this delivery gives us great confidence in the year ahead. Premiumization remains at the heart of this performance. Our Prestige & Above portfolio grew 36% in volume during the quarter, well ahead of the industry and continues to enrich our mix with every passing quarter. In vodka, the structural shift we have spoken about is gathering pace, with the category share of IMFL reaching 6.3% in Q2. Flavors are driving this change and Magic Moments is shaping it. In August, we launched Magic Moments Aam Panna, bringing a nostalgic flavor cherished in every Indian household into a contemporary format, supported by a digital-first campaign. Consumer response has been encouraging and tertiary offtake across the Magic Moments family remains healthy. In whisky, After Dark's modern new look is resonating well in the larger segment of the market and we are extending it to more states. 8PM Premium Black continues to gain momentum and market share, while Royal Ranthambore continues to perform well across civil and CSD channels. Our luxury portfolio including Rampur Indian Single Malt, Jaisalmer Indian Craft Gin and Virasat Indian Single Malt continue to receive an exceptional response from connoisseurs in India and abroad, and we are steadily taking Virasat to new states. Brand advocacy remains central to this effort. During the quarter, we continue to partnership and premium shop-in-shop formats at retail. The policy environment across key states continues to be progressive and supportive, and we see this as a meaningful tailwind for organized premium-led players like Radico in the years ahead. Internationally, we also became the first Indian spirits company to be present across four major UK airports, a proud moment for the Indian whisky in the home of scotch, and we continue to progress towards our target of 100 travel retail outlets in the times to come. At the same time, the global environment has turned increasingly volatile. We are seeing continued volatility in the raw material and packaging costs. We are managing this through sharper procurement, value engineering, our integrated manufacturing platform and a richer product mix. These levers give us the resilience to stay the course. Looking ahead, we have upgraded our Prestige & Above volume growth to 30% in FY '27, and we remain confident of sustaining an EBITDA margin of around 20% for the year. Before I close, an important update on our leadership. Effective today, Dilip Banthia joins the board as Executive Director and CFO, bringing his deep financial, capital allocation and alcobev industry experience to the board. Saket Somani has been elevated to Deputy CFO, with an expanded mandate across strategy, financial planning, investor relations and digital transformation. These elevations reflect our belief in nurturing talent from within. As we enter the festive season, I would like to wish you all and your families a very
Abhishek Khaitan (Radico Khaitan Ltd): Happy and prosperous Diwali. With that, I would now like to hand over the call to our Executive Director and CFO, Dilip Banthiya, for a detailed review of our financial and operational performance. Thank you.
Dilip Banthia (Radico Khaitan Ltd): Thank you, Abhishek. Thank you, everyone, for joining us on this call today. Before I begin, I would like to thank the board for its confidence in me. The momentum we built in the first quarter was sustained through Q2, with strong volume growth, higher profitability, and improved returns. Our performance reflects the resilience of our business model, driven by premiumization, operating leverage, and persistent focus on disciplined execution, even as the input cost environment has turned more volatile. During quarter two of FY '27, we delivered a strong, all-round performance with total IMFL volume of over 10 million cases, reflecting a 7% year-on-year growth. The Prestige and above category continued its strong upward trajectory, recording a highest-ever volume of 5.28 million cases at 36% volume growth. This performance was supported by a strong brand momentum and premiumization-led mix improvement. Regular volume degrowth was due to a higher base in quarter two of last year after the change in route to the market in the state of Andhra Pradesh and the impact of policy changes in Maharashtra and Karnataka. On profitability front, gross margin during the quarter is 48%, representing 440 basis points expansion on year-on-year basis and 109 basis points compression on quarter-on-quarter basis. This improvement on year-on-year basis is due to the ongoing premiumization, product mix. Premiumization added 510 basis points in, and the price increases added 85 basis points. This was offset to a certain extent by the recent volatility in packaging material, which resulted into approximately 27 crores of financial impact. The gross margin was impacted sequentially due to some cyclical brand mix change and inflation in grain prices. Despite an uncertain macro environment, we are confident of our margin trajectory in financial year '27. To mitigate the impact of increasing grain prices to a large extent, we had built a higher level of stocks, which has supported us through quarter two of FY '27. EBITDA margin for the quarter stood at 20.4%, expanding by 462 basis on year-on-year basis. The strong improvement reflects the success of premiumization strategy, better operating efficiencies, continued cost discipline. It also highlights the benefit of our consistent investment in building a strong premium and luxury brand portfolio over the years. Building on our strong financial performance, both ROE and ROCE improved during the quarter, supported by higher operating profit and better assets utilization. As a premium and luxury portfolio continue to expand, we expect our capital efficiency and return ratio to improve further. During the quarter, we made a deliberate investment in working capital to support the strong growth in our premium portfolio, new launches, and secure key raw material and packaging materials amid the price volatility. This is temporary, and we expect to normalize during the second half of this year. We remain disciplined in our approach to capital allocation, with CapEx directed toward maintenance, operational efficiencies, and essential capacity optimization. Looking ahead, our priorities remain very clear: driving profitable growth, maintaining a strong balance sheet, improving capital efficiency, and creating a long-term shareholder value. With this, we'll now open the line for question/answers. Thank you.
Moderator: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press "*" and "1" on their touchtone telephone. If you wish to remove yourself from the question queue, you may press "*"
Moderator: two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Aditya Soman from CLSA. Please go ahead.
Aditya Soman (CLSA): Yeah, hi. Good afternoon and thanks for the opportunity. So, two questions. Firstly, on this DRI investigation across the industry, can you explain a little bit more what the key issue here is? And and and how the various players potentially are impacted? And and secondly, on the raw material impact now now we've seen obviously a significant increase in in grain prices as well as packaging materials. So, from a pricing perspective, what proportion of our portfolio would you say has pricing freedom? And and and typically what would be the price lag or the lag between pricing and input cost increases? Thanks.
Dilip Banthia (Radico Khaitan Ltd): So, thanks Aditya. Actually, as far as the matter relating to the industry scrutiny on this thing, we are very very compliant company. We have always complied with these regulatory and issues. The scotches which we were importing earlier last 10-20 years are in the same HSN code as 2208 and after 15th July also we have we are importing the VMSs in the same code. So, we have not changed any of our code, neither the phonotation or the narratives of the material coming here. This is an industry issue which DRI is studying and I we don't know how far it goes on others. But we are confident that what we are doing is as per the current laws. Thank you. And to your second question, regarding the packaging material and raw material scenario, see we have actually as we in the beginning an opening remark, MD also said that we continue to maintain our EBITDA margin guidance of 20% for this full year. So, we are actually this quarter also there has been a negative impact of 27 crore which is approximately 156 to 160 basis point on gross margin basis. However, we with the kind of this thing we have been able to mitigate and when we see that in the new crop season which is starting from November onward, the prices should stabilize and at the same time, FCI allocation to this year's ethanol policy is also very very elevated at 72 lakh metric ton which will also stabilize this thing. So, from November onward, we see this to play a very benign kind of role. At the same time, on packaging material there has been an impact on account of the West Asia War and in particular, basically on the bottle prices and the pet prices like that and some laminated prices. It is very very unpredictable, but looking into the current uncertain and volatile scenario, we continue to work on our premiumization, improve on our product mix, and continue to have that that we can deliver a 20% guidance which we have given. So, I think we are confident about our business and portfolio.
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