Summary
Associated Alcohols & Breweries Limited - Q3 FY 2026 Earnings Call Summary Thursday, February 05, 2026 4:00 PM
Event Participants
Executives 3 Anshuman Kedia (CEO), Dilip Kumar Inani (CFO), Tushar Bhandari (Whole-time Director)
Analysts 6 Aachal Pal, Aman Baheti, Aniket, Dhruv Shah, Hrushikesh Shah, Manoj Kumar, Shreya Chatterjee, Vinay Rawal
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Net Revenue | ₹260 crores | -17.7% YoY; +3% QoQ. Decline driven by Inbrew moving from licensing to contract manufacturing (-₹52 cr impact). |
| EBITDA | ₹42 crores | +73% QoQ. Margins expanded to 16% due to softening raw material costs and premium product mix. |
| PAT | ₹27 crores | +95% QoQ. Net margin improved to 10% despite ₹2 crore provision for new labor code retirement benefits. |
| Proprietary IMFL | ₹127 crores (9M) | +30% YoY. Volumes reached 1.7 million cases (+32% YoY); EBITDA margin at 21%. |
| Licensed IMFL | ₹122 crores (9M) | -30% YoY. Impacted by business scope change with Inbrew; volumes at 1.02 million cases. |
| Ethanol Volume | 25 million liters (9M) | Supply currently exceeds demand (25% capacity vs 20% govt blending mandate); EBIT margin ~2%. |
| Merchant ENA | ₹100 crores (9M) | Volume at 14.7 million liters; declining as internal consumption grows for proprietary brands. |
| Gross Margin | 46% | +1000 bps QoQ. Driven by lower grain prices and higher realizations from byproducts. |
Geographic & Segment Commentary
- Madhya Pradesh & Kerala: Remain the core volume drivers, accounting for 80-85% of total IMFL volumes. Kerala is heavily dominated by brandy (70%), while MP is a whiskey-centric market where the company holds strong market shares in popular segments.
- Maharashtra & UP: Strategic expansion markets with higher realizations (~₹1,500/case vs ₹750/case average). Currently contribute ~2% of total volumes; expansion is being managed cautiously district-by-district due to high capital requirements for retail entry.
- Jharkhand: Entered in Q3 FY26 with the premium portfolio. Management noted strong initial traction for Nicobar Gin, claiming #3 market position in the premium gin segment in the first month of operations.
Company-Specific & Strategic Commentary
- Premiumization & New Launches: The RTD brand ‘Kultur’ is slated for H2 FY26 launch. Premium Tequila (authentic Mexican bottled) and Brandy are scheduled for Q1 FY27 to align with excise renewal cycles.
- In-house Malt Maturation: Total capex of ₹100 crores (₹65 crores spent) for a malt plant. Maturation started two months ago; first Indian Single Malt launch expected in Q4 FY27 to capture high-margin trends.
- Manufacturing Strategy: Transitioned Inbrew business to contract manufacturing to focus capital on proprietary brands. Maintaining fungible facilities to switch between ENA and Ethanol based on economics.
- Inorganic Growth: Actively bidding for a unit in Kerala via NCLT (SDF Industries) and acquired land in UP for a new distillery to optimize regional logistics and taxes.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| FY26 Revenue | Flat YoY (vs FY25) | Requires ~25% growth in Q4 FY26, driven by RTD launch and Q4 seasonality. |
| Volume Growth | 30% - 35% YoY | Targeting aggressive growth in proprietary IMFL brands like Central Province. |
| EBITDA Margins | Sustain 15-16% | Expect stable grain prices (₹20,000/ton range) and better mix to offset higher Q4 marketing spends. |
| Product Portfolio | Full Portfolio by FY27 | Aiming to have a complete range from popular to super-premium (Single Malt/Tequila) by next year. |
Risks & Constraints
| Risk | Context |
|---|---|
| Ethanol Oversupply | Industry supply matches 25% blending while govt mandate is 20%. Management is pivoting toward private party supply to mitigate. |
| Marketing Spend | Launching 3-4 premium brands will require significant Opex (events, bar takeovers), potentially capping near-term margin expansion despite RM tailwinds. |
| Working Capital | Expansion into UP and Maharashtra involves longer payment cycles and high upfront excise duties, likely increasing working capital days. |
| Regulatory | High import duties on grain or changes in state-specific excise policies remain constant structural risks for inter-state expansion. |
Q&A Highlights
Ethanol Economics
- Question: Why is Ethanol EBIT low (2%) despite lower grain prices? (Dhruv Shah)
- Answer: Lower volumes and fixed costs weigh on EBIT; however, EBITDA is healthier at ~6%. The primary growth engine remains IMFL, not Ethanol (Tushar Bhandari).
Inbrew Transition
- Question: What is the impact of the Inbrew model change on revenue? (Aniket)
- Answer: Converting from franchise to contract manufacturing caused a ₹52 crore YoY revenue drop in Q3, as only service fees/margins are now recorded instead of gross sales (Dilip Kumar Inani).
Malt Strategy
- Question: When will the malt plant impact margins? (Dhruv Shah)
- Answer: Self-produced malt will be used in internal whiskey blends by Q4 FY27, replacing expensive third-party malt and ensuring quality consistency (Tushar Bhandari).
Market Penetration
- Question: How are you competing in the Prestige & Above segment? (Harsh)
- Answer: We use a “combination strategy.” Popular brands like Central Province (aiming for 1 million cases) provide top-line scale, while craft spirits like Nicobar Gin build bottom-line value through high realizations (Tushar Bhandari).
Key Takeaway
Associated Alcohols delivered a margin-driven Q3 FY26, with EBITDA margins expanding 700 bps QoQ to 16% despite a 17.7% YoY revenue decline. This top-line contraction was largely technical, stemming from the transition of Inbrew volumes to a contract manufacturing model. The company’s strategic pivot toward its proprietary “Prestige & Above” portfolio is yielding results, with proprietary IMFL volumes growing 32% YoY and contributing 21% EBITDA margins. Management is focusing on long-term value creation through a ₹100 crore malt maturation project and the upcoming launch of authentic Mexican-bottled Tequila and RTDs. While ethanol oversupply and increased marketing spends for new launches remain watch points, the company expects a strong Q4 to bring FY26 revenues at par with FY25. Near-term growth is anchored in deepening the distribution of the “Central Province” series while scaling premium craft spirits in high-realization markets like Maharashtra and UP.
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