Tilaknagar Industries Limited (TI) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Tilaknagar Industries Limited Earnings Conference Call. 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 this conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Siddharth Ranganekar from CDR India. Thank you, and over to you, sir.

We shall commence with news from Mr. Dhanukar on the brief performance and financial highlights, followed by commentary by Mr. Rishpande on the strategy going ahead. They shall be followed by an interactive question and answer session. Before we commence, I would like to state that certain statements made on today's call could be forward-looking in nature, and a disclaimer to this effect has been included in the results presentation that was shared with you earlier, and which is also available on the stock exchange website. I would now like to request Mr. Dhanuka to make his opening remarks. Over to you, sir.

Good morning, everyone. Happy to have you all join us on this earnings call to discuss the Quarter 1 FY27 results. I will provide an update on the current quarter's performance, which will be followed by Amea taking you through the updates on Imperial Blue integration and guidance on future performance. Before I begin with the quarterly performance, Thank you. Thank you. On a year-on-year basis, MHB has grown by 7%. We have achieved this growth despite some disruptions in the month of April. Now, moving over to the financial performance, the overall NSR increased by 1.5% to INR 1183 per case for Q1 FY27, from INR 1166 per case in Q4 FY26, and by 5.3% from INR 1123 per case in Q1 FY26. We witnessed a strong growth of 166% year-on-year basis to reach a net revenue of INR 1046 crores during the quarter. Adjusted for subsidy, we recorded a growth of 189% to reach INR 1026 crores. The ongoing geopolitical tensions led to inflationary pressures across packaging inputs, particularly glass, increase in packaging costs during the quarter. Consequently, E&A prices. Adjusted for subsidy, we have achieved a gross profit of INR 432 crores in quarter 1 FI27 and a margin of 42.1% compared to 45.2% in quarter 4 FI26, 44.5%. EBITDA stood at INR 169 crores for Q1 F527, clocking a growth of 79% year-on-year and margin of 16.1%. Adjusted for subsidy, the EBITDA grew by 166% to reach INR 148 crores and a 14.5% margin on the combined business. Excluding the impact of inflationary pressures, the margin would have been approximately 17%. Looking ahead, we remain confident of improving upon the 15.5% baseline EBITDA margin achieved in Q4 FY26. PAT adjusted for exceptional items and acquisition-related amortization stood at INR 96 crores for Q1 FY27, clocking a growth of 9% year-on-year and margin of 9.4%. Adjusted for subsidy, the FAT grew by 52% to reach INR 76 crores and a 7.4% margin on the combined business. Excluding the impact of inflationary pressures and subsidy, the margin would have been approximately 10%. We incurred an exceptional expense to the tune of INR 30 crores during Q4 FI26 predominantly on account of TSMA fees and integration-related expenses. As on 30th June 2026, our gross debt stood at INR 2,241 crores and net debt stood at INR 2,100 crores. The increase in net debt is primarily on account of complete working capital cycle investment. Our target is to take the net debt in March 27 to approximately INR 1,700 crores. and fulfill demands for our brands to deliver a double-digit volume growth, optimize packaging, processes, and supply chain, and reap benefits of operating leverage and economies of scale, helping us achieve an EBITDA margin of 16-18% on combined business in the next two years. Focus on efficient capital deployment, disciplined debt management, and working capital investments, facilitating the reduction of net debt to EBITDA below 1 by FY29. Ride on the pan-India distribution strength of Imperial Blue and Mansion House franchises to expand TI's luxury and premium portfolio, including SSL. On the brand front, our priorities have been clear. Increased trade and consumer engagements for Imperial Blue. We have successfully carried out new activations in 28,000 outlets during Q1 with consistent on-ground communications. To update on the super premium and luxury side of the business, housed within House of TI, we have expanded the presence of our luxury brands Monarch Legacy Edition Brandy, Seven Islands Pure Malt Whiskey, and Samsara Gin owned by Spaceman Spirits in West Bengal during the quarter. The sale in Quarter 1 FY27 vs. Quarter 1 FY26, demonstrating strong market for craft spirits in India. The growth is led by Samzara Pink and their new launches with Indian flavors, jamun and pink salt, and raw mango in the fast-growing agave and tequila space called House for Picante towards end of Quarter 1. We also doubled down on our investment in Bartisans by increasing our stake from 36.2% to 41.5%. The proceeds from this investment will be used to expand within the quick commerce segment, product and packaging innovation, and for collaborative launches with TI. We will be optimistic on our luxury plate, both organic and through our strategic investments. I will now hand over to Ameya to take you through the integration of Imperial Blue and provide guidance on the future performance.

And a very warm welcome to everyone joining us today. On the post-acquisition integration front, I am happy to inform you that we have additionally transitioned from two more states, taking the tally to 90% of the IB business being successfully transitioned into Tilaknagar-operated units. Now, only one state remains under TSMA, and we expect to transition them over the course of the next few quarters, with an outer date of March 2027. I would now like to provide some guidance on the combined business going forward. We maintain our guidance for FY27 of achieving a high single-digit to low double-digit volume growth for the combined business. We are upgrading the guidance beyond 27, including new launches planned from 28 onwards. We expect an annual volume growth in mid-teens over the next couple of years, and our revenues are expected to grow at least by 300 basis points higher than In terms of margins, we expect the consolidated EBITDA margins to reach 16% to 18% for the combined business by FY29 with upward bias on the range. For FY27, we expect the margin to improve from the base of 15.5% set in Q4 FY26. As guided in the past as well, we expect the net debt to EBITDA ratio going below one time by March 29. Lastly, I would like to explain a small change that we have made in the NSR calculation. While calculating the NSR, we have now reduced cash discounts, breakages, and wastages. This change is limited to the NSR calculation only, and there is no change in reported net revenues in the current or past quarters. The NSR for the current quarter was Rs. 1183 per case compared to Rs. 1166 per case in Q4-F526. With that, I would now request the operator to open the call for Q&A.

Thank you. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Abneesh Roy with Nuwama Wealth Management. Please go ahead.

Thank you. I have two questions. First is on the IB overall scale-up. Specific question was, if you could tell us which states have seen more traction and where there are more challenges. And specific question was also on Karnataka. Karnataka, clearly, all the liquor companies are highlighting good recovery, both the reforms. If you could tell us how has the competition shaped up for IB in that market? My sense is there will be a lot of changes in terms of the pricing, given there is a lot of flexibility, number of slaps are also reduced. So if you could update on the Karnataka. That is my first question.

So on Karnataka post-price reduction, we have seen a good uptake in our volumes since the price reduction has taken place, and our market shares also have significantly improved in the operating segment.

Sorry, go ahead, Avnish.

Yeah, the other question was, in which states you have seen more traction in IB? Because clearly there was a lot of opportunity given if it were under-invested last few years. So which states you have seen more challenges versus the company average and where you have seen more traction also?

So, broadly, when we have taken over the business, what the market share was at the time of exit, we have seen improvement in all states. Of course, the improvement would have been varying magnitudes, but without exception, we have seen improvement in market shares post-acquisition compared to the average, say, the three-month average at exit.

Okay, improvement, I don't understand. Obviously, there will be improvement.

Improvement in market share.

Yeah, but relative basis, which states have been easier, which states, it's more work to do, versus average. See, everything will be better, I understand, because clearly, your overall aggression and your local connect, etc., will be faster. But I want you to understand which states are doing better, which states are not doing better, versus your national average.

So, without getting into the flavor of individual states, Abneesh, I would say that south in the whole has been an easier and more seamless transition for us, given our size and scale before. So, improvements over there perhaps have been better than some of the other regions. But even the north and the east, we have seen improvements, and also west.

In Maharashtra also, we have increased our market share. Right. So, Abhanesh, again, like Mr. Danukar mentioned, we won't get into details of the states, but needless to say, in each of the four regions, right, we have expanded our market share over what we actually got it when we acquired the business.

Sure. My last question is on the specific comment you made on Delhi. So Delhi, clearly, you have launched IB again. So I wanted to understand peak market share or peak size in Delhi for IB. And when do you see that getting achieved? And second, on North India and, say, other parts of South India, clearly, is the team scale-up done or still in terms of team and network still there's work to do, given you were a South-focused company earlier, but now with IB being done Pan-India, I wanted to understand team overall depth and network depth. Are you happy with current level of performance in those markets?

So, the team scale-up that has been totally completed, I think, pre-acquisition strength was approximately 350 people. As on March 31st, it was 850 people. So, the scale-up has been completed across India with particularly most of the additions came. They were feet on ground in terms of the sales operation, because obviously we were well covered in the south, but we have added capability across north, west, central, and east India, both in terms of sales and in terms of manufacturing footprint as well. So that has already been completed. And what was your second question? In terms of Delhi, so Delhi, I think at the peak, the volume of Imperial Blue would have been half a million cases. And we expect that within the next 12 to 18 months, we should be seeing those levels.

And this half a million would have been three years back?

It would have been perhaps slightly more than that.

Okay, I understand.

Thank you. 2019-2020.

Okay, pre-COVID.

Okay. Sure. Thank you. The next question comes from the line of Nitin with HDFC Securities. Please go ahead.

Yeah, hi. Thanks for taking my question. My first question pertains to, like, when we say Orissa, Punjab, Uttarakhand, and Karnataka were impacted, is it only for IB or the entire portfolio? And I also wanted to check on, like, what are the reasons in Orissa, Punjab, and Uttarakhand?

So, see, Nitin, when it comes to the question, yes, it was predominantly for IB itself, because we've mentioned over there that these were TSMA-related issues, right? TSMA was only relevant for IB. So, those were the challenges that we had. I won't get into the details of what each of these challenges were, but yeah, these were TSMA related.

Yeah, I was of the view that if there is any market-related challenge, but if it's TSMA, then it's fine. Second question, like, how are we planning in ID price segment where other brands have strengthened formulation and another brand is looking to grow at a faster scale, like Iconic White 50% growth for this year, and McDowell also, like, increasing the scotch and targeting this segment. So, do you see any sort of increased trade spending on the ground? That is the first thing. And second, like, how is the growth for the industry in this low-prestice segment, like, where we also want to sort of expand ideas present? Thank you.

So, I think this competitive intensity which you have mentioned that is absolutely correct. I think this segment, after a long time, it is seeing the activity. One of the reasons why this segment has perhaps not grown at a high rate has been because of inactivity of the leading players, but we are seeing a lot of activity by all participants in this category which should be helpful for the overall category growth. Let us not forget, there is a large volume of, you know, regular range products and country liquor, which is sitting just, you know, below our price points. So, activations and marketing activities in this particular segment will only help in growing the segment. And, of course, let us keep in mind also that we as a company also are increasing our ANSP reinvestment rates. So, we will also be active in this segment. As I had mentioned, during my opening remarks, we have activations now present in more than 28,000 outlets across the country. So, we have also become very active.

Yeah, thank you. This is quite helpful. Like, my last question pertains to your margin. So, like, we wanted to recover to 15.5% EBITDA margin. Like, how soon we can expect that to be achieved? Like, this packaging material inflation impact we are seeing. So, what is your view? How long it will continue?

So, see, when we say that we want to increase our margins beyond the base of 15.5, we are not assuming any kind of reduction in, or we are assuming that inflation is status quo as such, right? But having said so, in Q3 and Q4 is when you will see significant uptick in margins because from a seasonality perspective, those are the largest. This would be on account of incremental ANSP reinvestments as well.

Thank you. And it would be great if you can sort of help us understand how are you planning for next 3-4 years in terms of like, I guess we are in the early stage where we got... And looking at the past of like the domestic players, like they have been entering the premium space, plus they are also strengthening their back end. So any thoughts what you can offer? I guess the near term, the focus will be more on the IB stability, and then you will go for that. But any thoughts if you can offer, that would be great. Thank you.

So, currently, our earlier narratives also this year will be focused on the IB integration and increasing the width and distribution of our existing products. Going forward, of course, there are a few vacant spaces in our portfolio, and we would be looking at new launches in the next 12 to 36 months to complete our portfolio. And with the new launches in place, we expect the volume growth to be in mid-double-digit. We'll have a CEGR of mid-double-digit till FI29. So, broadly, I think the company is pointed in the right direction. And on the back of this distribution, of course, we will be introducing our premium products as well. Our own house of TI products, which is the Monarch Legacy Edition Brandy, Seven Islands, Pure Malt. We also have the extensive Space One Spirits portfolio, which we are taking to new markets as well. So, in terms of our luxury and super premium offerings, also our portfolio is fairly complete, and we have the distribution infrastructure now, which we will leverage.

So, Nitin, in terms of growth, right, the way to look at this is that you will have the existing business, including IB, where we will continue to gain market share, right? While we have done a reasonable job over the past seven months with IB within our fold in terms of market share gains, As Mr. Dhanakar mentioned, you will have input by us on the SuperPremium. And as we've also reiterated in our presentation as well, we have revised our guidance upwards in terms of volumes on account of the new launches that we'll be undertaking FY28 onwards.

Sure, this is super helpful. Thank you and all the very best.

Thank you. A reminder to all participants, you may press star and want to ask a question.

The next question comes from the line of Heer Gogri with Choice Equities.

Please go ahead.

Hello. Thank you for the opportunity. I wanted to ask what should we expect the run rate for IP volume going forward on a quarter-on-quarter basis?

So, for the full year, it will be a double-digit growth. I think when we acquired the business, it was around 20 million cases. So, clearly, we expect that we would end the year with a double-digit volume growth for Imperial Blue.

Okay, and what?

This is on the base of 21.5 million cases.

Okay, and what is the NSR for IB? The IB NSR?

We don't give a bifurcated NSR here. It will be a combined NSR that we are providing.

Okay, and one last question would be, are you expecting any price rise from Telangana, and any expectation on that front?

So, price rise from Telangana, we are expecting, because now it has been three years since the earlier price increase was given. We are in active discussions. The industry is engaged with the government, and we do expect price increase to happen in quarter two.

And in terms of just quantifying what the impact of this price increase would be, it would be in the range of 150 to 200 basis points, incremental impact on margins.

Okay. Thank you so much.

On an annualized basis.

The next question comes from the line of Vijay Jangir with Systematics Group. Please go ahead.

Hello. Thank you, sir. Thank you for the opportunity.

My first question is on Prague distillery. We were expecting annual savings of around 100 million rupees. So, what is the current utilization rate, and are there any cost savings reflecting in Q1 margins? Sorry, Vijay, could you just repeat that question again? We couldn't hear you clearly. Sir, on Prague distillery, we were expecting around 100 million annual savings. So, are there any cost savings reflecting in 1Q27 margins?

And what is the current utilization rate for the Prague distillery?

Yeah, so, you haven't seen the entire benefit of the bottling coming into Prague distilleries, but what is already baked into the numbers would be to the tune of around 60 to 70%.

And, sir, could you please comment on how competition in Maharashtra medical categories is shaping up, if you can say something about that?

So, currently, Vijay, the MML category, right, from what we understand, the industry is hovering in that 6 to 7 lakh cases per month region, right? Right. There hasn't been a significant movement as it happens in these volumes of the past few months. More specifically for us, we have been expanding market share in the state, right? So I'll speak more from our perspective. IB has done fairly well in the state in the past few months. So we keep inching our market shares in the state in the relevant price point. Okay, sir. Yeah, that's it for another time. Thank you, sir.

The next question comes from the line of Vaibhav Gupta with Powerhead India Fund. Please go ahead.

Hi, sir. Thanks for taking my question. So, sir, I wanted to understand how big would be Tamil Nadu market for us, and if there is a road to market change, how it would impact us? So, currently, the Tamil Nadu business is not very large for us. I think annualized it could be less than half a million cases. But let us keep in mind that Tamil Nadu is the largest brandy market in India, approximately probably 40-odd million cases of brandy sold in Tamil Nadu. So, we are waiting and watching in terms of what could be the policy changes which may happen post the new government which is in place in Tamil Nadu if they allow imports. So, if there is some move to open up the market further, we could be potentially big beneficiaries of the same.

Understood. Understood. That's all from my side.

Participants, please press star and want to ask a question.

The question comes from the line of Sukrit Patil with iSight FinTrade.

Please go ahead.

Good afternoon to the team. I have two questions. The first question to Mr. Amit Dhanukar is, you know, beyond the regular outlook that you have given, Just want to understand what are the top two to three execution priorities you're focusing on in the next few quarters, and alongside that, what do you see as the biggest risk in consumer demand shifts or competitive pressures, and how are you preparing to manage them whilst strengthening the company's position in the Alcovec industry? That's my first question. I'll have my second question after this.

Thank you.

I think, as I mentioned earlier in my opening remarks and added by Amiya, that the sales integration was completed by February, and 90% of the manufacturing integration has been completed by April. So, given the scale of the business which the company has acquired, I would say that the team has executed very well to complete this integration less than about four months after acquiring the business. The immediate priorities, of course, are in terms of widening and deepening the distribution of Imperial Blue and, you know, reinvesting in ANSP so that market shares can climb. And post-takeover of the business, as I had mentioned earlier, also we have seen improvements across states, of course, in terms of improvement in the market share, and we would only hope that this would now continue in the coming quarters. And the third priority is, of course, that with the distribution network which we have, we will concentrate on our luxury business as well. I think that is a long-term priority for us in terms of building the portfolio of the luxury business and the new launches.

Thank you. My second question to Mr. Rajesh is, again, from a financial point of view, what key risks or challenges do you anticipate in the coming quarter? And what specific measures have been taken to manage margins, cash flow, and balance sheet strength, especially in areas like raw material cost volatility, receivables, and regulatory compliance? Thank you.

I am. So, the inflation is one, I think, is something that to be watched out. And obviously, we have called out that in the quarter one, it has some impact, right? And it's a watch out for us. But having said that, there are several mitigating factors that we have, including the price increase in various states and ongoing discussions that we are having in few more states to get a price increase, and that will help us to mitigate the impact of the raw material increase.

Just to add to what Rajeshji mentioned, I think the term debt which the company has of approximately 2,000 crores that has been structured where majority of the payments, almost 80% of the payments are happening in years 5 and 6, which is giving us adequate cushion in terms of the repayment structure with moratorium in the first two years. But that said, I think the net debt currently stands at 2100 crores for quarter one. And we have a clear target that by March 31st, FI27, net debt should be around 1700 crores. So there's clear intent of reducing debt by approximately 400 crores in this financial year.

Thank you.

And I just wanted to add one point on the inflation front as well. Right. So along with the multiple mitigating factors that are there, one other very important and critical one is the supply chain optimizations. Right. We've identified in the past and also communicated the same on our earnings calls in terms of what is the kind of benefit that we see from our supply chain optimization activities. All of these will essentially lead to a scenario where we will expand our margins on the acquired business, the consolidated business. We would be expanding our margins by approximately 250 odd basis points. Thank you, and best vision.

Thank you. Ladies and gentlemen, we will take that as the last question for today. I would now like to hand the conference over to the management for the closing remarks.

Thank you all for joining today's call and for your continued interest in Tilaknagar Industries. We are pleased with the strong start to FY27 and the significant progress we have made in the integration of Imperial Blue. As we move into the next phase of our journey, our focus will be on driving sustainable growth, strengthening our premium portfolio, and leveraging our expanded Pan-India distribution network. We remain confident in the long-term opportunities ahead and appreciate your continued trust and support. We look forward to updating you on our progress in the coming quarters. Thank you once again for your time, and have a great day.

Thank you, sir. Ladies and gentlemen, on behalf of Tilak Nagar Industries, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.