Recommendation from Breweries & Distilleries Industry

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year. 

ASSOCIATED ALCOHOLS AND BREWERIES : HITTING THE HIGH ROAD

HERE IS WHY
✓ Growing acceptance of alcohol beverages
✓ Well-positioned for expansion
✓ Impressive increase in revenue

The Indian alcohol market is estimated to be valued at USD 55.81 billion in 2024 and is expected to reach USD 92.57 billion by 2031, exhibiting compounded annual growth rate of 7.5 per cent from 2024 to 2031. Factors such as rising disposable incomes. changing lifestyle and social drinking habits have been driving market growth. While the consumption of beer and spirits has increased substantially, Indian made foreign liquor (IMFL) continues to dominate the market.

Keeping all these factors in mind, our choice scrip for this issue is Associated Alcohols and Breweries Limited (AABL). The company is engaged in the business of manufacturing and trading of extra neutral alcohol (ENA), Indian made Indian liquor (IMIL) and IMFL. It is a major distillery in India producing vodka and scotch whisky for international brands. It is known for bottling single malt scotch whisky for Mason and Summers. AABL is expanding its operations to cater to various alcohol segments and has brands like ‘London Bridge’ gin and ‘James McGill’ whisky

AABL is a key player in the Indian alcohol beverage industry, backed by extensive infrastructure. The company boasts a 150-acre land bank, providing ample space for operations and future expansion. With integrated facilities, including an ENA unit, bottling line and ethanol plant, all located on-site, AABL ensures a seamless production and logistics process. Notably, the company successfully commissioned its ethanol plant in FY24, with a total capital expenditure of Rs150 crore, marking a significant milestone in its growth journey. In Q3FY25, on a standalone basis, its net sales rose by 73.47 per cent YoY to ₹334.26 crore compared to ₹192.69 crore from the previous year’s same quarter.

On a sequential basis, its revenue increased by 29.40 per cent from ₹258.33 crore. The profit after tax (PAT) increased by 107.58 per cent and stands at ₹26.09 crore from ₹12.57 crore in the previous year’s same quarter. On a sequential basis, its net profit increased by 70.27 per cent from ₹15.32 crore. During Q3FY25, out of the total revenue, contract manufacturing shared 34 per cent, IMIL contributed 21 per cent, IMFL consisted of 21 per cent, merchant ENA comprised 12 percent and IMFL proprietary accounted for 12 per cent.

AABL launched two new products in the premium segment: Nicobar gin and Hillfort whiskey. Collectively, these products have garnered sales of over 3,000 cases in nine months FY25. The company is focusing on expanding its product offerings to include ready-to-drink (RTD), brandy and tequila. AABL is actively working on extending its geographical reach, with plans to enter Maharashtra, Goa and Uttar Pradesh. The Indian alcohol beverage industry is undergoing transformation, with premiumisation as a key trend. Consumers are increasingly seeking high-quality, aspirational products that offer refined experiences.

AABL is well-positioned to capitalise on this shift through innovation and a diverse product portfolio. It is targeting revenue growth of over ₹1,200 crore in FY26, driven by strong performance in its proprietary brands. It has delivered three-year ROE of 15.1 per cent and three-year ROCE of 19 per cent. Considering the company’s business, we recommend BUY.