Radico Khaitan premiumisation and luxury portfolio drive margin expansion outlook

Investment View and Recommendation

In its October 12, 2026 report, ICICI Securities recommends BUY on Radico Khaitan Ltd. The thesis is based on the company's ability to benefit from premiumisation in Indian spirits, supported by premium and above (P&A) brand momentum, expansion in luxury products, structural margin improvement and balance-sheet deleveraging.

Radico Khaitan is an Indian-made foreign liquor manufacturer with eight millionaire brands and production capacity of 323 million litres per annum.

Premiumisation and Brand Momentum

Radico Khaitan's P&A portfolio grew at a 27 per cent CAGR to Rs 3,063 crore during FY23 to FY26, while P&A volumes rose at a 21 per cent CAGR to 16.7 million cases. ICICI Securities attributes this growth to brand building, product innovation and launches including tequila, alongside rising consumer preference for premium spirits and a growing cocktail culture.

Magic Moments Vodka remains a key growth driver. It held a 60 per cent market share and sold more than 8 million cases in FY26, compared with 7.1 million cases in FY25. Its Q1 FY27 volume of around 3.3 million cases was the brand's highest quarterly level and represented around 41 per cent of FY26 volumes. The vodka category's share of the Indian spirits market increased to 6 per cent from 4.6 per cent over the past year.

Management raised FY27 P&A volume-growth guidance to 25 per cent from 20 per cent. ICICI Securities forecasts Radico Khaitan revenue to grow at a 16 per cent CAGR from FY26 to FY29E.

Luxury Portfolio and International Expansion

Management guided for around 25 per cent growth in luxury portfolio revenue in FY27, following revenue of around Rs 475 crore in FY26. The key luxury brands are Rampur, Royal Ranthambore, Jaisalmer Gin and Sangam World Malt.

Radico Khaitan is present in more than 65 global duty-free locations and is targeting more than 100 locations. The company recently expanded into four major UK airports.

Margin Expansion and Operating Outlook

ICICI Securities expects product mix to drive sustained margin improvement. Radico Khaitan's EBITDA margin increased to 17 per cent in FY26 from 11.4 per cent in FY23, helped by the P&A mix rising to 45.6 per cent from 37.4 per cent, operating leverage and disciplined cost management.

Management targets a 20 per cent EBITDA margin in FY27. ICICI Securities expects approximately 500 basis points of EBITDA-margin expansion from FY26 to FY29E, taking the margin to 22 per cent in FY29E. The broker also sees the India-UK FTA as a potential additional positive, as lower scotch prices could reduce input costs for IMFL manufacturers.

Financial Outlook and Deleveraging

Radico Khaitan repaid Rs 138 crore of debt in Q1 FY27 and expects to become net debt free by Q2 FY27. With no major capacity expansion planned, management expects annual maintenance capex of Rs 150 crore to Rs 170 crore.

ICICI Securities expects free cash-flow generation, lower capital employed and improving profitability to lift RoE to 23 per cent and RoCE to 29 per cent by FY29E.

Valuation and Target Price

ICICI Securities has set a 12-month target price of Rs 5,550 by rolling valuation forward to the FY28 to FY29E average EPS of Rs 95.6 and applying a 58 times multiple.

Key Risks

• Changes in state liquor policy could affect revenue.
• Volatility in input prices could affect profitability.