TI - Tilaknagar Industries Ltd Share Price

The management of Tilaknagar Industries (TI) expressed a positive outlook, emphasizing strategic growth, margin resilience, and market share gains. Key highlights include:

1. Volume Recovery & Market Share:

• Excluding Andhra Pradesh (AP), Q3 primary volumes grew 10% YoY, with strong momentum in Karnataka (+20%), Puducherry, and Kerala. AP volumes rebounded in January 2025 (+14% YoY) post-transition to a new distribution model.
• Secondary volumes in AP grew 8% despite primary volume challenges. Market share in Telangana rose to 7.4% (vs. 6.8% in FY24).

2. Margin Resilience & Cost Optimization:

• EBITDA grew 17% YoY to Rs.60 crore in Q3 (margin: 17.7%), driven by cost efficiencies and lower S&D spends. Margins are expected to stabilize between 15.5"“17.5%, supported by premiumization and stable input costs (glass, packaging).
• NSR per case declined due to AP price corrections (~Rs.200/case), but cost-saving initiatives offset impacts.

3. Debt Reduction & Financial Health:

• Gross debt reduced by Rs.47 crore in Q3; net cash position at Rs.31 crore. Kotak Bank term loan fully repaid.

4. Premiumization & Portfolio Expansion:

• Launched Monarch Legacy Edition (luxury brandy) in Maharashtra and exports. Prestige & Above portfolio grew, supported by premiumization trends.
• Expanding non-brandy categories: Mansion House Whisky (Assam), Samsara Gin, and Sitara Rum (via partnership with Spaceman Spirits Lab).

5. Capacity Expansion & Capex:

• Exploring Rs.35"“50 crore investment to expand Andhra Pradesh unit (Prag Distillery), targeting capacity increase from 6 lakh to 36 lakh cases annually for operational savings.

6. Industry Trends & Growth Drivers:

• Cocktail culture and premiumization remain key trends. Focus on brandy's aspirational positioning via marketing (ATL/BTL).
• Export markets (Africa, Middle East) show robust traction.

Outlook:

• Mid-to-high teens revenue growth expected in FY26.
• AP recovery, southern market strength, and premiumization to drive volumes.
• Strategic investments (organic/inorganic) and prudent capital allocation prioritized.

Management remains confident in sustaining growth through operational discipline, market share gains, and innovation.

Q: Could you provide insights on raw material (RM) trends, including ENA, glass, and packaging for FY26?
A: ENA prices are expected to remain stable without significant inflation. Glass and other packaging costs have stabilized after recent corrections and are projected to stay stable.

Q: How will the Andhra Pradesh (AP) price correction impact future margins, and is the transition impact fully resolved?
A: The AP price reduction (Rs.200 per case) and operational transition are behind us. Growth resumed in January (14% YoY). Margins will normalize to 15.5%-17.5% due to reinvestments in advertising and sales promotion (A&SP).

Q: What drove Karnataka's 20% volume growth, and what was the price correction there?
A: Karnataka's growth stemmed from excise duty cuts, reducing retail prices (e.g., 180ml from Rs.257 to Rs.235). No ex-factory price cuts were made; growth reflects improved affordability.

Q: How are you addressing competition and premiumization in Andhra Pradesh?
A: AP's secondary volumes grew 8% despite primary volume challenges. Market share rebounded to 11.5% in December. Brandy saliency remains stable (~35%) despite new whisky entrants.

Q: Is reduced S&D spend sustainable, and how will marketing strategies evolve?
A: S&D efficiency is sustainable, but A&SP reinvestment will rise, lowering margins slightly. Marketing includes ATL campaigns (e.g., Monarch Legacy) and BTL activations to elevate brandy's aspirational appeal.

Q: What are cash deployment plans given the debt-free position?
A: Priorities include organic growth (geographic/category expansion), tactical acquisitions (e.g., Samsara Gin), and CAPEX (Rs.50 crore for AP unit expansion). Surplus cash use will align with stakeholder value.

Q: What is the tax outlook, and why are provisions absent despite profits?
A: A 25% tax rate is expected from FY26. Current provisions await final IT orders related to ongoing assessments; updates will follow resolution.

Q: What is the CAPEX guidance, and how will the AP expansion benefit margins?
A: Maintenance CAPEX is Rs.15-20 crore annually. The proposed AP unit expansion (Rs.35-50 crore) aims to boost bottling capacity, reducing reliance on third-party units and improving margins via cost savings.

Q: How does the Samsara Gin partnership align with strategy?
A: Samsara's craft positioning complements TI's premiumization goals. The 20% stake offers growth potential in premium gin, leveraging TI's distribution while exploring eventual stake increases.

Q: What is the revenue guidance for FY26?
A: Revenue is projected to grow in the mid-to-high teens, driven by volume recovery in AP, premiumization, and category expansion (whisky, gin).

Q: Are exports a focus, and what are Mansion House's geographic rights?
A: Exports (Africa, Middle East, Southeast Asia) grew strongly. Mansion House's rights are secured in operational markets, with plans to expand in southern India.

Q: How significant are subsidies, and will more be received in Q4?
A: Subsidy income (Rs.16 crore YTD) may see Q4 additions, but exact amounts are unspecified. These are tied to state-specific incentives.

Q: Could regulatory changes (e.g., Karnataka/Kerala) boost industry growth?
A: States adopting progressive policies (e.g., UP, AP) may expand market access. TI anticipates benefiting from such trends but avoids state-specific forecasts.