Premiumisation to drive growth in Indian spirits market: Jefferies

Global brokerage Jefferies has initiated coverage on three liquor stocks— United Spirits , Radico Khaitan , and Allied Blenders & Distillers —highlighting premiumisation as the key growth driver for India’s alcoholic beverages sector.

According to the brokerage, the Indian spirits market has been expanding at a modest mid-to-high single-digit rate at an aggregate level, supported by an increase in the legal drinking age population and a gradual upgrade from country liquor. However, the real momentum lies in the prestige and above (P&A) segment, which is growing at double-digit rates.

“Apart from growth, premiumisation also meaningfully enables profitability,” the brokerage said in a report.

Jefferies noted that premiumisation not only drives topline growth but also boosts profitability. Profit per unit volume in the super-premium and luxury segments is more than 10 times that of the entry-level popular segment, while also generating significantly higher tax revenues for the government. Notably, 10% of industry volumes account for over 40% of industry profits.

Initiates coverage on United Spirits, Radico Khatian, Allied Blenders

The brokerage house has initiated coverage on alcoholic beverages with ‘Buy’ ratings on United Spirits, Radico Khatian, and Allied Blenders. It expects double-digit top-line growth for all these three companies, with “meaningful room to expand margins”.

The agency, in its report, said that unlike fast-moving consumer goods (FMCG) peers, spirit companies still have significant margin headroom, as profitability remains below peak levels due to inflationary pressures during FY22–23. Margins have already recovered from FY23 lows and are expected to improve further, aided by premiumisation trends. It added that FY27 could provide an additional boost through the India-U.K. free trade agreement (FTA), which is likely to reduce scotch import costs.

It has given a target price of ₹3,590 for Radico Khaitan, while assigning a price target of ₹1,570 for United Spirits and ₹620 for Allied Blenders & Distillers (ABD).

“We expect all three companies to deliver double-digit top-line growth, led by the P&A segment,” it said.

Radico Khaitan has emerged as the brokerage’s top pick, backed by a strong earnings trajectory of over 35% earnings per share (EPS) CAGR. United Spirits, which has corrected more than 20% in recent months, is seen offering a favourable risk–reward profile, while ABD is termed a “dark horse” with meaningful upside potential, though execution remains a key monitorable.

Radico Khaitan is projected to post the fastest growth, with an 18% CAGR, driven by strong category momentum in vodka and the scale-up of its luxury portfolio. Allied Blenders is expected to deliver a 12% CAGR, supported by newer brands such as ICONiQ White and Srishti Whisky, the ramp-up of its super-premium offering ABD Maestro, and recovery in legacy brands like Officer’s Choice Blue and Sterling Reserve.

United Spirits, meanwhile, may face near-term headwinds from the recent Maharashtra tax hike, given its higher exposure in the state. However, Jefferies still forecasts double-digit CAGR over FY25-28, citing the company’s strong positioning in fast-growing luxury and super-premium categories.

According to Jefferies, Indian companies such as Radico Khaitan have outpaced peers in recent years by capitalising on fast-growing segments like vodka and Indian single malts. The brokerage noted that players such as Radico and Allied Blenders are aggressively focusing on new launches to fill portfolio gaps in the prestige & above (P&A) segment, where they have been traditionally under-indexed.

MNCs too have accelerated their pace of innovation, while exiting low-price point segments, citing the sale of Imperial Blue whisky by Pernod Ricard as an example, it said.

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