Allied Blenders & Distillers Ltd Management Discussions

ECONOMIC OVERVIEW

Global

The global economy entered 2025 with renewed optimism, buoyed by signs of resilience despite ongoing political and economic challenge. According to the IMF?s April 2025 World Economic Outlook, global GDP is projected to grow steadily at 3.1%–3.3%, supported by easing inflation and resilient demand. However, advanced economies are expected to register modest growth amid tight monetary conditions. In contrast, emerging markets—particularly India are driving global momentum, fueled by robust domestic consumption, structural reforms, and sustained government spending Emerging markets are pushing the momentum further, with India likely to record a robust 7.0% GDP growth. As global trade dynamics shift and supply chains diversify, the role of emerging economies is becoming increasingly central to global recovery.

India

India maintains it trend as the fastest growing large economy in the world, with 7.0% GDP that the country would record in 2024-25, fuelled by the robust infrastructure push and robust services.

Government CAPEX expenditure of 11.5 lakh crore (3.3% of

GDP) for FY 2024–25 accelerates job-opportunity creation and rural-connectivity. The rural demand recovery, though, is only partial because of erratic monsoons affecting crop yields. Digital India remains a key driver of economic growth, improving digital payment adoption and expanding access to government services. Programs like ONDC, DigiLocker, and Ayushman Bharat Digital Mission are strengthening the digital ecosystem, promoting formalization, and enabling more inclusive participation in the economy. Overall consumption in India is steadily strengthening, supported by rising consumer confidence and improving rural demand despite some challenges from uneven monsoons. Increased disposable incomes and a recovering supply chain are driving higher spending across both essential goods and discretionary services, signalling a broad-based revival in domestic demand.

Industry Overview

India corresponds to a dynamic and fast changing market for alcoholic beverages worldwide thanks to the favourable demographic condition, the growth in cities and the increment in disposable incomes. With a large share of India?s population under the age of 30 with demographic and cultural changes have fuelled rise in consumption of alcoholic beverages. Although the drinking age ranges between 18-25 in different states the increased working-age population as well as increasing middle class are some of the main drivers of the expansion of alcohol consumption.

Indian Spirit Market Overview

India?s spirits business is poised to grow with the support of a robust economy, fast urban development, and a rising middle class population. Compared to developed countries, there remains significant untapped potential in alcohol consumption, indicating ample room for market expansion. Whisky is the market leader selling more than 65% of all spirits, Growing urbanization, increased middle-class populations, and augmented awareness about worldwide living trends are the driving factors of spirits consumption. Consequentially, whiskey distilleries have launched a wide range of different flavours and variants in order to satisfy this type of a young experiential market.

Young consumers are a key demographic in creating the market, focusing on brand reputation, unique offering, and general premium product. The demand for premium spirits is still high even in periods of fiscal moderation because of renewed emphasis on quality and new products innovations.

Market Segmentation

According to the classification in India, the alcobev sector is structured as follows:

IMFL (Indian Made Foreign Liquor)

IMIL (Indian Made Indian Liquor)

Beer

Wine

Imported alcohol

Andhra Pradesh, Karnataka, Maharashtra, Telangana, Uttar Pradesh and West Bengal are among the principal consumer states.

Consumer Landscape

The consumer profile of India is changing evolving with rapidly propagating middle class. The segment is broadly categorised into::

Mass Premium Segment: Driven by affordability and accessibility, this segment appeals to a broad base of consumers seeking quality options at competitive prices, fuelling steady volume growth.

Prestige and Above Segment: Increased aspiration, international travel experiences and expanding brand awareness among urban consumers are key factors propelling growth in this premium market segment.

Evolving consumer demand includes:

Craft and flavoured spirits

Regionally customized blends

Multichannel brand engagement

Growth Potential

The Alcobev market of India is still underpenetrated when compared with an international benchmark. Growth catalysts include:

Demographic dividend: India?s young population drives economic vitality and future growth potential.

Urban migration and infrastructure development

Growing on-premise consumption

Greater social acceptance for drinking amongst women

Worldwide travel and exposure to the international drinking habits

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In operating in various markets, we are exposed to various finance and operational risks including market risks and liquidity and credit risks. Board oversight of risk management complements senior leader guidance by finance function in order to maintain effective risk control.

Market Risk

Market risk refers to the exposure to the possibility of financial disadvantage due to the movement in market prices – especially interest rates, foreign exchange rates and other financial conditions.

Interest Rate Risk

Financial risk caused by the fluctuations in interest rates is mainly due to our floating-rate debt instruments. Fluctuations in rates of benchmark interest rates could affect the rates that we pay in interest and the projections that we make of our cash flows. We keep on measuring risk and incorporate this into our borrowing strategies.

Foreign Currency Risk

Foreign currency risk is primarily related to transactions/ balances including USD, GBP, and AED, among others and particularly with reference to trade receivables, payables and outstanding borrowings. We review net exposures associated with imports and exports and do hedging wherever required. The Company continuously evaluates foreign exchange risk through regular analysis of market trends and currency movements to mitigate potential adverse impacts.

Inflation Risk

Increases or decreases in prices of the basic raw materials like ethanol, glass or grains, and fuel, can impact our cost of production. Our credit risk is heavily weighted toward specific states with major exposure to a few large customers.

Credit Risk

However, the concentrations of credit risk are concentrated in a few states with significant private sales.

Trade receivables: On credit and mainly from sales to government and private agencies.

Bank deposits and financial instruments: Funds are deposited in reputable banks and public institutions that adopt a conservative approach to risk.

We manage credit risk through:

Credit approvals and limits

Continuous monitoring of customer creditworthiness

Under the Expected Credit Loss (ECL) approach applied to gated receivables (except for low-risk accounts) Respective credit risk amounts for the majority of our cases originate from sales in specific states where dealings with non-government entities are considerable.

Liquidity Risk

Liquidity risk is the risk of our failure to meet routine or upcoming cash needs in a reasonable cost.

Liquidity risk is primarily caused by the commitments existing such as bank loan, lease payments, trade receivables and other financial debt.

We try to ensure to have enough liquidity because we review our net position regularly and deploy trade receivables as well as short-term borrowing arrangement.

This is the responsibility of the finance department, as instructed to do by the senior leadership in terms of the planning of strategies for cash management and funding operations.

Regulatory Risk

The Alcobev industry is highly regulated as the regulations are state specific. Licensing, taxation, or distribution policy changes at the state or central level may upset our business processes.

Cybersecurity and Data Protection Risk

Increasing digitization poses cybersecurity threats. In case of data breaches or IT systems failure, the business operations might be compromised, and noncompliance penalties may occur.

NET DEBTS

During the course of the year, the Company witnessed an improvement in net debt profile and the leverage ratios. Net IPO proceeds were utilized for repayment of high cost debt and statutory overdues in July 2024. The borrowings as on 31st March 2025 is mainly on account of working capital requirement, capex and acquisitions including backward integration projects. These borrowings are sourced on the back of enhanced credit ratings to A- with positive outlook. These ratings have given your Company?s access to more economical debt sources, thereby reducing interest costs and increasing shareholder value

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

We have an adequate system of internal controls in place. We have documented policies and procedures covering all financial and operating functions. These controls have been designed to provide a reasonable assurance regarding maintaining of proper accounting controls for ensuring reliability of financial reporting, monitoring of operations, and protecting assets from unauthorized use or losses, compliances with regulations. We have continued our efforts to align all our processes and controls with global best practices.

There have been no changes in our internal control over financial reporting that occurred during the period covered by this annual report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. During FY25, we assessed the effectiveness of the Internal Control over Financial Reporting and has determined that our Internal Control over Financial

Reporting as at March 31, 2025, is effective.

Material Developments in Human Resources / Industrial Relations Front, Including Number of People Employed

During the financial year March 2025, the Company continued to prioritize the development and well-being of its human capital, recognizing employees as a key pillar of sustainable growth. The Company is committed to foster a workplace culture that empowers our teams, supports career progression, and strengthens high levels of engagement across all levels.

Human Resources Initiatives

Capability development continues to be a strategic enabler as ABD transitions into a more diversified spirits

Company. The HR team has actively addressed shifting role expectations, especially in light of internal mobility and the expanding premium portfolio. During the year, two focused digital learning initiatives were rolled out to meet emerging capability needs.

A performance-driven culture was further reinforced through the implementation of enhanced appraisal systems and merit-based recognition programs.

Digital HR transformation initiatives were undertaken to streamline HR operations, including the deployment of digitalized recruitment tool.

Employee Engagement & Welfare

Various employee engagement activities were conducted throughout the year, including wellness programs, virtual town halls, and sport events, to foster a positive work environment.

Employee health and safety remained a key focus, with health check-ups, comprehensive health insurance plans, mental wellness support, and improved workplace safety protocols.

Industrial Relations

The Company maintained harmonious industrial relations throughout the year, closing long term wage settlements with no significant disruptions to operations.

The Company remained compliant with all applicable labor laws and regulatory requirements.

Workforce Strength

As of March 31, 2025, the total number of employees stood at 902 compared to 889 as of March 31, 2024.

The workforce includes personnel across various functions such as Sales & Marketing, Manufacturing, Finance and all other Corporate functions.

REFERENCES

Institute of International Finance (IIF), Global Debt Monitor Q1 2025; International Monetary Fund (IMF), World Economic Outlook, April 2025; Reserve Bank of India (RBI), Monetary Policy Report, April 2025; National Payments Corporation of India (NPCI), 2025; Ministry of Finance, Union Budget 2024–25; WHO, Global Status Report on Alcohol, 2024; IWSR Drinks Market Analysis, 2024; The Economist: Global Elections Outlook 2025; MoSPI, Government of India, 2025; OECD Global Consumption Database, 2024; GourmetPro – Definitive Guide to the Indian Spirits market 2025

FINANCIAL RATIOS STANDALONE