Cupid Breweries & Distilleries Ltd Management Discussions

1. Macro-Economic Overview

The Indian economy continues to demonstrate resilience amidst global headwinds, supported by robust domestic demand, government-led infrastructure push, and a growing consumption base. India remains one of the fastest-growing major economies in the world, with GDP growth projected in the range of 6 6.5% for FY 2025-26, driven by services, manufacturing, and private consumption.

The Alcobev (alcoholic beverages) industry has been a notable beneficiary of rising disposable incomes, urbanization, and evolving consumer preferences. Indias alcohol consumption has increased steadily from 4.86 billion litres in 2020 to 6.21 billion litres in 2024. The industry is projected to maintain a CAGR of 6 8%, with the market value expected to touch USD 55 60 billion by 2030.

The spirits segment dominates overall consumption, while beer and craft beer are witnessing accelerated growth, fuelled by shifting consumer choices towards premium and experiential products. Indias demographic dividend with over 65% of the population below 35 years of age along with increasing social acceptance of alcohol consumption, continues to drive market expansion.

At the global level, despite inflationary pressures and geopolitical uncertainties, the premiumization trend in alcobev remains intact, with rising demand for craft, premium spirits, and flavoured beverages. In India, state-specific regulatory regimes and taxation continue to influence industry dynamics, but proactive reforms in select states are creating opportunities for organized players.

The company expects to benefit from these favourable macroeconomic and industry trends, leveraging its multi-brand portfolio, expanding its manufacturing base, and international forays to capture a significant share of the growing market.

2. Industry Structure and Developments

The Indian alcohol and brewing industries are among the largest globally, characterized by diverse product offerings, strong consumer demand, and a complex regulatory environment with both central and state-level controls. Recent years have witnessed:

State-level reforms in excise and licensing frameworks. Increasing acceptance of premium and craft beverages. Growth in flavoured spirits and ready-to-drink categories.

Changing demographics, with over 65% of the population below 35 years, continue to shape demand for premium and mid-segment products.

3. Opportunities and Threats

Opportunities

Expansion into Tier-II and Tier-III cities where consumer preferences are evolving.

Growing demand for premium, craft, and flavoured liquor.

Export potential and international brand positioning, leveraging subsidiaries, engaging contract bottling Units, etc. Government focus on Make-in-India and simplified project approvals.

Threats

High dependency on state-specific excise regimes and frequent regulatory changes.

Rising input costs of ENA, packaging, and logistics.

Intense competition from domestic and multinational players. Taxation and prohibition risks in certain regions.

4. Segment-wise / Product-wise Performance

The Company operates as a single segment engaged in the manufacture and sale of alcoholic beverages beer, IMFL, and craft spirits.

During FY 2024 25, the Company focused on strengthening its operational base and laying the foundation for future expansion. Major emphasis was placed on upcoming projects engaging those units as contract bottlers out of those identified are

Goa (Ponda) development of a distillery and brewing facility. Mysore, Karnataka expansion of brewing capacity. Kalyani, West Bengal setting up of a new integrated unit. Pune, Maharashtra expansion of craft beer and premium segment production.

Additionally, subsidiary Crochet Industries Pvt. Ltd. has initiated groundwork for an integrated resort and through re-design & re-engineering converting its original IMFL unit as Malt-Spirit, using those with additional equipment at facility in brewing facility in Gopalpur, Odisha, marking a strategic step towards backward integration and tourism-driven business.

5. Outlook

The Company remains optimistic about medium to long-term prospects, backed by: Capacity expansion and modernization of brewing and distillation infrastructure. Launch of premium variants and ready-to-drink beverages. Strengthening distribution and retail networks in Southern and Eastern regions. Leveraging hospitality and tourism-linked ventures for enhanced brand visibility.

The Company is confident that its diversified strategy will enable sustainable growth and market leadership.

In addition to its domestic growth plans, the Company is also evaluating opportunities in Ras Al Khaimah (UAE) and Uzbekistan, which are expected to strengthen its global footprint.

6. Risks and Concerns

Volatility in raw material prices and supply chain disruptions. Unpredictable state excise and taxation changes. Regulatory and legal risks inherent to the alcobev sector.

Currency fluctuations and geopolitical risks impacting imports and overseas investments.

Risk Mitigation Measures: The Company has implemented proactive compliance systems, long-term vendor tie-ups, and regulatory engagement to minimize business impact.

7. Internal Control Systems and Adequacy

The Company has established a robust internal control framework aimed at ensuring accuracy of financial reporting, safeguarding of assets, and compliance with applicable laws and regulations. As an emerging company with expanding operations, the internal control systems are being continuously strengthened and upgraded to match the scale and complexity of the business.

Periodic internal audits are conducted across functions.

The Audit Committee of the Board regularly reviews audit observations and ensures timely corrective actions.

The Board and management remain committed to further improving the control environment in line with the Companys growth trajectory.

8. Discussion on Financial Performance with respect to Operational Performance

During FY 2024 25, the Company reported a decline in total income compared to the previous year, primarily due to subdued operational scale-up and higher fixed costs. The net loss widened as ongoing investments in people, capacity, and compliance preceded full revenue generation. Borrowings increased in line with project financing requirements, while equity infusion provided additional liquidity.

As the Company progresses with its upcoming contract bottling Units in Goa, Mysore, Kalyani, and Pune, management expects operational leverage to improve margins in the medium term. The Company remains focused on achieving sustainable profitability through disciplined execution, cost optimization, and prudent financial management.

9. Human Resources / Industrial Relations

As on March 31, 2025, the Company had 5 employees on its rolls, supported by contractual and outsourced resources as per operational requirements. The Company regards its employees as its core strength. Continuous investments were made in training, leadership development, and upskilling. Total workforce expanded to support enhanced production and sales operations.

Industrial relations remained cordial across all plants. The HR function is implementing a performance-linked incentive program and is actively attracting young professionals for technical and strategic roles.

10. Key Financial Ratios and Return on Net Worth

In compliance with Regulation 34 of SEBI (LODR) Regulations, 2015, the Company has evaluated key financial ratios. The following significant changes (25% or more) were observed during FY 2024 25 as compared to FY 2023 24:

Debt-Equity Ratio: The ratio increased significantly on account of higher borrowings ( 684.07 lakh in FY25 vs 216.03 lakh in FY24) and a negative net worth position, reflecting ongoing capital infusion and project funding requirements.

Operating Profit Margin (OPM): Declined sharply due to an increase in Pre-Revenue Operating expenses ahead of full-scale revenue generation, resulting in negative margins.

Net Profit Margin (NPM): Continued to remain negative due to widening net loss, largely attributable to fixed overheads, finance costs, and limited revenue during the year.

Return on Net Worth (RoNW): Negative in FY 2024 25 owing to accumulated losses and negative net worth position ( 170.33 lakh as at March 31, 2025).

The above changes are primarily due to the emerging stage of operations, capacity build-up, and ongoing investments in new projects, which are expected to start contributing to revenues and profitability in the coming years.

Other ratios, such as Current Ratio, Debtor Turnover, and Inventory Turnover, were not meaningful due to the early stage of operations.