Northern Spirits Ltd Management Discussions

GLOBAL ECONOMIC OVERVIEW

The global economy despite facing several shocks such as geopolitical tensions, trade disruptions and elevated interest rates showed relative stability throughout 2024 and is expected to remain modest but uneven in 2025. According to IMF Outlook April, 2025 the GDP is projected to drop to 2.8% in 2025 and 3% in 2026 which is down from 3.3% in 2024. 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. According to IMFs forecast growth in advanced economies is projected to be 1.4% in 2025. Growth in the United States (US) is expected to slow to 1.8% on account of greater policy uncertainty, trade tensions and softer demand momentum.

World GDP growth projections for 2024, 2025 and 2026 (in %)

Country	2024	2025 (P)	2026 (P)
Global Economy	3.3	2.8	3
Advanced Economies	1.8	1.4	1.5
Emerging Markets &	4.3	3.7	3.9
Developing Economies

The swift escalation of trade tensions and extremely high levels of policy uncertainty are expected to have a significant impact on global economic activity. For economies imposing tariffs, such tariffs will act as a supply shock feeding inflationary pressures. In contrast, the duties will act as a negative demand shock and weigh on inflation in tariffed economies. While headline inflation in developed markets is gradually retreating toward central bank targets, we forecast increasing inflation divergence between the US experiencing a tariff-induced inflation reacceleration and other economies experiencing ongoing disinflation. Emerging markets continue to grapple with localized cost pressures and currency volatility, especially where monetary policy easing is constrained, but Asia should experience ongoing disinflation. Overall, global inflation is forecast to decline from 4.5% in 2024 to around 3.6% in 2025, though downside progress remains vulnerable to commodity shocks, trade frictions, foreign exchange volatility and supply constraints.

Monetary policy is entering a new phase of divergence. While the disinflation trend has allowed central banks to pivot toward easing, the pace and scale of rate cuts will vary widely. In emerging markets, policy stances are increasingly reactive. While India, Mexico and South Korea are cautiously easing to support demand, others like Brazil, Nigeria and Turkey are maintaining or tightening policy to anchor inflation and stabilize financial conditions amid ongoing volatility.

Fiscal policy is increasingly constrained by high debt, rising interest costs and political pressure for social spending, tax relief and defense outlays. While some governments are tightening, others are expanding to counter social unrest or weak growth.

Global labor markets are undergoing a structural transformation as firms respond to cost pressures, demographic constraints and shifting technology frontiers.

The road ahead requires clarity and coordination. All Countries should work constructively to promote a stable and predictable trade environment, facilitate debt restructuring and address shared challenges. At the same time, they should address domestic policy and structural imbalances, thereby ensuring their internal economic stability.

INDIAN ECONOMY

Indias economy demonstrated remarkable resilience in FY 2024-25, achieving a GDP growth of 6.5% despite global headwinds and domestic challenges. While this represented a four-year low compared to the previous years 9.2% growth, it maintained Indias position as the worlds fastest-growing major economy.

This growth was supported by resilient domestic consumption, consistent government spending and a gradual easing of inflationary pressures. Proactive policy measures also enhanced market liquidity and supported economic momentum. However, external risks, particularly foreign portfolio outflows and currency volatility, remain key areas that require close monitoring.

The services sector remains a crucial contributor to the economy, accounting for 55.3% of gross value added (GVA) in FY 2025. Services exports surged by 12.8% year-on-year, with information and computer-related services experiencing consistent double-digit growth over the past decade. Tourism and hospitality have also rebounded strongly post-pandemic, with foreign tourist arrivals increasing by 18.5% in FY 2025.

According to the Economic Survey 2024-25 structural reforms in taxation, ease of doing business, and FDI policies continue to enhance Indias competitive position. The governments emphasis on infrastructure modernization, including logistics, smart cities and digital connectivity creates a robust foundation for long-term economic expansion.

Despite volatility in the global macroeconomic environment, the outlook for the Indian economy remains positive. Sustained political stability, enhanced government focus on public capital expenditure, increasing private capital expenditure, growing credit demand, moderating inflation, low corporate debt levels, and deleveraged balance sheets, are all expected to contribute to the economic growth.

The outlook for Indias economy in FY 2025-26 remains cautiously optimistic, with growth projections ranging between 6.3% to 6.5% across various international agencies, positioning India to continue as the fastest-growing major economy globally. The Reserve Bank of India has adopted a supportive monetary stance, cutting the repo rate by 50 basis points to 5.5% and shifting to a neutral policy stance to maintain growth momentum amid global uncertainties.

INDIAN SPIRITS INDUSTRY

According to IWSR (a global authority on alcobev data and insights) data, Indias alcobev volume registered a 2% compound annual growth rate (CAGR) between 2018 and 2023, mirroring the growth rates of Brazil and Mexico.

Indias year-over-year growth in alcobev volume accelerated to 5% in FY 2022-23, surpassing its 2018-23 CAGR. Provisional data for 2024 points to a continued, albeit slightly slower, year-over-year growth of 2% in Indias total alcobev volume for FY 2023-24. Moreover, the agency forecasts alcobev volume to double during the 2023-28 period to CAGR of 4%.

However, the report states that recent bilateral trade treaty between India and the UK that could lead to a reduction in the landed cost of Scotch whisky in the country. In 2022, the Indian alcobev market size was approximately 3.1 billion litres of pure alcohol, with distilled beverages accounting for about 92% of this. The report concludes that Indias low per capita consumption, favorable demographics and a growing drinking population present significant future growth potential for the alcoholic beverage market.

Indias alcobev market is undergoing a significant transformation, driven by evolving consumer preferences, rising affluence and industry innovation. Changing social attitudes, including increased acceptance among women in metro cities are further catalyzing expansion in the consumer base. Additionally, as more individuals enter the workforce at a younger age, the demand for premium alcoholic beverages is seeing a marked increase, fuelled by shifting social norms and aspirations for enhanced quality of life. premiumisation stands out as a major trend in the Indian alcoholic beverage market with consumers moving towards higher-quality products. Consumers are showing a growing preference for artisanal, small-batch and heritage spirits, reflecting a rising appreciation for authenticity, quality and craftsmanship. Cocktail culture continues to flourish, with a greater emphasis on curated bar experiences and the use of locally sourced ingredients.

Moreover, with the increasing awareness about environmental sustainability and ethical practices, consumers are gravitating towards brands that prioritize sustainability throughout their supply chain.

The Indian spirits market remains the dominant force within the alco-beverage industry, contributing over 83% of total market value, reaching Rs. 2,66,400 Crores in FY 2024. Over the past five years, the segment has expanded at a CAGR of 7.7%, with projections indicating further growth at 8.3% CAGR, reaching Rs. 3,97,600 Crores by FY 2029. Domestic spirits dominate the market, accounting for 98% of total spirits sales, while imported spirits contribute 2% in FY 2024. The value share of imported spirits has increased from 1.7% in 2019 to 2.0% in 2024 and is projected to reach 2.3% by 2029, reflecting the growing consumer preference for premium and luxury international brands. Meanwhile, beer and other alco-beverages account for 17% of the total market, standing at Rs. 56,000 Crores in FY 2024, followed by wine, which contributes a modest 1% share, valued at Rs. 36,000 Crores in FY 2024. However, wine has emerged as the fastest-growing alco-beverage category, outpacing spirits and beer with a 13.0% CAGR from FY 2019. This growth trajectory is expected to accelerate to 17.6% CAGR, pushing the segment to Rs. 7,200 Crores by FY 2029.

In the wine segment, growing health consciousness and a shift towards sophisticated drinking choices are driving demand. Red wines dominate, while white and sparkling wines are gaining traction, supported by better availability and branding. Domestic wineries are also expanding, benefiting from rising consumer awareness.

Market trends

There is a noticeable shift towards premium and high-quality products in the Indian wine and spirits market. With the continued growth of the middle class, urbanization, consumers are increasingly willing to pay more for premium and imported brands, driven by a desire for sophistication and status. Imported brands are projected to grow at a CAGR of 9.5% during the forecast period.

Wine consumption in India is experiencing steady growth, particularly among urban millennials and young professionals. This demographic is more inclined towards experimenting with new flavors and varieties. According to a study by Euromonitor International, wine is expected to outperform other alcoholic beverages in India, with a projected CAGR of 13% over the next five years.

The demand for healthier beverage options is increasing, with low-alcohol and low sugar content gaining popularity. The wine market is expected to witness a growth in demand for organic wines.

Retail channels for alcobev in India encompass a variety of outlets, including government-regulated stores, licensed liquor shops, bars/restaurants, duty-free shops, and informal markets. Alongside traditional options, new formats like specialty liquor stores, boutique wine shops and upscale bars/lounges are emerging. These venues offer curated selections and personalized experiences to appeal to discerning consumers, reflecting an evolving retail landscape.

The quality of bars and restaurants in India is now reaching world-class standards, with many of them ranked among Asias top 50 and the worlds top 50, creating world-class environments for high-quality beverage consumption.

The Indian alcoholic beverage market is driven mainly by domestic production, with whisky imports primarily used for blending in Indian Made Foreign Liquor (IMFL). India remains the worlds largest importer of Scotch whisky, with the premiumisation trend anticipated to further increase whisky imports.

India ranks 40^th globally in alcoholic beverage exports, and has significant opportunities for expansion, particularly in key markets such as the UAE, Singapore and Africa. The government is actively supporting this growth through initiatives like participation in global trade shows and improving market access.

Regulatory reforms and privatisation are expected to further drive the sectors expansion, unlocking substantial economic potential.

The Indian Alcobev industry is segmented into

IMFL (Indian Made Foreign Liquor), IMIL (Indian Made Indian Liquor)

Wine

Beer

Imported Alcohol.

By consumption patterns, Telangana, Maharashtra, West Bengal, Odisha, Karnataka, Uttar Pradesh, Punjab, etc. are among the largest consumers of Alcobev in India. Liquor stores serve as the predominant sales channel nationwide, especially since Alcobev consumption and sales primarily occurs outdoors.

The Indian spirits industry is poised for sustained and broad-based growth, supported by a favourable macroeconomic environment, rising affluence, and a more conducive regulatory landscape. Several states have taken progressive steps to simplify licensing, enhance distribution efficiency and promote ease of doing business, marking a notable shift in the operating environment. Despite ongoing regulatory complexities and a high-tax environment, the outlook for Indias spirits industry remains positive, supported by structural changes and continued demand for premium and differentiated offerings.

Government Schemes and Initiatives

The government supports the liquor sector through various initiatives of which few of them are:

Foreign Direct investment of 100 per cent is allowed under the automatic route for brewing and distillation of liquor, subject to licensing. The government has proposed setting up a National Grape and Wine Board (NGWB) on the lines of existing commodity boards like the Coffee and Tea Board.

APEDA promotes Wine of India Globally. APEDA has been entrusted with the responsibility of export promotion and development of scheduled products which include alcoholic and non-alcoholic drinks.

On December 18, 2020, the Government of Indias Food Safety and Standards Authority of India

(FSSAI) issued new regulations and standards for alcoholic beverages. These regulations include updated requirements for low alcoholic beverages including craft beers, alcohol-free beer and wine-based beverages, geographical indications, and labelling requirements for wine. Overall, the regulations cover the Definitions, Standards, Ingredients, Labelling, Packaging, Hygiene and Safety, Licensing and Registration, Adulteration and Contaminants, Alcohol Contents, and Import and Export of alcoholic beverages. The Government of Karnataka has provided a subsidy of Rs 50,000 per hectare under the National Horticulture Mission for new plantations. Uttar Pradesh will provide free excise duty and other considerations for wine produced from fruits grown in the state. In Meghalaya, the State government announced the setting up of a wine incubation center.

OPPORTUNITIES AND THREATS Opportunities

The Indian alcohol industry is in a nascent stage compared to the global liquor industry. The growing economy supports the sector through an interplay of demographics, urbanisation and policy reforms

India has one of the youngest populations globally. The total population of India is estimated at 1.43 billion for 2025. The median age in India is estimated to be 28.2 years in 2023 and is expected to remain under 30 years until 2030. This trend is expected to lead to rising income levels per household as well as higher levels of discretionary expenditure.

Tier 2 and Tier 3 cities are emerging as lucrative markets for alcoholic and non-alcoholic beverages, presenting opportunities for brands to expand their distribution networks beyond metro cities.

With increasing awareness about environmental sustainability and ethical practices, consumers are gravitating towards brands that prioritize sustainability throughout their supply chain.

The trend towards premiumization is expected to continue across both alcoholic and non-alcoholic beverage segments, as consumers increasingly seek higher quality and differentiated products.

Innovation in product offerings, packaging, and marketing strategies will be key for brands to capture market share and stay competitive in Indias dynamic beverage market.

Digital media is an effective instrument of alcoholic beverage marketing. Digital marketing has facilitated the reach of alcoholic beverage industry to its consumers and made alcoholic drinks more easily accessible than before. Influence-based campaigns are now a cornerstone of the marketing strategy.

Several states are developing beneficial excise policies that encourage a more favourable customer experience. Opportunities are provided to set up attractive retail outlets at prominent locations, including malls and airports. Excise policies are being reconsidered by states with two goals, namely improved customer experience and revenue optimization. In several states, tax reform efforts have also been initiated to reduce tax structure inequality and recover revenue loss due to increased sales.

Recent policy changes have created a more favourable business environment, offering opportunities for industry players to expand operations and streamline supply chains. Many organisations would leverage these regulatory shifts by refining their market strategies, enhancing compliance frameworks, and exploring new growth opportunities to drive long-term sustainability and expansion.

Threats

The Indian alcoholic beverage industry is governed by a highly fragmented regulatory framework, with each state implementing distinct excise policies, licensing structures, and tax regulations. Unlike other industries, alcohol is regulated at the state level rather than centrally, leading to inconsistent policies across regions. The process of obtaining licenses for manufacturing, distribution, and retail is complex, bureaucratic, and cost-intensive, often requiring substantial financial investment and prolonged approvals.

The alcohol market in India is highly fragmented, with different states having their regulations, taxes and distribution models. This creates complexities in reaching all potential markets effectively. The varying tax structures across different states lead to significant price differences, which in turn impact both the affordability of alcoholic beverages for consumers and the profitability of manufacturers.

The alcoholic beverages do not come under the goods and services tax (GST) framework. State Governments are allowed to implement their independent price control mechanisms, creating variation in the pricing models and methodologies applied across states.

The prevalence of illicit liquor, smuggling, and counterfeit alcohol poses a significant challenge to the legal alcohol industry. Many price-sensitive consumers opt for non-regulated alternatives, leading to revenue losses for legitimate businesses and potential health risks for consumers. Counterfeit products also erode brand equity, reducing consumer trust and impacting long-term profitability. Enforcement mechanisms to curb illegal alcohol trade vary across states, making regulatory compliance and brand protection even more challenging for new entrants.

Alcohol consumption in India is subject to cultural and societal opposition, influenced by religious beliefs and public health concerns. Advocacy groups and conservative communities often lobby for stricter regulations, leading to periodic changes in state policies, including bans and increased taxation. Negative perceptions surrounding alcohol consumption in certain demographics impact demand patterns and influence government policy decisions, adding to the unpredictability of the business environment.

Alcohol production globally relies on key raw materials such as grains, molasses and grapes, the prices of which fluctuate due to agricultural policies, climate conditions and global market trends. Further, state-specific restrictions on inter-state transportation and differential tax structures increase logistical complexities, often necessitating region-specific supply chains. These challenges result in high operational costs, making market entry and sustainable operations difficult for new players. Disruption in global supply chain can also lead to inventory shortage in imported liquor.

Growing awareness of health risks associated with alcohol consumption is driving a shift towards low-alcohol and non-alcoholic alternatives, forcing traditional beverage companies to adapt with agility to evolving consumer preferences.

Marketing alcoholic beverages in India presents considerable challenges due to stringent regulations that prohibit direct advertising across television, print and digital media. As a result, Companies often adopt brand extension strategies, promoting related non-alcoholic products such as bottled water, soda and music merchandise to maintain visibility.

The Indian alcoholic beverage market is dominated by established players all of which have extensive distribution networks and strong brand loyalty and knowledge of compliances. This makes it challenging for new entrants to compete on price, availability and consumer preference. Additionally, premium segments face competition from imported brands, further intensifying market dynamics. As a result, new players must make significant investments in branding, marketing and strategic partnerships to gain a foothold in the industry.

RISKS AND CONCERNS

Risk is an integral and unavoidable component of business. Given the challenging and dynamic environment of operations, your Company is committed to manage risk for accomplishment of its goals. Though risks cannot be eliminated, an effective risk management program ensures that risks are reduced, avoided, mitigated or shared. Following are the identified key business risks of the Company:

Type of Risk	Nature of Risk	Risk Mitigation Measures
1. Competition Risk	The market of liquor industry is rapidly evolving and the growth potential is likely to draw increased competition internationally as well as domestically and the Company expects that competition will continue to intensify due to new and varied product launches.	The Company has a robust nationwide distribution market. The brands have a very strong loyalty and steps have been taken to maintain the supply of the high contribution brands in the most profitable markets.
2. Regulatory Risk	The liquor industry is a high-risk industry, primarily on account of the high taxes and innumerable regulations governing it. As a result, liquor companies suffer from low pricing flexibility and have underutilized capacities, which, in turn, lead to low margins. Any changes in state- specific regulations or lapses in compliance could disrupt operations, delay product movement, and adversely impact the Companys profitability and overall business performance.	Company ensures compliance with the applicable rules and regulations in all the States where it is present. It also ensures that strong backup methods are in place to counter any adverse or abnormal situation that might affect the industry.
3. Cyber Security Risk	This risk can also be called data security and information breach. It causes financial loss, operational disruption as well as reputational damage to the Company.	Company has a centralized inventory established for all IT managed applications and infrastructure servers and also for managing all critical information assets. Company regularly conducts use of machine learning and threat intelligence to detect and block sophisticated threats. All servers, network devices are patched on regular basis. It also conducts mandatory global e- learning and regular phishing exercises for all employees to educate them about Cyber Security Risk.
4. Compliance Risk	Compliance risk involves the risk of facing legal, financial or reputational repercussions due to non-compliance with regulations, laws, internal policies and industry standards.	Company has implemented effective controls, systems, policies, and procedures to ensure identification, assessment and management of compliance risks on an ongoing basis. Company is committed to maintaining the highest standards of compliance by aligning the performance objectives with regulatory compliance requirements.
5. Economic Risk	A slowdown in global economic growth, driven by ongoing geopolitical tensions, may reduce consumers disposable income and dampen demand in the industry. This could adversely impact the Companys financial performance.	The Company leverages its robust business model and diverse premium product portfolio, which provides resilience during macroeconomic slowdowns. Its wide-reaching distribution network and sound financial position further enhance stability and enable quick market responsiveness.
6. Inflation risk	Your Company like other companies is part of Indian economy and is facing risk of inflation and high fluctuation in commodity prices.	The Companys long-standing relationship with most suppliers ensures steady availability of products at competitive prices.

FINANCIAL PERFORMANCE OVERVIEW

Gross revenues for this financial year stood at Rs. 1,94,261.38 Lakhs as against Rs. 1,23,530.58 Lakhs in the previous year. After providing for depreciation and taxation the net profit of the Company for the year under review was placed at Rs. 2,296.96 Lakhs as compared to the net profit of Rs. 1,657.28 Lakhs incurred during the previous year registering a steady growth of 38.60%. The Earnings Per Share (EPS) stood at Rs. 14.33 (face value of Rs. 10/- each) for the financial year ended 31^st March, 2025 as against Rs. 10.32 (face value of Rs. 10/- each) in the previous year. Company has maintained its momentum of satisfactory performance both in terms of profitability and turnover inspite of the challenges faced during the year. Companys prime focus has been on operational efficiency and prudent marketing by introducing new core brands in the market.

HUMAN RESOURCE DEVELOPMENT

The Companys relation with the employees and investors continues to be cordial which are the most valuable resources of our organization.

Company is committed to sustainable work practices and a transparent work culture which helps in attracting and retaining the talented people in the industry. The Company continues to focus on employee core connect, engagement, learning and development to build a workplace that is safe engaging and productive. Employees are presented with various learning opportunities to enhance career growth. Over the years your company has been able to build a team of qualified, dedicated & motivated professionals. The working atmosphere provided to the employees is aimed at creating a sense of ownership which helps them to shoulder greater responsibilities.

The Company firmly believes that its human resources are the key enablers for the growth of the Company and, therefore, an important asset. Taking this into account, the Company continues to invest in developing its human capital and establishing its brand in the market to attract and retain the best talent.

Employee relations during the period under review continued to be healthy, cordial and harmonious at all levels and the Company is committed to maintaining good relations with the employees.

ADEQUACY OF INTERNAL CONTROL SYSTEM

Company maintains an adequate system of internal controls commensurate with the nature, size, and complexity of the business operations. The Company has ensured that stringent and comprehensive controls are put in place to ensure effective and productive use of resources, safeguarding of the Companys assets and interests, all transactions are approved, registered, properly reported and checks and balances guarantee reliability and consistency of accounting data.

The Internal Auditor monitors and evaluates the efficacy and adequacy of internal financial control systems in the Company, its compliance with operating systems, accounting procedures and policies at all levels of the Company.

The internal control system facilitates optimum utilisation of available resources to ensure the protection of interest of all the stakeholders. Significant audit observations and the corrective actions thereon are presented to the Audit Committee of the Board. The control framework is established and maintained by the Company. The observations by the auditors is perused by the Management, the Audit Committee as well as the Board for proper implementation. The Companys internal financial controls have been found to be adequate and effective.

CAUTIONERY STATEMENT

The statements in the above analysis, describing the Companys projections, estimates, expectations or predictions may be ‘forward looking statements within the meaning of applicable securities laws and regulations. The actual results may differ from those expressed or implied. Important factors that could make a difference to the Companys operations include changes in government regulations, tax regimes, economic developments within the country and abroad, and other related factors.

	For and on Behalf of the Board of Directors
	s/d-
	Ankush Bakshi
Place: Kolkata	Managing Director
Date: 28th May, 2025	DIN: 02547254