Radico Khaitan Ltd Management Discussions

The global economy exhibited relative steadiness throughout CYYcYX despite navigating a complex landscape shaped by geopolitical tensionsX trade disruptionsX and elevated interest rates Amid these challengesX global GDP growth reached JJe in CYYcYX supported by resilient labour marketsX a gradual decline in inflationX and stable private consumption – particularly across emerging markets HoweverX growth is expected to slow down to YAe in CYYcY X primarily due to new tari measures introduced by the United States and retaliatory actions by key trading partners A modest recovery is anticipated in CYYcYX with global growth projected at Jce

P - Projected

Global inflation moderated in CYYcY but remained above pre-pandemic levels in many economies Headline inflation is projected to ease to Je in CYYcY and J?e in CYYcY?X down from a peak of over Ae in CYYcYY Advanced economies are expected to reach their inflation targets soonerX while emerging markets will experience a more gradual decline Despite declining commodity prices and tighter monetary policiesX the path to price stability remains uneven across regions

Advanced economies grew at a modest pace of Ae in CYYcY and are projected to expand more slowly at e in CYYcY and e in CYYcY? In contrastX emerging markets saw stronger momentumX led by India and ChinaX which posted robust growth rates

While emerging and developing economies continue to outperform their advanced counterpartsX their growth is expected to moderate to Je in CYYcY and Je in CYYcY?X reflecting the impact of softening global demandX waning fiscal stimulusX and tighter international credit conditions The long-term impact will depend on how trade tensions evolve and the extent to which businesses adapt to the new landscape

Source IMF World Economic OutlookX April YcY

India sustained its robust macroeconomic resilience in FYYcY X recording an estimated GDP growth of ? e and rearming its position among the worlds fastest-growing major economies This growth was supported by resilient domestic consumption (particularly in the rural areas)X consistent government spendingX and a gradual easing of inflationary pressures Proactive policy measures also enhanced market liquidity and supported economic momentum HoweverX external risksX particularly foreign portfolio outflows and currency volatilityX remain key areas that require close monitoring

The governments continued emphasis on infrastructure developmentX digital transformationX and manufacturing – particularly through the "Make in India" initiative – has been instrumental in driving economic momentum Key sectors such as constructionX telecommunicationsX financial servicesX and fast-moving consumer goods (FMCG) have witnessed significant expansionX reflecting robust domestic demand and investment activity AdditionallyX the recovery in rural demandX coupled with moderating inflationX has further strengthened consumption patternsX contributing to broad-based economic resilience Despite global headwindsX Indias external position remained stableX reinforcing its economic strength and long-term growth prospects

Inflationary pressures eased significantly in FYYcY X with average retail inflation declining to ?e – the lowest level since FYYc This milestone underscores the eectiveness of the Reserve Bank of Indias (RBI) pro-growth monetary policyX which has successfully balanced economic expansion with price stability Government interventions on the supply sideX including policy measures to stabilise food pricesX played a key role in curbing inflation AdditionallyX targeted fiscal support and global commodity price moderation have contributed to softening inflationary pressures Looking aheadX headline inflation is projected to decline further to ce in FYYcY?X reinforcing a steady path toward price stability While the inflation outlook remains favourableX global uncertainties and potential weather-related supply shocks continue to pose upside risks to future inflation trends

Indias economic outlook remains strongX with the country set to remain one of the fastest-growing major economies The Reserve Bank of India projects a ? e real GDP growth rate for FYYcY?X driven by robust domestic consumptionX improving rural demandX and steady expansion in manufacturing and services Government-led infrastructure investments continue to support growthX with increased capital expenditure fuelling development On the external frontX strong services exports and resilient remittance inflows have helped cushion the merchandise trade deficitX keeping the current account deficit at sustainable levels

MeanwhileX improved system liquidityX lower borrowing costsX and stable foreign exchange reserves highlight the resilience of Indias financial system Despite challenges like geopolitical tensions and softening global tradeX Indias structural strengths – including a growing workforceX digitalisationX and deeper economic formalisation – are expected to drive long-term growth With a growth-focused policy environment and renewed emphasis on manufacturingX job creationX and rural inclusionX India is well-positioned to maintain strong economic performance in the coming years

Source MOSPIX PIB

Private consumption accounts for over half of Indias GDP and remains one of the fastest-growing economic segments With rising incomes and shifting consumer preferencesX Indias consumption is expected to double over the next decade Household growth is outpacing population growthX leading to smallerX nuclear familiesX which have become a key catalyst for expanding consumption AdditionallyX the recent Lakh Crore tax cuts are expected to boost spending and further strengthen demand As seen in other growing economies such as ChinaX discretionary consumption often outpaces non-discretionary spending during periods of economic expansion With Indias per capita income surpassing US- YXcccX this trend is expected to followX reinforcing the countrys position as a consumption-driven economy

In the post-pandemic eraX consumer spending patterns have shifted significantlyX reflecting evolving preferences and income dynamics While growth remains unevenX demand for premium and luxury products is rising faster than essential goodsX driven by middle- and high-income households with growing disposable incomes Over the last two decadesX Indian households have reshaped their spending habitsX with traditional necessities such as foodX beveragesX and clothing taking up a smaller share of overall spending MeanwhileX discretionary categories – including travelX entertainmentX and high-end products – have seen a sharp rise

This structural shift is further accelerated by Indias youthful demographicX rapid urbanisationX and evolving consumer aspirationsX reinforcing the countrys private consumption sector as a key economic driver Premiumisation has become a core strategy for FMCG companiesX particularly in urban marketsX despite inflationary pressures and price sensitivity among lower-income segments

As consumer confidence and spending continue to riseX businesses must navigate changing market dynamicsX adapt to evolving consumer preferencesX embrace digital transformationX and maintain a customer-centric approach By leveraging innovationX tapping into market opportunitiesX and staying attuned to shifting consumer behavioursX companies can position themselves for long-term growth in this dynamic landscape

The Indian spirits industry delivered moderate growth in FYYcY X navigating a year of two contrasting halves The first half was marked by elevated input costsX delayed excise renewals in key states like Delhi and TelanganaX and a subdued rural demand due to erratic monsoons The second half saw a clear recoveryX supported by stabilising raw material prices and favourable policy developments NotablyX Andhra Pradesh liberalised its trade structureX and Karnataka introduced a simplified pricing and listing frameworkX both aiding ease of doing business and market expansion A strong festive seasonX improving on-trade consumptionX and premiumisation trends further supported volume recoveryX particularly in the Prestige & Above segment

Indias alcobev market is undergoing a significant transformationX driven by evolving consumer preferencesX rising auenceX and industry innovation Premiumisation remains a dominant themeX with a clear shift toward super-premium and craft oerings across whiskyX ginX and rum Consumers are showing a growing preference for artisanalX small-batchX and heritage spiritsX reflecting a rising appreciation for authenticityX qualityX and craftsmanship Cocktail culture continues to flourishX with a greater emphasis on curated bar experiences and the use of locally sourced ingredients

The retail landscape is evolving in parallelX with the emergence of largerX format-driven liquor stores oering wider product assortmentsX improved merchandisingX and elevated shopping experiences These outlets are playing a key role in enhancing brand visibility and consumer discoveryX particularly for premium and niche labels A more inclusiveX gender-neutral drinking culture is taking rootX expanding the market to a broader demographic base In a highly regulated advertising environmentX digital-first marketing – including influencer-led campaigns and omnichannel brand engagement – is redefining how alcobev brands connect with their audiences

According to Euromonitor InternationalX Indias IMFL (Indian Made Foreign Liquor) industry grew by YAe in volume terms in CYYcYX surpassing cc million -litre cases The industrys e value growth reflects a clear shift toward premiumisation White spiritsX including vodka and ginX recorded a robust ?e year-on-year volume growth and e growth in valueX underscoring their rising appeal among Indian consumers While vodka accounts for over a fourth of global spirits consumptionX white spirits comprise only e of the Indian market in volume termsX highlighting significant untapped potential The categorys momentum is being fuelled by favourable demographicsX increasing urban consumptionX and a growing preference for flavoured beverages and cocktail culture Despite ongoing regulatory complexities and a high-tax environmentX the outlook for Indias spirits industry remains positiveX supported by structural changes and continued demand for premium and dierentiated oerings

The Indian spirits industry is poised for sustained and broad-based growthX supported by a favourable macroeconomic environmentX rising auenceX and a more conducive regulatory landscape Several states have taken progressive steps to simplify licensingX enhance distribution eciencyX and promote ease of doing businessX marking a notable shift in the operating environment Premiumisation is no longer a passing trend but a structural shiftX with consumers increasingly seeking higher-quality and dierentiated oerings According to Euromonitor InternationalX IMFL volumes in India are projected to reach Y million -litre cases by CYYcYX with a ce CAGR in volume and Ae CAGR in value between CYYcY and CYYcYX highlighting rising consumer spend per case

White spiritsX particularly vodka and ginX are expected to be standout performers The segment is forecast to grow at CAGR of Ae in volume and e in value between CYYcY and CYYcYX driven by increasing consumer preference for cocktail culture and flavoured spiritsX particularly among younger urban audiences Despite currently representing a small share of the Indian marketX white spirits hold substantial headroom for growth given their much higher share globally

On the supply sideX easing inflationary pressures and the softening of key input costs – especially grain and extra neutral alcohol (ENA) – are providing margin relief and operational flexibility Combined with improving retail infrastructureX rising digital engagementX and increasing investor interestX these trends support a robust medium- to long-term outlook for the industryX anchored by both volume growth and the accelerating shift toward premiumisation

Radico Khaitan Limited (‘Radico Khaitan or ‘the Company) is one of Indias oldest and largest IMFL companies in IndiaX with a rich history dating back to J and a strong focus on brand developmentX scaling operationsX and robust growth Formerly known as ‘Rampur Distillery CompanyX Radico Khaitan has gradually evolved from a bulk spirits supplier and bottler for other manufacturers to become a renowned name in the IMFL industry

Entering the IMFL business in A with APM WhiskyX Radico Khaitan concentrated its first decade (A-Ycc?) on building robust manufacturing capabilities and achieving a pan-India presence During this periodX the Company achieved sales volume exceeding c million cases From Ycc?X it adopted premiumisation with the launch of Magic Moments VodkaX which went on to become Indias best-selling vodka and sixth-largest globally The premiumisation journey accelerated in Yc? when the Company launched its first luxury brandX Rampur Indian Single Malt Whisky Over the past decade and a halfX it has built a strong portfolio of premium productsX driven by consumer demand and bolstered by more than Yc new brand launches

Radico Khaitan is known for its emphasis on innovationX research and development (R&D)X and customer-centricity It stands out as one of the few companies in India to have developed its entire brand portfolio organically by using in-house capabilities Committed to both premiumisation and business adaptabilityX it focuses on backward integration eciencies to maintain competitiveness

The Company is also a leading supplier of branded IMFL to the Canteen Stores Department (CSD)X a business segment with high entry barriers due to strict brand registration requirements Significant strides have been made in building brand equity in overseas marketsX with the Companys products exported to over cc countriesX giving it an extensive global reach

The Company boasts a well-recognised brand portfolio across whiskyX brandyX rumX ginX and vodka within the Indian Made Foreign Liquor (IMFL) sector NotablyX eight of our brands achieved annual sales exceeding a million cases Further details on our product range and key brands can be found on pages to of this Annual Report

In FYYcY X the Company continued to enhance its product portfolio and advance its premiumisation strategy with the launches ofX Rampur Jugalbandi and Rampur Indian Single Malt Whisky Barrel BlushX and Ankahi Zaran Spiced Liqueur

The Prestige & Above category delivered robust growth in FYYcY X with volume sales rising by e to reach Jcc million cases In line with our strategic focus on premiumisationX Prestige & Above brands contributed approximately of total IMFL volumes and e of IMFL value sales during the year Our flagship premium offeringX Magic Moments VodkaX surpassed the significant milestone of million cases After Dark Whisky entered the prestigious millionaires club as our eighth brand to achieve this landmark AdditionallyX we launched Royal Ranthambore in the CSD marketX further strengthening our premium whisky portfolio

Radico Khaitans luxury and semi-luxury portfolio continues to gain strong tractionX contributing approximately ce of the Companys overall IMFL sales value in FYYcY X translating to revenue of around Jc crore This segment includes brands such as Rampur Indian Single MaltX Sangam World MaltX Jaisalmer Indian Craft GinX and Royal Ranthambore Backed by rising consumer aspirationsX expanding distribution in premium outletsX and growing global interest in Indian-origin spiritsX the Company expects this segment to grow significantlyX targeting revenues of over cc crore in FYYcY? This performance reflects Radico Khaitans strategic focus on premiumisation and its ability to build long-termX globally scalable luxury brands

Radico Khaitan operates eight distilleries four in Rampur (Uttar Pradesh)X one in Sitapur (Uttar Pradesh)X and three in Aurangabad (Maharashtra)X the latter a J?e joint venture The Company has a total production capacity of JY million litres The Companys capacity is supported by a network of bottling units across the countryX including five owned facilitiesX six operating under royalty agreementsX and JJ under tie-up or lease contracts In additionX the Company has dedicated printing units at three locations to support the growth of Magic Moments VodkaX ensuring consistency and high quality

The Companys extensive manufacturing network eectively meets consumer demand while minimising interstate taxes and transport costs Continuous eorts are directed at improving productivity and product quality across our manufacturing platform

Radico Khaitan has established a significant nationwide sales and distribution networkX supported by ecient supply chain management Reaching over XccXccc retail outlets and cXccc on-premises locationsX our Jcc personnel are organised into four zonesX each under a regional profit centre head for streamlined operations This widespread distribution network and sophisticated systems ensure consistent product availability across various channels and regions

Note The above numbers are on a standalone basis

Radico Khaitan nurtures a dynamicX growth-oriented culture with a strong ambition to create premium and luxury brands anchored in quality and innovation Our people practices are guided by core values – consumer focusX innovationX guardianshipX and a pro-employee approach – brought to life through behaviours that promote global thinkingX local executionX calculated risk-takingX and performance excellence

Radico Khaitans HR function plays a pivotal role in aligning talent priorities with evolving business objectives We continue to build a resilient and future-ready workforce by investing in structured capability developmentX data-driven talent planningX and agile workforce models Our People Strategy is embedded within the business strategy to ensure that HR is a value-creating partner in the Companys transformation journey

The Companys performance management system is built on a Balanced Scorecard framework and a -Box Talent MatrixX fostering accountability and future leadership development High-potential employees are identified through our Assessment and Development Centre (ADC)X which helps craft customised growth journeys In FYYcY X employees received an average of hours of trainingX with Ye of programmes led by internal trainers Special focus was placed on developing premium brand selling skillsX operations excellenceX and leadership readiness through partnerships with top B-schools

Radico Khaitan maintains a sharp focus on quality and safety across its manufacturing units Compliance with FSSAIX HACCPX and ISO standards and operational excellence initiatives like TPMX SX and Kaizen are embedded in daily practices Employees are regularly trained in quality control tools and root-cause analysisX reinforcing a culture of problem-solvingX collaborationX and continuous improvement

We are committed to building a diverseX inclusiveX and non-discriminatory workplace Gender-neutral hiringX flexible work policiesX extended maternity benefitsX and gender sensitisation workshops have strengthened inclusion across the organisation We continue to celebrate events like International Womens Day and partner with NGOs supporting womens empowerment and entrepreneurship

We promote holistic employee wellbeing through physical health initiatives (gymsX yogaX check-ups)X mental wellness programmesX and financial security via ESOPsX incentivesX and comprehensive insurance coverage Our retirement benefits include PFX gratuityX and pension contributions Our workplace celebrates Indian cultural valuesX and employee milestonesX creating a sense of belonging and engagement

As part of our digital transformationX we are investing in AI-enabled toolsX digital learning platformsX and process automation to elevate employee experience and enhance data-driven HR decision-making These investments ensure agility and eciency across our HR ecosystem while preparing the organisation for future talent demands

As we growX we remain deeply committed to empowering our peopleX strengthening our cultureX and delivering long-term value across all stakeholders

At Radico KhaitanX Digital Sutra is more than a technology initiative – it is our digital transformation philosophy Rooted in the Sanskrit word SutraX meaning "thread" or "connection"X it represents the seamless integration of peopleX processesX and data across the enterprise This digital framework is designed to enhance visibilityX resilienceX and intelligent decision-making at every level of the organisation Our ambition is to build a digitally intelligentX secureX and agile enterpriseX guided by cloud-first principlesX advanced analyticsX and next-generation ERP platforms – all aligned to evolving business needs and long-term value creation

Future-Proofing the Digital Core A cornerstone of our Digital Sutra roadmap is the transition to SAP S HANAX which brings a modernX cloud-enabled ERP architecture to the heart of our operations This upgrade enhances visibilityX scalabilityX and responsiveness across functions New capabilitiesX such as mobile enablementX intelligent reportingX workflow automationX and cost centre-level controlsX are streamlining our business processesX ensuring data accuracyX and supporting smarterX faster decision-making

Scalable Analytics and AI To unlock the full value of enterprise dataX we are developing a centralised Data Lake that unifies critical information across productionX salesX supply chainX financeX logisticsX and HR This infrastructure will support real-time dashboards and predictive analytics We are also piloting Generative AI and Agentic AI tools to transform static reporting into dynamicX conversational insights – starting with applications in salesX supply chainX and finance

Agile Business Execution As part of our digital evolutionX we plan to roll out an advanced Sales & Operations Planning (S&OP) platform This end-to-end tool integrates demand planningX production schedulingX supply chain optimisationX distributionX and financial forecastingX enabled by AI ML-driven algorithms With mobile interfaces and intelligent planning capabilitiesX it empowers business teams to make fasterX data-backed decisions while improving cost eciency and responsiveness

Trust by Design With growing digital interconnectednessX cybersecurity is integral to our digital agenda At Radico KhaitanX security is built by designX not as an afterthought We have deployed advanced Endpoint Detection & Response (EDR) solutions and enterprise-grade firewall systems to protect digital assets Our Yx Security Operations Centre (SOC) ensures continuous monitoringX while regular Vulnerability Assessments and Penetration Testing (VAPT) reinforce our readiness against evolving threats These initiatives reflect our ongoing commitment to safeguarding the integrity of the Digital Sutra ecosystem

At Radico KhaitanX the supply chain strategy closely aligns with the Companys overarching business objectivesX ensuring that sourcing and procurement functions directly support profitabilityX customer satisfactionX and market expansion Our sourcing approach is anchored in delivering superior customer serviceX optimising total cost of ownership (TCO)X advancing value engineeringX and leveraging innovative procurement practices "Make in India" continues to be a core pillar of our sourcing philosophyX mitigating supply chain risks while improving service levels and operational resilience A robust regional supplier baseX complemented by proactive backward integrationX enhances our agility and supports long-term sustainability Key focus areas include demand forecastingX technology-led automationX supplier relationship managementX and packaging eciency As part of our digital transformation journeyX the Company is integrating AI and other advanced technologies to drive real-time decision-making and process optimisation

We have significantly strengthened our focus on TCO by evaluating end-to-end costs across the supply chain – from procurement and transportation to currency exposure and commodity inflation TCO analysis is embedded in strategic sourcing decisionsX and global commodity trends are closely monitored to inform pricingX contractingX and negotiation strategies

Radico Khaitan continues to invest in advanced digital platformsX including SAP-based tools and dynamic MRP systemsX to enhance demand forecastingX inventory controlX and procurement efficiency Technology integration has improved forecast accuracyX optimised working capitalX and elevated service levelsX positioning the supply chain as a key enabler of business performance

Regional sourcing is pivotal in our supply chain model The commissioning of a new bottle printing facility in Aurangabad for Magic Moments vodka – supported by a local glass supplier – has reduced lead times and logistics costs across Maharashtra and nearby states Capacity expansion at the PET facility in Telangana supports the ecient production of PET bottles for supply in South India The grain-based ENA distillery in Sitapur significantly reduces dependency on external suppliers and enhances supply security

Our procurement strategy integrates environmental responsibilityX ethical practicesX and social accountability Launching a cce recyclable PET Hipster pack demonstrates our commitment to sustainable packaging alternatives We continue to invest in building a trusted and transparent vendor network that aligns with our values and supports long-term brand equity

We continue to pursue cost-effective packaging innovations without compromising product quality Examples include lightweighting hipster packs for After Dark and APM Premium BlackX and in-house PET bottle production in Telangana Collaboration with global leading suppliers under a cost-plus conversion model has provided better cost controlX particularly in low-margin segments These innovations are being extended across the portfolio to support bottom-line performance

Radico Khaitan is committed to building a resilient supply chain by localising procurement of key inputs such as glass bottlesX laminatesX and other packaging materials Our shift from imports has cut lead times by nearly a month and improved service reliability We continue to invest in localisationX multi-sourcingX safety stock strategiesX and contingency planning to ensure supply chain continuity in a dynamic operating environment

The Company has a comprehensive internal control mechanism with adequate policies and procedures to ensure the orderly and ecient conduct of its business This includes adherence to the Companys policiesX safeguarding its assetsX prevention and detection of fraud and errorsX accuracy and completeness of the accounting recordsX and timely preparation of reliable financial disclosures

Radico Khaitans internal control systems are commensurate with the nature of its businessX as well as the size and complexity of its operations The internal financial controls concerning the Financial Statements are adequate Internal auditors validate the eectiveness of the Companys internal controlsX which management regularly re-examines The CEO and CFO provide a certificateX included in the Corporate Governance

ReportX affirming the existence and effectiveness of internal controls This certificate also includes a commitment to report and address any deficiencies to the Audit Committee

The Company has appointed Ernst & Young LLP and SCV & Co LLP as its joint internal auditors for FYYcY?X who will submit their quarterly reports to the Audit Committee The Audit Committee oversees the financial reporting processX ensuring transparencyX integrityX and quality By maintaining a specified and delegated internal control systemX the Company aims to provide accurate and timely disclosures while suggesting improvements as needed

The narrative within this Management Discussion and Analysis includes ‘forward-looking statements relating toX among other thingsX the execution of strategic plansX future business developmentsX and economic performance While these statements reflect the Companys assessment and expectations for the future direction of its businessX numerous risksX uncertaintiesX and other unforeseen factors could cause actual outcomes to dier significantly from these expectations These factors includeX but are not limited toX general marketX macroeconomicX governmentalX and regulatory trendsX fluctuations in currency exchange and interest ratesX competitive pressuresX technological advancementsX changes in the financial standing of third parties engaged with the CompanyX legislative changesX and other significant factors that could influence the Companys business and financial results Radico Khaitan undertakes no obligation to publicly update any forward-looking statements to reflect future or likely events or circumstances