Som Distilleries & Breweries Ltd Management Discussions

1. ECONOMIC ENVIRONMENT

India remained resilient during FY2025-26 despite a complex global environment marked by geopolitical tensions, trade uncertainties, volatile commodity prices and uneven global growth.

Indias domestic growth drivers remained intact, supported by consumption, infrastructure investment, urbanisation, formalisation of the economy and a large working-age population. The medium-term outlook for consumer-facing businesses remains constructive, although businesses continue to navigate volatility in energy, commodities, logistics and interest rates.

For the alcoholic beverages industry, Indias favourable demographics, rising disposable incomes, increasing urbanisation and changing consumer preferences provide a strong structural foundation. The opportunity is increasingly shifting from pure volume growth towards value creation through stronger brands, premiumisation, market expansion and better operating efficiency.

2. INDIAN ALCOHOLIC BEVERAGES INDUSTRY

India is one of the worlds most attractive growth markets for alcoholic beverages. The Indian alcoholic beverages industry is estimated at approximately Rs.5.3 lakh crore in FY2026, with CRISIL forecasting 8-10% revenue growth and 5-6% volume growth during the year. Spirits account for approximately 65-70% of industry revenue, with beer, wine and country liquor accounting for the balance.

The long-term opportunity is equally compelling. IWSRs latest data shows that Indias total beverage alcohol volumes grew 6% in 2024, with value increasing 9% in 2025, India remained one of the worlds strongest growth markets, recording approximately 4% volume growth even as global beverage alcohol volumes declined 2%. IWSR expects Indian beverage alcohol volumes to grow at approximately 3% CAGR between 2024 and 2034.

Beer remains the Companys principal category. ICRA expects beer industry volumes to grow by approximately 4-6% in FY2026, supported by steady demand, favourable demographics and premiumisation.

Premiumisation is increasingly driving value rather than simply volume. CRISIL expects premium and luxury spirits priced above Rs.1,000 per 750 ml to grow by approximately 15% in FY2026. IWSRs H1 2025 data similarly showed Indias premium-and- above beverage alcohol volumes growing 8%.

The demographic opportunity is significant. IWSR estimates that approximately 15-20 million consumers reach legal drinking age in India every year. IWSR expects India to move from the worlds eighth-largest beverage alcohol market currently to fifth-largest by 2035.

India remains one of the worlds most attractive growth markets for alcoholic beverages. Latest IWSR data indicates that India continues to outperform several major global beverage markets, supported by demographics, consumer participation, urbanisation and premiumisation.

IMFL continues to benefit from increasing disposable incomes, urbanisation and consumer movement towards branded and higher-quality products. The market is increasingly value- oriented, with consumers trading up within established categories.

During FY2025-26, the Companys IMFL volumes grew 31.84%, providing evidence of the potential for the spirits portfolio to

become a second growth engine alongside beer.

3. KEY DEMAND DRIVERS

Taken together, these factors provide a favourable long-term demand environment for the Indian alcoholic beverages industry. Importantly, the opportunity is evolving from volume- led growth towards a combination of volume, premiumisation, brand strength and geographic expansion.

For SDBL, this creates multiple avenues for growth: strengthening its core beer franchises, expanding its IMFL portfolio, developing premium and mid-premium offerings, increasing geographic diversification and progressively utilising its expanded manufacturing footprint.

The Companys immediate objective is to convert these structural industry opportunities into higher volumes, stronger realisations, improved capacity utilisation and sustainable operating leverage, while maintaining disciplined capital allocation and managing the regulatory and operating risks inherent in the sector.

Increasing Formalization and Brand Preference

The Indian alcoholic beverages industry continues to benefit from the gradual formalisation of consumption and distribution. Consumers are increasingly exposed to established brands, consistent product quality and professionally managed distribution networks.

This creates an advantage for companies with established brands and manufacturing capabilities. Scale, quality consistency, regulatory compliance and distribution reach are becoming increasingly important competitive differentiators.

Product Innovation and New Consumption Occasions

Innovation is becoming increasingly important as consumers seek greater variety and differentiated experiences.

The industry is witnessing the emergence of new formats, packaging innovations, premium variants and products designed around specific consumption occasions. Companies that can combine innovation with strong distribution and consistent product quality are better positioned to capture evolving consumer demand.

For SDBL, the opportunity lies in using its existing manufacturing capabilities and brand platform to selectively introduce products that address emerging consumer preferences while maintaining a disciplined approach to capital allocation.

Growth in Hospitality, Tourism and Social Consumption

The continued development of Indias hospitality, tourism, food-service and entertainment sectors is creating additional consumption occasions for beer and spirits.

The growth of hotels, restaurants, bars, clubs, resorts and destination tourism is contributing to the increasing visibility and availability of branded alcoholic beverages.These channels also play an important role in brand discovery and consumer trial, particularly for premium and differentiated products.

Geographic Expansion and Local Manufacturing

Indias alcoholic beverage market is highly fragmented from a regulatory and distribution perspective, with individual states having distinct excise policies, taxation structures and market mechanisms.

This creates challenges for national expansion but also creates an opportunity for companies with strong local manufacturing capabilities. Local manufacturing can improve product

availability, reduce logistics costs, provide greater responsiveness to market demand and strengthen relationships with state-level distribution networks.

The Companys expanded manufacturing footprint, including the recently commissioned Uttar Pradesh brewery, is therefore strategically important. It provides the Company with the ability to serve northern markets more efficiently while reducing dependence on a limited number of manufacturing locations.

Expansion of IMFL Consumption

The IMFL category continues to benefit from increasing formalisation, brand development and premiumisation.

The Company sees this as an important complementary growth opportunity. During FY2025-26, the Companys IMFL volumes increased by 31.84%, significantly outperforming the overall volume performance of the business. The growth demonstrates the potential to build IMFL into a meaningful second growth engine. The Companys strategy is to strengthen its presence across attractive segments while selectively developing brands with the potential to scale across multiple markets.

Growth of Beer Consumption

Beer remains an important category within Indias alcoholic beverage market and continues to benefit from its positioning as a relatively accessible and social beverage.Indias strong preference for strong beer is particularly relevant to the Company given its established portfolio of Hunter, Power Cool and Black Fort. At the same time, the gradual development of premium beer and differentiated formats provides additional opportunities for value creation.

The Companys expansion of the Legend brand is aligned with this opportunity and provides scope to build a differentiated proposition across selected markets and export channels.

Changing Consumer Preferences

Indian consumers are becoming more informed and selective in their beverage choices. Brand recognition, product quality, packaging, taste, availability and value-for-money are increasingly influencing purchase decisions.

At the same time, consumers are showing greater willingness to experiment with new brands, formats and categories. This creates opportunities for companies with the ability to innovate while maintaining consistent quality and distribution.

The Company continues to strengthen its portfolio across established mainstream brands and newer offerings, allowing it to participate across different consumer segments and price points.

Urbanisation and Changing Consumption Patterns

Rapid urbanisation is contributing to the evolution of Indias consumption patterns. Increasing urban populations, greater exposure to national and international brands and the expansion of organised retail and hospitality are creating new consumption occasions.

The growth of restaurants, hotels, bars, clubs, entertainment venues and tourism is also expanding the out-of-home consumption environment. This is particularly relevant for beer, where consumption is closely linked to social occasions, leisure and food-led experiences.

The Company expects these trends to support the gradual broadening of beer and spirits consumption beyond traditional markets and occasions.

Premiumization and Trading Up

Premiumization is becoming an increasingly important driver of value growth in the Indian alcobev market. Consumers are demonstrating greater willingness to move from mainstream products to premium and mid-premium offerings where they perceive a meaningful difference in quality, taste, brand image

or overall experience.

Latest industry data supports this trend. IWSR reported that premium-and-above beverage alcohol volumes in India grew faster than the overall market during H1 2025. CRISIL has also projected strong growth in the premium and luxury spirits segment.

For manufacturers, premiumisation provides an opportunity to improve realisations and margins without relying entirely on volume growth.

The Company believes its portfolio provides a platform to participate in this trend through established beer brands as well as the expansion of its IMFL portfolio, including Mahavat.

Rising Disposable Incomes and Increasing Affluence

Indias sustained economic growth and rising household incomes are supporting the expansion of discretionary consumption. As consumers experience an improvement in purchasing power, alcoholic beverages increasingly form part of a broader consumption basket that includes dining, entertainment, travel and social experiences.

The resulting increase in spending power is supporting both volume growth and, importantly, higher value per occasion. Consumers are increasingly willing to experiment with branded products and selectively trade up to better-quality offerings.

For the industry, this creates an opportunity to grow not only through increased consumption but also through improved product mix and realisations.

Favourable Demographics and Expanding Consumer Base

Indias large and growing working-age population provides a significant structural opportunity for the alcoholic beverages industry. A sizeable number of consumers enter the legal drinking-age population every year, creating a continuously expanding addressable consumer base. IWSR estimates that approximately 15-20 million consumers reach legal drinking age in India annually.

The significance of this demographic trend extends beyond the addition of new consumers. As younger legal-age consumers enter the market, consumption preferences are also evolving, with greater emphasis on brands, product quality, packaging, experience and differentiated offerings. This provides established companies with opportunities to develop new products and build long-term consumer franchises.

The Indian alcoholic beverages industry is supported by a combination of favourable demographics, rising disposable incomes, urbanisation, evolving consumer preferences and increasing premiumisation. While the industry remains subject to state-level regulation and taxation, these structural factors provide a favourable foundation for long-term growth.

4. BUSINESS OVERVIEW

SOM Distilleries & Breweries Limited is engaged in the manufacture and sale of beer and Indian Made Foreign Liquor. The Company has built a multi-location manufacturing platform and an increasingly diversified portfolio of beer and spirits brands.

Its principal beer brands include Hunter, Power Cool, Black Fort, Legend and Woodpecker, while its IMFL portfolio spans whisky, rum, vodka and brandy.

During FY2025-26, the Company operated manufacturing facilities at Bhopal, Hassan and Odisha. Commercial production subsequently commenced at the Uttar Pradesh brewery during Q1 FY2026-27.

Manufacturing Location	Beer capacity (mn cases)	IMFL capacity (mn cases)
Bhopal	15.2	1.8
Hassan	14.0	2.7
Odisha	9.0	0.6
Uttar Pradesh*	10.0	—
Total	48.2	5.1

* Uttar Pradesh commercial production commenced during Q1 FY2026-27.

5. FY2025-26 - A YEAR OF DISRUPTION AND TRANSITION

FY2025-26 was a challenging year for the Company. The year was characterised by regulatory disruption, weaker volumes in key markets and elevated input costs, while the Company simultaneously continued investing in its long-term manufacturing and brand platform.

The most significant development was the suspension of the manufacturing licence at the Companys Bhopal facility with effect from 4 February 2026.

The disruption occurred towards the end of the financial year and materially affected production and dispatches during the fourth quarter. This was compounded by continued weakness in Karnataka and higher raw-material and packaging costs.

The Companys response has been to accelerate geographic diversification, strengthen alternative manufacturing capacity, expand its IMFL portfolio and bring the Uttar Pradesh facility into commercial operation.

6. MATERIAL REGULATORY DEVELOPMENT - BHOPAL LICENCE

The suspension of the excise/manufacturing licence at the Companys Bhopal facility with effect from 4 February 2026 was the most material operational event of the year.

The suspension disrupted manufacturing operations during the final two months of FY2025-26 and had a direct bearing on fourth-quarter volumes and profitability.

Management considers the licence-related disruption to have been a material contributor to the sharp deterioration in Q4 performance. However, the Company does not attribute the entire decline to the licence issue, as the quarter was also affected by weakness in Karnataka and higher input and packaging costs.

Consolidated

Particulars	Q4FY26	Q4 FY25	YoY
Total Income	Rs.182.0 cr	Rs.340.0 cr	-46.4%
Total Volume	34.44 lakh cases	60.00 lakh cases	-42.6%
EBITDA	Rs.(54.7) cr	Rs.42.8 cr	—
PAT	Rs.(56.7) cr	Rs.23.7 cr	—

The Company is pursuing legal remedies and evaluating measures to mitigate the impact on operations.

7. OPERATING PERFORMANCE

FY2025-26 operating performance reflected the impact of the above disruptions. While beer volumes declined, the Company maintained beer realisation and delivered strong growth in IMFL.

Particulars	FY2025-26	FY2024-25	Change
Beer	187.19 lakh cases	234.40 lakh cases	-20.0%
IMFL	15.03 lakh cases	11.40 lakh cases	+31.84%
Total	202.22 lakh cases	245.80 lakh cases	-17.7%
Beer realisation	Rs.556/case	Rs.534/case	+4.1%
IMFL realisation	Rs.963/case	Rs.991/case	-2.8%

Beer accounted for approximately 92.5% of total volumes during FY2025-26.

Hunter recorded 50.19 lakh cases, Power Cool 77.16 lakh cases, Black Fort 16.70 lakh cases and Legend 11.44 lakh cases.

8. FINANCIAL PERFORMANCE

The Companys financial performance reflected lower volumes, operating deleverage, the Bhopal disruption and cost pressures.

Rs. crore	FY2025-26	FY2024-25	Change
Total Income	1,233.4	1,447.4	-14.8%
Gross Profit	422.0	521.6	-19.1%
EBITDA	78.0	180.7	-56.83%
EBITDA Margin	6.32%	12.48%	—
Interest Cost	22.0	11.1	+98.2%
Depreciation	33.3	26.0	+28.1%
PAT	10.4	104.5	-90.0%

The disproportionate decline in EBITDA relative to revenue reflects the impact of lower capacity utilisation and fixed-cost absorption.

The financial priority for the next phase is to restore volumes, improve utilisation, rebuild operating leverage and convert the expanded asset base into sustainable cash generation.

9. LIQUIDITY AND CAPITAL STRUCTURE

Particulars	31 March 2026	31 March 2025
Gross Debt	Rs.211 cr	Rs.168 cr
Cash & Cash Equivalents	Rs.17 cr	Rs.20 cr
Net Debt	Rs.194 cr	Rs.148 cr
Gross Debt / Equity	0.30x	0.25x

The increase in debt reflects investment in manufacturing capacity and associated funding requirements. The Company remains focused on prudent leverage, working-capital discipline and adequate liquidity while the new capacity ramps up.

10. MAJOR BUSINESS DEVELOPMENTS

Uttar Pradesh - from capacity creation to utilisation

The Uttar Pradesh project represents a major step in the Companys geographic expansion. Commercial production commenced during Q1 FY2026-27. The facility provides approximately 10 million cases of annual beer capacity and is intended to improve regional market access and supply-chain efficiency.

Karnataka

The Company expects the revised excise environment to provide a more supportive operating environment and remains focused on rebuilding volumes and strengthening market share.

Odisha

Odisha has also emerged as an important recovery market, providing an opportunity to leverage the Companys expanded manufacturing capacity in eastern India.

Mahavat

The Company launched Mahavat, a mid-premium whisky positioned in the Rs.1,000-1,100 price range. The brand has been rolled out across Madhya Pradesh, Delhi and Uttar Pradesh.

Legend

Legend has emerged as an important addition to the Companys beer portfolio and provides further scope for premium and export-oriented positioning.

11. BUSINESS STRATEGY Strengthen core markets

Continue to invest behind established beer franchises, with the objective of recovering volumes and gaining market share.

Build local manufacturing

Use local manufacturing to improve market access, supply-chain efficiency and product availability.

Build IMFL as a second growth engine

Use the strong FY26 IMFL growth as a foundation to strengthen whisky, rum, vodka and brandy offerings.

Premiumisation

Develop premium and mid-premium offerings selectively where brand proposition, market opportunity and distribution economics support attractive returns.

Improve utilisation

Focus on utilisation of existing capacity rather than capacity creation for its own sake.

Geographic diversification

Reduce dependence on individual markets through owned manufacturing, local partnerships and bottling arrangements.

12. RISK MANAGEMENT AND MITIGATION

Key risk	Potential impact	Management response
Excise / regulatory changes	Manufacturing, pricing and market access	Regulatory monitoring, diversification and local manufacturing
Bhopal licence uncertainty	Volume and profitability pressure	Legal remedies and alternative manufacturing capacity
Input-cost volatility	Margin pressure	Strategic sourcing and cost optimisation
Capacity utilisation	Lower return on assets	Market expansion and utilisation focus
Seasonality / weather	Quarterly volatility	Geographic diversification
Competition	Market-share pressure	Brand building, distribution and innovation
Working capital	Liquidity pressure	Inventory and receivables discipline
UP ramp-up	Execution risk	Phased commissioning and market development
Changing consumer preferences	Portfolio relevance	Innovation and premiumisation

13. HUMAN RESOURCES People. Capability. Execution.

The Companys next phase of growth will depend increasingly on execution capability across manufacturing, sales, supply chain, technology and corporate functions.

During FY2025-26, 60.65% of employees underwent training and 100% were covered under performance reviews. Employees also had 100% coverage under PF, gratuity and ESI.

The Companys people priorities are focused on strengthening plant-level technical capability, developing leadership depth, building a performance-oriented culture, continuous learning, succession planning, employee wellbeing and maintaining a safe, compliant and inclusive workplace.

As the Company moves from capacity creation to capacity utilisation, the focus will increasingly be on productivity, accountability and operational excellence. The company and its subsidiaries had 460 employees on its rolls.

14. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Controls built for scale and accountability

The Companys internal control framework is designed to provide clear accountability, disciplined processes and timely visibility across procurement, inventory, manufacturing, sales, receivables, treasury, finance and statutory compliance.

The expansion of the Companys manufacturing footprint has increased the importance of consistent controls across locations. Accordingly, the Company continues to strengthen ERP-based controls, approval matrices, reconciliations, inventory controls and exception-based monitoring.

Internal audit provides an independent review of key processes and risk areas, with observations placed before management and the Audit Committee and corrective actions monitored.

The objective is not simply compliance, but ensuring that risks are identified early, ownership is clear and corrective action is measurable.

15. INFORMATION TECHNOLOGY

From transaction processing to decision support

Technology is increasingly becoming an operating backbone for the Company. The ERP and digital systems support finance, procurement, inventory, manufacturing, sales and distribution.

As the manufacturing footprint expands, integrated information across locations becomes increasingly important. Technology priorities include real-time management information, production and demand planning, inventory visibility, procurement analytics, sales and distribution information, management dashboards, cybersecurity and data controls.

The Company reported nil data-breach incidents during FY2025- 26 while continuing to strengthen its information-security framework.

The objective is to use technology not merely to automate transactions, but to improve decision speed, strengthen controls and optimise cost and working capital.

16. SUPPLY CHAIN MANAGEMENT

Supply-chain resilience remains central to the Companys operating and margin performance.

The Company continues to focus on strategic sourcing, supplier development, demand forecasting, inventory optimisation, logistics efficiency and procurement discipline.

Key inputs including barley, ENA, glass, cans, packaging materials, fuel and logistics remain exposed to commodity and geopolitical volatility.

The expanded manufacturing footprint provides an opportunity to progressively manufacture closer to key markets. The Uttar Pradesh facility is particularly important in this context.

The focus is increasingly on cost per case, inventory turns, service levels and working-capital efficiency, while maintaining product quality and regulatory compliance.

17. ESG AND CORPORATE RESPONSIBILITY

FY2025-26 ESG indicator	Reported metric
Zero-liquid-discharge facility coverage	100%
Recycled waste	5501.21 MT
Environmental incidents	Nil
Female workforce	19.24%
Data-breach incidents	Nil
Employees covered under PF / gratuity / ESI	100%
CSR expenditure	Rs.224.78 lakh
Employees trained	60.65%
Employee performance reviews	100%

The Companys ESG priorities include responsible water use, energy conservation, waste reduction, employee safety, community development and responsible governance.

18. OUTLOOK

The Company enters FY2026-27 with a significantly different operating platform from the one with which it entered FY2025- 26.

Resolve: Continue to pursue legal and regulatory remedies relating to the Bhopal manufacturing licence.

Recover: Rebuild volumes and market share in core markets.

Scale: Ramp up the Uttar Pradesh brewery and build the northern market.

Diversify: Strengthen the IMFL portfolio and expand geographic presence.

Utilise: Improve utilisation across the expanded manufacturing footprint.

Optimise: Improve fixed-cost absorption, procurement

efficiency and working-capital discipline.

The Company believes that its expanded manufacturing footprint, diversified geographic presence, established brands and growing IMFL portfolio provide a foundation for sustainable growth once current regulatory and operating disruptions are resolved.

19. MATERIAL SUBSEQUENT DEVELOPMENTS

The Companys application for the FY2026-27 excise license is still pending. The Company is pursuing legal remedies and evaluating measures to mitigate the impact on operations.

Commercial production commenced at the Companys Uttar Pradesh brewery during Q1 FY2026-27.

The Company reported Q1 FY2027 total income of approximately Rs.268.8 crore, EBITDA of approximately Rs.15.2 crore and PAT of approximately Rs.1.6 crore.

Management reported encouraging recovery trends in Karnataka and Odisha and continued to focus on market expansion, capacity utilisation and premium portfolio development.

20. CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis describing the Companys objectives, expectations, estimates, projections and assumptions may constitute forward-looking statements within the meaning of applicable securities laws and regulations.

Actual results may differ materially from those expressed or implied due to factors including changes in economic conditions, consumer demand, weather conditions, excise and regulatory policies, taxation, raw-material and packaging costs, competition, interest rates, liquidity, capacity utilisation, supply- chain disruptions, litigation, regulatory developments and other risks and uncertainties affecting the Companys business.

The Company assumes no obligation to publicly update or revise any forward-looking statements except as required under applicable laws and regulations. Investors are advised to exercise due caution and independently assess the risks associated with the Companys business by referring to the Companys statutory and regulatory disclosures.

Place: Bhopal	For and on behalf of the Board
Date: 05.09.2026	For Som Distilleries and Breweries Limited
REGISTERED OFFICE:	Sd/-
1-A Zee Plaza, Arjun Nagar,	Jitendra Parihar
Safdarjang Enclave, Kamal Cinema	Company Secretary & Compliance Officer
Road, New Delhi-110029	Mem No:- A40734
Tel.: 011 26169909, 26169712