Tilaknagar Industries Ltd Management Discussions

ECONOMY OVERVIEW

Global economic overview -

As per the International Monetary Funds (World Economic Outlook, April 2025), the global economy grew by 3.3% in CY 2024, demonstrating resilience despite a challenging environment marked by geopolitical tensions, trade policy shifts, and elevated interest rates. Growth was supported by resilient labour markets, easing inflationary pressures, and stable private consumption, particularly across emerging markets.

For CY 2025, the IMF projected a slowdown in growth to 2.8%, reflecting the anticipated impact of higher tariffs introduced by the United States and retaliatory measures by key trading partners. A gradual recovery is expected in CY 2026, with growth forecast at 3.0%.

Real GDP Growth (%)	CY 2024	CY 2025 (P)	CY 2026 (P)
Global Economy	3.3	2.8	3.0
Advanced Economies	1.8	1.4	1.5
Emerging Markets & Developing Economies	4.3	3.7	3.9

Advanced economies are forecast to grow modestly at around 1.4% to 1.5% over CY 2025 to CY 2026, constrained by tight credit conditions and demographic headwinds. Emerging and developing economies, led by India and China, are expected to expand at 3.7% in CY 2025 and 3.9% in CY 2026, supported by domestic demand and structural reforms, although momentum may moderate due to softer global trade and reduced fiscal stimulus.

Headline inflation is expected to decline to 4.3% in CY 2025 and is further expected to ease to 3.6% in CY 2026, with advanced economies likely to achieve their inflation targets sooner than emerging markets.

While the global economy has demonstrated resilience, risks persist from potential re-escalation of trade tensions, volatile commodity prices, and financial market vulnerabilities. The path to sustained, broad-based growth remains contingent on geopolitical stability and continued policy support in key economies.

Source: IMF World Economic Outlook, April 2025

Indian economic overview

India continued to demonstrate robust economic momentum in FY25, remaining one of the fastest-growing major economies globally. According to the Reserve Bank of Indias Monetary Policy Report (April 2025), real GDP growth for FY25 is projected at 6.5%, driven by strong investment activity, healthy corporate and bank balance sheets, and sustained government infrastructure spending. This follows 9.2% growth in FY24, underscoring the economys resilience amid a challenging global environment.

On the inflation front, headline CPI inflation fell to 4.6% in FY25, the lowest since FY19. This milestone highlights the effectiveness of the Reserve Bank of Indias pro-growth monetary policy, which has successfully balanced economic expansion with price stability.

Indias macroeconomic stability has been supported by a comfortable foreign exchange reserve position, a manageable current account deficit, and a strong services export performance. Urban consumption remained buoyant, while rural demand showed signs of improvement aided by increased government spending and a normal monsoon forecast for 2025.

Looking ahead, the RBI projects real GDP growth at 6.5% for FY26, supported by continued investment momentum, benign commodity prices, and a gradual recovery in global trade. Headline inflation is expected to reduce further to 4.0% in FY26, although risks from global crude oil prices and climate- related disruptions remain.

Source: Reserve Bank of India, Monetary Policy Report - April 2025; Ministry of Statistics and Programme Implementation (MOSPI)

INDIAN LIQUOR INDUSTRY OVERVIEW

Indias liquor industry is one of the fastest growing as well as fastest evolving liquor markets in the world. India has become a big opportunity for international brands as well as homegrown craft and artisanal brands. With 15 million - 20 million people being added to the legal drinking age every year (Source: IWSR), the demographics are also in favour of the industry, especially for innovative alcobev products.

As per industry estimates, the overall IMFL industry size in India was around 410 mn cases in FY25, growing at 3% + over last year.

From a region perspective, South India continues to be the largest alcobev consuming region, with an almost 60% share, followed by the North, West and East regions.

Within IMFL, Whisky is the largest category with 64% share, followed by Brandy as the second largest category at 22%, and then followed by Rum at 11%. Vodka and Gin enjoy a market share of low single digits. (Source: Industry data)

During the year, Andhra Pradesh introduced a progressive excise policy, improving market access and enhancing competitiveness. Karnataka implemented simplified pricing and listing norms, which contributed to greater operational clarity for industry players. The eastern states displayed steady demand, while select northern markets recorded robust gains driven by expanding premium offerings.

In FY25, the industry benefited from stable raw material availability and easing inflationary pressures, especially on the packing material front, though volatility in ENA prices remained an area of concern.

Premiumization continued to be the defining trend, with consumers increasingly gravitating towards higher-quality and craft offerings across all spirit categories. Modern trade and e-commerce channels expanded their share in key states where permitted, and experiential marketing through festivals, tastings, and on-trade activations played a significant role in influencing purchase behaviour.

Looking ahead, the medium to long-term outlook for the Indian spirits industry remains positive, supported by favourable socioeconomic factors and a young, aspirational consumer base. While regulatory changes and raw material cost movements will require close monitoring, the ongoing premiumization trend, rising female participation in consumption, and further growth in the cocktail culture are expected to shape the industrys evolution in the coming years.

GROWTH DRIVERS FOR THE INDUSTRY

Favourable Demographics - A more inclusive and gender- neutral drinking culture is emerging, widening the consumer base. Women are increasingly shaping social norms and contributing to a more inclusive consumption narrative.

Premiumization - Consumers are shifting from quantity to quality, driving robust demand for premium and superpremium beverages. This trend is visible in the rising preference for super-premium and craft segments across categories.

Product Innovation - Growing interest in artisanal, small- batch, and heritage spirits reflects a deeper appreciation for authenticity, quality and craftsmanship. Rising demand for flavoured alcoholic beverages, low-alcohol variants and premium mixers presents opportunities for portfolio diversification.

Favourable Policy Environment - Progressive policy changes are creating a more enabling business climate, facilitating expansion and improving supply chain efficiency for industry players.

Evolving Retail Landscape - Larger, format-driven liquor stores with wider assortments, improved merchandising and premium in-store experiences are enhancing brand visibility and discovery, especially for niche and premium offerings.

Digital Platforms - The growing influence of digital platforms is enabling targeted marketing, influencer-led campaigns and omnichannel engagement, reshaping how alcobev brands connect with consumers and build loyalty.

COMPANY OVERVIEW

Tilaknagar Industries Limited (hereafter referred to as "TI" or "the Company"), was founded in 1933 as The Maharashtra Sugar Mills Limited by Shri Mahadev L. Dahanukar. In the 1970s, the Company started making alcohol and quickly became one of the most well-known manufacturers of alcobev brands in India.

TI is the maker of Indias highest-selling premium brandy, Mansion House Brandy. The Company sells over 15 different brands of brandy, whisky, gin, rum, and vodka. TIs brandy labels primarily occupy the Prestige & Above segments.

TIs manufacturing operations are carried out across 21 units, including 4 owned units and 17 contract manufacturing units, with the mother plant located in Shrirampur, Ahilyanagar district, Maharashtra. In Shrirampur, TI also has a 100 KLPD grain-based distillery and a 50 KLPD molasses-based distillery.

TI sold over 11.9 million cases in FY25, an increase of 6.7% compared to FY24, with the southern states contributing 86% of the volume. During FY25, brandy accounted for 91% of the Companys volume.

In terms of major volume contributors, Mansion House Brandy sold 8.7 million cases, followed by Courrier Napoleon Brandy with 1.9 million cases during FY25.

TI continued to be the largest IMFL player in its lighthouse market of Puducherry and third largest IMFL P&A player in Telangana and Karnataka.

The Company has a strong distribution network across the country, primarily selling through state corporations, direct sales and distributors. It also exports its products to Africa, the Middle East, East and South-East Asia and Europe.

STRENGTHS

Mansion House Brandy and Courrier Napoleon Brandy -

Two of the largest selling and fastest growing brandies in India

Distribution strength - Products sold across 40,000+ outlets across the country

Wide manufacturing footprint - Manufacturing undertaken across 4 owned units and 17 contract manufacturing units

Low debt levels - Supporting strong cash flows and enabling business agility towards market opportunities as well as lowering risk on account of any potential softness in consumption

PRODUCT PORTFOLIO

Tls product portfolio is predominantly in the Prestige & Above segment and across categories, namely brandy, rum, whisky and gin.

Brandy

Brandy contributes highest to the IMFL sales of the Company. Tls brandy brands are:

Mansion House Brandy (MHB) - Mansion House Brandy continued to be the largest selling brandy in India and the second largest selling brandy globally.

Mansion House Flavoured Brandy (Flandy) - Flandy currently comes in 5 flavour variants;

Orange, Lemon, Cherry, Peach and Green Apple. Flandy is Indias first premium flavoured brandy and as of March 2025, selling in the states of Telangana, Puducherry, Andhra Pradesh and Sikkim.

Courrier Napoleon Brandy (CNB) - TIs second Millionaire brand. Variants of CNB stride across Deluxe to Super Premium segment. CNB has seen a 7% growth in volumes in FY25, selling around 1.9 mn cases.

Monarch Legacy Edition Brandy - TIs first luxury foray, Monarch Legacy Edition, is a 100% pure grape brandy launched during the year in Maharashtra, Goa and Puducherry, and soon will be introduced in Karnataka and other states.

Rum

Madiraa, the Companys rum brand, is well-known in India for the unique flavours it offers in the niche rum market. The Company also launched White House Rum, a rum in the SemiPremium segment, in its key state of Kerala.

Whisky

The Company relaunched Mansion House Whisky in the semi premium whiskey category in September 2024. This whiskey was launched in East & North-East region and soon will be launched in southern states. Senate Royale Whisky is the other whisky brand from TIs whisky portfolio.

Gin

Even though its contribution to total sales is modest, the Company has been expanding the distribution of its gin brands. Blue Lagoon Gin is now the fourth biggest brand in TIs brand portfolio.

Spaceman Spirits Lab portfolio

TI has started selling Spaceman Spirits Lab portfolio under the usership arrangement from April 2025 onwards. This premium portfolio includes Samsara Gin, Sitara Rum & Amara Pink Vodka.

Bartisans - Ready to Pour cocktail mixers

During the year, TI has made a strategic investment in Round the Cocktails Pvt. Ltd., the makers of Bartisans.

FINANCIAL PERFORMANCE

The sales volume increased by 6.7% from 11.2 mn cases to 11.9 mn cases in FY25, on account of subdued growth in the first 9 months of FY25 due to industry-wide disruptions in some of the key states. On a 5 years CAGR basis, the volumes have grown 13.1%.

The Revenue from Operations (net of excise duties) increased 2.9% in FY25, from 1,394 crore to 1,434 crore. The impact on revenue has been due to the price reduction taken in Andhra Pradesh as well as subdued volume growth.

EBITDA increased by 37.4% in FY25, from 185 crore to 255 crore, with EBITDA margin expanding 447 basis points from 13.3% to 17.8%. Adjusted for subsidy, EBITDA has grown 21.8% to 226 crore, at a margin of 16.1%. This expansion in margins has been despite the persistent inflationary pressures on input costs, especially in ENA. The margins have expanded on account of a mix of robust premiumization drive within the portfolio, cost optimization initiatives and operating leverage.

Profit after tax (excluding exceptional items) increased 62.9% in FY25, from 141 crore to 230 crore due to improved operating profitability as well as reduction in finance costs from 27 crore to 12 crore, on account of reduction in debt during the year.

Debt

Debt decreased by more than 77 crore between March 31, 2024 and March 31, 2025, from 119 crore to 42 crore. The Company achieved net debt free status in Q2 FY25, well before its stated target of end of FY25. As of March 31, 2025 the net cash position was 107 crore.

In addition, CRISIL has assigned a CRISIL A-/Positive rating in Q3FY25. The rating has been assigned for term loan facility of upto 50 crore and for working capital facility of upto 150 crore. The rating reflects the healthy business risk profile of TI backed by its established leadership position in the brandy segment aided by strong brands such as Mansion House and Courrier Napoleon, improving operating efficiency as well as financial risk profile.

Ratio analysis

The key financial ratios of the Company are as under:

Sr No	Particulars	2024-25	2023-24	% of change
(i)	Debtors turnover	7.66	7.88	(2.78)%
(ii)	Inventory turnover	5.47	6.53	(16.31)%
(iii)	Interest coverage ratio	22.24	7.60	192.59%
(iv)	Current ratio	2.86	2.35	22.17%
(v)	Debt equity ratio	0.05	0.18	(73.67)%
(vi)	Operating profit margin (%)	49.29%	49.15%	0.29%
(vii)	Net profit margin (%) (excluding exceptional items)	16.00%	10.47%	52.73%

Explanation for variation of 25% or more in Key Financial Ratios

a) Interest Coverage Ratio : The Earnings for the current year has increased along with subsidy income. The finance cost has reduced due to prepayment of debts

b) Debt Equity Ratio : Improvement in profitability. Prepayment of debts

c) Net Profit Margin (%) (Excluding Exceptional Items): Growth in business, focus on premium brands, reduction of debts and subsidy income have resulted in higher profit.

OUTLOOK

The Company continues to be the largest player in the brandy category in India, with two millionaire brands. With continued focus on brandy and a strong innovation and launch pipeline, we expect to not only expand our market share within the brandy category, but also in overall IMFL through launches in other categories in the premium segments. The Company will continue with its premiumization and cost optimization efforts, enabling us to expand our profitability.

OPPORTUNITIES

Brandy and its nascent premiumization journey - Despite being the second largest category within IMFL, Brandy as a category has significant headroom for premiumization. We believe that there is tremendous opportunity to gain market share in the category through product launches across premium price points as well as communicating an aspirational and more inclusive narrative around brandy.

Entry into non-brandy categories - TI is one of the leaders in each of the major states it is present in, not only in terms of market share of brandy but also within overall IMFL industry. Given its brandy leadership, the Company has a very strong distribution network in Southern states like Telangana and Karnataka, both of which are whisky-dominant states. This will enable us to launch new products in these states despite the competitive nature of these categories.

CHALLENGES

Regulatory challenges - The Indian alcohol business is highly regulated, and each state has its own rules with respect to indirect taxes and duties, which can impact business operations. In addition, there are multiple regulatory considerations with respect to pricing, licensing, plant set-up, marketing & advertising and distribution. All these rules and regulations serve to create barriers to entry for both new and existing players.

Inflation - The past year has seen multiple inflationary headwinds, owing to the Russia-Ukraine conflict, which has further impacted profitability of the industry.

Dependence on some state governments to get price increases - In some states, pricing decisions are decided by the respective state government, which could lead to a lag between increase in costs, owing to inflation, and increase in price for the manufacturers or brand owners.

RISKS & CONCERNS

Risk management is a crucial function that can have critical and severe effects on the business if it is not addressed in a timely manner. As a pan-India organisation with a global presence, the Company faces a number of risks. Listed below are some of the most significant risks and proposed mitigation strategies.

Sr No	Type of risk	Nature of risk	Risk mitigation factors/ measures
A.	EXTERNAL RISKS
1	Regulatory risk	The IMFL 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 low margins.	Unless the regulatory authorities come out with any adverse regulations affecting the industry, the business of the Company will not be affected as the Company is complying with the applicable rules and regulations in all the States where it is present.
			The Company has strong & well accepted brands and its profitability is in line with best players in the industry. Further, industry associations take up the matter of price increases with State Govts whenever required.
2	Competition Risk	The markets for IMFL industry are rapidly evolving and are highly competitive and the Company expects that competition will continue to intensify due to establishment of new capacities, expansion of existing capacities and consolidation of operations across the IMFL industry.	The Company is strongly positioned in designated markets commanding a premium for its products. The Company has adequate manufacturing and bottling facilities to ensure supply side security. 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. Further, due to strong govt regulations, there are significant entry barriers for entry of new players.
B.	INTERNAL RISK
1	Concentration risk	A large percentage of the Companys turnover is derived from Southern India, where any unfavorable regulatory policy may impact its business. Also, the major portion of revenue of the Company is derived from brandy sales, exposing the Company to category vulnerability.	The Company is focusing on the Northeast market where the demand for brandy as well as Gin brands are good. Further the Company has launched Whisky in the Assam Market in FY25 and is proposed to be launched in other North East states in FY26. Whisky is the largest IMFL segment in the North East market. Though in value terms, the markets continue to be small as compared to South India volumes, the Company is taking small steps so as to diversify geographical risk keeping in mind the financial aspects. The Company will also be exploring other markets going forward.
2	Dependence on tie up units	The Company has arrangement with various tie up units for manufacturing of its products due to which the Company has to depend upon third parties for its product requirements.	It is an industry practice to supplement production in own units with that in tie up units as having own production facility to cater to the entire demand will require huge capital expenditure that is neither feasible nor economical and desirable. Availability of bottling units in the major states where the Company operates is not a constraint.
3	Procurement risk	Any rise in cost of raw materials e.g., molasses and grains or packing materials e.g., glass, packaging material may affect the margins of the Company. Dependence on any supplier may expose the Company to supply risk.	The Management is continuously exploring the possibilities for developing alternative/additional sources for procurement of raw material/packing materials. The Company has more than one supplier for all its key raw material/packing material requirements. The Company is also exploring ways to improve state wise and brand wise mix of profitable brands which would enable to negate the increase in the material cost.

HUMAN RESOURCES

The Companys human resource management is dedicated to empowering employees to reach their full potential and align their growth with organizational objectives. Emphasizing individual strengths, the Company recognizes that each employee possesses unique skills and talents that are vital to its success. This is fostered through an inclusive culture, offering flexibility and a challenging work environment that promotes personal development and job satisfaction. The Company invests in employee development through training, structured learning pathways, and skill enhancement. Additionally, the integration of technology in business processes allows employees to focus on value-adding tasks and innovation. This comprehensive and forward-thinking approach prioritizes both individual and collective growth to drive the Companys success.

INFORMATION TECHNOLOGY

The Company views technology as a key pillar for organisational growth and business continuity. Innovations in technology enable processes and operational effectiveness. TIs data- driven platform with trusted software and hardware drives seamless processes across the Company.

During the year, the following measures were taken:

a) Information Technology Service Management (ITSM):

The Company has further strengthened its IT governance framework through the adoption of Information Technology Service Management (ITSM). This framework enables the systematic planning, implementation, and optimization of end-to-end IT service delivery, ensuring seamless alignment with user requirements and overall business objectives.

b) Security Enhancements:

Recognising the growing complexity of the cyber threat landscape, the Company has implemented a Unified Threat Management (UTM) system. This deployment provides advanced safeguards, including malware analysis, user identification, URL filtering, and traffic visibility. Collectively, these measures fortify the Companys security posture and provide a robust defence mechanism to protect critical information assets and resources.

c) SAP System Enhancements:

Strategic enhancements have been carried out across multiple SAP modules with the objective of optimising business processes and improving system performance. These upgrades are expected to deliver greater operational efficiency, process reliability, and long-term scalability.

d) Network Infrastructure Upgrade:

In line with evolving business requirements, the Company has initiated a comprehensive network infrastructure upgrade. This initiative is designed to enhance capacity and scalability, strengthen network security, and simplify management processes, thereby laying the foundation for a robust, secure, and future-ready digital infrastructure.

INTERNAL CONTROL

The Company has designed a reliable internal financial reporting and control system to record financial and operational information in accordance with all applicable internal controls and other regulatory compliance requirements. The Companys Internal and Statutory Auditors periodically review the internal control systems to ensure that day-to-day operations are conducted with minimal risk of fraud or other discrepancies.

The Audit Committee reviews the findings of the Internal and Statutory Auditors. This ensures the sustained adequacy and efficiency of internal controls. Additionally, the Board oversees the Audit Committees examination and ensures that prompt and adequate measures are taken to limit the risk and rectify the situation.

CAUTIONARY STATEMENT

A statement in the Management Discussion & Analysis Report describing the Companys objectives, projections, estimates and expectations may be "forward-looking" within the meaning of applicable securities laws and regulations. Actual results could differ from those expressed or implied. Important factors that could make a difference to the Companys operations include raw and packing material availability and prices, changes in Government regulations, tax regimes and other incidental factors.