Robust revenue growth, premiumisation drive, and FTA cost savings fuel optimism for Indian spirits major
May 26, 2025: Motilal Oswal Financial Services Ltd (MOFSL) has initiated coverage on Radico Khaitan with a ‘Buy’ rating, setting a target price of ₹3,000 per share—implying a potential upside of 22% from its current market price of ₹2,453.
MOFSL’s bullish stance is backed by Radico’s sustained revenue growth and strategic expansion in the premium and luxury spirits market. The brokerage estimates a 16% CAGR in revenue from FY25 to FY28, driven by an impressive 20% CAGR in Radico’s Prestige & Above (P&A) portfolio, which now constitutes 70% of its Indian Made Foreign Liquor (IMFL) business.
FTA Boost to Lower Costs, Enhance Profitability
A major tailwind comes from the recently concluded India-UK Free Trade Agreement (FTA), which will gradually cut customs duties on whisky and gin from 150% to 40% over the next decade. MOFSL projects this will reduce Radico’s input costs by ₹750 million by FY26, enhancing the profitability of premium brands like Sangam, After Dark, and Ranthambore.
Operational Resilience & Nationwide Expansion
Radico’s operational discipline has seen its gross debt shrink from ₹820 crore in FY16 to ₹190 crore in FY22. Although there was a temporary rise in debt during the FY23 capex cycle, strong free cash flow is expected to restore a downward trend in debt.
The company’s robust market presence—over 100,000 retail outlets and 10,000 on-premise locations—gives it a distinct advantage in navigating India’s complex regulatory landscape and strengthening its brand equity.
Premiumisation Strategy & Competitive Edge
Radico dominates the P&A vodka segment with an 85% market share, which now represents half of its premium portfolio. MOFSL believes Radico’s aggressive focus on premiumisation and forays into high-demand markets, including premium whisky, will further bolster its market position.
Margins Poised for Recovery
Past margin pressures from high costs of glass and Extra Neutral Alcohol (ENA) are expected to ease, thanks to moderating raw material prices and operational efficiencies. MOFSL forecasts Radico’s EBITDA margin will improve to 16.2% by FY28.
While competitive dynamics and potential excise duty changes remain risks, MOFSL remains confident in Radico’s ability to capitalise on the growing premium spirits market in India.