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Informist, Monday, May 19, 2025

By Avishek Rakshit

KOLKATA – Indian Premier League is likely to cast a gloomy shadow on United Spirits Ltd. despite the company being expected to post a revenue growth for the March quarter, driven by higher sales volumes. The dividend from its wholly-owned subsidiary, Royal Challengers Sports Pvt. Ltd., which owns the Royal Challengers Bangalore cricket team of the Indian Premier League, is expected to have not been paid in the March quarter. The lack of payout is expected to result in a significant drop in other income for the quarter. United Spirits reports this dividend in its other income which excludes its core business of alcoholic beverage sales.

United Spirits Ltd. is expected to report a nearly 17% on-year decline in net profit for the March quarter, with the bottom line projected at just over INR 3 billion, based on the average estimates of nine brokerages. Despite this, revenue is likely to rise by 10% on year to exceed INR 29 billion, driven by increased sales volume, as per the average of estimates from nine brokerages. On a sequential basis, however, net profit is anticipated to fall over 32% while revenue may decline more than 14%. United Spirits will declare its financial results for the quarter and year ended March on Tuesday.

In the year-ago quarter, United Spirits, the Indian division of the world's fourth largest alcoholic beverage company by market capitalisation Diageo Plc, had earned a net profit of nearly INR 4 billion on sales of around INR 27 billion. In Oct–Dec, which typically sees higher liquor consumption due to festival demand, the company reported a net profit of nearly INR 5 billion on revenue over INR 34 billion.

HDFC Securities Ltd. has issued the highest profit estimate for the company at over INR 4 billion while Anand Rathi Share and Stock Brokers Ltd. has the lowest at INR 3 billion. On the revenue front, Equirus Securities Pvt. Ltd. projected the highest figure at INR 30 billion while HDFC Securities had the lowest estimate of around INR 27 billion.

Nearly all brokerages have projected that the premium and upper premium segment, termed as prestige and above in the alcoholic beverages industry, would register a volume growth of 6.5-8.0% on year, which will boost revenue from this segment by around 12.5% on year. Brokerages also anticipate the mass product segment to register a 2-3% volume growth, which may lead to a 5% revenue growth from mass products' sales. Kotak Institutional Equities said United Spirits would likely register a 7.5% on-year overall volume growth at over 13 million cases in the March quarter.

Opening up of Andhra Pradesh will also aid sales growth. According to a pan-Indian study published in August 2024, Andhra Pradesh ranks second to its neighbour Telangana in terms of annual per capita spends on liquor consumption at INR 1,306 during 2022-23 (Apr-Mar). The study was published by the National Institute of Public Finance and Policy, an autonomous research institute under the Ministry of Finance.

Under the new liquor policy of Andhra Pradesh, companies selling Indian made foreign liquor are expected to get a boost. As part of the policy, the state has granted 3,736 licences to private liquor shops, valid until September 30, 2026. In addition, 12 licences will be issued for setting up premium and high-end liquor retail outlets, on the lines of Haryana. These premium licences will be allocated in major cities such as Vijayawada, Visakhapatnam, Rajamahendravaram, Kakinada, Guntur, Nellore, Kurnool, Kadapa, Anantapur, and others. Thus, opening up of Andhra Pradesh and the state's new policy on liquor sales are expected to provide a fillip to the company's sales volume and top line.

Brokerage Elara Securities (India) Pvt. Ltd. is also bullish on United Spirits reporting volume driven growth from Uttar Pradesh as well.

United Spirits is expected to report an earnings before interest, tax, depreciation, and amortisation of over INR 4 billion, according to the average of projections from eight brokerage houses. The highest estimate of around INR 5 billion has been given by Nuvama Wealth Management Ltd. and the lowest projection of nearly INR 4 billion was made by HDFC Securities Ltd.

Nuvama said the company's gross margins could expand 108 basis points on year to 44.4% and the EBITDA margin could increase by 227 basis points on year to 15.9%. Kotak Institutional Equities expect the gross margins to improve 130 basis points on year and the EBITDA margin to go up 180 basis points on year. Stability in extra neutered alcohol prices – the key raw material to make alcoholic beverages - and deflation in glass prices is expected to help margin growth.

On Monday, shares of United Spirits closed 1% higher at INR 1,556.0 on the National Stock Exchange.

Following are the Jan-Mar earnings estimates for United Spirits based on reports from nine brokerage firms in the descending order by the estimate of net profit:

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Subhojit Sarkar

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