Domestic alcohol companies may see revenue growth of 8-10% in FY24: Icra

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₹26 billion, exceeding the pre-covid levels. During Q1 FY2024, the spirits industry reported a 13% year-on-year increase in revenues despite being the lean season for the segment, while the beer industry, despite being the peak season, witnessed a marginal decline of 1%, due to the unseasonal rainfall," the ratings firm said in its note.

However, companies are set to see a decline in operating margins on account of elevated prices of input materials such as non-basmati rice and other grains such as maize, used to produce extra neutral alcohol (ENA), the base to manufacture spirits. Icra anticipates companies under its coverage to report margin contraction of 90-140 basis points in FY2024, following a sharp 300 basis points decline in FY2023.

The impact of a sub-par monsoon, the El Nino conditions, and the Government measures on grain prices thus remain crucial to ascertain the industry cost structure, it said. “Icra expects alco-bev consumption to remain steady, supported by growing urbanisation, rising disposable incomes, favourable demographics, and easing regulatory environment by some states.

A sub-par monsoon with warm weather amid ongoing El Nino conditions will further drive demand, particularly for beer, in FY2024," Kinjal Shah, Vice President and Co-Group Head, corporate ratings said. Analysts at Icra warned of high packaging material costs—particularly glass, led by an increase in soda ash prices.

However, prices of barley, the key raw material for producing beer, have corrected in recent quarters and are likely to remain stable in the near to medium term. Moreover, the availability and consequent pricing pressures from the diversion of grains towards production of ethanol, which is seeing increased demand due