Tilaknagar Industries Ltd. (TI) is a prominent player in the Indian alcoholic beverage industry, with a history spanning over 90 years. Originally founded in 1933 as Maharashtra Sugar Mills, the company transitioned its focus entirely to the spirits business, rebranding itself to reflect this new direction. Today, TI stands as the largest brandy manufacturer in India, a position built on the strength of its flagship brands. The company's portfolio is dominated by two "millionaire" brands (selling over a million cases annually): Mansion House Brandy, which is the largest selling brandy in India and the second largest globally, and Courrier Napoleon, recognized as one of the fastest-growing brandy brands in the world.

The company's operational strategy is anchored in an asset-light model, with approximately 70% of its production handled by 17 contract manufacturing units, supplemented by 4 owned facilities. This network spans across key states in India, allowing for efficient production and distribution. While its production is widespread, TI's sales have historically been concentrated in Southern India, which accounts for over 86% of its total volumes.

Recently, the company has embarked on a significant transformation. After a period of financial restructuring, TI has strengthened its balance sheet and is now executing an ambitious growth strategy. This includes organic expansion into new categories like whisky with the launch of Mansion House Whisky, and a move into the luxury segment with Monarch Legacy Edition Brandy. More significantly, TI is undertaking a transformational acquisition of the Imperial Blue whisky business from Pernod Ricard India. This move is set to diversify its product portfolio, dramatically reduce its geographic concentration on the South, and establish it as a formidable pan-India, multi-category spirits company.

Official Website: http://www.tilind.com/

• Q2 & H1 FY26 Performance:

• For the quarter ended September 30, 2025 (Q2 FY26), Net Revenue grew 6.2% year-over-year (YoY) to INR 398 crore. Adjusted for subsidy income, the growth was stronger at 9.3%.

• For the half-year (H1 FY26), Net Revenue increased by 17.4% YoY to INR 807 crore. Adjusted growth was 14.4%.

• This revenue growth was driven by a significant increase in sales volume, which grew 16.2% YoY in Q2 and 21.0% in H1.

• Profitability:

• EBITDA for Q2 FY26 stood at INR 60 crore, with a margin of 15.1%. This represents an 8.8% YoY decline, primarily due to a strategic increase in Advertising & Promotion (A&P) expenses from 0.6% to 2.1% of net revenue.

• H1 FY26 EBITDA grew 33.2% YoY to INR 155 crore, with the margin expanding by 228 basis points to 19.2%.

• Profit After Tax (PAT) for Q2 was INR 53 crore (13.2% margin) and for H1 was INR 141 crore (17.3% margin).

• Balance Sheet Strength:

• As of September 2025, the company is in a strong financial position with a gross debt of only INR 47 crore.

• Following a preferential issue of equity and warrants, the company holds a significant net cash position of INR 1,086 crore. This capital raise is primarily to fund the upcoming acquisition of Imperial Blue.

• Total Equity has more than doubled from INR 882.2 crore in March 2025 to INR 1,991.2 crore in September 2025.

• Key Metrics:

• Net Selling Realization (NSR) per case showed sequential improvement, rising from INR 1,193 in Q1 FY26 to INR 1,215 in Q2 FY26. However, it is down YoY due to a price reduction in Andhra Pradesh in the previous year.

• Finance costs have reduced significantly, down 37.4% YoY in Q2, reflecting the company's deleveraged balance sheet.

The company has demonstrated robust top-line growth driven by volumes, and despite a planned increase in A&P spend impacting Q2 profitability, its balance sheet is exceptionally strong ahead of a major acquisition.

• Dominance in Brandy:

• TI is the largest brandy manufacturer in India, giving it significant scale and brand recognition in this category.

• Its brand, Mansion House, is the #1 selling brandy in India and #2 globally. Courrier Napoleon is the 3rd fastest-growing brandy globally. This demonstrates strong brand equity and consumer loyalty.

• Asset-Light Manufacturing Model:

• The company operates with 4 owned and 17 contract manufacturing units. Approximately 70% of production is outsourced.

• This model allows for operational flexibility, lower capital expenditure, and the ability to scale production efficiently in response to demand across different states.

• Concentrated Market Leadership:

• With over 86% of sales volumes coming from Southern India, TI has established deep-rooted distribution networks and a strong understanding of consumer preferences in this key region for brandy consumption.

• This regional stronghold provides a stable and profitable base from which to expand into other geographies and categories.

TI's unique position is built on its unparalleled leadership in the brandy segment, an efficient asset-light production model, and a deeply entrenched presence in its core South Indian markets.

• Attractive Market Dynamics:

• India is the world's largest market for spirits (by volume) and whisky, presenting a massive addressable market for TI.

• The whisky market has shown attractive growth, with a volume CAGR of 9.3% from 2020-2024.

• Favorable Demographics:

• Approximately 20 million new consumers are added to the legal drinking age population annually in India.

• This expanding consumer base provides a sustained tailwind for volume growth across the industry.

• Premiumization Trend:

• The rise of the middle-class consumer is a key driver of premiumization, where consumers are increasingly willing to upgrade to higher-quality and higher-priced brands.

• This trend supports value growth and margin expansion for companies with strong brands in the prestige and above segments.

The Indian spirits industry offers a robust growth environment, supported by favorable demographics and a clear trend towards premiumization, which aligns perfectly with TI's strategic initiatives.

• Strong Volume Growth:

• The company achieved its highest-ever Q2 sales volume, reaching 3.42 million cases, a 16.2% YoY increase.

• For H1 FY26, volumes grew 21% YoY to 6.62 million cases, indicating sustained momentum and market share gains from competitors.

• Inorganic Growth - Imperial Blue Acquisition:

• TI has signed a definitive agreement to acquire the Imperial Blue business, the 3rd largest IMFL brand in India, which sold 22.4 million cases in the last twelve months ending March 2025.

• This acquisition is transformational, immediately giving TI a massive scale in the whisky category, where Imperial Blue holds a ~9% volume share.

• The transaction, valued at an enterprise value of ~€413 million, has received approval from the Competition Commission of India (CCI) and is expected to close in Q3 FY26.

• Organic Expansion and New Launches:

• The company is expanding its geographic footprint by launching existing and new brands in new territories. Mansion House Whisky was recently introduced in Odisha, Telangana, and Kerala.

• It is also moving up the value chain with the launch of Monarch Legacy Edition Brandy in key markets.

• Strategic Investments:

• TI increased its stake in Spaceman Spirits Lab (SSL), a craft spirits company, to 21.36%.

• It has commenced distribution of SSL's premium brands like Samsara Gin and Amara Vodka, strengthening its presence in the fast-growing craft spirits segment.

TI is executing a multi-pronged growth strategy, combining strong organic volume growth and geographic expansion with a game-changing acquisition that will redefine its scale and market position.

• Pan-India and Multi-Category Transformation:

• The Imperial Blue acquisition will transform TI from a South-focused, brandy-led company into a true pan-India player with a powerful presence in whisky, the largest spirits category in India.

• Post-acquisition, whisky is expected to contribute over 65% of volumes, providing a balanced portfolio.

• Synergies and Cross-Selling:

• The combination of TI's deep network in the South and Imperial Blue's nationwide presence creates significant opportunities for distribution synergies and cross-selling brands across territories.

• This expanded reach will allow TI to unlock underserved regions and drive penetration for its entire portfolio.

• Premiumization Platform:

• Imperial Blue provides a strong platform in the value segment, which can be leveraged to drive premiumization.

• Combined with its own launches (Monarch Legacy Edition) and strategic investments (SSL), TI is well-positioned to capture growth across multiple price points, from value to luxury craft spirits.

• Potential Margin Expansion Levers:

• The company expects to realize cost synergies from scale efficiencies in advertising and administration post-acquisition.

• Furthermore, a potential Free Trade Agreement (FTA) between the UK and India is expected to be a major tailwind for the Imperial Blue business, which uses imported Scotch malts.

The acquisition of Imperial Blue is a strategic masterstroke that unlocks immense opportunities for geographic diversification, portfolio expansion, and capturing the long-term premiumization trend in India.

• Manufacturing Footprint:

• TI operates a network of 21 manufacturing units across India, comprising 4 owned facilities and 17 contract manufacturing partners.

• This asset-light approach provides significant operational flexibility and reduces the need for heavy capital investment in building new plants.

• Capital Work-in-Progress:

• The balance sheet indicates an increase in Capital Work-in-Progress from INR 3.4 crore in March 2025 to INR 40.3 crore in September 2025.

• This suggests ongoing investment in upgrading or expanding existing facilities to support growth.

The company's asset-light manufacturing network is a key strength, and current capital expenditure appears focused on targeted enhancements rather than large-scale greenfield projects.

• Integration of Imperial Blue:

• The immediate priority is the successful closure and integration of the Imperial Blue business in Q3 FY26.

• A Transition Manufacturing and Services Agreement (TSMA) with Pernod Ricard will ensure a smooth transition of operations.

• Disciplined Debt Management:

• The acquisition will be funded by a mix of equity (preferential issue of INR 2,296 crore) and debt.

• Management has a clear target to manage the balance sheet prudently, aiming to reduce the Net Debt to EBITDA ratio to below 1.0x by the end of FY29.

• Building a Premium Portfolio:

• The company's "Journey Ahead" involves using the scale from Imperial Blue as a stepping stone to develop a premium portfolio across multiple categories.

• This will be achieved through a combination of organic launches in the Prestige & Above segment and potential future inorganic acquisitions.

• Sustained Brand Investment:

• The company is "doubling down on A&P reinvestment rates," as seen in Q2 FY26, to strengthen brand equity and drive market share ahead of key selling seasons.

TI's future is focused on integrating its transformative acquisition, maintaining financial discipline, and leveraging its newfound scale to build a powerful, multi-category, premium spirits portfolio.

• EBITDA Margin Performance:

• The consolidated EBITDA margin for H1 FY26 was strong at 19.2%.

• The Q2 FY26 EBITDA margin was 15.1% (adjusted for subsidy). The YoY contraction from 17.6% is attributable to a conscious decision to increase A&P spending to fuel future growth.

• PAT Margin:

• PAT margin for H1 FY26 stood at 17.3%, an expansion of 316 basis points YoY, reflecting operational leverage and lower finance costs.

• The Q2 FY26 PAT margin was 13.2%.

• Future Margin Drivers:

• The company expects synergy benefits from the Imperial Blue acquisition to support EBITDA margin expansion in the future.

• Operating leverage from increased scale and potential cost efficiencies in go-to-market and administration are key levers.

• A favorable UK/India FTA could provide a significant boost to the margins of the Imperial Blue business by reducing the cost of imported raw materials.

While near-term margins are influenced by strategic investments in brand building, the company has clear levers for long-term margin expansion through synergies and operating leverage post-acquisition.

• Strengthened Competitive Position:

• TI is already the leader in the Indian brandy market. The acquisition of Imperial Blue will elevate it to a top-tier player in the overall Indian spirits market.

• Imperial Blue is the 3rd largest IMFL brand with ~9% volume share in the whisky segment, placing TI in direct competition with the largest players in the industry.

• Gaining Market Share:

• Management commentary explicitly states that the company gained market share across most key markets in Q2 FY26, driven by the strong performance of its existing portfolio against the competition.

• Brand Power as a Moat:

• The company possesses powerful brands with strong recall. Mansion House and Courrier Napoleon have won numerous awards and hold dominant positions.

• Imperial Blue has a strong heritage and "top-of-mind" brand recall, which is a significant competitive advantage.

TI is transitioning from a regional, category-specific leader into a national powerhouse capable of competing effectively with the largest incumbent players across the spirits landscape.

• Integration Risk:

• The acquisition of Imperial Blue is significantly larger than TI's current operations. Successfully integrating such a large business, including its manufacturing, distribution, and personnel, is a complex undertaking and poses a considerable execution risk.

• Financial Risk:

• The transaction is being funded by a mix of equity and debt. While management has a clear deleveraging plan, managing the new debt load and meeting financial covenants will be critical for long-term stability.

• Regulatory Risk:

• The alcoholic beverage industry in India is subject to a complex and fragmented regulatory environment, with rules varying by state.

• As evidenced by the price reduction in Andhra Pradesh which impacted NSR, changes in state-level excise policies, pricing, or distribution rules can materially affect performance.

The primary risks are centered on the successful execution and integration of the large-scale Imperial Blue acquisition and navigating the inherent regulatory complexities of the Indian spirits industry.

• Acquisition Milestone:

• The Competition Commission of India (CCI) granted approval for the acquisition of the Imperial Blue business on October 7, 2025. The transaction is on track to be completed in Q3 FY26.

• Strengthening Strategic Investments:

• TI made a follow-on investment of INR 10.66 crore in Spaceman Spirits Lab (SSL) in August 2025, increasing its stake from 12.98% to 21.36%.

• Improved Credit Profile:

• CRISIL revised its credit rating for the company upwards to A-/Positive in December 2024. This led to a tangible benefit of interest rate reduction on its term loan from 13% to 9.95%.

• Brand Recognition and Awards:

• The company's brands won multiple accolades in Q2 FY26 at events like the 'Spiritz Conclave & Achievers' Awards', 'India Wine & Spirits Awards', and 'Shark Awards', reinforcing the premium perception and quality of its products.

The company is executing its strategic plan with precision, securing regulatory approvals for its acquisition, strengthening its investments, and continuing to build brand equity through industry recognition.