India’s alcoholic beverage industry is poised to record an 8-10% revenue growth, reaching Rs 5.3 lakh crore in FY26, according to a new report by Crisil Ratings. This comes after the sector registered a robust 13% compound annual growth rate (CAGR) over the past three fiscal years.
“Healthy volume growth combined with ongoing premiumisation will support revenue momentum, even without significant price hikes,” said Jayashree Nandakumar, Director at Crisil Ratings.
Sajesh KV, Associate Director at Crisil Ratings, noted, “Operating profitability in the spirits segment is expected to rise 80-100 bps, while beer could see a 50-70 bps improvement. The industry’s blended operating margin will expand for the second consecutive year.”
With stable working capital and minimal large-scale capex plans, industry players' credit metrics remain robust. The interest coverage ratio is projected to be a healthy 21 times in the current fiscal year.
Premiumisation Drives Profitability Expansion
Operating profitability in the sector is expected to improve by 60-80 basis points, propelled by the rising demand for premium and luxury alcoholic beverages. These high-end products, priced above Rs 1,000 per 750 ml, are projected to see a 15% revenue surge, accounting for 38-40% of total spirits revenue.“Healthy volume growth combined with ongoing premiumisation will support revenue momentum, even without significant price hikes,” said Jayashree Nandakumar, Director at Crisil Ratings.
Spirits Dominate Industry Revenue
Spirits remain the dominant force, contributing 65-70% of the total industry revenue, while beer, wine, and country liquor make up the rest. Overall industry volumes are forecast to grow by 5-6% in FY26, driven by urbanisation, increasing disposable incomes, and a rising number of consumers.Input Costs and Margins: A Balanced Outlook
Despite a marginal uptick in input costs, rising realisations from premiumisation are expected to support better cost absorption. Extra Neutral Alcohol (ENA) and barley, which together form 60-65% of total raw material costs, are anticipated to rise by 2-3% and 3-4%, respectively. Packaging costs, mainly glass bottles, will remain firm amid strong demand.Sajesh KV, Associate Director at Crisil Ratings, noted, “Operating profitability in the spirits segment is expected to rise 80-100 bps, while beer could see a 50-70 bps improvement. The industry’s blended operating margin will expand for the second consecutive year.”
Capacity Utilisation and Capital Outlook
The sector has expanded capacities by 15-20% over the past two years and currently operates at 70-75% utilisation, indicating adequate headroom for meeting future demand. As a result, major debt-funded capital expenditure is unlikely in FY26.With stable working capital and minimal large-scale capex plans, industry players' credit metrics remain robust. The interest coverage ratio is projected to be a healthy 21 times in the current fiscal year.