Tilaknagar Industries Ltd

#CSStart#

It is with great pleasure that I share the highlights of a remarkable year for Tilaknagar Industries Limited, a year that underscores our commitment to excellence and our shared vision for the future.

• TI was the fastest growing IMFL company of scale for the second year in a rows

• We closed out the year as the third largest IMFL P&A player in Karnataka and Telangana and the largest IMFL player in Puducherry

• Mansion House Brandy continues to be largest selling brandy in India and the second largest selling brandy globally

• Courrier Napoleon Brandy was the second fastest growing brandy and the third fastest growing spirits brand globally in CY23

• Mansion House Flandy, our flavoured brandy range already enjoys a 5% share of Mansion House Brandy sales in the relevant states

• Mansion House Reserve Brandy grew over 2x in Tamil Nadu Our achievements this year are a testament to the hard work and dedication of our entire team. Thanks to their relentless pursuit of innovation and excellence, and your unwavering support, we have met our key objectives, setting new benchmarks for growth and performance.

Our growth is especially impressive, given it has been in conjunction with expansion in profitability and margins, despite a very volatile year from a raw material prices perspective.

At an industry level, while overall IMFL industry grew at low single digits, the Prestige & Above segment witnessed a strong mid-single digit growth. This growth in P&A was especially stark in white spirits and brandy. Some interesting trends being witnessed in the alcoholic beverages industry are:

• Growing prevalence of women consumers

• Cocktail culture taking off

• Increase in ‘at home’ consumption

• Social drinking on the rise

• Drink less, but better

• Experimental attitude towards consumption by consumers

• Experience-focused retail evolution

• Growth of flavoured spirits

Each of the above indicates a clear move towards premiumisation in the industry.

We are also seeing a remarkable shift in consumer preference for home-grown brands, especially in the luxury and premium end of the industry. We believe that this shift in consumer preference will extend to categories beyond Gin and Whisky. I see these as very exciting and encouraging signs for the evolution and growth of the industry, which further align with our strategic goals.

In FY24, our volumes have grown by 16% YoY as compared to industry growth of around 2-3%. Our Prestige & Above (P&A) portfolio contributed 84% of total volumes in FY24. Not only did we gain market share in overall IMFL industry, but also across the P&A segment. While brandy P&A continues to be one of the fastest growing categories, we still see significant headroom to grow, in line with overall IMFL P&A.

I am also happy to share that we continued to grow faster than industry in almost all our key states.

• Telangana:

Growth at 20% YoY vs. IMFL industry growth of 3%

• Karnataka:

Despite being a predominantly whisky consuming state, your Company has a ca. 20% share of entire IMFL P&A industry; TI registering a mid-single digit growth vs. low single digit degrowth for overall IMFL P&A industry

• Puducherry:

25%+ share of overall IMFL industry in the state

In FY24, our net revenue grew by 20% to _ 1,394 crores, on the back of volume growth as well as premiumisation trend within the portfolio. Our NSR per case grew by 7.1% in FY24 to _ 1,282.

Our EBITDA grew 35%, from _ 137 crores to _ 185 crores. I am especially proud that we expanded our EBITDA margins by 152 basis points to 13.3% in FY24 in a very volatile inflationary scenario. This has been on account of premiumisation, price increases received in key states, cost optimisation, and operating leverage.

Our debt reduction efforts have led to a significant reduction in finance costs, with our Profit After Tax (PAT) excluding exceptional items growing 95% to _ 141 crores in FY24. Gross debt came down by _ 130 crores in FY24, from _ 250 crores to _ 119 crores as on March 31, 2024. Our net debt as on 31^st March 2024 stood at _ 74 crore. We are confident of achieving net debt-free status in FY25. In January 2024, CRISIL assigned A-/Stable rating, leading to reduction in interest rate on Kotak loan from 13% to 9.95%, effective mid-Q1 FY25.

I am also happy to share that the Board of Directors of the Company has recommended a dividend of _ 0.50 per share for FY24.

FY24 was a year of taking small yet significant steps in giving brandy the ‘share of voice’ commensurate to its ‘share of market’. We launched 2 large marketing campaigns; the first being our largest digital initiative, in the form of ‘A Warm Welcome’ – Mansion House Brandy’s brand proposition. This initiative was coupled with viral influencer marketing campaigns, which garnered great engagement, organically as well as inorganically.

Our second large scale campaign was ‘The Flandy Song’, Flandy’s brand anthem which synced with ‘Welcome The Now’ – Mansion House Flandy’s brand proposition, giving brandy a more aspirational, fun, inclusive and versatile positioning.

As our launch and innovation pipeline keeps progressing, we expect to invest more on marketing and brand building. We see these as investments which will bear fruit over a long period of time. FY24 was a year of recognition as well. TI won the ‘Company of the Year’ award at the coveted Spiritz Conclave &Achievers’ Awards, which was held in December 2023.

While the industry we work in is very complex, our strategy going forward is straight-forward.

• Strengthening our leadership position in the brandy category, with new innovative launches as well as filling of price need gaps in brandy

• Exploring opportunistic launches in other categories for regional diversification

• Playing a key role in the craft spirits space through organic and inorganic participation

• Ensuring all new initiatives in the Prestige & Above segment, to drive profitability

• Promoting brandy as a youthful, fun, and aspirational category

• Increasing marketing investments for long-term benefits

• Continuing to grow market share in the brandy segment

• Focus on profitability and cash flows

• Debt reduction with the aim to be net debt-free by FY25

• Continued focus on efficient levels of working capital

• Improvement in Return on Capital Employed (ROCE)

• Continue an asset-light model approach

In FY24, our market share within brandy expanded 177 basis points to 12%. Whilst being the second largest category in IMFL, brandy is still a very fragmented category. We foresee TI playing a key role in significantly consolidating demand within the category with innovations and launches across premium price points.

While short term disruptions may persist, especially on account of elections in early FY25, on a long- term basis, we see tremendous potential in the Indian consumer space as well as the alcoholic beverages industry. Complemented by our innovation and launch pipeline, we are confident of making significant strides to become one of India’s most valuable consumer businesses.

On the cost front as well, while short-term inflationary pressures persist, especially on the raw materials side, our business unit economics are very strong. And with our premiumisation drive bearing fruit, we expect to expand our profitability and margins in the mid and long-term.

As we look ahead, we remain optimistic about the opportunities that lie before us. Our strategy is designed to capitalise on emerging trends and continue delivering exceptional value to our stakeholders. We are excited about the possibilities and confident in our ability to build on this year’s successes.

Thank you for your continued trust and investment in Tilaknagar Industries Limited. Your support is invaluable, and we are honoured to have you as part of our journey. Together, we look forward to achieving even greater milestones in the coming year.

With sincere appreciation,

Chairman & Managing Director

Tilaknagar Industries Limited