Motilal Oswal Initiates Coverage on Radico Khaitan with ‘Buy’ Rating, Sets Target Price at ₹3,000

Brokerage sees 22% upside driven by strong premium portfolio growth and India-UK FTA benefits

May 26, 2025: Motilal Oswal Financial Services Ltd (MOFSL) has initiated coverage on Radico Khaitan, assigning it a ‘Buy’ rating with a target price of ₹3,000—an expected 22% upside from the current ₹2,453.

MOFSL’s bullish view stems from Radico’s robust revenue growth and strategic expansion in premium and luxury spirits. The brokerage projects a 16% revenue CAGR for FY25-28, driven by a 20% CAGR in the Prestige & Above (P&A) portfolio, which already accounts for 70% of Radico’s Indian Made Foreign Liquor (IMFL) revenue.

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FTA to Slash Costs, Boost Margins
The recently concluded India-UK Free Trade Agreement (FTA) is a key tailwind, as it phases down customs duties on whisky and gin from 150% to 40% over a decade. MOFSL anticipates this will lower Radico’s input costs by ₹750 million by FY26, directly enhancing the profitability of brands like Sangam, After Dark, and Ranthambore.

Resilience & Market Expansion
Radico has shown impressive operational improvements, cutting gross debt from ₹820 crore in FY16 to ₹190 crore in FY22. Despite a temporary debt spike during FY23’s capex cycle, steady free cash flow is expected to restore a downward trend.

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The company has also expanded its retail and on-premise presence to over 100,000 outlets and 10,000 locations nationwide—an edge in navigating India’s complex regulatory environment and cementing its brand strength.

Premium Portfolio & Competitive Advantage
Radico has captured an 85% share in the P&A vodka segment, which now comprises 50% of its premium portfolio. The company’s aggressive premiumisation strategy and expansion into high-demand markets, including premium whisky, underpin MOFSL’s positive outlook.

Margin Recovery & Future Prospects
Inflation in glass and Extra Neutral Alcohol (ENA) weighed on margins in the past, but easing raw material costs and operational efficiencies are set to support margin recovery. MOFSL expects EBITDA margin to reach 16.2% by FY28.

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While acknowledging risks from competitive pressures and possible changes in excise duties, MOFSL sees Radico as well-positioned to capture emerging premium spirits market opportunities.

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Radico Khaitan, MOFSL coverage, India-UK FTA, premium spirits market, Indian Made Foreign Liquor, beverage industry outlook, Radico Khaitan buy rating, India stock market news, Indian beverages sector