Expanding Premium Brands Will Transform India's Beverage Industry

Key Takeaways

• Expansion into premium brands and entry into high-growth markets positions the company for higher revenue and margin gains as the market formalizes.
  
• Improved operational efficiency, vertical integration, and long-term contracts support margin stability and strengthen future earnings growth.
  
• Heavy exposure to regulatory changes, volatile input costs, and competitive pressures threaten growth, profitability, and cash flow stability, hindering sustainable investment and long-term margin expansion.

Catalysts

Manufactures and sells bulk alcohol and alcoholic products in India.

• The company is expanding its premium and luxury brand portfolio (Prestige & Above, luxury, selective state launches, duty-free, CSD entry), benefiting from the ongoing shift in India from unbranded to branded spirits and consumer trading up-this supports significantly higher revenue growth and margin expansion as the addressable market broadens and formalizes.
  
• Rising per capita income and urbanization, along with a young demographic profile in India, continue to drive strong volume growth in alcoholic beverages; Globus Spirits' multi-state expansion in high-potential markets like Uttar Pradesh and additional states positions it to capture outsized future revenue growth.
  
• Enhanced operational efficiency and cost control through backward integration and raw material hedging (notably the transition to maize in Eastern India with forward contracts and flexible sourcing) are expected to provide stable or improved net margins by reducing input cost volatility in manufacturing.
  
• The commissioning of the new multi-feed distillery in Uttar Pradesh is a near-term catalyst, enabling both vertical integration for consumer business growth (especially in the large UP IMIL market) and added ethanol/ENA capacity, which should support higher utilization rates and future earnings growth.
  
• Stronger relationships and long-term contracts with organized players, OMCs (oil marketing companies), and government entities help stabilize revenues, and the anticipated growth in ethanol blending under government mandates will further support both revenue base and margin consistency for the manufacturing business.

Globus Spirits Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Globus Spirits's revenue will grow by 16.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 1.0% today to 5.8% in 3 years time.
• Analysts expect earnings to reach ₹2.4 billion (and earnings per share of ₹62.9) by about August 2028, up from ₹257.0 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 26.7x on those 2028 earnings, down from 131.9x today. This future PE is lower than the current PE for the IN Beverage industry at 41.1x.
• Analysts expect the number of shares outstanding to decline by 0.5% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.73%, as per the Simply Wall St company report.

Globus Spirits Future Earnings Per Share Growth

Risks

• Overdependence on state-specific excise policies-particularly in key markets like Uttar Pradesh and Rajasthan-exposes Globus Spirits to regulatory risks and sudden changes in taxation or licensing, which could negatively affect revenue stability and profitability.
  
• Slower-than-expected ramp-up of high-margin IMFL and luxury segments, combined with cautious expansion and the company's own acknowledgment of challenging base effects, limits the potential for accelerated long-term revenue and EBIT margin growth versus diversified peers.
  
• Intensifying competitive pressures-including entry of larger branded players in both the IMIL and premium segments, as well as global multinationals leveraging scale and brand power-could erode market share and force higher marketing or promotion spend, suppressing net margins and earnings.
  
• Reliance on raw material cost advantages due to maize hedging and current surplus conditions may prove temporary; long-term volatility in grain prices (due to government ethanol blending programs, climate-related supply shocks, or policy reversal on FCI rice) could once again pressure manufacturing margins and profitability.
  
• High working capital needs-driven by inventory management, state-wise receivables, and continued investment in new state expansion-create cash flow risk and may limit the company's ability to sustainably invest for growth, potentially depressing net earnings especially during periods of demand volatility or margin compression.

Valuation

• The analysts have a consensus price target of ₹1600.0 for Globus Spirits based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹41.4 billion, earnings will come to ₹2.4 billion, and it would be trading on a PE ratio of 26.7x, assuming you use a discount rate of 12.7%.
  
• Given the current share price of ₹1173.0, the analyst price target of ₹1600.0 is 26.7% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.