In a recent note, JM Financial initiated coverage on Tilaknagar Industries with a ‘Buy’ rating and a price target of Rs 550, implying around 25% upside from current levels.
The brokerage believes the company is entering a new phase of growth, driven by portfolio expansion, premiumisation and a stronger play in the whisky segment following the Imperial Blue acquisition.
Imperial Blue acquisition could drive next leg of growth
JM Financial said the acquisition of Imperial Blue from Pernod Ricard in November 2025 is a key turning point for the company. The brand, which ranks among the top players in the lower prestige whisky segment, gives Tilaknagar access to a much larger market. Whisky is the biggest segment within IMFL, and the deal helps the company move beyond its heavy reliance on brandy, the report added.
With this, Tilaknagar’s portfolio becomes more diversified across categories and regions, significantly expanding its total addressable market, the report noted.
From a regional brandy player to a pan-India portfolio
As per the report, the company’s business was largely concentrated in South India, with a significant share of revenues coming from brandy. This limited its participation in larger and faster-growing segments like whisky, as per the report.
The brokerage firm notes that the acquisitions, such as Imperial Blue, will help the company diversify across geographies and categories.
Volume growth expected to improve
JM Financial expects the legacy business to remain stable, with volume growth of around 11% CAGR over FY26–28. At the same time, Imperial Blue, which has seen muted growth in recent years, is expected to recover under Tilaknagar’s ownership. The brokerage expects 6–8% volume growth for the brand over FY27–28, supported by higher brand spends, improved distribution and increased focus.
The report further added that the combined entity is expected to deliver around 8–9% volume growth over the same period.
Margins may expand despite higher spending
The brokerage expects EBITDA margins of around 12.5–12.8% in FY26 for the combined business. Furthermore, the company is expected to spend more on advertising and promotions, especially to revive and push key brands. But over time, JM Financial believes the benefits of the Imperial Blue acquisition should start to show. Savings from areas like packaging, bottling and other operating costs could gradually help improve margins.
The report added that the company has built in around 150 basis points of margin improvement over FY26–28.
Cash flows and balance sheet to strengthen
Given limited capital expenditure requirements, the brokerage expects Tilaknagar to generate strong free cash flows of about Rs 4.4 billion in FY27 and Rs 5.8 billion in FY28. This could help the company reduce debt and improve its balance sheet further, the report added.
Valuation still at a discount to peers
Despite the recent re-rating, JM Financial noted that the stock continues to trade at a discount to peers in the alcoholic beverages sector. The target price is based on a valuation of 35 times FY28 estimated earnings, factoring in relatively lower margins and higher debt compared to peers.
The brokerage said the company now has the necessary ingredients, strong brands, wider portfolio and improved distribution to tap into the large IMFL opportunity. But a lot will depend on how well the company executes from here. Bringing back growth in Imperial Blue, building scale in newer segments, and steadily improving profitability will be key things to watch.
Risks to watch
Key risks include slower-than-expected recovery in Imperial Blue, regulatory changes in key markets and input cost volatility.
For now, JM Financial believes Tilaknagar is at an inflection point, but investors may need to watch how effectively the company delivers on its expansion strategy.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.