🧠 At a Glance

United Spirits (Diageo India) is the alcohol industry’s undisputed Maharaja, with global brands, near-zero debt, and margins fatter than a pub on IPL night. But the stock — like a Sunday hangover — just won’t move much. In 5 years, profits are up 23% CAGR, but sales have barely grown. So, is this a compounding cocktail or a premium-priced placebo?

🥂 1. The Boozy Business – From McDowell’s to Johnnie

• Parent company: Diageo PLC, one of the world’s largest liquor companies.
• Brand Portfolio:
  • 🥃 Mass appeal: McDowell’s No.1, Royal Challenge, Signature
  • 💎 Premium & Luxury: Johnnie Walker, Black Dog, VAT 69, Ciroc, Tanqueray
• India’s largest IMFL (Indian Made Foreign Liquor) player with 80+ brands.
• Diageo increased ownership to ~57% over time — signaling long-term India bet.

📦 Distribution: 3,000+ distributors, 60 bottling units across states. Complex, but efficient.

📈 2. Financial Snapshot – Whisky Sales Straight, Profits Neat

📊 5-Year Summary (₹ in Cr)

• 🧪 Revenue CAGR (FY21–25): 10.3%
• 🍷 Profit CAGR: 23.1%
• 💸 Operating Margin Surge: From 13% to 19% in 5 years
• 🧹 Debt cleaned: Down from ₹1,037 Cr to ₹480 Cr (FY25)

In short: Topline sipping soda. Bottomline guzzling single malt.

🔍 3. What’s Buzz-Worthy

✅ Premiumization Working
High-end brands like Johnnie Walker and Ciroc are driving growth. Mass-market is flat, but profit-rich premium makes up for it.

✅ Debt Detox
From ₹8,000+ Cr borrowings in FY14 → now almost net-debt-free.

✅ Free Cash Flow Machine
FY25 cash from operations: ₹1,947 Cr. Enough to host every investor at a Goa bar.

✅ Diageo’s Indian Laboratory
India is Diageo’s 2nd largest market by volume. They use USL to test new ideas, like non-alcoholic launches and boutique brand rollouts.

🥴 4. What’s Bitter in the Brew

❌ Sales Growth = Drunk Turtle
5-year sales CAGR: 5.3%. Most of the bottom-line growth came from margin expansion and cost-cutting.

❌ Valuation on Steroids
P/E = 65x earnings. That’s not whisky. That’s champagne pricing.

❌ Regulatory Overhang
Excise duty hikes, state bans, and dry days = constant political hangover.

❌ Flat Volumes
India’s population is growing. Liquor volumes? Not really. Company is depending on price hikes more than volume uptick.

🍻 5. Peer Group – Spirit vs Spirits

Observation: High P/Es are industry-wide. But USL’s margins and scale are the best in class.

🧠 6. Shareholding & Promoter Dynamics

• Promoter (Diageo PLC): 56.68%
• FIIs: 15% and stable
• DIIs: Rising — now 14.6%
• Public: Just 13.7%

📉 The stock is tightly held — and that can support higher valuations. But growth must follow.

💸 7. Valuation – Will the Party Continue?

• FY25 EPS: ₹21.75
• CMP: ₹1,461
• P/E: 65.2x

📌 EduInvesting Fair Value Range

🎯 FV Range: ₹880 – ₹1,500

At ₹1,461, it’s priced to perfection. Any hiccup — like a weak festive season, tax policy, or drop in premium consumption — could dent it fast.

🥃 Final Shot: Smooth Business, Rough Valuation?

United Spirits is a high-quality, margin-rich, and nearly debt-free FMCG-style liquor business. But it’s also:

• Growing slowly
• Valued aggressively
• Dependent heavily on price hikes and premium strategy

If you want steady compounding, strong governance, and are okay with low yield — USL is your brand.
But if you’re looking for growth on the rocks, you might want to try another bar.

🏷️ Tags: United Spirits, Diageo India, Premium liquor stocks, Johnnie Walker, IMFL, McDowell’s, Indian alcohol market, EduInvesting Recap

✍️ Written by Prashant | 📅 20 June 2025