The September quarter results underscore Allied Blenders' ability to navigate a challenging operating environment characterised by rising input costs and competitive intensity. The company's portfolio of premium brands—including Officer's Choice, Sterling Reserve, and Jolly Roger—continued to gain traction, driving both volume growth and margin expansion. Sequential momentum remained strong, with net profit rising 13.70% quarter-on-quarter from ₹56.56 crores in Q1 FY26.
The stock's post-result decline reflects investor caution around valuation multiples that have expanded significantly over the past year. Trading at ₹649.95, Allied Blenders has delivered a remarkable 96% return over the past twelve months, substantially outperforming both the Sensex (3.78% return) and the broader beverages sector (which declined 5.97%). This stellar performance has pushed the stock into "very expensive" territory based on traditional valuation metrics, raising questions about sustainability of current price levels.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | Net Profit (₹ Cr) | QoQ Growth | Operating Margin |
|---|---|---|---|---|---|
| Sep'25 | 990.06 | +7.28% | 64.31 | +13.70% | 12.67% |
| Jun'25 | 922.86 | +0.24% | 56.56 | -28.08% | 12.09% |
| Mar'25 | 920.65 | -5.47% | 78.64 | +36.84% | 14.76% |
| Dec'24 | 973.94 | +12.25% | 57.47 | +20.84% | 11.99% |
| Sep'24 | 867.67 | +14.52% | 47.56 | +324.64% | 11.91% |
| Jun'24 | 757.63 | -1.29% | 11.20 | -564.73% | 9.79% |
| Mar'24 | 767.57 | — | -2.41 | — | 7.79% |
Financial Performance: Margin Expansion Drives Profitability
Allied Blenders' Q2 FY26 performance was characterised by strong top-line growth coupled with meaningful margin improvement. Net sales of ₹990.06 crores represented the company's highest quarterly revenue, reflecting robust demand across key markets. On a half-yearly basis for H1 FY26, the company reported revenues of ₹1,912.92 crores, up 17.86% from H1 FY25, demonstrating consistent momentum.
Operating profit excluding other income reached ₹125.42 crores in Q2 FY26, marking a 21.33% year-on-year increase. More impressively, operating margins expanded by 76 basis points to 12.67%, up from 11.91% in the corresponding quarter last year. This margin expansion reflects the company's premiumisation strategy and improved operational efficiencies, even as employee costs rose to ₹63.94 crores from ₹38.09 crores a year earlier.
Interest expenses remained elevated at ₹29.81 crores, though the company has been steadily reducing its debt burden. Depreciation stood at ₹16.50 crores, whilst tax outgo was ₹20.95 crores at an effective rate of 24.98%. The net profit margin improved to 6.36% from 5.48% a year ago, indicating better cost management and operational leverage benefits as the business scales.
For H1 FY26, Allied Blenders reported consolidated net profit of ₹120.87 crores, representing a substantial 105.70% increase from ₹58.76 crores in H1 FY25. This remarkable growth trajectory underscores the company's operational turnaround from the challenging FY24, when it reported minimal profitability of just ₹1 crore for the full year on revenues of ₹3,327 crores.
Operational Excellence: ROE Improvement Signals Better Capital Deployment
Allied Blenders has made significant strides in improving capital efficiency, with return on equity (ROE) reaching 12.63% and return on capital employed (ROCE) climbing to 15.95%. These metrics, whilst still below industry leaders, represent a marked improvement from the company's historical performance and signal management's focus on value creation rather than mere top-line expansion.
Key Strength: Improving Return Ratios
The company's ROCE of 15.95% demonstrates improving capital productivity, whilst the five-year EBIT growth rate of 38.70% highlights strong operational momentum. Management's focus on premiumisation and margin expansion is yielding tangible results, with operating margins consistently trending upward over the past five quarters.
The balance sheet shows a company in transition. Shareholder funds stood at ₹1,542.86 crores as of March 2025, up dramatically from ₹406.93 crores a year earlier, primarily driven by the successful initial public offering. Long-term debt declined to ₹119.17 crores from ₹234.74 crores, reflecting deleveraging efforts. The debt-to-EBITDA ratio of 3.85x, whilst still elevated, has been improving as EBITDA generation strengthens.
Working capital management remains an area requiring attention, with current liabilities of ₹1,851.87 crores substantially exceeding the company's shareholder funds. Trade payables stood at ₹606.91 crores as of March 2025, down from ₹702.40 crores a year earlier. The company's ability to generate consistent operating cash flows—₹185 crores in FY24—provides comfort regarding liquidity management.
The Valuation Conundrum: Premium Pricing Meets Premium Growth
Allied Blenders trades at a price-to-earnings ratio of 73x trailing twelve-month earnings, positioning it at the expensive end of the beverages sector spectrum. The price-to-book value multiple of 12.20x significantly exceeds the sector average, reflecting investor optimism about the company's growth trajectory and premiumisation strategy. The EV/EBITDA multiple of 40.01x and EV/Sales of 5.15x further underscore the premium valuation.
Valuation Reality Check
The stock's classification as "very expensive" stems from stretched multiples relative to both historical norms and peer group averages. Whilst the 96% one-year return justifies some premium, the sustainability of current valuations hinges on the company's ability to maintain high-teens revenue growth and continue margin expansion. Any growth disappointment could trigger significant multiple compression.
The company's dividend yield of 0.54% provides minimal income support, with the latest dividend of ₹3.60 per share declared in June 2025. The absence of a meaningful dividend payout ratio reflects management's preference for reinvesting profits into growth initiatives rather than returning cash to shareholders—a strategy appropriate for a company in growth mode but offering limited appeal to income-focused investors.
Technical indicators paint a bullish picture, with the stock in an uptrend since October 20, 2025, when it changed from "mildly bullish" to "bullish" at ₹582.25. The stock trades above all key moving averages, with the 200-day moving average at ₹431.84 providing strong long-term support. However, at ₹649.95, the stock sits just 9.72% below its 52-week high of ₹719.95, limiting near-term upside potential.
| Company | P/E (TTM) | P/BV | ROE (%) | Div Yield (%) | Debt/Equity |
|---|---|---|---|---|---|
| Allied Blenders | 73.24 | 12.20 | 12.63 | 0.54 | 0.50 |
| Varun Beverages | 53.65 | 8.68 | 22.82 | 0.32 | 0.00 |
| United Spirits | 61.54 | 1.26 | 15.55 | 0.83 | -0.30 |
| United Breweries | 125.21 | 10.98 | 8.09 | 0.55 | 0.04 |
| Radico Khaitan | 92.38 | 1.44 | 10.00 | 0.13 | 0.14 |
| Tilaknagar Industries | 37.76 | 11.90 | 19.42 | 0.18 | -0.08 |
Relative to peers, Allied Blenders commands a valuation premium despite having lower ROE than sector leaders like Varun Beverages (22.82%) and Tilaknagar Industries (19.42%). The P/BV multiple of 12.20x significantly exceeds the peer average of approximately 6.9x, reflecting market expectations of accelerated growth and margin expansion. However, the company's moderate debt-to-equity ratio of 0.50 provides some comfort compared to more leveraged peers.
Shareholding Dynamics: Stable Promoter Base, Gradual Institutional Build-up
Allied Blenders' shareholding structure reflects a company transitioning from family control to broader institutional ownership. Promoter holding remained rock-solid at 80.91% across the past five quarters, with no dilution since the IPO. This substantial promoter stake—held primarily by Bina Kishore Chhabria (58.2%) and Resham Chhabria J Hemdev (19.4%)—provides stability and alignment with minority shareholders.
| Category | Sep'25 | Jun'25 | Mar'25 | Dec'24 | QoQ Change |
|---|---|---|---|---|---|
| Promoter | 80.91% | 80.91% | 80.91% | 80.91% | 0.00% |
| FII | 2.96% | 2.82% | 2.73% | 2.55% | +0.14% |
| Mutual Funds | 3.68% | 3.80% | 3.30% | 3.34% | -0.12% |
| Other DII | 0.88% | 0.93% | 0.73% | 0.66% | -0.05% |
| Non-Institutional | 11.57% | 11.53% | 12.32% | 12.53% | +0.04% |
Foreign institutional investor (FII) holding has been gradually increasing, reaching 2.96% in September 2025 from 2.55% in December 2024, signalling growing international confidence in the company's prospects. The presence of 55 FII investors provides diversification and liquidity support. Mutual fund holding of 3.68%, backed by 11 funds, represents modest but stable domestic institutional interest.
The absence of insurance company holdings and relatively low other DII participation (0.88%) suggests room for further institutional accumulation as the company demonstrates consistent profitability and growth. Notably, there is zero promoter pledging, eliminating a key governance concern that often plagues mid-cap companies. The non-institutional shareholding of 11.57% provides adequate free float for trading liquidity.
Stock Performance: Spectacular Returns Amidst High Volatility
Allied Blenders has been a standout performer in the Indian equity market, delivering exceptional returns across multiple timeframes. The stock's 96% return over the past year substantially outpaced the Sensex's 3.78% gain, generating alpha of 92.22 percentage points. This performance becomes even more impressive considering the broader beverages sector declined 5.97% over the same period, highlighting Allied Blenders' relative outperformance of 101.97 percentage points.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +1.72% | -1.17% | +2.89% |
| 1 Month | +16.91% | +1.99% | +14.92% |
| 3 Months | +30.93% | +3.56% | +27.37% |
| 6 Months | +111.64% | +3.44% | +108.20% |
| Year-to-Date | +51.26% | +6.75% | +44.51% |
| 1 Year | +96.00% | +3.78% | +92.22% |
The stock's momentum has been particularly strong in recent months, with a 111.64% return over the past six months and 30.93% gain over three months. Even the one-month return of 16.91% significantly outpaced the Sensex's 1.99% gain. However, this spectacular performance comes with elevated volatility—the stock's 39.40% volatility over the past year classifies it as a "high risk, high return" investment, substantially exceeding the Sensex's 12.45% volatility.
The stock's beta of 1.35 indicates it is 35% more volatile than the broader market, amplifying both gains and losses. The risk-adjusted return of 2.44 over the past year, whilst positive, reflects this elevated volatility profile. For context, the Sensex's risk-adjusted return stood at just 0.30, highlighting the different risk-return profiles. Investors must weigh the potential for continued outperformance against the heightened volatility inherent in the stock.
"Allied Blenders exemplifies the classic growth-at-a-premium trade-off—stellar operational momentum and margin expansion justify some valuation premium, but stretched multiples leave little room for execution missteps."
Investment Thesis: Quality Improving, But Valuation Demands Caution
Allied Blenders presents a nuanced investment case characterised by improving fundamentals offset by demanding valuations. The company's overall quality grade of "Good" reflects its consistent progress on key operational metrics, particularly the impressive 38.70% five-year EBIT growth rate and improving return ratios. The financial trend remains "Positive," supported by the latest six-month profit of ₹120.87 crores growing at 105.70%.
The technical picture remains constructive, with the stock in a confirmed "Bullish" trend since October 20, 2025. Multiple technical indicators—including MACD, Bollinger Bands, Moving Averages, Dow Theory, and On-Balance Volume—all signal bullish momentum. However, the KST indicator shows a "Mildly Bearish" signal, suggesting potential near-term consolidation.
Key Strengths
- Robust Revenue Growth: Consistent double-digit top-line expansion with Q2 FY26 revenues at ₹990.06 crores, up 14.11% YoY
- Margin Expansion: Operating margins improved to 12.67%, up 76 bps YoY, reflecting premiumisation benefits
- Improving Capital Efficiency: ROCE of 15.95% demonstrates better capital deployment and operational leverage
- Strong Promoter Commitment: 80.91% promoter holding with zero pledging ensures alignment and governance
- Deleveraging Progress: Long-term debt reduced to ₹119.17 crores from ₹234.74 crores, improving financial flexibility
- Market Outperformance: 96% one-year return vastly outpaces Sensex and sector, validating growth strategy
- Positive Cash Generation: Operating cash flow of ₹185 crores in FY24 supports growth investments
Key Concerns
- Stretched Valuations: P/E of 73x and P/BV of 12.20x leave minimal margin of safety for any disappointment
- Below-Peer ROE: 12.63% ROE lags sector leaders like Varun Beverages (22.82%), indicating efficiency gaps
- Elevated Debt Metrics: Debt-to-EBITDA of 3.85x remains high despite improvement, constraining financial flexibility
- Low Institutional Holding: Just 7.52% institutional ownership limits liquidity and price stability
- High Volatility: 39.40% volatility and beta of 1.35 make the stock unsuitable for risk-averse investors
- Minimal Dividend Yield: 0.54% yield offers negligible income support during market corrections
- Working Capital Pressure: Current liabilities exceeding shareholder funds require careful management
Outlook: What to Watch in Coming Quarters
The trajectory for Allied Blenders over the next 12-18 months will be determined by its ability to sustain high-teens revenue growth whilst continuing margin expansion. Management's premiumisation strategy appears to be gaining traction, but execution consistency will be critical to justify current valuations. Key monitoring points include quarterly revenue growth rates, operating margin trends, and the pace of institutional accumulation.
Positive Catalysts
- Sustained Revenue Growth: Continued double-digit top-line expansion driven by premiumisation
- Further Margin Improvement: Operating margins crossing 13-14% through operational leverage
- Institutional Buying: Increased FII/MF participation providing liquidity and validation
- Market Share Gains: Officer's Choice and Sterling Reserve gaining distribution reach
Red Flags to Monitor
- Growth Deceleration: Revenue growth slipping below 10% would trigger multiple compression
- Margin Pressure: Operating margins declining due to competitive intensity or input costs
- Valuation Correction: Any sector-wide de-rating impacting premium-valued stocks
- Institutional Exits: FII or mutual fund selling signalling confidence loss
The company's ability to maintain its quality grade of "Good" whilst transitioning to "Great" will depend on further ROE improvement and sustained profitability growth. The current Mojo Score of 71/100 with a "BUY" rating reflects confidence in near-term prospects, but investors should remain vigilant about valuation sustainability. Any quarter showing revenue growth below 10% or margin contraction could trigger significant price correction given stretched multiples.
The Verdict: Growth Story Intact, But Entry Point Matters
Score: 71/100
For Fresh Investors: Allied Blenders offers a compelling growth story with improving fundamentals and strong operational momentum. However, current valuations at 73x P/E and 12.20x P/BV demand caution. Fresh investors should consider building positions gradually, waiting for any correction towards ₹550-580 levels (near 20-day moving average) to accumulate. The stock is suitable only for growth-oriented investors with high risk tolerance and a 3-5 year investment horizon.
For Existing Holders: Continue holding with a trailing stop-loss around ₹580 (near recent trend change level). The 96% one-year return justifies booking partial profits (25-30% of holdings) to reduce concentration risk, whilst retaining core position to benefit from continued growth momentum. Monitor quarterly results closely—any signs of growth deceleration or margin pressure should trigger further profit booking.
Fair Value Estimate: ₹580-620 based on sustainable earnings growth and sector multiples (11% downside to 5% upside from current levels). Current price of ₹649.95 reflects significant growth expectations already priced in.
Key Rationale: The BUY rating stems from strong operational momentum, consistent margin expansion, and improving capital efficiency. However, the premium valuation limits upside potential and increases downside risk. The stock warrants a position in growth portfolios but should not exceed 3-5% of total portfolio value given elevated volatility and valuation concerns.
Note– ROCE= (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results. Investments in equity markets are subject to market risks, and investors may lose part or all of their capital.
