Nao Spirits Faces Significant Revenue Decline in FY25

Nao Spirits, the creator of the popular Greater Than and Hapusa gins, has experienced a downturn in its financial performance during FY25. Following an impressive revenue increase of 2.45X in FY24, the company reported a revenue decline exceeding 25% in FY25, while its losses also escalated during this period.

Financial Overview

The firm’s gross revenue fell by 25.6%, dropping to Rs 60.46 crore in FY25 from Rs 81.26 crore in FY24, as indicated in its consolidated annual financial statements filed with the Registrar of Companies (RoC). Founded in 2015 by Anand Virmani, Abhinav Rajput, Aparajita Ninan, and Vaibhav Singh, Nao Spirits operates as a craft distillery in India, specialising in high-quality gin.

Revenue Sources

The company’s sole revenue stream stems from the sales of its gin brands. A significant portion of Nao Spirits’ revenue is generated within the Indian market, though export revenues reached Rs 1.13 crore in FY25.

Cost Management

With the revenue decline surpassing 25% in FY25, Nao Spirits also experienced a corresponding decrease in its primary cost, which is excise duty. The excise duty expense reduced by 22.6% to Rs 33 crore from Rs 42.9 crore in FY24, though it still constituted 36% of total costs and represented more than half of the company’s revenue.

Operational Expenses

The procurement costs saw a 13% year-on-year reduction, landing at Rs 14.91 crore in FY25. Advertising and promotional expenditures totalled Rs 13.42 crore, reflecting a 24% decrease throughout the year. These two categories of expenses accounted for 16.2% and 14.6% of the total costs, respectively.

Employee and Overhead Costs

Employee benefit expenses grew by 30%, reaching Rs 10.73 crore. Together with legal, travel, rent, and miscellaneous overheads, the total expenses for the company amounted to Rs 92 crore in FY25, remaining relatively stable compared to FY24.

Impact of Sales Decline

The sales drop prompted a doubling of losses for the Goa-based company, rising to Rs 30.25 crore from Rs 14.6 crore in FY24. The EBITDA margin suffered, weakening to -38.07% alongside an EBITDA loss of Rs 23 crore. The expense-to-revenue ratio was recorded at 1.52.

Current Assets and Acquisition

As of March 2025, Nao Spirits had total current assets valued at Rs 23.7 crore, which included a cash and bank balance of Rs 1.13 crore. In June 2025, Diageo India (United Spirits Ltd) acquired Nao Spirits for Rs 130 crore ($15 million). Before this acquisition, the company had secured Rs 54 crore ($6.5 million) over five funding rounds, as reported by various sources.

Market Challenges

This acquisition aligns with a typical pattern of increasing losses and a weakening top line, often associated with balance sheet adjustments. The acquiring entity tends to disrupt existing processes while striving for streamlined systems integration. However, the current decline in revenue raises concerns for Nao Spirits and, beyond the parent company, highlights the fluctuating nature of the Indian market. Despite exhibiting consistent growth rates, the market is undergoing significant shifts in consumer preferences, state regulations, and increased competition from other local craft brands.

Gin Market Dynamics

The gin category comprises less than 2% of the overall market, predominantly concentrated in urban areas. There is a consistent risk of becoming overshadowed within a larger corporation like Diageo, which prioritises its primary profit and volume contributors. Although the acquisition offers potential advantages in distribution reach, it remains uncertain whether Nao Spirits can regain its growth trajectory as a fashionable gin option for consumers.