Pernod Ricard Shifts Strategy: India IPO Shelved as Debt Reduction Takes Priority

Pernod Ricard rules out an Indian IPO, using internal cash to cut debt. India's 4% sales growth contrasts with declines in China and the US, as the firm targets a stronger balance sheet by 2029.

In a decisive move concerning its largest volume market, Pernod Ricard has ruled out a public listing for its Indian subsidiary. The French spirits giant is instead doubling down on internal cash generation to strengthen its balance sheet, positioning India as the central engine for growth amid significant challenges in other key regions.

Global Headwinds and Regional Contrasts

The company's global performance for the first half of fiscal year 2026, ending in December, presented a mixed picture. Overall organic sales declined by 5.9% to €5.253 billion. This downturn was led by steep drops in two critical markets: a 28% decrease in China and a 15% fall in the United States. European sales also contracted slightly by 3%.

This starkly contrasts with the Indian market's trajectory. India, which contributes approximately 12 to 13 percent of Pernod Ricard's global revenue and is its second-largest market by value, reported a 4% sales increase for the same period. Excluding the "Imperial Blue" brand, growth accelerated to 8%. Management anticipates further acceleration in the latter half of the year, driven by rising demand for international premium brands, which is expected to help offset local tax pressures.

A Clear Path to Deleveraging

The explicit dismissal of an Initial Public Offering (IPO) in India underscores a strategic pivot. The group's leadership is now focused on using internally generated cash flows to reduce its debt burden. The specific target is to lower the net debt-to-EBITDA ratio from the current level of 3.8x to below 3x by fiscal year 2029.

This deleveraging effort is already underway. Despite the difficult operating environment, free cash flow increased by 9.5% to €482 million, aided significantly by a 10% reduction in structural costs. However, the organic operating profit (PRO) fell by 7.5% to €1.614 billion, causing the operating margin to contract by 55 basis points to 30.7%.

Maintaining Long-Term Ambitions

Pernod Ricard has classified fiscal 2026 as a transitional year but remains committed to its medium-term objectives. The company continues to target annual organic sales growth in the range of 3 to 6 percent. The dual strategy of stringent cost discipline and a concentrated focus on the Indian market forms the foundation for the intended balance sheet strengthening through 2029. The critical question remains whether India's robust momentum can sufficiently counterbalance the substantial declines witnessed elsewhere in the group's global portfolio.