Allied Blenders and Distillers is the third
largest Indian-made foreign liquor (IMFL) company in India, in terms of annual
sales volumes between Fiscal 2014 and Fiscal 2022.
The company is one of the only four spirits
companies in India with a pan-India sales and distribution footprint. As of
March 31, 2023, its products were retailed across 79,329 retail outlets across
30 States and Union Territories in India.
The company is a leading exporter of IMFL, and
had an estimated market share (in terms of sales volume) of 11.8% in the Indian
whisky market for Fiscal 2023. As of December 31, 2023, the company exported
its products to 14 international markets, including countries in the Middle
East, North America, Africa, Asia and Europe.
In 9M FY24, the company derived 97.77% of its
revenue from India and 2.23% from outside India.
To enter into the mass premium whisky segment,
the company launched its flagship brand, Officer’s Choice Whisky in 1988.
Officer’s Choice Whisky has been among the top selling whisky brands globally
in terms of annual sales volumes between 2016 and 2019.
As of December 31, 2023, its product portfolio
comprised 16 major brands across five main categories of IMFL, i.e., whisky,
brandy, rum, vodka and gin. The company also sells packaged drinking water
under Officer’s Choice, Officer’s Choice Blue and Sterling Reserve brands. In 9M
FY24, Whisky contributed 96.1% to total sales volume, Brandy 2.64%, Rum 1.14%
and Vodka 0.12%.
With sales across 30 States and Union Territories,
the company has a market share of 8.2% in IMFL market by sales volumes in
Fiscal 2023.
The company has adopted a lifestyle approach
towards brand positioning by focusing on building awareness, enhancing the
appeal of its products sold under various brands, ensuring affordability of
products, maintaining the quality and building consumer engagement.
The company owns and operates distillery located
in Rangapur, Telangana that is spread over 74.95 acres with a built-up area of
over 25,000 square meters. Its in-house distillation capacity of extra neutral
alcohol (ENA), the key material used in the manufacture of products, is 600 lakh
litres per year.
The company also has extensive bottling
capabilities across India. As of December 31, 2023, it relied on 32 bottling
facilities, including bottling facilities owned and operated and contract
bottling facilities both on exclusive and non-exclusive basis, for bottling its
products. As of December 31, 2023, the company owned and operated nine bottling
units.
In 9M FY24, owned and operated bottling
facilities (including leased facilities) contributed 75.77% to total revenue
and third-party bottling facilities 21.52%.
Going ahead, the company intends to introduce new
products in the premium, semi-premium and deluxe segments with an aim to
deliver higher margins and greater profitability over time. The company also
intends to introduce product experiences that will appeal to younger consumers
and include flavoured spirits, craft spirits, low alcohol content beverages and
ready mixes.
The company is evaluating growth opportunities
through selective acquisitions and investments that are complementary to its
growth strategy, particularly those that can help enrich product portfolio and
expand its customer base.
Offer and its objects
The IPO comprises fresh issue of equity shares
worth up to Rs 1000 crore and an offer for sale of equity shares aggregating up
to Rs 500 crore by Bina Kishore Chhabria and Resham Chhabria Jeetendra Hemdev.
Price band for the IPO
is Rs 267 to Rs 281 per equity share of face value Rs 2 each.
The objectives for the fresh issue includes prepayment/scheduled re-payment of certain
outstanding borrowings of Rs 720 crore and remaining amount to be used for
general corporate purposes.
Promoters of the
Company are Kishore Rajaram Chhabria, Bina Kishore Chhabria, Resham Chhabria
Jeetendra Hemdev, Bina Chhabria Enterprises, BKC Enterprises, Oriental Radios
and Officer’s Choice Spirits. Promoters and promoter group holds an aggregate
of 244,113,665 equity Shares, representing 100% of the pre-Offer issued and
paid-up Equity Share capital. The post IPO shareholding for the same is
expected to be around 81%.
The issue, through the book-building process,
will open on 25 June 2024 and will close on 27 June 2024.
Strengths
Over the years, the company has developed a
well-recognized product portfolio spread across various categories and price
points. Moreover, certain of its brands, such as, Officer’s Choice Whisky,
Sterling Reserve, Officer’s Choice Blue and ICONiQ Whisky, are ‘Millionaire
Brands’ that have sold over a million 9-litre cases in one year.
Third party bottling of products provides it with
flexibility to meet production requirements. In addition, owing to its
contractual arrangements with local and regional third-party bottlers, the
company is not required to transport products beyond state borders, thereby
limiting any additional excise import and export duty expenses that would
otherwise incur. This ensures that its products remain competitively priced.
There is a natural barrier to new entrants in
mass-premium whiskey segment given the complexities of the business. The
mass-premium segment requires large scale of operations, multiple units across
various states, a strong distribution network, the ability to deliver products
cost-efficiently while maintaining product quality to match consumer
expectations.
Large segments of audiences that currently
consume country liquor or economy brands are looking to upgrade supported by
rising incomes. Given these trends, the company is well prepared to Increase
its market share of Officer’s Choice Whisky across regions.
The company has a robust distribution network
across India, ensuring widespread availability of its products and efficient
reach to consumers across urban and rural areas.
Low per capita consumption coupled with positive
demographics factors and addition of more than 13 million people each year to
the population eligible for drinking, make India an attractive market for
alcoholic beverages. The company is well positioned to capture tailwinds in the
Indian IMFL industry.
The company is focused on innovation and new
product development to cater to younger consumers.
The company is led by an experienced management
team with a deep understanding of the alcoholic beverages industry and a track
record of executing growth strategies effectively. Further, the company has decided
to reconstitute the composition of its Board and senior management to include
more industry experts.
Weaknesses
The company is substantially dependent on sales
of whisky products under the Officer’s Choice brand, which generated 75.85% of
its revenue in fiscal 2023 and 73.02% of revenue in 9M FY24. Any reduction in
sales of these products could have a material adverse effect on business and
financial prospects.
The company operates on a very low operating and
PAT margin. In 9M FY24, its OPM and PAT margin was 3.09% and 0.07%
respectively.
Government may increase taxes on alcohol to
discourage its consumption. Changes in alcohol regulations, tax policies, or
licensing requirements could adversely affect operations and profitability.
The company’s contingent liabilities constitute
47.07% of its net worth as of December 31, 2023. If these contingent
liabilities materialize fully or partly, its financial condition may be
adversely affected.
The income tax department conducted search and
seizure operations (basis warrants issued) from December 11, 2023 to December
17, 2023 at several premises of the company. An adverse outcome in proceedings
may result in significant tax liabilities.
Certain of its subsidiaries have incurred losses
during Fiscal 2021, 2022 and 2023, and in the nine months ended December 31,
2022 and December 31, 2023.
Increasing scrutiny on environmental
sustainability and social responsibility practices within the industry could
lead to higher regulatory compliance costs or reputational damage, if not
managed effectively.
The alcohol industry is working capital intensive
in nature, and the company funds a large part of its operations through
borrowings. As of March 31, 2024, the company had total financial indebtedness
of Rs 834.58 crore.
The company’s Statutory Auditors have included
certain emphasis of matters in their examination report and have included
certain observations in Restated Consolidated Financial Statements.
The Company, its Directors, and Promoters are
involved in certain legal and regulatory proceedings (including criminal
proceedings). Any adverse decision in such proceedings may have a material
adverse effect on business and reputation.
Valuation
In 9M FY24, consolidated
sales were up by 9.69% to Rs 5911.14 crore compared to 9M FY23. OPM increased
by 58 bps to 3.09%, which led to 34.69% increase in operating profit to Rs
182.37 crore. Other income decreased 63.18% to Rs 3.83 crore, while interest
cost increased 30.15% to Rs 127.93 crore and depreciation decreased 5.61% to Rs
39.09 crore. PBT before EO increased 214% to Rs 19.18 crore. Tax expenses for 9M
FY24 was of Rs 9.97 crore compared to tax expense of Rs 3.22 crore in 9M FY23. Net
profit rose 46.79% to Rs 4.23 crore.
In FY23, consolidated
sales were down by 1.27% to Rs 7105.68 crore compared to FY22. OPM decreased by
13 bps to 2.6%, which led to 5.76% decrease in operating profit to Rs 184.99 crore.
Other income decreased 1.57% to Rs 11.07 crore, while interest cost decreased 6.98%
to Rs 134.97 crore and depreciation decreased 5.96% to Rs 55.14 crore. PBT increased
55.57% to Rs 14.2 crore. Tax expenses for FY23 was of Rs 4.35 crore compared to
tax expense of Rs 2.35 crore in FY22. Net profit increased 8.47% to Rs 1.60
crore.
The TTM EPS (excluding extraordinary items and
relevant tax) on post-issue equity works out to Rs 0.16. At the upper price
band of Rs 281, P/E works out to 1772.39.
The company will be repaying
90% of its debt from the issue proceeds. This will bring down its interest cost
substantially and boost profits. TTM EPS works out to Rs 5.57 if 90% of its
interest cost is removed, keeping all other items, including tax rate same.
Re-worked P/E, at upper price band, moderates to 50.
As of 20 June 2024,
its listed peers such as United Spirits trades at TTM P/E of 65, Radico Khaitan
trades at TTM P/E of 91 and Globus Spirits trades at TTM P/E of 19. For FY23,
Allied blenders & distillers OPM and ROE stood at 2.6% and 0.39% respectively,
compared to 13.35% and 18.93% for United Spirits, 11.4% and 9.98% for Radico
Khaitan, and 11.64% and 13.78% for Globus Spirits respectively.
Pre-IPO Enterprise Value/TTM Sales of Allied Blenders work out to 1.03
times, compared to FY24 Enterprise Value/ Sales of 3.56 times of United
Spirits, 1.59 times of Radico Khaitan and 0.81 times of Globus Spirits.
Allied Blenders and Distillers: Issue highlights
|
For Fresh Issue Offer size (in no of shares )
|
|
- On lower price band
|
3,74,53,184
|
- On upper price band
|
3,55,87,189
|
Offer size (in Rs crore)
|
1,000
|
For Offer for Sale Offer size (in no of shares )
|
|
- On lower price band
|
1,87,26,592
|
- On upper price band
|
1,77,93,594
|
Offer size (in Rs crore)
|
500
|
Price band (Rs)
|
267-281
|
Minimum Bid Lot (in no. of shares )
|
53
|
Post issue capital (Rs crore)
|
|
- On lower price band
|
56.31
|
- On upper price band
|
55.94
|
Post-issue promoter & Group shareholding (%)
|
81
|
Issue open date
|
25-06-2024
|
Issue closed date
|
27-06-2024
|
Listing
|
BSE, NSE
|
Rating
|
40/100
|
Allied Blenders and Distillers: Consolidated Financials
|
|
2103 (12)
|
2203 (12)
|
2303 (12)
|
2212 (9)
|
2312 (9)
|
Sales
|
6,378.78
|
7,196.92
|
7,105.68
|
5,389.04
|
5,911.14
|
OPM (%)
|
3.04%
|
2.73%
|
2.60%
|
2.51%
|
3.09%
|
OP
|
193.96
|
196.31
|
184.99
|
135.40
|
182.37
|
Other inc.
|
19.04
|
11.25
|
11.07
|
10.41
|
3.83
|
PBIDT
|
213.00
|
207.55
|
196.06
|
145.81
|
186.20
|
Interest
|
141.51
|
145.09
|
134.97
|
98.30
|
127.93
|
PBDT
|
71.49
|
62.46
|
61.09
|
47.51
|
58.27
|
Dep.
|
58.74
|
58.64
|
55.14
|
41.41
|
39.09
|
PBT
|
12.75
|
3.82
|
5.95
|
6.10
|
19.18
|
Share of Profit/(Loss) from Associates/JV
|
-
|
-
|
-
|
-
|
-
|
PBT before EO
|
12.75
|
3.82
|
5.95
|
6.10
|
19.18
|
Exceptional items
|
-
|
-
|
-
|
-
|
4.99
|
PBT after EO
|
12.75
|
3.82
|
5.95
|
6.10
|
14.20
|
Taxation
|
10.24
|
2.35
|
4.35
|
3.22
|
9.97
|
PAT
|
2.51
|
1.48
|
1.60
|
2.88
|
4.23
|
Minority Interest
|
-
|
-
|
-
|
-
|
-
|
Net Profit
|
2.51
|
1.48
|
1.60
|
2.88
|
4.23
|
EPS (Rs)*
|
0.09
|
0.05
|
0.06
|
#
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#
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* EPS is annualized on post issue equity capital of Rs 55.94 crore of
face value of Rs 2 each
|
|
|
# EPS is not annualised due to seasonality of business
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|
|
|
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EO: Extraordinary items. EPS is calculated after excluding EO and
relevant tax
|
|
|
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Figures in Rs crore
|
|
|
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Source: Capitaline Corporate Database
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