Tilaknagar's Andhra expansion plans gets HC breather

Stay on capacity expansion plans in the state vacated, paving way for the company to meet demand in a key state

The Andhra Pradesh High Court recently lifted a stay on the capacity expansion of Prag Distillery, a subsidiary of liquor major Tilaknagar Industries. This will allow Prag Distillery to increase capacity from 50,000 cases a month to about 200,000 cases a month in the near future.

Why it is critical is because Andhra Pradesh ranks among the top five liquor markets in the country, contributing 10 per cent to India's total liquor volume of 292 million cases. For the Rs 748-crore Tilaknagar, the maker of Mansion House brandy, Andhra Pradesh is its largest market, giving it a turnover of Rs 225 crore. Prag alone contributes Rs 120 crore in terms of sales. The rest comes largely from cases imported into the state by the company from its units located in adjoining areas such as Telangana, Maharashtra and from bottling tie-ups in Andhra.

According to sources, the vacation of the stay will help the company add Rs 480 crore to its existing turnover from Prag, thereby reducing its dependence on imports and contract manufacturers. While this is expected to happen in two or three years when capacity moves up to around 350,000 cases a month, at a broader level, Tilaknagar is expected to have a better handle over production in the state due to the high court verdict. Unlike Telangana, which is largely a whisky market, people in Andhra prefer both whisky and brandy, say experts tracking the market.

City-based Tilaknagar had applied for capacity expansion at Prag Distillery in 2010 following a notification by the Andhra Pradesh government. The proposal was to take capacity up in a phased manner over a four-year period.

Following this, a letter of intent was issued in June 2011 by the principal secretary to the Andhra Pradesh government as well as the state excise department to Prag Distillery, persons in the know said.

Tilaknagar subsequently invested around Rs 50 crore in the project towards land, equipment and other mandatory approvals. However, the final approval for capacity expansion from the government never came despite repeated follow-ups.

A fresh request for capacity expansion in 2014 by Tilaknagar saw the company being recommended a letter of intent again by the assistant excise commissioner of the state. But, this time, the company saw itself being dragged to court by a local distiller (Platinum Distillers), which challenged the assistant excise commissioner's decision to do so.

With the stay now being set aside, a crucial bottleneck has been eliminated, which is expected to improve the heft of the firm in negotiations with potential strategic investors.

Saddled with nearly Rs 800 crore debt, Tilaknagar has been exploring the possibilities of debt restructuring for a few months now. It is also looking at the possibility of a stake sale to strategic investors. Tilaknagar's Chairman and Managing Director Amit Dahanukar was not available for comments despite repeated calls and text messages.