Allied Blenders may tap capital market

Allied Blenders & Distillers (ABD), the Rs 900 crore spirits major, is planning to go in for an initial public offering (IPO) in 2-3 years.

In the mean time, the company plans to invest close to Rs 125 crore in setting up a grain distillation plant in Haldia in West Bengal, for manufacturing 100 kilo litre of grain spirits per day.

ABD also intends to have a diversified portfolio of brands. It plans to move up from ‘regular’ priced spirits (its current area of operation) to ‘premium’ range. Also, the company plans to foray into premium rum brands category in one year from now, as well as launch new flavours in vodka. According to Deepak Roy, executive vice-chairman and CEO, “We need to raise money to introduce more brands and in different segments. Launching and marketing one brand costs close to Rs 25 crore, and we plan to launch close to three brands each year. Also, we intend to get into greenfield manufacturing for uninterrupted supply of raw material instead of depending on others.”

“We estimate our current company valuation at almost Rs 1,000 crore, and the money we raise through IPO would depend on that. We are still working out how much we intend to raise, but we are committed to an IPO in 2-3 years from now,” Roy added.

“We intend to manufacture spirits ourselves instead of depending on other states for sourcing. Currently we buy spirits from manufacturers in Maharashtra, Uttar Pradesh, Andhra Pradesh, etc,” Roy said.

“Having our own spirits manufacturing facility means we get to make the same product for almost Rs 6 less per litre, as we do not have to bother about others’ profit margins. Ideally, we need around three distilleries to control production,” Roy explained.

Currently the company sells 9.5 million cases of spirits annually. The last few years of boom have seen the spirits industry growing from 90 million cases to 160 million cases anually, with an average rate of growth of 12 per cent. This year the industry saw the pace of growth moving upwards to over 18 per cent.

Simultaneously, ABD intends to have a diversified portfolio of brands in different segments. For this, the company plans to move up from selling ‘regular’ priced spirits to ‘premium’ range as well. Also, the company plans to foray into premium rum brands and launch new flavours in vodka.

Currently ABD has its flagship ‘Officer's Choice’ brand and ‘Class Vodka’, and has recently entered the premium vodka segment with Wodka Gorbatschow, which is a 87 years old German vodka brand launched by Henkell & Company India, through a joint venture with ABD.

Wodka in India is priced at Rs 535 for a 750 ml bottle. The brand has already achieved approximately 10 per cent market share in Mumbai, Delhi, Pune, Gurgaon, and Bangalore, and is being launched pan-India in a phased manner.

Next, ABD would introduce citrus, green apple and orange flavours in Wodka Gorbatschow in six months from now.

“About 20 per cent of vodka volumes comes from flavours. Again, about 50 per cent of markets like Bangalore, prefer flavours in vodka. We intend to tap this market and therefore introduce newer flavours with a slight colour change in packaging,” Roy said.

Currently, the Indian vodka market is around 4.8 million cases per annum. Premium vodka makes up 1 million cases per annum. “We will also launch a premium rum brand in one year. We intend to price the brand between Rs 250 and Rs 350 for 750 ml, while regular segment rum brands cost Rs 165 for 750 ml,” Roy said.