Ticker 532432/ MCDOWELL-N
ISIN : INE854D01016
Industry Analysis :
Even though it is low risk industry in European markets, Liquor industry in India is high risk industry due to high tax. Even after that many big player all around the world enter the Indian Market and the segment growing 8-10% CAGR since 2007. CRISIL in its report mentioned that it is not expected that the risk due to high tax will come down even after the entry of multinational companies in Indian markets. Most of the scotch whisky manufacturers established themselves in India and also introducing their brand in India with IMFL.
The Indian industry segmentation is as follows
- Indian Made Foreign Liquor
- Foreign Liquor Bottled In INDIA (BII)
- Foreign Liquor Bottled In Origin (BIO)
- Country liquor, Beer and wine
The sizeof industry is around 80 million Case only with IMFL. Around 60% market out of this is Whiskey after that Rum with 25%. BIO and BIO segment is Small with respect to this. Only one million Case per annum when added both. Country liquor segment is Very large and account for 2 times of IMFL. But there is no one player and fragmented. Beer market is account for 70 million Case per annum. Wine is less than 3 million case per annum. Small.
Because of tax, pricing flexibility is low with many companies. That is the reason why the margin is very low in many companies. Large working capital and Capital Expenditure is needed in the industry. High leverage and Low interest coverage. Best example is United Spirits itself.
Export of Indian liquor is low. The reason is Most of them are Molasses, by-product in sugarcane Refining for sugar. Where as foreign liquor are mainly Manufactured by Fruit, grain spirit. That is why whenever there is change in domestic market, the demand also change. But hardly Change with foreign markets change like income levels.
Company Analysis : United Spirits the company is Second largest Spirits company by volume. Formerly it was part of UB group. Subsidiary of Diageo. As per the website the company owns 140 Brands. Out of which 20 brands sell above 1 million cases annually. Product Portfolio includes whisky, Vodka, Rum segment. Some important brand name as follows
- McDowell’s no 1, Royal Challenge, Signature, Antiquity
The company manufacturing all their brands around India over 80 Manufacturing facilities.
After the exit of Vijay mallaya, the company is looking good and Recent results are look better and on some Prospectus they are better than last five years or More. As now the company is in hand of Diageo, it is expected that the Diageo will shape the company as Indian liquor is limited and not much export is taking place. I am expecting that Diageo will introduce the own brands as also.
Shareholding Pattern :
Financial And Ratio
Many people are giving many Targets and talking different. For me, ₹1 lk cr market capitalization is looking easy target. Recent yearly results come up with some Good and bad thing. The utilisation is better than last year as ROA and Asset Turnover looking Good. But Profit Margin and on some other aspects also the company is looking Good. Only problem is high Price to book value.
The future is bright for the company.
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