Invest in India’s spirits market: Allied Blenders & Distillers IPO analysis

Allied Blenders and Distillers is going public. The IPO has really caused a buzz in the stock market! They happen to be one of those prominent names in the Indian alcoholic drinks industry. They are the makers of Officer’s Choice, this brand is a top favourite drink across India.

Today, we will be looking at important dates and financial statements and assessing Allied Blenders and Distillers’ future prospects for its IPO.

Company information

Let’s talk about the company’s business. 

Allied Blenders and Distillers (ABD):

• Makes,
• Markets and 
• Distributes alcoholic drinks in India. 

It was established in 2008. 

They are the third biggest Indian-made foreign liquor (IMFL) company in India. Officer’s Choice Whisky – their famous brand- is one of the top-selling whiskies globally. They also sell packaged drinking water under various brands.

ABD offers a wide range of liquors like:

• Rum, 
• Whisky
• Brandy 
• Vodka, and 
• Gin. 

These products are exported to many countries – around 22 countries.

In India’s whisky segment, ABD has a solid market share of 11.8% based on sales as of March 2023.

Also read: NFO or IPO – What do you think is the better option? 

Key details: Allied Blenders and Distillers IPO

Let us look at some of the major details about Allied Blenders IPO:

Issue dates: The IPO is open between 25th and 27th June, 2024.

Price band: The price range is ₹267-₹281 per share. With a face value of ₹2.

Issue size: For this offering, the total issue size is ₹1,500 crores which includes;

• Fresh issue: ₹1,000 crores
• Offer for sale (OFS): ₹500 crores

Minimum lot size: The minimum bid quantity should not be less than 53 shares.

Registrar: Link Intime India Private Limited

Lead managers: Iti Capital Ltd, ICICI Securities Limited and Nuvama Wealth Management Limited 

Also read: Mason Infratech IPO 

Allied Blenders and Distillers IPO dates are as follows: 

Source: Allied Blenders and Distillers RHP 

Allied Blenders and Distillers IPO’s GMP (grey market premium) is +87 as on June 26, 2024. The unofficial secondary market has the current grey market price for these shares at ₹87 suggesting that it is trading above its issue price.

Fund utilisation plan

The net proceeds from the IPO will be used by the company for: 

• Paying its debt 
• Lowering its finance costs and 
• Boosting its profit margins 

Allied Blenders and Distillers financials 

Here is a snapshot of the company’s key financial indicators: 

Source: Allied Blenders and Distillers RHP 

Allied Blenders and Distillers – Investment considerations

Strengths

• Allied Blenders, which is the biggest Indian-owned producer of Indian-made foreign liquor, is the third largest company in India based on annual sales volumes from FY14 to FY22. By FY23, Officer’s Choice has taken a 20.9% market share in mass premium. 
• The company is now diversified with several brands and products as opposed to its single brand early days that operated across different IMFL categories and segments within India. 

Allied Blenders intends to use the IPO proceeds for debt repayment in a bid to considerably bring down finance charges and improve profit margins. This plan seeks to decrease the total indebtedness of the business from ₹ 798 crores in December 2023 to ₹80 crores, thereby reducing interest expenses substantially and enhancing profitability and return ratios.

Must read: Understanding IPO valuation through relative and absolute methods

Weaknesses

• The IMFL industry faces growing competition, likely tax rises with a highly regulated structure. Failure by the company to compete effectively could materially hurt their business prospects, financial condition or results. Moreover, the P/E ratio at this IPO valuation seems much too high at 4,014 times.

Source: Allied Blenders and Distillers RHP 

• The company has significant reliance on the sale of whisky products under the Officer’s Choice brand. 

• Fiscal 2021 – 83.76%
• Fiscal 2022 – 82.29%
• Fiscal 2023 – 75.85%
• 9M FY24 – 73.02% 

If the company is unable to maintain or increase the popularity of the Officer’s Choice brand, it could negatively affect its business prospects and financial performance.

Bottomline

In conclusion, Allied Blenders and Distillers IPO presents a promising investment opportunity with its robust market presence, diverse product portfolio, and strategic financial plans. 

However, investors should weigh the company’s strengths against the potential industry risks and high valuation before making an investment decision.