In this article, we will explore Radico Khaitan Ltd. fundamentally, understand its business model and industry, and determine whether it’s a good investment fit for you.
Radico Khaitan Ltd.
Radico Khaitan Ltd. (RKL) is a leading Indian alcoholic beverage company with a rich heritage dating back to 1943. Headquartered in Rampur, Uttar Pradesh, the company boasts a diverse portfolio of renowned brands, including Rampur Select, Magic Moments Vodka, Old Smuggler Whisky, and 8 PM Whisky. RKL’s manufacturing facilities are strategically located across India, enabling it to cater to a wide consumer base.
Magic Moments, which is the company’s brand, leads the vodka Industry in India with over 58% market share whereas Morpheus Brandy leads the premium brandy category with over 56% market share. During the last decade, RADICO launched 12 new brands, 11 of which are in the premium category.
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Is the alcoholic beverages industry a good sector to invest in?
India is the third-largest consumer of alcohol globally, with an estimated consumption of 6.3 billion litres in 2022. The country’s alcoholic beverage sector is a dynamic and evolving landscape, offering a blend of challenges and opportunities for potential investors. With a market size estimated at over Rs. 3 lakh crore, the sector is driven by factors such as rising disposable incomes, increasing urbanisation, and evolving consumer preferences. However, the industry also faces intense competition, stringent regulations, and government policies that can impact prices and other investment decisions.
Despite several challenges, the alcoholic beverage sector in India presents compelling growth potential. The sector is expected to expand at a CAGR of 5-7% over the next five years, fueled by the above factors. Moreover, the industry’s consolidation trend, with larger players acquiring smaller brands, is creating opportunities for mergers and acquisitions (M&A) that make the big players even bigger.
Who are RADICO’s competitors in the alcoholic beverages sector?
Here are some of RADICO’s competitors:
- United Spirits Ltd.
- United Breweries Ltd.
- Tilaknagar Industries Ltd.
- Sula Vineyards Ltd.
- Globus Spirits
History of Radico Khaitan Ltd.
Established in 1943, Radico Khaitan emerged as a prominent player in the Indian Made Foreign Liquor (IMFL) industry. Initially known as Rampur Distillery Company, the company’s operations primarily involved distillation and bottling for branded players and canteen stores of the armed forces.
Radico Khaitan marked a significant milestone in 1997 when it diversified into its own branded IMFL products. The company’s debut brand, 8PM Whisky, achieved remarkable success, attaining millionaire status within a year of its launch.
This transformative step paved the way for Radico Khaitan’s growth trajectory, establishing it as a leading IMFL brand in India. Over the decades, RKL has consistently expanded its presence, evolving from a bulk spirits supplier to one of the most prominent players in the Indian Made Foreign Liquor (IMFL) segment.
RKL has also actively pursued strategic acquisitions to strengthen its market position and expand its geographical reach. Notable acquisitions include:
- Abhishek Cement Ltd. (1997): This acquisition led to RKL’s renaming as Radico Khaitan Ltd.
- Anab-e-Shahi Bottling Plant (2004): This acquisition expanded RKL’s presence in Andhra Pradesh.
- Kyron Drinks Ltd. (2018): This acquisition enhanced RKL’s portfolio with brands like Kyron Whisky and Blue Blazer Brandy.
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Investing in RADICO
Pros
- The company shows good signs of profitability and efficiency in operations.
- Possesses a strong portfolio of branded products, most of which are well recognised
- It owns three manufacturing facilities in India, giving it a total capacity of over 165 million litres. It also operates 33 bottling units spread across the country.
Cons
- The stock is currently trading at more than 9 times its book value
- Sales growth numbers haven’t been the best for some years at 11.8%
- Return on equity is also low of just over 13% in the last 3 years
- At an industry average of roughly 15%, net income has only grown 12% for Radico
- There are also chances that the company might be capitalising its interest cost
The finances
| Metric | Value |
|---|---|
| Market cap | ₹22,032 cr |
| Book value | ₹168 |
| Dividend Yield | 0.19% |
| ROCE | 11.6% |
| ROE | 9.82% |
| Face value | ₹2.00 |
Shareholding pattern of Titan Ltd.
Here’s the shareholding pattern of Titan:
- Promoters: 40.26%
- Foreign Institutional Investors (FIIs): 18.18%
- Domestic Institutional Investors (DIIs): 23.92%
- Public: 17.63%
Insurance forms and other DIIs have consistently increased their stakes in the company over the last four quarters. While retail investments have gone down marginally, this is in the minority of companies where FII investments over the last year have neither increased nor decreased.
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Peer multiple comparison
| Stock | P/E Ratio | P/B Ratio | Div. Yield |
| Radico Khaitan Ltd. | 95.41 | 9.52 | 0.19% |
| United Spirits Ltd. | 67,45 | 12.78 | – |
| United Breweries Ltd | 145.43 | 11.14 | 0.45% |
| Tilaknagar Industries Ltd | 34.66 | 10.76 | 0.09% |
The comparable numbers look fairly average across the board. While the stock is certainly trading at a premium, its comparables are as well.
Conclusion
So, that’s a brief overview of everything you need to know about Radico Khaitan Ltd. before investing. This information is by no means, however, exhaustive, and we encourage you to do your own research before investing.
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