IPO will list on 2 Jul'24
Allied Blenders and Distillers Ltd
Minimum Investment
₹ 14,893 / 53 shares
Grey market premium
₹ 82 (29% premium)
Our Verdict:
Neutral
- Allied Blenders and Distillers Ltd (ABDL), a key player in the IMFL sector, has shown negligible profits over the past three years. As of 9MFY24, the firm had significant debt of ~Rs 800 crore, which is anticipated to decrease to ~Rs 80 crore following debt repayments from IPO proceeds. This shift in capital structure post-IPO is likely to improve net profits and return ratios in the future.
- In terms of valuation, the IPO is priced at an aggressive P/E multiple of 1,394 based on projected FY24 earnings post-IPO. Additionally, ABDL's product portfolio and operational metrics appear to be considerably weaker compared to its peers.
- Given these factors, long-term investors may prefer to wait and monitor the company's performance over the next two quarters, as the inherent risks currently outweigh the potential benefits.
- However, considering the grey market premium (GMP) for the IPO, short-term investors with a greater risk appetite may subscribe for potential listing gains.
About the company
Founded in
8 Oct'08
Managing director
Alok Gupta
- ABDL ranks as the third largest Indian-made foreign liquor (IMFL) company in India based on annual sales volumes. It is one of the only four spirits companies in India with a nationwide sales and distribution network. As of March 31, 2023, its products were available in 79,329 retail outlets across 30 States and Union Territories.
- ABDL's product portfolio includes 16 major brands spanning five main categories of IMFL: whisky, brandy, rum, vodka, and gin. Additionally, it sells packaged drinking water under the Officer’s Choice, Officer’s Choice Blue, and Sterling Reserve brands.
STRENGTHS
- Market Leadership: ABDL is the third largest producer and a prominent exporter of IMFL, capturing ~8.2% of India’s IMFL market. It also commands ~11.8% of the Indian whisky market and distributes its products across 30 states and union territories.
- Revenue Growth: Over the past two years, ABDL's operational revenue has expanded at a CAGR of 5.5%, reaching Rs 7,106 crore in FY23. For 9MFY24, the firm reported revenues of Rs 5,911 crore with an EBITDA margin of 7.3%.
RISK FACTORS
- Product Dependency: ABDL heavily relies on its whisky products, particularly under the Officer’s Choice brand, which accounted for 75.85% of its revenue in FY23 and 73.02% in 9MFY24. A decline in sales of these products could significantly impact the company's business and financial health.
- Low Profitability Margins: ABDL operates with very low operating and profit after tax (PAT) margins. In the first nine months of FY24, its operating margin was 3.09% and PAT margin was only 0.07%. Additionally, its return ratios are considerably lower than those of its peers in the industry.
- Significant Contingent Liabilities: ABDL’s contingent liabilities represent a substantial part of its net worth, approximately 47% as of December 31, 2023. Should these liabilities become actual debts, it could severely impact the company's financial stability.
- Losses in Subsidiaries: Some of ABDL’s subsidiaries reported losses during FY21 to FY23, and in the nine months ending December 31 for both 2022 and 2023.
- Legal and Regulatory Risks: ABDL, along with its directors and promoters, is involved in various legal and regulatory proceedings, including criminal cases. An unfavourable outcome in any of these proceedings could adversely affect the company’s business operations and reputation.
Financials
Issue details
Issue type
Mainstream
Issue size
₹ 1,500 crore
Fresh Issue
₹ 1,000 crore
OFS
₹ 500 crore
Price range
₹ 267 - 281
Lot size
53 shares
Issue Objective
ABDL intends to utilise the net proceeds from the fresh issue towards:
- Prepayment or scheduled repayment of a portion of certain outstanding borrowings; and
- General corporate purposes.
Dates
Bidding open
25 Jun'24
Bidding close
27 Jun'24
Allotment date
28 Jun'24
Refund date
1 Jul'24
Listing
2 Jul'24
IPO Reservations
Qualified institutional buyers
<50%
Non-institutional investors
>15%
Retail individual investors
>35%
Read the Offer Document
© 2024 by Liquide Solutions Private Limited, SEBI Registered Research Analyst (Registration number - INH000009816)
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