POWERBULL CAPITAL SERVICES PVT. LTD.
RADICO KHAITAN
TURNAROUND STRATEGY
MCAP Rs. 4813
CMP Rs.362
As on 04-MAY-2019 INDUSTRY – LIQOUR INDUSTRY – LIQOUR
India is one of the fastest growing alcobev With consumer demand picking up, the
markets in the World, with an estimated 324.3 industry is expecting mid-single digit growth in
million cases sold in 2017. The Indian alcobev the coming financial year.
industry is segmented into IMFL, IMIL, Wine, During 2017, the industry faced challenging
Beer and imported alcohol. IMFL category times resulting in 2.7% sales decline partly due
accounts for almost 70% of the market. IMFL to the Supreme Court-order ban on sale of
Shareholding Pattern value sales grew 2% in the financial year under
D.P Gandhi , Director
alcohol near highways and distribution changes
Promoters 40.4% review. in some states like in West Bengal,
gandhidpg1@[Link] Chhattisgarh and Jharkhand.
Various factors like improvement in standards
+91-98159-69638 of living along with increase in disposable Regulatory controls of both central and state
income, higher influence of western culture governments encompass a slew of restrictions
and favourable demographics has lead to on production, movement and sale of alcobev
Bavneet Arora , Vice
President growing culture of social drinking. With nearly products. In addition, direct advertising of
65% of population younger than 35 years, alcobev products are not permitted in India.
arorabavneet@[Link] India is a young country with median age 27.9 The heavy taxes & import duty levied raised
+91-98769-00852 in 2017. Here exists tremendous opportunity to the prices of imported alcohol to a large extent.
drive growth of alcobev industry on the back About 20% of state governments revenue come
of its rising working-age population. The per from excise duty imposed on alcobev. Further,
Aakash Bansal
capita consumption of alcohol in 2018 is alcohol was kept out of the purview of GST,
aakash543@[Link] estimated at 5.1 litres which is considerably most of its inputs are part of GST. As a result,
lower than the regional average of 20.9 litres input credit offset was not available to alcobev
per capita amongst Asian countries. companies which led to increase in the cost of
operations.
ABOUT RADICO
● One of the largest The management has focus on building brands
Radico Khaitan Ltd (Radico) is one of the and driving a profitable growth which is
spirits manufacturers.
India's oldest and largest player in Indian spirit visible by Established track record of its four
Operates three
industry, with a pan-India presence. The millionaire brands namely ‘8PM Whisky’,
distilleries and one
Company has 157 million litres capacity and ‘Contessa Rum’, ‘Old Admiral Brandy’ and
joint venture.
operates 3 distillery & one joint venture. They ‘Magic Moments Vodka’
Operate three distilleries and one joint venture
and has strong distribution network of sale Through successful efforts of the company it
through over 75,000 retail and 8,000 on has developed strong hold in niche segment
●Strong distribution premise outlets. i.e. Vodka & Rum. With aim to drive growth
network. Sale through from prestige & Above category brands it has
Radico has grown its portfolio of brands recently launched premium brands like:
over 75,000 retail and
organically and is focusing on increasing the Jaisalmer Indian Craft gin, Rampur Indian
8,000 on premise
share of Prestige & Above brand contribution Single Malt, 1965 rum, Pluton Bay rum, Regal
outlets
to total IMFL volumes which currently stands Talon whisky .
at 26% in volume terms and 43% in value
terms.
With 28 bottling units i.e. 5 own and 23
●Consistently
contract bottling units spread across the
increasing Prestige &
country it aims to strategically reducing
Above brand
interstate taxes and transport costs. They are
contribution to total
also one of the largest providers of branded
IMFL volumes; 28%
IMFL to the Canteen Stores Department
FY 2019 premium
(CSD), which has significant entry barriers
volume share ; 49% in
which has significant entry barriers.
value terms.
CONCALL UPDATES
The prices of raw materials mainly c-
BUSINESS heavy molasses & glass prices. The glass
prices have seen an increase of 6-7 %
Despite several headwinds in the industry and are not expected to go up
viz. GST , highway ban radico is back on significantly, there may be increase in
growth path with its regular segments prices of molasses. Despite the
brands growing @ 3.5 % and prestige & expectation of increase in prices of
above average category brands @ 18.5 molasses the management is aiming to
%. increase its EBDITA margin by 100 to
RADICO 150 basis points y-o-y for three years.
Poised to further increase share in
Highlights premium segment as industry is growing Radico is also deleveraging its balance
at double digits it is focusing on surrogate sheet and has reduced net debt by 250 crs
marketing and is coming up with two new during FY 2019 and will be debt free by
advertisement campaign and is planning 2021.
to launch two new brands in next two
years.
FY 2019 EARNINGS
UPDATES
Profitability & Balance Sheet
Revenue ●Finance cost declined by 48% YoY to
● RDCK’s revenue increased by 15.0% YoY to Rs35.48crs led by debt reduction
Rs2097.00 crs driven by 10.8% increase in
IMFL sales volumes ● Net Debt was Rs3200crs (Debt repayment of
Rs250.34 crs ).
●Robust sales volume growth was led by
RADICO 21.30% increase in Premium category. This ● Net Profit increased 52% YoY to Rs188 crs as
segment contributed 28.30% of total volume in
Highlights FY19. Regular category sales volume increased
a result of higher volumes, margin expansion
and lower finance costs.
7.10% YoY
Margins
● EBDITA margin increased by 200bps YoY to
16.70% driven by a combination of price
increases, favorable product mix, lower raw
material costs and ongoing cost optimization
initiatives undertaken
● EBITDA increased by 40% YoY to Rs917m
and EBITDA margins expanded by 305bps
YoY to 17.7%
MANAGEMENT TEAM
Dr. Lalit Khaitan, Chairman & Managing Director
● Has more than 50 years and has successfully leas the transformation from a bottler to leading IMFL player.
●He provides overall strategic decision to the company.
●He is on the managing committee of a number of associations, including the PHD Chamber of Commerce and Industry,
the Associated Chamber of Commerce and Industry of India, All India Distillers Association, Uttar Pradesh Distillers
Association and Confederation of Indian Industry
Abhishek Khaitan, Managing Director
● The brain behind Radico’s foray into branded business
● With over 2 decades of industry experience, he has been instrumental in launching over 15 successful brands of which 5
feature in the millionaires club
Amar Sinha, Chief Operating Officer
●Has over 30 years of experience of heading reputable Indian and multinational FMCG companies and in the field of sales
& marketing.
●Prior to joining Radico in 2017, he was the Executive Director at Wave Industries and also headed leadership positions at
Shaw Wallace &White & Mackay India, BDA Ltd (now ABD) and Playwin, among others
K. P. Singh, Director – Production
• Has over 45 years of industry experience and has been with the Company for over two decades in the field of Alchoal &
Liqour industry.
DILIP K BANTHIYA - Chief Financial Officer
•Has over 30 years of experience in corporate finance, treasury, international finance and corporate mergers and
acquisitions.
•He is also a fellow member of the Institute of Chartered Accountants of India.
RADICO
Highlights
“In the business
world, rear-view
mirror is always
clearer than the
wind-shield.”
-Warren Buffett
Profit And Loss - Standalone [INR-Crore]
DESCRIPTION Mar-18 Mar-17 Mar-16 Mar-15 Mar-14
INCOME :
Gross Sales 6270.36 4867.95 4271.09 3212.56 3045.10
Less: Excise Duty 4447.60 3188.05 2619.27 1724.17 1593.40
Net Sales 1822.77 1679.90 1651.82 1488.39 1451.70
EXPENDITURE :
Raw Material Consumed 504.70 535.29 502.14 470.87 441.80
Power & Fuel Cost 35.47 27.75 28.63 29.19 27.58
Employee Cost 154.97 141.17 128.34 119.51 93.18
Other Manuf. Exp. 501.81 427.78 441.09 293.13 302.14
Balance Sheet - Standalone - [INR-Crore]
General & Admin Exp. 143.39 131.26 131.22 74.31 85.82
DESCRIPTION
Selling & Distribution Exp. Mar-18
215.87 Mar-17
197.87 Mar-16
177.20 Mar-15 Mar-14
283.61 286.19
“In the business EQUITY
Operating Profit 266.86 210.78 187.51 166.15 188.93
world, rear-view &LIABILITIES
Other Income 29.92
20.50 39.44 49.73 41.44
mirror is business
“In the always Share Capital 26.66 26.61 26.61 26.61 26.61
world, rear-view
clearer than the Reserves
Operating Profit 1115.06
296.78 1002.44
231.28 935.97 802.27
226.95 754.18
215.89 230.37
mirror is always
wind-shield.”
Secured Loans
Interest 34.40
68.60 103.31 80.73 195.73
85.10 326.02
90.44 423.58
85.21
clearer than the PBDTTrade Payables 214.14
228.18 185.32150.55 176.01 124.22
141.85 127.56
125.44 145.16
-Warren Buffett Other Current Liabilities 167.77
Depreciation 40.90 232.09 41.70 259.10
43.13 274.40
38.32 163.34
38.75
wind-shield.” Short
Profit Term
Before Borrowings
Tax 487.80
187.28 550.91108.85 620.06
98.72 412.41 405.55
87.13 106.40
-Warren Buffett Total
Profit Current
Before Tax Liabilities 951.28
187.28 1008.54
108.85 1088.82
98.72 853.55 735.09
87.13 106.40
Total Liabilities
Provision for Tax 2231.16
63.83 2220.1828.78 2310.99
25.27 2086.96
19.49 2015.71
35.15
Profit After Tax 123.45 80.07 73.45 67.64 71.25
Net Block 685.49 703.82 729.39 572.74 570.50
Non Current
155.39 155.39 155.39 48.06 58.37
Investments
LT Loans & Advances 124.75 177.19 87.24 142.19 134.13
Currents Investments 50.00 50.00 50.00 50.00 50.00
Inventories 310.86 293.03 274.09 213.03 210.31
Sundry Debtors 630.01 624.01 610.93 477.81 523.32
Cash and Bank 22.35 14.07 12.70 10.33 15.29
Other Current Assets 123.66 97.49 184.30 201.89 100.04
ST Loans & Advances 102.06 85.28 178.61 366.20 341.23
Total Assets 2231.16 2220.18 2310.99 2086.96 2015.71
Total Debt 592.05 799.04 959.72 849.26 903.81
Radico Khaitan Ltd. CashFlow - Standalone - [INR-Crore]
Mar- Mar- Mar- Mar- Mar-
DESCRIPTION 18 17 16 15 14
106.4
Profit Before Tax 187.28 108.85 98.72 87.13 1
110.4
Adjustment 92.99 105.32 118.53 112.82 0
-
Changes In working Capital 71.18 52.85 235.52 68.73 -53.24
Cash Flow after changes in Working 163.5
Capital 351.45 267.02 -18.27 268.68 7
“In the business Interest Paid
world,
“In the rear-view
business Tax Paid -35.67 -15.11 -20.75 -18.29 -26.43
mirror
world, is rear-view
always Other Direct Expenses paid
clearer Extra & Other Item
mirror isthanalways
the
137.1
wind-shield.”
clearer than the Cash From Operating Activities 315.78 251.91 -39.03 250.39 3
wind-shield.”
-Warren Buffett -
Radico Khaitan Ltd. Financial Ratios-Standalone 141.3
-Warren Buffett Cash Flow from Investing Activities -20.76 3.11 83.50 -82.92 0
Mar- Mar- -Mar- Mar- - Mar- -
Cash from Financing Activities 18
DESCRIPTION 17292.5716 233.98
15 -86.61
14 172.42 3.46
Net Cash Inflow / Outflow 2.45 21.05 -42.14 -4.96 -0.71
EPS (Rs.) 9.26 6.02 - 5.52 -5.08 5.36 -
Opening
PBIDTM Cash
(%)& Cash Equivalents 314.23 5.31
4.73 4.75 335.286.72
293.14
7.57 15.29 16.00
PATM (%) 1.97 1.64 1.72 2.11 2.34
ROE (%) 11.37 8.04 - 8.24 -8.50 9.56
-
Closing Cash & Cash Equivalent 311.78 314.23 335.28 10.33 15.29
ROCE (%) 14.36 10.11 10.23 10.61 12.12
Receivable days 36.50 46.30 46.52 56.87 57.46
Inventory Days 17.58 21.26 20.81 24.05 23.69
Payable days 49.89 47.89 41.50 37.05 37.43
Total Debt/Equity(x) 0.52 0.78 1.00 1.04 1.17
Radico’s Brands
- -Magic Moments NOTE:-
- -8 PM Whisky
- -Rampur Single
Malt
1.
- -Jaislmer Gin
- -Morpheus
-1965 Rum
Investment Rationale
We as a team at Powerbulls Capital Services (P) Ltd. are interested and have invested a respectable amount in RADICO Ltd considering at the
opportunity .
The foray of businesses into Prestige and above category would drive value through command of premium prices .
RADICO
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