Officer’s Choice maker files for a ₹2,000 cr IPO banking on more people hitting alcohol eligible age

• Allied Blenders & Distillers has filed draft papers with SEBI to raise ₹2,000 crore from the public.
• It consists of a fresh issue of ₹1,000 crore and an offer for sale by promoters of shares worth ₹1,000 crore.
• Some amount of the IPO money will be used to repay debt and rest will be for general corporate purposes.

Allied Blenders and Distillers, an Indian spirits company and maker of alcohol products like Officer's Choice Whisky, Sterling Reserve, Officer’s Choice Blue and others, has filed a DRHP with the markets regulator SEBI for a ₹2,000 crore IPO.

The company sells alcoholic beverages in India and abroad with a wide range like whiskey, rum, brandy and vodka across 29 countries. It owns nine bottling units, one distilling facility and over 22 outsourced manufacturing sites.

It faces competition from listed companies like United Spirits and Radico Khaitan that have a strong hold over the market.

Lockdown induced due to Covid-19 pandemic has left a huge scar on the company’s operations. Its distillery and bottling facilities were temporarily closed for several weeks during lockdown in the months of March and April 2020, leading to dip in sales volumes since then.

Besides, the national lockdown mandated by the government also resulted in complete ban on the sale of alcohol in India, which significantly impacted its business, inventories and cash flows in 2020.

The total cases sold by the company declined from 33.23 million cases in FY20 to 25.52 million cases in FY21.

Moreover, the company is in a competitive market wherein marketing and pricing by its competitors also impacts its sales.

“Sales of our products could also be adversely affected by other factors, including increases in excise taxes, supply, production or distribution changes / interruptions, marketing or pricing actions by one or more of our competitors, changes in consumer preferences or other factors. Any such adverse development could result in significant loss which would materially and adversely affect our business, profitability and reputation,” said the firm in its DRHP.

As on December 31, 2021, the total outstanding borrowings of the company stood at ₹926 crore.

All these uncertainties hit by the pandemic reduced its profitability of the company by a large amount.
In fact, its advertisement and promotion expenses also came down to ₹90 crore in FY21 from ₹168 crore in FY19. However it has high hopes of a rising population of the eligible age group required for consuming alcohol.

The market for alcohol beverages in India is estimated to grow at 3.8% by volume between 2021 to 2025 as approximately 10-12 million people join the drinking population every year.

Key players and their volume trends

SEE ALSO: It could be slowflation not stagflation – and it’s better for the equity markets
Startups go physical from digital as pandemic boom ends
Indian credit card users spend 40x more than debit card users online