Ravikumar Distilleries Ltd. (RKDL) IPO Price Band 56 ... - PARASRAM

Please Note: Retail Limit in this issue is ` 2 Lakhs (` 200,000)
Ravikumar Distilleries Ltd. (RKDL) IPO Price Band 56-64 (FV 10)
Sector
FMCG-Alcoholic Beverages
Website http://www.ravikumardistilleries.com
Issue Opens 8 December 2010
Issue Closes 10 December 2010
No. of Shares 1.15 Crore
Aggregating (at upper band) ` 73 Crore
Key Executives R.V.Ravikumar
R. Amirthavalli
Registrar KARVY
BRLM COMFORT SECURITIES
Post Issue Equity ` 24 Crore
Company Background
Started in 1993, Chennai based Ravikumar Distilleries Ltd (RKDL) is in the business of manufacturing of Indian Made Foreign
Liquors (IMFL) products. With a global outlook towards sourcing the best of raw materials and technical know-how, RKDL has
entered into tie-ups with CGEVF France for production of Brandy and with JBB (Greater Europe) Plc for the production of Scotch
whisky. Its plant is located in Puducherry. The Factory has a capacity to produce 1.43 million cases per annum.
Its brands are categorized into 3 segments:
Super Premium: “CAPRICON” brand for Super Premium Whisky, Brandy, XXX Rum, Vodka etc. “2 Barrels” Rum, Brandy,
Napoleon Whisky etc.
Premium: “3 Coins”, “Kada”, Mr King” for Brandy & “Dupliex” Whisky.
Regular: “Konarak” Whisky, Rum & Brandy. “Chevalier” Whisky, Rum, Brandy. “Oncemore” Grape Brandy, Rum etc.
In addition to manufacturing and marketing of its own liquor products, is also having tie-up arrangement with various leading
liquors companies of India like Radico Khatian Ltd, Shashi Distilleries Pvt. Ltd, John Distilleries Ltd, Gemini Distilleries (Pondy)
Pvt. Ltd., Mondovi Distilleries & Breweries Pvt. Ltd etc. RKDL manufactures and markets brands like 8 PM, Contessa, Original
Choice, Brihans, Chairman, Majestic, Mens Choice etc.
Objectives of the Issue
The company plans to raise about `. 73 Crore (at upper band) from the issue. It plans to utilize issue proceeds as:
Particulars ` Crore
Expansion of Existing Unit (1.43 Mn Cases to 3.6 Mn Cases per Year) 11.22
To part –finance the marketing and corporate branding expenses 3
To part finance the incremental working capital requirements 34
Total Rupees Crore 48.22
Besides, it plans to meet issues expenses, General & Corporate Expenses from the IPO Proceeds

Highlights
India with annual consumption of about 40 Million Cases is the 3 rd largest market in the world for Alcoholic Beverages.
Alcohol industry is among the largest source of revenue of the State Exchequer, with gross amount paid about Rs. 25,000
Crores. The Industry Net turnover is about Rs. 10,000 crores.
Indian demographics are favorable to consumption of alcohol. Alcohol consumption begins at age 16-18 in India and
peaks at 30-35. The 18-35 age groups in India is 300 Million and growing at 3.4% p.a. Coupled with growth in
purchasing power, the industry is witnessing a sustained growth of 8-10% annually.
Alcoholic beverages officially manufactured in India are categorized as BEER, Country Liquor (CL) and Indian Made
Foreign Liquor (IMFL).
IMFL production includes wines, whisky, rum, vodka, gin and brandy.
In India, country liquor and IMFL (Indian-Made Foreign Liquor) cater for two quite different sectors of the liquor market.
Country liquor is consumed in rural areas and by low income groups in urban areas. IMFL is consumed by the middle and
high income groups, primarily in urban areas.
However in the last decade cheap IMFL has been displacing country liquors, with a few states going so far as to ban the
sales of country liquor resulting in a switch to IMFL by country liquor customers.
There is stronger branding in IMFL than CL. CL is also produced illegally on large scale at individual, household and
community level.
IMFL industry is largely organized and it has growth by 12-15% in last 5 years (whereas CL industry has stagnated).
IMFL can be sub divided into Brown Spirits (Whisky, Rum & Brandy) and White Spirits (Gin & Vodka). The major
segment of IMFL include:
Source: http://www.smartinvestor.in/ RKDL RHP
Vodka has the smallest Share in overall IMFL presently but it is the fastest growing Segment. The growth rates across
various categories is as:

RKDL is a small regional player mainly focused on markets of Tamil Nadu, Pondicherry, Andhra & Karnataka.
It enjoys strong brand awareness in the region, with strong presence in fast growing Vodka segment.
Besides, it also manufactures & markets popular brands of other leading Liquor makers.
It has tie technical tie ups with 2 of the Europe based players, which open exports opportunity for the company.
Financial Highlights
` Crore FY 10 Q1 FY 2011 FY 11 E
Total Income 50.23 13.93 56.42
Operating Expenses 43.88 12.17 49.08
PBDIT 6.35 1.76 7.33
Interest & Bank Charges 2.79 0.73 2.9
Depreciation 0.7 0.15 0.65
PBT 2.86 0.88 3.78
Tax 0.87 0.29 1.25
PAT 1.99 0.59 2.54
Other Adjustments 0 0 0.00
Net Profit 1.99 0.59 2.54
Equity (FV 10) 12.5 12.5 24
EPS 1.59 0.47 1.06
PE @ 64 40.20 135.59 60.58

Peerset Comparison
` Crore (FY 10) RKDL** Empee Distillery Globus Spirit
FY 10 Total Sales 50.23 874.36 385.5
FY 10 PAT 1.99 15.41 28.92
Equity 24 19.01 19.76
Face Value 10 10 10
EPS 0.83 8.11 14.64
CMP 64 123 180
PE 77.19 15.17 12.30
Market Cap 154 234 356
M Cap/Sales 3.06 0.27 0.92
PAT (%) 3.96 1.76 7.50
** RKDL Equity Post IPO
Risks
Alcohol & Related industries are under strict Govt control.
The industry is among the highly taxed, it is cash cow for many states with weak financial condition. With rising
competition, higher taxes compress margins.
It is a state subject and different states have their own regulations, any player that plans pan India operations has to deal
with 28 different rules.
The industry has negative social image. In some states like Gujarat, Mizoram etc. there is complete ban on alcoholic
beverages.
The size of RKDL is too small, with rising competition from domestic & Foreign players, it may find it very hard to
expand.
The issue looks over-priced given its bigger peers are at more attractive valuations.
CARE has given the Issue low “2/5” Ratings for Poor Fundamentals.
Valuation & Recommendation: Highly Risky
RKDL is a small IMFL maker based in Tamil Nadu. The IPO Pricing looks steep, given better valuations of Peers and CARE’s
low grading. It looks to be an effort to make hay of the excitement in Primary market. The issue is highly risky.
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