Mid-sized spirits company Tilaknagar Industries Ltd, makers of Mansion House brandy brand, is in discussions to acquire Hyderabad-based Liquors India Ltd, a distillery and bottling unit, augmenting its production base in the key southern markets, said multiple sources familiar with the process.
The company, one of the fastest growing domestic liquor firms, may also tap the market for raising Rs 100 crore through institutional placement.
TIL chairman-and-managing director Amit Dahanukar confirmed talks for an equity participation or outright acquisition of Liquors India. "We are in the midst of discussions and due diligence to arrive at a valuation," he said, when contacted.
Dahanukar also said, TIL could look at a fund raise at an appropriate time in the near future. "We may look at raising around Rs 100 crore through institutional placement or from mutual funds for propelling our growth. The institutional route could also mean private equity or venture capital," he explained.
In February, TIL struck a deal with Alcobrew Distilleries to acquire the latter’s six brands, which has reasonable presence in CSD (Army canteen) channels.
Liquors India, with primary distillation, has a monthly bottling capacity of 1.4 lakh cases (of 9-litre each). Dahanukar declined to speculate on the acquisition cost as the process was still underway. Industry estimates suggest that a complete acquisition should be in excess of Rs 40 crore but this could not be verified independently.
On Wednesday morning, Tilaknagar stock was quoting at Rs 142, up 3.8%, on BSE at the time of posting this report.
Liquors India has an ongoing bottling arrangement with Pernod Ricard (formerly Seagram India) for its whiskies such as Royal Stag and Imperial Blue, which will continue post the acquisition. The stake buy will help TIL step up aggressive growth plans for its brands Mansion House, Senate whisky, Courrier Napoelean brandy in the southern markets that account for over 65% of the overall national spirits volumes.
Independent industry numbers suggest that branded volume sales of what is described as Indian Made Foreign Liquor (IMFL) reached 157 million cases in FY10, growing at nearly 12% year-on-year. This figure rises to around 220 million cases when the cheap commoditized labels that flourish in pockets are included.
The liquor trade in the large southern states are state-controlled making it a more transparent and level playing field for companies irrespective of their size.
TIL has seen its sales by value rising nearly 90%, while volume sales jumped roughly 65% in FY10, Dahanukar added. Tilaknagar's sales including excise duties crossed Rs 1,000 crore in the last fiscal. The volume sales stood at 8.5 million cases (of 9 litre each). TIL's consolidated net was around Rs 35 crore. The Dahanukar family has been controlling TIL (formerly Maharashtra Sugar Mills Ltd) based in Shrirampur in Maharashtyra for several decades now.