 "Allied Blenders and Distillers lists at 14% premium to issue price")
Allied Blenders and Distillers (ABDL) made a decent stock market debut with its shares listed at Rs 320 on the NSE, a 14 per cent premium over the issue price of Rs 281 per share on Tuesday. The stock of the largest Indian-owned Indian made foreign liquor (IMFL) company listed at Rs 318.10, up 13 per cent from its issue price on the BSE.
At 10:01 am; ABDL was trading at Rs 313, quoting a 11 per cent premium over its issue price. The stock had hit a low of Rs 311.10 on the NSE in intra-day trades. A combined around 17 million shares changed hands on the NSE and BSE.
The initial public offering of ABDL was subscribed 24.85 times. The qualified institutional buyers (QIB) portion was subscribed 50.37 times, non-institutional investors portion subscribed 32.09 times, while retail investors subscribed to 4.73 times their allocated shares.
ABDL is one of the only four spirits companies in India with pan-India sales and distribution footprint and a leading exporter of IMFL. It had an estimated market share of 11.8 per cent in terms of sales volume in the Indian whisky market for FY23. The company entered into the mass premium whisky segment by launching its flagship brand Officer’s Choice in 1988. As of December 2023, the company’s product portfolio comprised of 16 major brands of IMFL across whisky, brandy, rum and vodka.
The company is one of the largest players in the IMFL market with its flagship brand Officer’s Choice holding 20.9 per cent market share in the mass premium segment as of FY23. The company is expected to reduce its total debt from Rs 798 crore as of December 2023 to ~Rs 80 crore from the proceeds of the issue which will help reduce interest cost to a great extent thereby boosting profits and return ratios, according to a report by SBI Securities.
According to Axis Capital, ABDL faces intense competition in the IMFL market in India, from various domestic and multinational companies in India. Some of their key competitors include United Spirits, John Distilleries, Radico Khaitan Ltd and Tilaknagar Industries.
They may face competition from larger competitors with significant resources and which benefit from economies of scale and scope. They continue to face competition in markets where they currently operate, as well as in markets where they expect to expand their operations and currently have limited or no experience, the brokerage firm said in its IPO note.
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ABDL plans to use majority of its proceeds to pay down debt, which will lower finance costs and boost profit margins. Even though the issue is fully priced in near term, analysts at Anand Rathi Share and Stock Brokers believes the company has promising long-term business prospects.
While ABDL boasts a strong brand presence, a diverse product portfolio, and an extensive pan India distribution network, its suitability for investment requires careful consideration.
The company's financial performance has been volatile, characterized by low-profit margins and high debt levels. Additionally, the IMFL industry faces intensifying competition, potential tax hikes, and a highly regulated environment. Additionally, the IPO valuation appears exceptionally high, with a P/E of 4014x, the brokerage firm Swastika Investmart said in its IPO note.