Allied Blenders IPO opens: Is Officer's Choice whiskey maker worth bidding?

Allied Blenders & Distillers has announced its Initial Public Offering (IPO) as a book built issue aiming to raise Rs 1,500.00 crores. The IPO comprises a fresh issue of 3.56 crore shares amounting to Rs 1,000.00 crores and an offer for sale of 1.78 crore shares totaling Rs 500.00 crores.

Allied Blenders & Distillers Ltd. raised Rs 449.10 crore from anchor investors on June 24. Top investors included Nippon Life India Trustee, JM Financial Mutual Fund, Jupiter India Fund, Winro Commercial, and Authum Investment and Infrastructure.

The net proceeds of the IPO will be utilised for scheduled repayment of a portion of outstanding borrowings availed by the company. 

 

Allied Blenders and Distillers is an Indian liquor company and offers four liquor categories subsuming whisky, brandy, rum, and vodka. Additionally, they sell packaged drinking water under the Officer's Choice, Officer's Choice Blue, and Sterling Reserve brands.

Here are the key details of Allied Blenders IPO

Allied Blenders IPO lot size, price band

The price band for the Allied Blenders IPO is fixed at Rs 267 to Rs 281 per share. Retail investors can apply for a minimum lot of 53 shares, requiring an investment of at least Rs 14,893. For Non-Institutional Investors (NII), the minimum lot size is 14 lots (742 shares), amounting to Rs 2,08,502, and for Qualified Institutional Buyers (QIBs), it is 68 lots (3,604 shares), amounting to Rs 10,12,724.

Allied Blenders IPO important dates

Subscription for the Allied Blenders IPO opens on June 25, 2024, and closes on June 27, 2024. Allotment is expected to be finalised by Friday, June 28, 2024, with a tentative listing date on BSE and NSE set for Tuesday, July 2, 2024.

Allied Blenders IPO GMP

According to IPO information platform Chittorgarh IPO, the latest grey market premium (GMP) for Allied Blenders is Rs 82. With a price band of Rs 281, the estimated listing price for the IPO is Rs 363, projecting an expected listing gain of 29.18 percent per share.

Allied Blenders IPO financials

In FY23, Allied Blenders recorded a 1.2 per cent decrease in revenue to Rs 7,116 crore from Rs 7,208 crore in FY22. The company’s profit after tax (PAT) jumped by 8.1 per cent to Rs 1.60 crore in FY23, as against Rs 1.48 crore in FY22.

Allied Blenders IPO share allotment

The company has allocated up to 50 per cent of the shares for Qualified Institutional Buyers (QIBs), at least 35 per cent for retail buyers, and a minimum of 15 per cent for Non-Institutional Investors (NIIs).

Allied Blenders IPO lead book runners

ICICI Securities Limited, Nuvama Wealth Management Limited, and Iti Capital Ltd are the book running lead managers for the Allied Blenders IPO, with Link Intime India Private Ltd serving as the registrar for the issue.

Post the IPO, the price to earnings multiple of the company will be 1393.87 times with an earning per share of Rs 0.2. So, should you apply or not?

Here’s what key brokerages say:

Anand Rathi:

According to analysts at Anand Rathi’s, Allied blenders and distillers is one of the largest IMFL companies in India, offering a diversified and contemporary product portfolio. The company has built a well-recognized product portfolio, evolving from a single-brand entity to a multi-product, multi-brand firm with a presence across various categories and segments of the IMFL industry in India

The company has P/E ratio is 1,405 times its FY24 annualised earnings, with a market capitalization of Rs 7,859.6 crore after the issuance of equity shares and a market cap-to-sales ratio of 0.99 times its FY24 annualised earnings.

The company plans to use the majority of its proceeds to pay down debt, which will lower finance costs and boost profit margins, analysts said. “Even though the issue is fully priced in near term, we believe the company has promising long-term business prospects. Therefore, we recommend a "Subscribe – Long Term" rating for the IPO,” the brokerage wrote in a note. 

SBI Securities:

Those at SBI Securities said that company is valued at an annualised FY24 EV/EBITDA multiple of 31.3x based on the post-issue capital on upper price band. Adding that it 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. 

According to the brokerage, 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. Hence analysts at SBI Securities recommended subscribing to the issue from a long term view.

BP Equities: 

On the valuation front, the issue looks expensive on the price-to-earnings multiple front and ahead of its peer set, the brokerage said. However, looking at the alcohol industry dynamics and the company's strong positioning in the IMFL landscape, it advised high-risk investors to “Subscribe” to the issue for listing gains.

Swastika Investmart: 

Analysts at Swastika Investmart advised investors to avoid the IPO considering associated risks and high valuation. They said that the company's financial performance has been volatile, characterised by low-profit margins and high debt levels. 

Additionally, the Indian Made Foreign Liquor (IMFL) industry faces intensifying competition, potential tax hikes, and a highly regulated environment. “Additionally, the current IPO valuation appears exceptionally high, with a P/E of 4014x, the brokerage said in a report.