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Do NOT apply; Avoid Ravi Kumar Distilleries IPO:: research report by MLR Securities:: IPO note
Company Background
Ravi Kumar Distilleries Ltd was incorporated on 11th October, 1993. The company is engaged in the business of manufacturing and trade of Indian Made
Foreign Liquor like Whisky, Brandy, Rum, Gin & Vodka. Presently the company is having an installed capacity of 14,25,000 cases per annum in
Puducherry. The company derives majority of its sales from local market of
Puducherry.
Mr. R.V.Ravikumar, age 54 years, is the founder promoter & Managing Director of the Company. He has over 30 years of experience in liquor industry. He
has also nurtured various other companies belonging to tourism, food, pharmaceuticals and real estate industry under his management. He is the secretary of Pondicherry Distilleries & Breweries Association and was a member of All India Distilleries Association.
Investment Summary
The company has plans to use the issue proceeds to increase its capacity
from present 14,25,000 cases per annum to 30,00,000 cases per annum
and expand its reach in the neighboring states of Kerala, Karnataka and
Andhra Pradesh.
At present the capacity utilization rate is low and the Company is manufacturing 60,000 cases per month which is supplied to Puducherry region
only and despite of getting regulatory approvals it will be a difficult task
to penetrate in new markets where already there is huge competition.
Ban on liquor advertisements makes task of brand development difficult.
The domestic IMFL industry is worth USD 2 Bn (125 Mn Cases) and is
around one third of the total liquor market. It is expected to grow at a
CAGR of 9.7% over next three years.
The per capita consumption of liquor in India is 0.82 ltr/annum as compared to global average of 4.63 ltr/annum. However, changing social habits and increasing disposable income will likely result higher per capita
consumption of liquor in India, also the demand for branded liquor will
increase more than unbranded liquor.
Although the outlook for growth in demand of IMFL in India is good this does
not augurs well for regional distilleries because of stiff central and state government policies related to production, distribution and taxation. The ban on
liquor advertisements makes the task of penetrating in new markets very difficult. The IPO price band does not offers attractive valuations and we recommend to avoid this issue.
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