ABD set to enter IPO market but only after general elections

Liquor baron Kishore Chhabria- owned Allied Blenders & Distillers (ABD)--the largest homegrown spirits maker--will hit the IPO market with an Rs 700-800-crore issue soon after the general elections as it hopes the markets, which is down in the dumps now, to revive. The company, which last month had made a world record by creating a million case-brand with a premium brand labelled 'Sterling Reserve' in flat 261 days, is also in talks with private equity players to offload a part of its equity to raise about Rs 600 crore before the IPO.

For ABD, this is not the first attempt at IPO as it was close to hitting the markets in 2016 as well, but deferred due to adverse market conditions, and has already mandated JM Financial and Credit Suisse to manage the initial public offer (IPO) under which promoter Chhabria will dilute about 10 per cent of his 97 per cent holding. In fact, in 2017, it was even close to filing the IPO papers with the Sebi. "We were keen to have the issue this fiscal year itself. Then see what happened to the IPO market. We hope the market settles after the hustings. We are working towards an issue soon after the forthcoming elections," vice-chairman Deepak Roy told PTI.

Since the first quarter, the primary market has almost dried up this fiscal year. The market sentiment changed after the IL&FS bankruptcy, it can be recalled. "We hope to raise about Rs 600 crore in pre-IPO stake sale and Rs 700-800-crore through the IPO, which should happen anytime after the general elections," he said.

Roy, who owns a tad less than 3 per cent in the company as sweat equity--down from 5 per cent earlier as he was not matching Chhabria's equity infusion--does not have any plans to dilute his stake either through the IPO or through the rights issue to PEs.

Media reports last month had said ABD had signed a term-sheet with Kedaara Capital and Carlyle Group to raise about Rs 600 crore, but Roy denied any such development saying, "we haven't reached that level yet. But we are very much in the market and are talking to many PEs, for sure." Roy, who is credited with transforming Officer's Choice into the world's largest selling mass market whisky with about 35 million cases a year now (all the sub-brands together), and now for creating another million-case brand in the shortest period of 261 days with Sterling Reserve, said PE infusion is to pare debt by the time of the IPO.

He is also hopeful of creating another million-case brand with the more premium variant of Sterling Reserve called Sterling Reserve B-10 priced at around Rs 1,050 for a bottle in about next 18 months. The Sterling Reserve B-10 has already sold 2.4 lakh cases since launch under 10 months back, while the B-7 (blend) of the Sterling Reserve priced at Rs 760 a bottle, has already notched up 1.6 million since creating the world record on January 6, he said.

"We are overleveraged now. While we had just about Rs 150 crore of working capital debt last fiscal, today we are at Rs 500 crore, which is too high for a company with a Rs 3,000 crore annual sales (FY19 forecast)," Roy said. ABD, the country's third-largest liquor maker with around 10.5 per cent market share after Pernord Ricard's 14 per cent and Diageo's 30 per cent, is likely to close the current fiscal year clipping at 16 per cent in value terms at Rs 3,000 crore and 11 per cent in volume, Roy said.

ABD has an installed capacity for 48 million cases per annum which can go up to 50 million cases through its nine company-owned bottling plants and 23 contracted units. Roy said the present capacity can take care of the next two years.

(With inputs from agencies.)