Get set for the Rs. 2,000 crore Officers Choice IPO
In the first half of 2022, over 50 fresh IPO filings have been done with SEBI, marking a record for the first half of any year. However, the number of issues have not really kept pace with the number of filings with the most obvious case being that not a single IPO hit the market in the month of June. There are reasons like the global uncertainty, the weak performance of IPO listings like LIC, Delhivery etc, but that is off the point. The fact, that the enthusiasm for filing for IPOs has hardly abated. The latest in the list is a liquor company.
Allied Blenders and Distillers Ltd, the makers behind the popular Officer's Choice whisky, has filed its draft red herring prospectus (DRHP) with SEBI. The proposed issue size would be Rs2,000 crore, which will comprise of a fresh issue of Rs1,000 crore and an offer for sale of Rs1,000 crore. The OFS portion of the shares will be offered by the promoters and the early shareholders of the company. Three shareholders, Bina Kishore Chhabria, Resham Chhabria and Neesha Chhabria will be selling total of Rs1,000 crore of shares between them.
Out of the above three selling shareholders; Bina Chhabria who holds 52.2% stake in Allied Blenders and Distillers Ltd will offload shares worth Rs.500 crore. Resham Chhabria who holds a 24.05% stake in the company will offload shares worth Rs250 crore while Neesha Chhabria who holds a 19.96% stake in Allied Blenders and Distillers Ltd will also offload shares worth Rs.250 crore in the offer for sale of the company. The fresh issue proceeds will be largely used to defray the Rs.927 crore debt in the books of the company.
The liquor is not a very capital intensive business and does not require ongoing investments of a major scale. The liquor business is more about working capital. Hence the focus of the IPO is to reduce the outstanding borrowings of the company to cut down on the debt servicing costs and improve the leverage and the solvency ratios of the company. This will enable the company to add more value to its equity shareholders. The lead managers are ICICI Securities, Axis Capital, JM Financial, Kotak Mahindra Capital and Equirus Capital.
Regarding the background of the company, Allied Blenders and Distillers is India’s third largest manufacturer of Indian made foreign liquor (IMFL). Its flagship brand, Officer's Choice whisky, is among its top-selling brands globally. The product portfolio of the company comprises of 10 major brands of IMFL spread across whisky, brandy, rum and vodka. Some of its millionaire brands (brands that sell more than 10 lakh cases) include Officer’s Choice Whisky, Sterling Reserve and Officer’s Choice Blue.
The company is not only into the core liquor business but also sells packaged drinking water under Officer’s Choice, Officer’s Choice Blue and Sterling Reserve brands. This is a practice used by most liquor companies to enable easy advertisement in the electronic and other audio visual media. Within India, Allied Blenders sells across 30 states and UTs. It sells to around 22 markets overseas; including West Asia, the Americas, Africa, Asia and Europe. For FY21, the company had total revenues of Rs6,379 crore, but with negligible profits.