Ticker 532432/ MCDOWELL-N

ISIN: INE854D01016

Industry Analysis : 

Even though it is a low-risk industry in European markets, the Liquor industry in India is a high-risk industry due to high taxes. Even after that, many big players worldwide entered in Indian Market, and the segment has been growing at 8-10% CAGR since 2007. CRISIL, in its report, mentioned that it is not expected that the risk due to high tax will come down even after the entry of multinational companies into Indian markets. Most of the scotch whisky manufacturers established themselves in India and also introduced their brand in India with IMFL.

The Indian industry segmentation is as follows

  • Indian Made Foreign Liquor
  • Foreign Liquor Bottled In INDIA (BII)
  • Foreign Liquor Bottled In Origin (BIO)
  • Country liquor, Beer, and wine

The size of the industry is around 80 million Cases only with IMFL. Approximately 60% market out of this is Whiskey after that Rum with 25%. BIO and BIO segment is Small concerning this—only one million Cases per annum when added both. The country liquor segment is Vast and accounts for two times IMFL. But there is no one player and fragmented—the beer market accounts for 70 million cases per annum. Wine is less than 3 million cases per annum. Small.

Because of tax, pricing flexibility is low for many companies. That is the reason why the margin is meager in many companies. In addition, sizeable working capital and Capital Expenditure are needed in the industry: high leverage and low-interest coverage. The best example is United Spirits itself.

Export of Indian liquor is low. Most of them are Molasses, a by-product of sugarcane Refining for sugar. In comparison, foreign liquor is mainly Manufactured by Fruit and grain spirits. That is why the demand also changes whenever there is a change in the domestic market. But hardly Change with foreign markets change, like income levels.

Company Analysis: United Spirits the company is the Second largest Spirits company by volume. Formerly it was part of the UB group. A subsidiary of Diageo. As per the website, the company owns 140 Brands. Out of which 20 brands sell above 1 million cases annually. Product Portfolio includes whisky, Vodka, and Rum segment. Some important brand names are as follows.

  • McDowell’s no 1, Royal Challenge, Signature, Antiquity

The company manufactures all its brands around India over 80 Manufacturing facilities.

After the exit of Vijay Mallya, the company is looking excellent and Recent results look better; on some Prospectus, they are better than last five years or More. As now the company is in the hands of Diageo, it is expected that Diageo will shape the company as Indian liquor is limited and not much export is taking place. I am hoping that Diageo will introduce its brands as also.

Shareholding Pattern : 

Financial And Ratio

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Future Prospects

When I first wrote about this company, it was bright. For some time, it was part of nifty also. But that was not reality now. Things are changing for good. The stake held by Vijay Mallya is now out of his hand. This company is primarily a global company. I am not an alcoholic, and my family saw the destructive effects of alcohol, so I don’t have this in my portfolio, but I saw a craze for this share. MNCs I always like. If you want to hold this financially, you can keep it.