Ravi Kumar Distilleries

Ravi Kumar Distilleries, promoted by Mr. R. V. Ravikumar, is engaged in the business of manufacturing Indian Made Foreign Liquor (IMFL) under its own brand portfolio. The IMFL comprises of Whisky, Brandy, Rum, Gin & Vodka. In addition to manufacturing and marketing of its own liquor products, it also has tie-up arrangement with various leading liquor companies of India like .Radico Khatian Ltd., Shashi Distilleries Pvt. Ltd., John Distilleries Ltd., Gemini Distilleries (Pondy) Pvt. Ltd., and Mondovi Distilleries & Breweries Pvt. Ltd for manufacturing and marketing of their popular brands.



The company started with initial capacity of 7,20,000 cases per annum and a bond capacity of 6300 cases of Excise Bonded warehouse. Presently the plant is having an installed capacity of 14,25,000 cases per annum and 26000 cases of Excise Bonded Warehouse. The company currently operates through their manufacturing unit located at Katterikuppam village, Mannadipet Commune, Puducherry.

The company intends to enter capital market to raise money in the range of Rs 64.4 crore to Rs 73.6 crore by issuing around 1.15 crore equity share of face value of Rs 10 each at the price range of Rs 56 to Rs 64 per share.

The proceeds from issue will be used will be used for the expansion of the current unit by increase in existing capacity and installation of Re-distillation plant. At present the company is producing 60000 cases per month, which is supplied to Puducherry region only, which they propose to increase to 300000 cases per month. Expansion is to be commissioned by May 2011 and installation of re-distillation plant is scheduled to be over by March 2011.

The civil and structure related work will cost Rs 0.4 crore, purchase and installation of machines will cost Rs 10.82 crore. The issue proceeds will also part finance the marketing and corporate branding expenses costing Rs 3 crore and also incremental working capital requirements of Rs 33.97 crore.

Strengths

It has established itself in Puducherry.

The company has already developed technology in the field of manufacturing a wide range of IMFL products.

Weaknesses

The company's products lack adequate brand presence and awareness and also has limited geographical presence across the country.

The IMFL Industry is heavily regulated by the government and is politically sensitive. Any changes in regulations or applicable government policies could materially adversely affect the operations and growth prospects.

Valuation

Net sales for the quarter ended June 2010 was at Rs 13.92 crore and a net profit of Rs 0.59 crore. Net sales for the year ended March 2010 was at Rs 49.25 crore, showing a 13% growth. OPM declined by 90 basis points to 12.8%. Net profit grew by 17% to Rs 2 crore.

At a price band of Rs 56 to Rs 64 per equity share of Rs 10 face value, the P/E at the lower band works out to 67.38 times the EPS of Rs 0.8 for FY10 (on post-IPO equity). At upper band, P/E works out to 77.01 times. In Breweries and Distilleries Industry, industry composite TTM P/E is high at 46. However considering the very small size of the company and its limited presence only in Puducherry, the asking price is very high.