INSUBCONTINENT EXCLUSIVE:
Chennai-based value investor Dolly Khanna has a liking for brewer and distiller Associated Alocohols Breweries
And it's not without reasons
The company's market capitalisation crossed Rs 600 crore as of April 11 as against Rs 242 crore a year ago
Even the stock is on the turn, which jumped 150 per cent to Rs 334.05 from Rs 133.65 during the same period
Khanna, who has a knack for picking lesser-known quality stocks on Dalal Street, holds over 1 per cent stake in the company as of March
end, the latest shareholding data showed
To give you a perspective, she was not even its key shareholder during October-December.
The firm has a balanced portfolio across categories
such as whisky, rum, gin and vodka, among others
Khanna has been investing in the domestic stock market since 1996 and her portfolio is entirely managed by her husband Rajiv
Khanna.
Associated Alcohols has a lot going for it
Sample this.
1) The company aims to double ENA (extra neutral alcohol) capacity in coming years, according to the annual report
A mere 50 per cent investments in assets will double manufacturing capacity, strengthening its capital cost efficiency, the company claimed
It has also emerged as one of the most competitive grain-based ENA manufacturers in India.
2) Associated Alcohols has been a vendor to
Diageo from the late Nineties, including consistent Smirnoff vendorship from 2002 onwards.
3) The company also has plans to increase its
distillery capacity to 7 crore litres per annum in coming years, from 3 crore litres
It's set to use 10 acres out of its available land parcel of 125 acres for this Rs 80 crore expansion
The project is expected to be fully go on stream starting 2020-21
Following the scale-up, the brewing firm expects to emerge as one of the largest ENA manufacturers in India with one of the lowest
manufacturing costs, an effective volume-value play that will enhance the company’s competitiveness and profitability.
4) Associated
Alcohols is also trying to become a pan-India player
In 2016-17, it was present in three states -- Delhi, Madhya Pradesh and Rajasthan
In 2017-18, the company intends to be present in five more such as Puducherry, Kerala, Goa, Maharashtra and Chhattisgarh.
5) The company is
readying plans to transform pricing model into premiumisation
In the annual report, the company said, “In 2016-17, 20 per cent of the company’s revenues were derived from IMFL, of which 3 per cent
of IMFL revenues were premium
By 2020, the company expects to increase the proportion of IMFL revenues to 50 per cent and 50 per cent of the company’s IMFL revenues are
expected to be derived from premium varieties.”
For 2016-17, the company had posted a net profit of Rs 17.38 crore, up 22 per cent from Rs
14.29 crore in the same quarter last year
However, profit surged 95 per cent year-on-year for the quarter ended December 2017 against Rs 4.91 crore a year earlier.
