Back in 1994, Globus Spirits started its operations with a distillery in Samalkha,
Haryana having an installed annual capacity of 14.4 million bulk litres. Today,
the company is a largest gran based distillers in India and operates a distillery
capacity of around 150 million bulk litre across four modern and fully integrated
distilleries at Rajasthan, Haryana, Bihar and West Bengal. The company has
presence across Distillery, IMIL (Indian made Indian liquor), IMFL (Indian made
foreign liquor) and franchise bottling.
The company is focused its efforts on creating a 360 degree presence in alcohol. The company enjoys
established relations with the largest brands liquor in India for supply of bulk alcohol. Globus brands of
Indian Made Indian Liquor (IMIL) are leaders in the North Indian markets of Delhi, Rajasthan and
Haryana, making Globus the largest player in IMIL in the country. The 360° way is a unique model in the
Indian alcohol industry perfected by the company. Globus Spirits straddle the entire value chain in
alcohol starting from distillation to bottling for industry leading Indian Made Foreign Liquor brands to
marketing of its own brands of Indian Made Indian and Foreign Liquors.
Globus Spirits increased its capacity to 150 million bulk litre by adding greenfield distilleries in West
Bengal and Bihar with capacity of 33 million BL and 26 million bulk litres respectively in FY 2016-17
which makes it country’s biggest grain based distiller and also a bottler to brand owners
Globus Spirits is founded by Ajay Swarup, Managing Director of the company. His son Mr. Shekhar
Swarup is the Joint Managing Director of the company. Unibev marks Mr. Swarup entry into the deluxe
and premium segments of the liquor market.
In the fourth quarter of FY 2016-17, the Board of Directors appointed Mr. Vijay Rekhi as Additional
Director (Executive Director) of the Company. Mr. Rekhi brings in four decades of experience in IMFL
space and has played an instrumental role in premiumization of various IMFL brands across segments.
Under his leadership, the company has launched three niche IMFL brands through its Joint Venture -
Unibev Limited (formerly was 100% subsidiary of the company, known as M/s Uber Blenders & Distillers
Limited) (Indian subsidiary).Unibev has production facilities in Bengaluru & Haryana. In Haryana it has its
own unit while in Bangalore the company has a tie-up.
To bring synergies with its existing business, Globus Spirits forayed into animal feed. The company has
introduced a high nutrient feed ingredient, Distillers Dried Grains with Solubles (DDGS), in the Indian
market. DDGS is a byproduct of alcohol manufacturing process. Globus Spirits is one of the few
manufacturers providing rice based DDGS, which has even higher protein than the conventional maize
based DDGS.
Products:
IMIL (Indian Made Indian Liquor)
i) Nimboo – First IMIL brand in India positioned as mix of natural
lemon flavor.
ii) Narangi - Popular dark spirits’ brand Positioned as refreshing
and juicy as Orange
iii) Ghoomer - Tribute to Rajasthani folk dance, blend popular in
winter months of the desert region
iv) Heer Ranjha – It’s a smooth blend, Tribute to the most
popular romantic tales of the region.
IMFL (Indian Made Foreign Liquor)
i) Governor’s Reserve – It is a 100% premium grain
whisky, a carefully crafted blend with upto 12 year
old imported scotch and matured Indian malts.
ii) Oakton – Oakton is a barrel aged rare premium grain
whisky, a unique blend with upto 18 year old
imported scotch and matured Indian malts.
iii) L’Affaire Napoleon – It is a premium brandy launched
in Dec’17 in Pondicherry.
2. Industry Outlook
India alcoholic beverage industry is one of the biggest alcohol industry across the globe only behind
from two major countries such as China and Russia. Growing demand for alcoholic beverages in India is
majorly attributed to the huge young population base and growing consumption of alcohol by the
young generation as well as rising disposable income is strengthening the industry growth. With
population of 1.3 billion India is one of the largest consumer markets across the globe. It is also
demographically one of the youngest with around 50% of its population below the age of 25 and around
65% below the age of 35. The majority of alcohol volume is consumed by people between the ages of
18 and 40. These demographic stats are expected to fuel the growth of alcoholic beverages market at
rapid pace in coming years.
Additionally, rapid urbanization of tier-II cities is further fuelling the market growth. The states of
Andhra Pradesh, Telangana, Kerala, Karnataka, Sikkim Haryana and Himachal Pradesh are amongst the
largest consumers of alcohol in India. The Indian alcohol industry is segmented into IMFL (Indian made
foreign liquor), IMIL (Indian made Indian liquor), Wine, Beer and imported alcohol. Imported alcohol has
a meager share of around 0.8% in the Indian market. The heavy import duty and taxes levied raise the
price of imported alcohol to a large extent.
The Indian alcohol market is growing at a CAGR of 8.8% and it is expected to reach 16.8 Billion litres of
consumption by the year 2022. The popularity of wine and vodka is increasing at a remarkable CAGR of
21.8% and 22.8% respectively. India is the largest consumer of whisky in the world and it constitutes
about 60% of the IMFL market.
3. Recent Developments (12th Dec 2018)
i) Increase in shareholding of Director through Open Market Purchase – Dec 2018
On 13th Aug’18, Promoter & Joint Managing Director of the company, Mr. Shekhar Swarup has acquired
64,465 shares through open market purchase at Rs. 139.14 per share. His personal shareholding in the
company increased to 2.09% post this transaction. Moreover, Aashti Bhartia who is Director’s
Immediate Relative has bought 12,080 shares recently on 05th Dec’18 at average price of Rs. 148.75 per
share.
ii) Production of Grain based Ethanol to be a Game Changer – Nov 2018
For the first time, Govt of India has allowed to produce ethanol using damaged food grains like wheat,
broken rice etc which are unusable for human consumption. Farmers are at a risk of not getting
appropriate price for their produce during the surplus production phase. Taking this into account, the
policy allows use of surplus food grains for production of ethanol for blending with petrol with the
approval of National Biofuel Coordination Committee.
Globus recently participated in the tender for ethanol purchase floated by the oil companies in India.
The company has been allocated a supply of 26 million litres of ethanol at the end of the first tender
cycle. This quantity will be supplied during the period March 2019 to November 2019. As per
management, it expects to receive allocation of another 14 million litres of ethanol by
OMCs. Production of 40 million litres of ethanol from its Haryana and Bihar facility to meet OMCs
requirement will fetch additional profits of Rs. 20 crores (Rs. 5 per litre) for the company in FY19-20
as ethanol purchase price fixed by OMCs is Rs. 47.13 compared to ENA price of Rs. 41 – 42 per litre.
iii) Globus Spirits restarted its Bihar facility - Oct 2018
The company has resumed its operation and commenced production of ENA on 9th Oct 2018 at its
Bihar facility. This facility has production capacity of 80,000 bulk litre per day.
Pursuant to order passed by the Hon'ble High Court of Patna vide dated March 7, 2018 and dated May
3, 2017, the prohibition, excise and registration department, Govt. of Bihar, vide their notification
through official gazette dated March 16, 2018, has laid down certain conditions for issuance of distillery
license to the company and allowed manufacture of ENA within the state of Bihar and to be sold /
exported outside the state of Bihar in accordance with the provision of law.
Bihar government upon orders of the High Court has permitted manufacturing of ENA in the state
implying that the company can now recommence its plants and export ENA out of the states and also
out of the country.
The closure of the Bihar plant seriously impacted company’s financial performance in the last financial
year. Bihar facility has capacity of 27 million litre per annum and expected to generate additional
revenue of Rs. 100 crores for the company for full financial year.
iv) Globus Sprits forms JV - Unibev with Former USL MD Vijay Rekhi – Jun 2018
Former United Spirits MD Vijay Rekhi has struck a joint venture with India’s largest bulk alcohol
producer Globus Spirit to tap the premium drinks market dominated by French giant Pernod Ricard and
Diageo which now controls United Spirits Ltd. Globus Spirts owns 90% stake in Unibev and Mr. Vijay
Rekhi has 10% personal stake. Globus Spirits has the largest grain based distillery in India which augurs
well for Unibev’s premium brands portfolio.
In Phase - 1, Unibev is focused on the southern Indian states for its whisky and brandy portfolio. The
company has identified high throughput outlets to ensure quick placement and movement of stocks.
Southern Indian launch operations are funded through internal accruals. The company is hopeful to sell
100,000 cases by the end of first year in the market.
The company has launched two premium whiskies and one premium brandy. Governor’s Reserve
infused with 12 year old scotch in semi premium whisky category is priced cross lined to Royal Challenge
and Royal Stag Barrel Select. Oakton Barrel Aged whisky infused with 18 years old scotch is priced cross
lined to Blenders Pride and Signature Premier. L’Affaire Napoleon premium grape brandy infused with 3
years old french grape spirit is priced cross lined to Morpheus and Kyron brands. The company will also
launch another premium whisky 7th Heaven (blended with 21 aged scotch) by end of this financial year.
Premium Rum and Premium Vodkas are in the pipeline.
4. Financial Performance (12th Dec 2018)
Globus Spirits standalone net profit rises 1.44% in the Sept 2018 quarter
Net profit of Globus Spirits rose 1.44% to Rs 2.81 crore in the quarter ended Sept 2018 as against Rs
2.77 crore during the previous quarter ended Sept 2017. Sales rose 11.68% to Rs 225.14 crore in the
quarter ended Sept 2018 as against Rs 201.59 crore during the previous quarter ended Sept 2017.
Globus Spirits standalone net profit rises 380.25% in the June 2018 quarter
Net profit of Globus Spirits rose 380.25% to Rs 7.54 crore in the quarter ended June 2018 as against Rs
1.57 crore during the previous quarter ended June 2017. Sales declined 0.37% to Rs 231.51 crore in the
quarter ended June 2018 as against Rs 232.37 crore during the previous quarter ended June 2017.
The company performance for the last quarter saw a steady growth of 11% in revenues whereas
operating margins were under pressure due to increased input costs, overheads of the recently
recommenced Bihar facility. Moreover, the company is facing headwinds from increased competition in
its IMIL business in both Rajasthan and Haryana state. To counter this, the company continue to focus
on innovation, product development and strengthening its distribution. We believe the company will
report higher revenue with significant increase in operating profit margins from Jun’19 quarter onwards
considering supply of Ethanol to OMCs and higher consumption of ENA in its IMIL and UNIBEV business.
5. Peer Group Comparison (12th Dec 2018)
We find Globus Spirits valuations attractive compared to other players with expected increase in
profitability. The company is currently available at price to book ratio of 1.1 whereas other companies in
the same Industry are commanding price to book in the range of 3 to 4. Moreover, market cap to sales
ratio of Globus Spirits is low at 0.45 whereas same for other companies ranges from 1.3 to 1.5.
6. Key Concerns & Risks (12th Dec 2018)
i) Any change in regulation from central and state government is one of the major risk for the
companies operating in alcohol Industry.
ii) Any escalation in the cost of raw materials and other inputs can impact the profit margins of the
company.
iii) Increase in competitive intensity from other players in IMIL segment mainly in states like Rajasthan
and Haryana can adversely impact the revenue of the company.
7. Technical Analysis (12th Dec 2018)
Above is the monthly chart of Globus Spirits since listing of the stock on 31 Aug 2009 i.e. last 9 years.
After listing at Rs. 100, stock price traded in the range of Rs.39 to Rs. 197 during last 9 years. Globus
Spirits made high of Rs. 215 recently in Aug 2018 however was not able to give a confirmed breakout.
Stock was included in ASM later by exchanges due to which stock price fell and made a low of Rs. 128.
Its important to note that some of the small / mid cap stocks from alcohol Industry like GM Breweries,
Som Distilleries, Radico Khaitan etc have delivered strong returns (200% to 500%) in period of 7 to 12
months post technical breakout in long term monthly charts.
8. Fundamental Analysis (12th Dec 2018)
✰ Globus Spirits is amongst the largest and most efficient grain based distillery operations in India with
approx. 150 million bulk litres of distillery capacity. The company has existing facilities at Haryana
and Rajasthan and commissioned Greenfield facilities in West Bengal and Bihar. Location advantage
like lower raw material costs, higher utilization and other logistical benefits is expected to drive
overall profitability of the company in coming years.
✰ Under IMIL business, the company has strong position in key states like Rajasthan, Haryana and Delhi
with 4 to 5 IMIL Brands. The company enjoys leadership position in Rajasthan IMIL with 30% market
share. The company commenced commercial production at the greenfield distillery in West Bengal
in Q4 FY17 and cater to growing need of bulk alcohol in West Bengal which is witnessing a huge
deficit. Globus Spirits has also launched its IMIL brand Goldee in West Bengal and the overall traction
is positive.
✰ The company’s Joint venture Unibev (the company owns 90% stake and 10% is owned by former
United Spirits MD Vijay Rekhi) has launched 3 IMFL liquor brands i.e. Governor’s Reserve Whisky,
Oakton Whisky and L’Affaire Napoleon Brandy in southern states and West Bengal. The company is in
the process of registering its brands in other states in south and east in the next six to nine months.
The new brand launches in IMFL as well as IMIL and planned expansion in other states is expected to
bring significant revenue growth over next 2 to 3 years.
✰ Under Unibev, the company’s strategy is to build portfolio of four to six niche brands in price
segments which contribute maximum profit and currently only have two to three dominant brands.
Premium IMFL is a highly attractive segment account for over 45% of total profit contribution with
just 13% of total volumes. Indian premium alcohol market is growing at a steady CAGR of 8% in last 3
years compared to flattish performance of overall IMFL industry.
✰ Under leadership of Mr. Vijay Rekhi, Unibev is expected to contribute significantly in revenue growth
as well as increasing operating margins of the company in long term. The company has registered
sales CAGR of 16.7% with ROE of 2.6% over last 3 years. The company’s performance was poor in
past, however we believe with recent expansion in capacity, commencing of operations at Bihar
plant with favourable High Court decision and entry into high margin IMFL category will improve
company’s performance over next 2 years.
✰ Production of ethanol from its Haryana and Bihar facility to meet OMCs requirement will fetch
additional profit of Rs. 5 per litre for the company in FY19-20. Ethanol purchase price fixed by OMCs
is Rs. 47.13 compared to ENA price of Rs. 41 – 42 per litre. Expected allocation of 40 million litre of
ethanol by OMCs will significantly increase the profitability of the company.
✰ As on Sept’18, promoter’s shareholding in the company is 54.43%. Promoters holding is decreased
by 2.42% since Sept 2017. However, recently on 13th Aug’18, Mr. Shekhar Swarup - Promoter & Joint
Managing Director of the company has increased his holding from 1.87% to 2.09% by purchasing
64,465 shares. FIIs holds 18% stake in the company with major holding of Templeton Strategic
Emerging Markets Fund IV, LDC at 17.49%.
✰ The company has paid dividend in initial 4 years from 2010 to 2013 post its listing on exchanges in
2009. Later it skipped paying dividends due to lower profit margins and ramping up its production
capacity. We expect company will start rewarding minority shareholders by announcing dividends
from FY19-20 onwards with expected increase in profits.
9. Saral Gyan Recommendation (12th Dec 2018)
✰ As per our estimates, Globus Spirits Ltd can deliver net profit of Rs. 39 crores in FY 2019-20 with
annualized EPS of Rs. 13.5. At current price of 153.05, stock is available at forward P/E multiple of
11.3X based on FY19-20 earnings. Company’s valuation looks attractive when compared to other
listed players in the same industry.
✰ On equity of Rs. 28.8 crore, the estimated annualized EPS for FY 19-20 works out to Rs. 13.5 and the
Book Value per share is Rs. 135.34. At current market price of Rs. 153.05, stock price to book value is
1.13.
As per various global research reports, the India alcoholic beverages market is expected to register
robust growth between CAGR of 7.4% to 8.8% over next 4 to 5 years. Growing consumption of alcohol
in young population with change in life style habits and rising disposable income will fuel the growth of
alcoholic beverages market at rapid pace in coming years, hence expected to augur well for companies
operating in this segment. We believe Globus Spirits will deliver significant improvement in profit
margins on the back of production of ethanol, higher revenue contribution from high margin IMIL &
IMFL segment in FY19-20. Considering company’s plan to reduce debt over next 2 years with higher cash
flows from Bihar plant, expansion and new brand launches in high margin IMFL business under Unibev,
and attractive valuations of the company, Saral Gyan team recommends “BUY” on Globus Spirits Ltd. “Buy” on Globus Spirits Ltd at
current market price of Rs. 153.05 for target of Rs. 375 over a period of 12 to 24 months.