In the past, I had studied AABL and I will write based on that. Over a long run, the ticker has done quite well 40% CAGR. But, Several red flags for me
- There was never a solid case for how they could expand out of MP. Liquor being a govt. Regulated industry, barriers to open in New states are no trivial. Thus, long term, the most likely case is a 7% state gdp growth at best. They had some hits in kerala etc which later seemed to fizzle out. Their stated volume expansions kept getting delayed or suddenly revised downwards.
Having one large integrated distillery into really great considering cross border alchohol transfer and ena/ethanol being out of gst ambit. - Dr. Vijay malik has a thorough study going back many years which dredged up a lot of Corp governance issues. Remuneration to the Kedia’s, loans from AABL to MEBL, MEBL coming in as subsidiary and then moving out etc.
- Beer and spirits have different unit economics. United spirits and united breweries are separate entities for instance. Since broached the merger a few quarters back, AABL stopped quarterly earnings calls too, the case for merger is never clearly explained. It has been in the works for long.
Given this background, in my opinion, the prudent thing is to let the market price the combined entity and to see whether the claimed synergies are indeed coming through.
Disclosure - I am an IDIOT, please treat this as no more than the rants of a drunken sailor.
I am not invested. This is NOT a recommendation.
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