Globus Spirits

In my opinion, others are valued too highly as they have a horse that can count up to 10 even though growth or ROE or both are poor – Well entrenched brands in Premium/Luxury Category. For instance:

• United Spirits Ltd: Manufactures, sells, and distributes a wide portfolio of premium brands | comprehensive brand portfolio | brands that sell more than a million cases each year
• United Breweries Ltd: Products under the flagship brands Kingfisher and Heineken
• Radico Khaitan Ltd: One of the largest and oldest manufacturer of IMFL(Indian Made Foreign Liquor). Company has a wide range of branded portfolio across IMFL categories. Seven millionaire brands.

On the other hand, GSL is still perceived as a mass alcohol manufacturer (commodity chemical company – Input cost driven by commodity cycle and Finished good pricing dictated by market forces) who has just started to learn the ABCs of IMFL trade and will take lot of time and effort to graduate and join the big 3. In FY23, Total Revenue: 2103Cr.

• Manufacturing Revenue: 1357Cr. [~65% of Total Revenue | Prospect boosted from ethanol blending | Capacity will further increase in Steps +120 KLPD to come onstream from Q4FY23 and another 400 KLPD (Odisha+UP) in near future]
• Consumer Revenue:
  • IMIL: 709Cr. [~34% of Total Revenue]
  • IMFL: 37Cr. [5% of consumer revenue, 1.7% of Total Revenue after 6+ Yrs. of effort| Still Loss Making at EBITDA level | product, brand, marketing, and distribution are evolving]

Pole positioning of big 3 hints at the valuation that GSL can command if the IMFL initiative succeeds. One shall monitor the footprints of the IMFL initiative closely as that will mprove the overall margins and change the perception (E2E integrated player, stable margins in high double digit).