Allied Blenders & Distillers IPO Analysis

Overview of Allied Blenders & Distillers Ltd

Allied Blenders & Distillers Ltd (ABDL), incorporated on October 8, 2008, is the third-largest Indian-made foreign liquor (IMFL) company in India based on annual sales volumes. As a key player in the IMFL sector, it offers a wide range of alcoholic beverages, including whisky, brandy, rum, vodka, and gin. The firm has a strong nationwide presence, with products available in 79,329 retail outlets across 30 States and Union Territories.

ABDL IPO Details & Subscription Status

The IPO shall remain open for subscription until June 27. ABDL seeks to raise Rs 1,500 crore from its IPO, which includes a fresh issue of Rs 1,000 crore and an offer for sale (OFS) of up to Rs 500 crore. The price band is set between Rs 267 and Rs 281 per share.

The IPO received 51% subscription on the first day of bidding. Subscription levels varied among investor categories: The non-institutional investors (NII) category saw 87% subscription while the retail individual investors (RIIs) part got subscribed 63%. The Qualified Institutional Buyers (QIBs) portion received 2% subscription.

Financial Performance & Growth Prospects

ABDL’s operational revenue has expanded at a CAGR of 5.5% over the past two years, reaching Rs 7,106 crore in FY23. As of 9MFY24, it reported revenues of Rs 5,911 crore with an EBITDA margin of 7.3%. Despite this, the company has faced challenges in maintaining high profitability, with a PAT margin of only 0.07%.

Allied Blenders & Distillers Net Profit

ABDL holds a strong market position as the third-largest producer and a significant exporter of IMFL in India, capturing ~8.2% of the market. Its significant debt of around Rs 800 crore is expected to reduce drastically to about Rs 80 crore post-IPO, utilizing the proceeds for debt repayment. This strategic move is anticipated to enhance the company’s net profits and overall financial health in the future.

Risk Factors & Considerations

Investors should note several risks before participating in the IPO. These include ABDL’s heavy reliance on its whisky products, low profitability margins, significant contingent liabilities, and ongoing legal and regulatory proceedings. Furthermore, the company's subsidiaries have reported losses in recent fiscal years, which could impact its overall financial stability.

IPO Valuation

The IPO is priced at an aggressive P/E multiple of 1,394x based on projected FY24 earnings post-IPO. This steep valuation is despite having weaker operational metrics when compared to peers.

Investment Recommendation

ABDL’s IPO presents a mixed bag of solid market presence and challenging financial metrics. For long-term investors, it may be prudent to wait and observe the company’s performance over the next two quarters before making investment decisions, as the high valuation and current financial metrics present considerable risks. However, short-term investors might find the IPO attractive for potential listing gains, considering the robust grey market premium (GMP) of 29%.

For a deeper dive into this IPO, explore: IPO Corner on Liquide

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