Radico Khaitan May Sell Minority Stake To Suntory Holdings
Liquor maker Radico Khaitan is planning to sell a minority stake to Japan's oldest liquor company Suntory Holdings, ET states. It is offering 26% stake to the company, emphasizing on the growing attraction of the local liquor market to foreign firms.
The Japanese major is expected to pay around R 870 Cr for the stake, valuing Radico Khaitan at R3,500 Cr. Multinational Investment bank UBS is the advisor to Radicon Khaitan. The proposed deal is likely to include a provision to buy another 23% stake at a later date.
However, according to BSE filing, the company does not comment on market speculation.
It was found that the Khaitans began talks with Suntory in 2011, but a deal did not materialise due to issues over majority control. However it resulted in creation of an alliance whereby Radico got the rights to market Suntory's Yamazaki single malt and Hibiki blended whiskies in India.
Japanese liquor makers are keen to expand into growing markets like India as liquor sales plummet in a rapidly aging home market. Spirits sales in India are expected to reach 360Mn cases by 2017 from 26Mn cases. Radico accounts for 18 million cases in the Indian spirits market, with 8 PM whisky alone crossing four million cases.
Suntory Holdings, the $23 Bn Japanese beverage was planning to enter the Indian alcoholic beverage sector. It entered the non-alcoholic beverage market through 51% stake acquisition in Mumbai based Narang Connect Private Limited to focus on focus on premium, healthy, coffee-based and carbonated beverages.
It has two whisky brands - Yamazaki 12 YO single-malt whisky and Hibiki 17 YO blended whisky — are currently sold in India under an exclusive marketing tie-up with Radico Khaitan.
Suntory has been trying to ramp up its presence in India through acquisitions. In 2009, it launched an unsuccessful attempt to acquire a stake in Indage Vinters. Recently, it was also seen to be acquiring stake in Tilaknagar industries along with Pernod Ricard.
Radico Kahitan established in 1943 as Rampur Distillery by Lalit Khaitan is one of the oldest and largest liquor manufacturer. The company came out with their own brand 8PM in 1999. The other brands are Contessa Rum, Morpheus and Old Admiral Brandy. They have 33 bottling units, 5 of which are owned and the rest are on contract basis.
It is observed that Khaitan, the promoters of the company who started as bottlers, will retain stake in the distillery business and provide outsourcing support to the multinational partner.
Last year, Radico Khaitan Ltd has acquired Royal Lancer and Elkays brands from Mysore-based Yezdi group to strengthen its presence in Karnataka.
The increasing presence of foreign liquor companies will result in a major shift to premium products.
In this sector, British drinks giant Diageo bought 53.4% in Vijay Mallya's United Spirits for close to R12000 Cr in November 2012 and currently accounts for 50% of the Indian spirits market.
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