The Hindu Business Line : Radico Khaitan to look for acquisitions at `right price'

RADICO Khaitan Ltd, which has emerged as the second largest Indian Made Foreign Liquor (IMFL) player after the UB Group gulped down Shaw Wallace & Co (SWC) earlier this week, will take the acquisition route if opportunities come at the "right price".

"We are on the look out for inorganic growth if it comes at the right value. At the same time, our organic growth has been pretty robust with volume rising almost 50 per cent year-on-year," Mr Abhishek Khaitan, Joint Managing Director of RKL, told Business Line.

The company, with flagship whisky brand 8PM, is expected to end the current financial year with volume sales of over 9.5 million cases (excluding country liquor sales in north India).

Last year, RKL bought the shares of its majority partner, Bacardi, in the joint venture company Whytehall India Ltd, which has annual depletions close to half-a-million cases.

It has also effected bottling unit acquisitions in Andhra Pradesh and Rajasthan and has earmarked Rs 150 crore to pursue inorganic growth opportunities.

However, analysts said the company, with perhaps the strongest balance sheet in the domestic liquor industry, has not yet shown the appetite for big-ticket acquisitions.

"UB's acquisition of SWC will give momentum to consolidation in the industry," said Mr Khaitan, while adding that his company could look at some major leveraged buyouts if there were opportunities in the market.

Analysts expect RKL and Seagram India, part of the French drinks giant Pernod Ricard, to galvanise further consolidation as UB takes control of 50 per cent share of the IMFL industry pegged at 110 million cases annually.

RKL reported a net profit of Rs 18.22 crore on a turnover close to Rs 600 crore during 2003-04, while Mr Mallya's largest spirits company, McDowell & Co, showed Rs 21.35 crore as net on a topline of Rs 1,081 crore last year.

Despite a significant spike raw material costs during the current financial year, RKL's net in the first nine-month period stands at Rs 22.75 crore as against McDowell & Co's Rs 18.18 crore in the same period.

Mr Khaitan said UB's acquisition of its main rival SWC would help to shore up the profitability of the liquor industry as the indiscriminate trade incentives and discounts could come under the hammer.

According to industry estimates, and corroborated by UB officials, the marketplace slugfest between UB and SWC involved trade incentives of over Rs 200 crore annually.

RKL remains unenthused about a merger game plan to gather a bigger mass and drive consolidation even though Mr Khaitan said UB and his company could be the only attractive vehicles for any multinational spirits company looking for a breakthrough in the Indian market.

Apart from 8PM Whisky, RKL's other million cases brands include Old Admiral Brandy and Contessa Rum, which mainly sells in the Canteen Stores Department channel.

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