The Kishore Chhabria led-Allied Blenders & Distillers (ABD) is now looking to chart a new growth map after Chhabria settled a nearly two-decade old legal battle with Vijay Mallya’s UB Group earlier this week. Deepak Roy, executive vice-chairman and CEO of ABD tells FE’s Ajay Sukumaran that the company hopes to push ahead with plans for a new distillery as the time is right for bold investments.
How do you view the developments, now that a long-standing legal battle has been settled?
It’s business as usual. It’s not that the Officer’s Choice brand or the company was ever at any risk. It was basically an irritant because everytime it was made to appear in the press that our brand is at risk and this perhaps also put doubts in the mind of investors and customers. Now, we won’t have to work hard in removing that.
It was a kind of a diversion, all this litigation was a drain on our resources, both physical as well as financial. Now, we can look forward and keep growing our business, which has been very buoyant over the last 5 years. We are the third largest (liquor) company and Officer’s Choice is the world’s largest selling whisky.
Also, all impediments towards raising funds that we need for growth have been totally removed. They had already been removed by the courts about three months back, but more importantly, there was a psychological effect in the mind of investors. That’s also removed now.
As you focus on expansion, what’s the vision for the company?
We have launched four brands already in the last three years and they are all doing well. Officer’s Choice Blue, which is in the semi-premium segment, will cross a million cases in its first 12 months. Then, we have launched a semi-premium brandy called Lord & Master in Kerala and Andhra Pradesh and we are rolling out in Pondicherry.
So, basically we will keep expanding our portfolio because we can’t be dependant on one brand and we will keep creating a strong back-end because today that’s one of our weaknesses. We are dependant on contract bottlers for 75% of our business and, now, we want to definitely raise money and put up our own bottling plants. We also want to have some more strategic control over the raw material. These are the areas we are going to focus on.
You are looking at building a distillery in Andhra Pradesh, which would require R200-300 crore. Are you talking to investors?
Not exactly, we have a few people who expressed interest to do business with us. But we haven’t as yet made up our mind as to what’s the best way of raising capital, whether its going to be debt or private equity or an IPO. We still need to make up our minds on that. We are evaluating various options.
What’s the timeline you are looking at?
We are looking at doing some of these things at the beginning of the next financial year, so hopefully we would get something off the ground.
How is it that you are only now looking at investing in a distillery?
First of all, we had three units of our own in Aurangabad, Gurgaon and in Karnataka. Basically, because we were a subsidiary of Herbertsons; therefore, all our manufacturing was done in the United Spirits units and we never had to invest. And then, when we came out of United Spirits, obviously our balance sheet was very weak and we couldn’t raise the capital. So, work on all that has happened now and it would take us a few years to create our own capability. The time is absolutely right now for bold investments.
UB’s brands such as McDowell’s No.1 are close behind Officer’s Choice in volume. Does it mean the battle for marketshare will now intensify?
I would say, for me, being number one or two is not that sacrosanct. I think what is more important is that I get profitable growth. Second, I don’t think we are under threat of losing our number position. McDowell No.1 is not just one brand, but three products put together while Officer’s Choice is a solo brand. Next year, our brand will include Officer’s Choice Blue and the gap will widen. I’m not concerned about this (the race for) number one and number two.
