Radico in talks with Diageo to cut JV stake
India's second-largest liquor manufacturer, Radico Khaitan, today said that it is talking to UK-based Diageo Plc to reduce its stake in their joint venture Diageo Radico Distilleries.
"Things are moving and at an appropriate time we will discuss it out. At this point of time all I can say is that talks are going on," Dilip K Banthiya, chief financial officer told Reuters.
The world's largest alcoholic drinks maker and Radico have an equal JV to make and sell liquor products in India.
In January, the Indian firm had declined to comment on whether it would be willing to reduce stake in the joint venture.
Late last year, Diageo had received approval from India's Foreign Investment Promotion Board to raise its stake in the joint venture to 100 per cent.
Radico, which has brands such as 8 p.m. Whiskey, Magic Moments, Contessa Rum and Old Admiral Brandy in its portfolio, in its four-year old joint venture with Diageo has so far produced the premium whiskey brand, Masterstroke, launched about three years back.
The firm has raised Rs 340 crore recently via a Qualified Institutional Placement (QIP) and has used the proceeds to reduce debt.
The firm's current debt on the books is at Rs 420 crore from Rs 770 crore before the QIP, Banthiya said.
NEW LAUNCHES
In the current fiscal the firm plans to launch two more whiskey brands in India.
"We are planning to launch two more whiskeys from Radico in the premium space and on that you will hear very soon... the launch will be this fiscal," Banthiya said.
The Indian liquor maker also said it expects a huge boost to its performance in this fiscal as it targets a more than two-fold jump in sales in its premium brandy 'Morpheus'.
"Morpheus is doing very well and we have done 80,000 cases in the first year itself and going forward we are targetting a substantial growth of about 240,000-270,000 cases," Banthiya said.
"The product is at a high price point so it should give our margins a significant boost," he added.
Radico, which saw overall volume sales of 14.62 million cases in FY10, a growth of 13.6 percent from the same period a year earlier, expects a volume growth of 15-17 per cent in FY11.
The firm is expecting a topline growth of 20-22 per cent and expects operating profits to climb 27-30 per cent in FY11. It has also outlined a capital expenditure of 150-200 million rupees for the current fiscal.
"The capex is just for some normal maintenance requirements and we dont have any capacity expansion this year," Banthiya said.
The firm which did exceptionally well this year saw its net profit for the twelve months ended March 31 surge to Rs 41.54 crore from Rs 6.53 crore in FY10 and saw a sales jump 23 per cent in the same period to Rs 1,150 crore.
"Price increases and lower raw material prices helped us achieve such good numbers..we expect to continue this performance with good volume growth and as molasses prices in the past month have corrected by 18-20 per cent," he said.
"If it stays at current levels also our operating margins will improve by 100-150 basis points," Banthiya said.
Shares of the firm ended up 1.08 per cent at Rs 126.45 in a strong Mumbai market today.
