Financial Analysis of Ubhl and Radico Khaitan

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Liquor Industry
"All is fair in love and war and when it comes to the liquor industry, it is war." This was an extract from a note signed by none other than the man they called the ‘King of Good Times’.

The Indian liquor industry is a high-risk industry, primarily on account of the high taxes and innumerableregulations governing it. As a result, liquor companies suffer from low pricing flexibility and have inefficientcapacities, which, in turn, have led to low margins and weak financial profiles. Moreover, even though the twolarge liquor groups in the country enjoy a majority market share, the price-sensitive nature of the industry hasensured a high degree of competition, which is exacerbated by the low export potential. Hence, while severalstrong brands have come up and the industry has exhibited healthy volume growth over the last few years (forinstance, the Indian-made foreign liquor (IMFL) segment has registered a 8-10% compounded annualaggregate growth rate (CAGR) over the last three-four years), its high-risk profile continues to dog theindustry.

• Indian Liquor Industry is divided into 2 broad categories  Indian Made Foreign Liquor (IMFL)  Indian Made Indian Liquor (IMIL)

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IMFL Brown Spirits hite Spirits W Whisky Vodka Brandy Gin Rum Licensed

IMIL Illicit

The Indian liquor industry comprises the IMFL, foreign liquor bottled in India (BII), foreign liquor bottled inorigin (BIO), country liquor, beer and wine segments. The estimated 80 million case2 per annum IMFLsegment primarily includes molasses-based whisky, rum, brandy, gin and vodka. This segment is dominated bywhisky, which accounts for about 60% of its volumes, followed by rum at about 25%. The BII and BIOsegments are very small in comparison. Put together, they are estimated to be less than one million cases perannum. The country liquor segment, estimated to be one-and-a-half to two times the size of the IMFL segment,is, however, characterised by fragmented capacities with a number of small players focused on the highconsumption rural areas. The beer market is estimated to be about 70-75 million cases per annum while thewine segment, estimated at less than three million cases a year, is, again, small.

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Companies
UBHL: United Breweries Holding Limited (UBHL) 1915 - The Company was Incorported at Chennai. United Breweries (Holdings) Ltd (UBHL), headed by Dr. Vijay Mallya, is the result of demerger of brewing business from the erstwhile United Breweries Ltd to a separate company, United Breweries Limited (UBL). The demerger left the company with investments in the group companies and real estate business. The company`s principle activities are to develop, market and export alcoholic beverages, leather footwear, pharmaceutical products, agrochemicals and processed foods. In addition, the group provides engineering colleges, air transportation, agrochemicals etc. through its subsidiaries.

Radico Khaitan: Radico Khaitan is one of India's oldest and largest liquor manufacturers. Formerly known as Rampur Distillery which was established in 1943. It was only in 1999, that Radico decided to launch and market its own brands, thereby embarking on a period of phenomenal growth. To further boost its production capacity of bottled and branded products, the company has tied up with bottling units in various parts of the country.

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Financial Statement Analysis
(Common Size Balance Sheet– UBHL)
Com mon Size March ,2007 Com mon Size Marc h 31,2 008 Com mon Size Marc h 31, 2009 Com mon Size Marc h 31, 2010 Com mon Size Marc h 31, 2011

March3 1,2007

March3 1,2008

Marc h 31, 2009

Marc h 31, 2010

Marc h 31, 2011

SOURCES OF FUNDS (1) SHAREH OLDERS’ FUNDS (a) Capital (b) Equity warrants (c) Reserves and Surplus (2) Foreign Currency Monetary Item Translatio n...
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