I think India has a strong preference for whiskey, and USL, with its extensive portfolio of whiskey brands, benefits significantly. The 7.2% CAGR for whiskey consumption further supports this advantage. While brandy is popular in South India, its market share is smaller compared to whiskey’s nationwide appeal.
However, Radico Khaitan till 2019 use to get PE between 30-40 only but it’s valuation increased when its margins crossed 16% with strong sales growth. Tilaknagar Industries is currently positioned similarly to where Radico Khaitan was before its valuation surge. It boasts a debt-free balance sheet and has generated free cash flow in the recent quarter. This financial strength allows Tilaknagar to reinvest in its business, as evidenced by recent investments in brands like Bartisans gin, Sitara gin, and Samsara rum. There are also rumors of Tilaknagar’s interest in acquiring the Imperial Blue whiskey brand (sales in India would be approximately 5000 crore).
CRISIL Ratings has upgraded Tilaknagar Industries Ltd’s outlook to ‘Positive’ and reaffirmed its rating at ‘CRISIL A-’ due to improved financials and becoming net-debt free by September 30, 2024.
Tilaknagar Industries Limited, has prepaid its entire outstanding term loan of Rs 36.74 crores from Kotak Mahindra Bank Limited (“Kotak Bank”) on December 27, 2024.
Management is walking the talk now. FCF can be utilised for organic/inorganic growth. A BIG POSITIVE!
Completely agree with you, This is the only Stable Company which I could find Reasonably valued against its competitors. With nil debt and increasing sales Including Sales, from its recently acquired investments, will definitely boost the bottom line of the company. I could hardly find any red flags. Only thing I am uncomfortable about is promoters have been selling their holdings though It is marginal, but still a red flag.
The promoter’s share sales since 2019 were primarily driven by the need to repay a substantial debt of 1200 crore, even when the company’s market capitalization was only 600 crore. This highlights the crucial principle that it’s always preferable to ensure the company’s survival by selling a portion of ownership rather than facing complete financial collapse.
I think Mr. Amit Dahanukar is an excellent leader who turned around the company in such a short period. This is the reason why seasoned investor like Madhu kela sir invested 126cr in the company.
The median trailing PE of the company over the last 1 to 3 years is approximately 35
Six months ago, it ranged between 32 and 38
As of January 26th, the current PE is roughly around 41 ~ 42
The median trailing PE of 18 companies in the Alcoholic Beverages sector is 40.36.
However, only 6 companies in the sector have a market capitalization above ₹5,000 crore.
The average trailing PE of these 6 companies is 96, with Tilaknagar being the lowest at 41.57.
The Relative Strength (RS) of the stock has consistently outperformed the Nifty50 and its peers.
In the last 4 to 5 months, there have been a few spikes in trading volume.
EPS has been growing consistently, increasing by 63.56% over the last 3 years.
The PE seems to be growing as well.
Fundamental Positives:
The company is a market leader in Brandy and holds the largest market share.
The management appears to be making significant progress, introducing new products, investing in branding, expanding into new geographic regions, and more.
Positive policy changes by the Andhra Pradesh government regarding alcohol distribution are benefiting the company, as it has a major customer base in the region.
The company recently became debt-free. It previously carried significant debt, but the management successfully turned the situation around.
Fundamental Negatives:
The company lacks significant pricing power.
The alcohol industry is heavily regulated.
The cost of raw materials (glass and ENA) is volatile.
The company’s presence is limited to southern Indian states, where Brandy is popular.
In other parts of the country, Brandy is not as culturally popular.
Due to past losses, the company has not been paying taxes. However, taxes will resume next year, which will impact EPS.
There have been governance concerns due to the back-to-back resignation of company secretaries, but these doubts remain speculative.
Questions / Things to Figure Out:
What is the Forward PE, and what is its potential?
The price has hit 20% LC today following the Bombay High Court’s rejection of the company’s plea in a trademark dispute concerning the Mansion House brand.
“The status quo as of this date remains with the company continuing its uninterrupted use and sale of the brand MANSION HOUSE whilst preparing for filing an appeal against the concerned order before the Division Bench of Bombay High Court,” Tilaknagar Industries said in an exchange filing on Saturday, February 8, 2025."
I don’t see a fundamentals issue here other than maybe brand dilution. Why the price tanked?
Everything is in the brand name and the present question is about use of the name. This is serious incase if others also have the right yo use thus name.
Mansion House possesses significant brand equity, but the potential impact on revenue and profitability remains uncertain. This longstanding dispute may escalate if the division bench upholds the ruling, potentially allowing Allied to utilize the same brand name. This could lead to consumer confusion, making it difficult for them to distinguish between the two brands.
From the release it appears like that. Also 85% of the revenue comes from South states. May market is anticipating that the current ruling might get extended for across all the state over a period of time ? Just my guess…
The legal tussle b/w TI and ABD is more than a decade old.
Once they get to sell in WB rest of the states will also open up for ABD.WB will be a stepping stone and TIL flagship brand will face huge challenge. Matter will go to supreme court i guess.
But I think it’ll not significantly impact their finances as everyone is projected because still tilaknagar can sell with the same name in south india. Once management gave some statement, we get the clear picture.
