Globus Spirits ltd was incorporated in the year 1993. The company is in the business of manufacturing and marketing IMFL (Indian made foreign liquor), industrial alcohol and country liquor. The company has two manufacturing and bottling plants at Behror and Samalkha with a licensed and installed capacity of 1,44,00,000 bulk litres per annum at each plant. The company has a capability to make alcohol from grain and also molasses. It supplies rectified spirit or ENA (extra neutral alcohol to almost all the leading liquor manufacturers in the country. The company has a decent presence and market share in Haryana, Delhi and Rajasthan in the country liquor segment and has launched its IMFL brands additionally in Uttar Pradesh and the four Southern states of Karnataka, Kerala, Tamil Nadu and Andhra Pradesh.

Market and earnings

The company is promoted by Mr Ajay Swarup, an IIM graduate from Kolkatta and his investment company Chand Bagh Investments Ltd. The demand for liquor or the growth in the sector is a fact of life with factors such as rising population, the wider acceptance of liquor being a part of life and no longer a social taboo and of course the average age of people being initiated into drinking coming down. At the same time it may also be relevant to know that the per capita consumption in India is 2 litres against 3.5 lts in Thailand, 5 lts in USA and 9 lts in Russia. The company had gross sales of Rs 235.26 crs in 07-08 and Rs 281.40 crs in 08-09. They have shown a further growth in the first quarter of the current year with sales rising to Rs 92.35 crs. The profit after tax has been Rs 12.64 crs and Rs 12.93 crs showing that margins have been under pressure. The margins were under pressure and the same have been reflected in numbers primarily on account of rising costs. In the current quarter Globus Spirits did get a price increase and the same resulted in a jump in net profits to Rs 6.77 crs for the first quarter. The EPS for 07-08 is Rs 10.58 and for 08-09 Rs 10.55. The annualised EPS for 09-10 is Rs 22.12 and actual for the quarter Rs 5.53

The profits look sustainable simply for the reason that traditionally the first half sales in the liquor industry account for 40% while the second half accounts for 60%.

The objects of the issue are as follows:-

1. Multi-Pressure Distillation Plant to produce 35,000 litres/day of ENA at Behror Unit.
2. Multi-Pressure Distillation Plant, including Slurry mixing and Liquefaction,
   Saccharification cum-Fermentation along with auxiliaries etc. to produce 35,000 Litres/day of ENA, at Samalkha Unit.
3. Brand Development for Marketing of IMFL Brands
4. Acquisition of Canteen Stores Department registered IMFL Brands
5. IMFL Bottling Section at Samalkha Unit
6. IMFL Bottling Section at Behror Unit.

The total cost of all the above and other aspects of the project are estimated to cost Rs 89.3 crs.

Growth and Valuations

The main drivers going forward would be to increase the company’s presence in the IMFL segment and with a brand acquisition of a Canteen Stores Department (CSD) approved/registered brand increase sales in the premium segment.

The share is attractively priced at 4.07 times and 4.52 times at the lower and upper price band respectively of its first quarter EPS on an annualised basis. As mentioned earlier the EPS for the quarter was Rs 5.53 and on an annualised basis the same was Rs 22.12

I recommend investors to subscribe to the issue for medium term gains.  

SEBI Disclaimer:- I intend to subscribe to the issue