Chennai-based value investor Dolly Khanna has a liking for brewer and distiller Associated Alocohols & Breweries. And it's not without reasons.
The company's market capitalisation crossed Rs 600 crore as of April 11 as against Rs 242 crore a year ago. Even the stock is on the turn, which jumped 150 per cent to Rs 334.05 from Rs 133.65 during the same period.
Khanna, who has a knack for picking lesser-known quality stocks on Dalal Street, holds over 1 per cent stake in the company as of March end, the latest shareholding data showed. To give you a perspective, she was not even its key shareholder during October-December.
The firm has a balanced portfolio across categories such as whisky, rum, gin and vodka, among others. Khanna has been investing in the domestic stock market since 1996 and her portfolio is entirely managed by her husband Rajiv Khanna.
Associated Alcohols has a lot going for it. Sample this.
1) The company aims to double ENA (extra neutral alcohol) capacity in coming years, according to the annual report. A mere 50 per cent investments in assets will double manufacturing capacity, strengthening its capital cost efficiency, the company claimed. It has also emerged as one of the most competitive grain-based ENA manufacturers in India.
2) Associated Alcohols has been a vendor to Diageo from the late Nineties, including consistent Smirnoff vendorship from 2002 onwards.
3) The company also has plans to increase its distillery capacity to 7 crore litres per annum in coming years, from 3 crore litres. It's set to use 10 acres out of its available land parcel of 125 acres for this Rs 80 crore expansion. The project is expected to be fully go on stream starting 2020-21. Following the scale-up, the brewing firm expects to emerge as one of the largest ENA manufacturers in India with one of the lowest manufacturing costs, an effective volume-value play that will enhance the companys competitiveness and profitability.
4) Associated Alcohols is also trying to become a pan-India player. In 2016-17, it was present in three states — Delhi, Madhya Pradesh and Rajasthan. In 2017-18, the company intends to be present in five more such as Puducherry, Kerala, Goa, Maharashtra and Chhattisgarh.
5) The company is readying plans to transform pricing model into premiumisation. In the annual report, the company said, “In 2016-17, 20 per cent of the companys revenues were derived from IMFL, of which 3 per cent of IMFL revenues were premium. By 2020, the company expects to increase the proportion of IMFL revenues to 50 per cent and 50 per cent of the companys IMFL revenues are expected to be derived from premium varieties.”
For 2016-17, the company had posted a net profit of Rs 17.38 crore, up 22 per cent from Rs 14.29 crore in the same quarter last year. However, profit surged 95 per cent year-on-year for the quarter ended December 2017 against Rs 4.91 crore a year earlier.