The Telegraph
Monday , May 5 , 2014
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Chhabria firm steps up hunt

Roy: Control call

New Delhi, May 4: Kishore Chhabria-led Allied Blenders & Distillers (ABD) will continue its talks with Mumbai-based liquor maker Tilaknagar Industries for a takeover. Tilaknagar, however, has said it does not wish to part with more than a minority stake.

“We remain interested in Tilaknagar. We wish to get a majority control of the distillery. The (only) thing is that we do not wish to pay an abnormally high cost for the liquor firm,” Deepak Roy, chief executive of ABD, one of India’s three biggest spirit makers, said in an interview. Allied is believed to be negotiating with the Dahanukar family, which owns Tilaknagar since 1933, through financial advisory firms.

“We remain interested in selling a stake in our firm to either a PE investor or a strategic investor. However, at this juncture we would neither like to name nor deny with whom we are in talks,” Amit Dahanukar, chairman and managing director of Tilaknagar Industries, whose main market is in south India, told The Telegraph over the telephone,

Tilaknagar has long said it was only interested in selling a minority stake. Dahanukar said, “As we look for an investor, simultaneously we have been working to grow our business and have recently bought IFB Agro brands.”

Earlier this year, Tilaknagar had bought IFB Agro’s Volga (vodka) and Blue Lagoon (gin) brands for an undisclosed sum.

However, merchant bankers say that Tilaknagar’s huge debt of Rs 750 crore, compared with an annual net profit of just Rs 60.6 crore on a turnover of Rs 737 crore in 2012-2013, makes it vulnerable to a sale. Besides, Tilaknagar is also locked in a legal dispute over its Mansion House brand.

The Mansion House brand was licensed to the company by Dutch beverages firm Herman Jansen, which is now jointly owned by Herman and ABD. Tilaknagar and Herman Jansen’s relationship has soured with the Dutch firm suing Tilaknagar for breach of agreement. Herman Jansen also said the agreement expired seven years ago. Tilaknagar, however, claims that it registered the trademark in 1993 and has perpetual rights over it.

In this battle, courts have ruled in Tilaknagar’s favour. An appeal against the ruling is pending.

Analysts said other potential investors would remain shy of Tilaknagar because of this dispute. Meanwhile, ABD, which has invested in Mansion House, is keen on a buyout to use the brand in India. Mansion House is essentially a brandy brand in the global market, though Tilaknagar sells whisky under that label.

Possibly because of the localised Mansion brand extensions, Dahanukar clarified that Tilaknagar would not consider any brand sale.

But with the need to pump in money into the business, choices for the 75-year-old Tilaknagar may be running out.

“If we are able to buy in, we want to leverage Tilaknagar’s coverage of the south Indian market, which is essentially a brandy market, and where, except in Andhra, we do not have such a great presence,” Roy said.

“However, while the buyout means market leadership now, we do have products in which if we keep investing, we will get the growth and coverage we desire.” ABD, whose Officers’ Choice is touted as the world’s largest selling whisky brand by volume, reported a turnover of Rs 2,504 crore in the last fiscal and has been trying to grow both organically and inorganically in a bid to retain its market position.