India is the 5th largest market for alcoholic beverages globally. According to the global market intelligence agency IWSR, the Indian liquor market is dominated by whiskies, accounting for 66% of total sales.
India’s long-standing love for whisky is no secret, and the demand for the overall spirit market is surging rapidly, driven by a thriving middle-class population. The domestic spirits market took nearly a decade to grow from 228 million cases in FY11 to 330 million cases in FY18. However, it hasn’t looked back since the market shrunk to 311 million cases in FY21 due to the COVID-19 pandemic and continues to grow.
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Since the dip in FY21, annual incremental sales in India have surpassed the combined consumption in the UK, France, and Spain. This is despite a modest 4% growth in FY24.
In recent years, there has been a significant shift in alcohol consumption patterns across India, with the market gradually moving towards the premium and above spirits segment. This trend is promising as consumers are increasingly prioritizing value over volume. Amidst all the buzz around premium liquor, Indian single malts have particularly stood out.
Indian-distilled single malts have been gaining significant attention, competing strongly with renowned Scottish brands like Glenlivet. According to a report by the Confederation of Indian Alcoholic Beverage Companies (CIABC), Indian single malts accounted for approximately 53% of the total single malt sales in 2023.
Today, we are going to talk about one such business that has been a front-runner, with its award-winning single malt ‘Indri’.
Piccadilly Agro Industries!
Indri: Ranks Up The Charts Worldwide
*Source: Indri’s Website
Indri, the single malt whiskey brand from Piccadily, has been making waves since its launch in November 2021. Piccadily also reported that it sold 100,000 cases of Indri within just two years, making it the fastest-growing whiskey in history.
Indri has won multiple awards in its short existence, solidifying its reputation. Last year, Indri Diwali Collector’s Edition 2023 received the ‘Double Gold Best In Show’ award at one of the world’s largest whisky-tasting competitions. Indri also won the Tokyo Whiskey and Spirits Competition 2023, the Fifty Best World Whiskies 2022 Award, the International Whisky Competition in Las Vegas, and many more.
*Source: Indri’s Website
However, you might wonder if Piccadilly was always into making such world-class liquor.
The answer is no. Piccadilly has a long history to it, before being recognized as one of the best single malt distillers in the world.
Let’s dive into it!
Piccadily Group
Piccadilly’s history dates back to 1953 when K.N. Sharma started a company called Kedar Nath and Sons in Doraha, then in undivided Punjab. The company back then held all liquor contracts in the state.
In addition to its alcohol distribution business, the company also launched a restaurant called ‘Picadili Restaurant & Bar’, which remained the only standalone bar in Chandigarh for over 35 years.
The company then expanded into the hospitality sector by opening Picadilly Theatres in 1972 in Amritsar and Jalandhar. Also, the family launched Picadilly Hotel in Chandigarh between 1975-76 and soon expanded to other cities including Manali, Raipur, Lucknow, Delhi, Gurgaon, and Ludhiana. Some of its hotels are now run by the group in collaboration with Hyatt Hospitality.
Piccadilly then began its transformation into what it is today. In 1994, it purchased a sugar mill and distillery, marking its entry into the alcohol manufacturing and distillery business. Also, Piccadilly became the first company to receive permission to produce alcohol from cane juice in 2008.
Fun fact, The Piccadily Group also owns iTV Network, which encompasses print, electronic, and digital media. iTV Network was founded by Mr. Kartikeya Sharma, a third-generation member of the family group, who currently also serves as a member of the Rajya Sabha.
Promoter History
Piccadilly’s promoter group has had an infamous history.
Let us start with Mr. Venod Sharma, a second-generation family member. He is a politician and has had a long career, being associated with the Indian National Congress (INC) for 40 years.
During his tenure with INC, Mr. Sharma was elected as an MLA in Bannur, Punjab in 1980, served as an MP in the Rajya Sabha from 1992 to 1998, and was elected again as an MLA in Ambala in 2004. In 2014, Mr. Sharma went on to form his own political party, the ‘Haryana Jan Chetna Party’.
Also, back in 2006, Sidhartha Vasishtha aka Manu Sharma (son of Mr. Venod Sharma) was convicted of the murder of Ms. Jessica Lal. He was later released in June 2020. Here are the details of the case.
That being said, Piccadily’s promoter group currently holds ~71% of the Piccadily Agro Industries.
*Click on the image to enlarge.
Out of the ~71% holding, Soon N Sure Holdings Ltd. holds a majority 33.46% stake, followed by Siddhartha Sharma and Piccadily Hotels Pvt Ltd. Shakti Rani Sharma (Wife of Venod Sharma), has been serving as one of Soon N Sure’s directors since 1995. As far as the management is concerned, Mr. Harvinder Singh Chopra has been serving as the managing director of the company since 1995.
Now let’s refocus on Piccadily’s business operations and explore what seems interesting.
Business Segments
Piccadily’s business is divided into 2 segments:
- Sugar
- Distillery
Sugar Business
Piccadily began its venture into sugar manufacturing in the year 1992-93. The company specializes in sugarcane crushing to produce sugar and its byproducts like molasses and bagasse.
Additionally, they produce ethanol, which is poised to become a significant driver for the sugar business, especially with the increasing emphasis on ethanol blending. India is keen on achieving a 20% ethanol-blended petrol target by 2025 and also seems to be on the right track.
In FY23, Piccadily produced 3,663,949.37 bulk liters of ethanol, which was supplied to various oil manufacturing companies.
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The above table gives us a glimpse of the performance of its sugar mills over the last two seasons.
In the 2022-23 season, the sugar mills operated for 154 days, crushing 66.21 lakh quintals of sugarcane, which resulted in the production of 6.7 lakh quintals of sugar at an average recovery rate of 10.05%.
The recovery rate at sugar mills is a crucial measure of efficiency, indicating how effectively a mill converts sugarcane into sugar. For example, if a sugar mill processes 1,000 tons of sugarcane and produces 100 tons of sugar, the recovery rate would be 10%.
Distillery Business
Piccadily currently operates 3 distilleries located in Indri, Patiala, and Bawal. Prior to 2008, they were predoinanentely a country liquor manufacturing company, but then the company decided to mover towards premiumisation.
It opened its first malt distillery in 2012 and only over a decade later, Piccadily is recognized as India’s largest independent malt manufacturer and retailer.
Its distillery business can be further divided into:
- Country Liquor
- Indian Made Foreign Liquor (IMFL)
Under its country liquor segment, Piccadilly produced 58.4 lakh cases of Malta and 9,121 cases of Marshal Rum in FY23. Its country liquor brands have become popular in the State of Haryana.
Now let’s talk about the real deal. The major driver for Piccadily going forward is its IMFL segment supported by the changing customer trends we discussed above.
Under this segment, the company has 4 brands-
- Indir (Single-Malt Whiskey)
- Whistler Whiskey (Blended-Malt Whiskey)
- Royal Highland (Blended-Malt Whiskey)
- Camikara Rum
In FY23, Piccadilly produced 15,145 cases of Indri, 49,371 cases of Whister Whiskey, 432 cases of Royal Highland Whiskey, and 253 cases of Camikara Rum.
Indri as we already know is the flagship product for Piccadily. However, the management is also very bullish on its newly launched Camikara Rum.
*Source: Camikara’s Website
Camikara marks a significant departure in Indian distillery practices by being the country’s first rum made from cane juice, rather than the commonly used molasses. Launched in 2022, Camikara 12YO quickly distinguished itself, becoming the first Indian rum to win a gold medal at the International Wine and Spirit Competition (IWSC).
More recently, at the 2024 Rum & Cachaca Master competition, Camikara continued to impress, winning two gold medals for its 12YO and 8YO variants, and a silver medal for its 3YO variant.
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The above chart gives us a sense of the shifting focus of Piccadilly’s revenue streams towards its distillery business.
In FY20, the sugar business accounted for 61% of Piccadilly’s total revenue, with the distillery business contributing the remaining 39%. Skip to FY24, a notable shift can be seen in revenue distribution with 67% of the company’s revenue coming from the distillery business.
This trend is also evident in the absolute revenue figures. While revenue from the sugar business saw a modest increase, growing from Rs 246 crore in FY20 to Rs 275 crore in FY24, revenue from the distillery business experienced a more dramatic rise, growing by ~3.5 times from Rs 153 crore to Rs 553 crore.
Adding Capacity For Future Growth
Piccadilly stands as one of the largest malt producers in India, with the capability to produce 12,000 liters of malt daily and housing over 50,000 barrels.
Given the 5 to 7 years required for single malt whiskey to mature, the current production capacity is expected to meet demand only for a limited period. In response, management is taking steps to significantly increase this capacity.
By FY25, Piccadily plans to enhance its capacity to 30,000 liters per day and aims to double that capacity to 60,000 liters by FY26, effectively increasing capacity to 5 times more than the current levels in the next 2 years.
To support this expansion, the company intends to raise Rs 1,000 crore through a QIP this fiscal year. The expansion efforts are already underway, with expansions at their Indri plant and the construction of a new facility in Chhattisgarh.
Additionally, in 2022, Piccadilly acquired Portavadie Distillers & Blenders Ltd in the United Kingdom, marking its entry into the Scottish distillery segment and the broader foreign market. The spirits from this new distillery are anticipated to hit the markets in 2024.
Furthermore, according to its website, Piccadilly is expanding its warehousing and coopering (art or skill of manufacturing wooden casks) operations, adding 12 new warehouses and 60,000 barrels, which will increase its total capacity to over 1 lakh barrels.
Indri Story Translating Into Numbers
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Piccadily’s revenues have shown robust growth, expanding at ~20% CAGR from FY20 to FY24. FY24, in particular, marked a notable surge with revenues leaping by ~30% from Rs 635 Cr to Rs 829 Cr. This significant increase was driven by the outstanding performance of its distillery business, while revenues from its sugar business have remained relatively constant.
Below is an overview of the growth trajectory of Piccadilly’s distillery business:
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Piccadily’s distillery business is on a roll, growing at ~38% CAGR from FY20 to FY24! The latest fiscal year, FY24, saw a spectacular 53% revenue jump—from Rs 361 Cr in FY23 to Rs 553 Cr. This surge can be attributed to the soaring popularity of Indri and the exciting introduction of its Camikara rum.
*Click on the image to enlarge.
Piccadily’s EBITDA has also been growing impressively at ~ 38% CAGR from FY20 to FY24. In FY24 alone, its EBITDA skyrocketed to an all-time high of Rs 150 Cr.
This growth at the same time was supported with its EBITDA margins expanding from ~10% in FY23 to ~18% in FY24. This boost in profitability can be linked to the surging demand for premium liquor across the country, with Piccadily’s tapping the markets with its award-winning brands like Indri and Camikara Rum.
This looks like a perfect tale of the Indri story now translating into numbers.
*Click on the image to enlarge.
Piccadily’s PAT also tells the same story, with PAT growing at ~67% CAGR from FY20 to FY24. Notably, its PAT leaped from Rs 23 Cr in FY23 to a striking Rs 110 Cr in FY24, underlining a year of exceptional performance.
However, there’s a catch!
Q3 FY24 included a gain from exceptional items amounting to Rs 29 Cr. However, even after adjusting for this exceptional gain, the PAT for FY24 still stands at an impressive Rs 81 Cr, marking a significant YoY growth of ~250%.
Current Outlook and Valuation
Piccadily reported robust results in the recent quarter of Q4 FY24:
- Revenue grew by ~37% YoY to Rs 285 Cr.
- EBITDA grew significantly by ~350% YoY to Rs 67 Cr from Rs 15 Cr.
- EBITDA margins at the same time, expanded from 7% in Q4 FY23 to ~23% in Q4 FY24.
- Margin expansion primarily on the back of increasing demand for its premium products.
- Significant YoY PAT growth from ~ Rs 5 Cr to ~Rs 43 Cr.
- However, PAT declined slightly on a QoQ basis by about 4%. This decrease was largely due to the exceptional gain of Rs 29 Cr recorded in Q3 FY24, previously discussed.
Piccadilly’s management is keen on maintaining their growth momentum in the upcoming years by increasing production capacity and introducing more premium products like its Camikara Rum.
Capacity expansion is already underway, with plants to raise Rs 1,000 Cr through a QIP to support it further. The company aims to increase its current malt production from 12,000 liters per day to 30,000 liters by FY25, and further to 60,000 liters by FY26.
Additionally, spirits from its new distillery in Scotland are expected to enter the market this year, though the capacity details are yet not known.
Also, in a recent interview following the Q4 results announcement, Piccadilly’s management hinted their expectation of a topline growth of ~30% for FY25 while maintaining EBITDA margins above 20%. They also anticipate maintaining PAT margins between 13-15%.
Piccadilly’s stock has seen a significant surge, more than doubling in value since the beginning of FY25.
In terms of valuation, the company is currently trading at an Enterprise Value (EV) of Rs 7,355 Cr. (Market Cap : Rs 7198 Cr + Debt : 171 Cr – Cash: 14 Cr). In FY24, it reported an EBITDA of 150 Cr, which gives out an EV/EBITDA of ~49 times.
Considering the management’s expectation of 30% topline growth for FY25 and aiming to sustain EBITDA margins at 20%, the anticipated EBITDA for FY25 would be about Rs 215 Cr. This projection adjusts the FY25E EV/EBITDA to ~34 times.
The markets has already started assigning a premium to the stock, considering the growth drivers and planned capacity expansions intended to capitalize on these opportunities.
However, it would be interesting to track the company in the next 2-3 quarters to see if it continues the same growth trajectory and fulfill expansion commitments as outlined by the management.
Feature image source: www.indri.in
Disclosure: I, Sidhanth Paul, Research Analyst, author, and the name subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific view(s) in this report.
Research Analyst or his/her relative or Capitalmind Research LLP does not have any financial interest in the subject company. Also, the Research Analyst, his relative, Capitalmind Research LLP, or its Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further Research Analyst or his relative or Capitalmind Research LLP or its associate does not have any material conflict of interest at the time of publication of this research report.
Also, Piccadilly Agro is not a part of our Capitalmind Premium Portfolios. This article is intended solely for informational purposes and should not be considered as an investment recommendation.
Capitalmind Research LLP is a SEBI Registered Research Analyst having registration no. INH000014003
