Som Distilleries RI April/May 23 review - (May apply)

•    SDBL is in the business of manufacturing and marketing beers, IMFL. 
•    It posted losses for FY21 and FY22. A sharp rise for 9M of FY23 raises eyebrows. 
•    Currently, the segment is catching investors' fancy. 
•    Well-informed/cash surplus/risk seekers may consider parking funds for the long term. 

PREFACE:
The company went public in 1994 with its maiden at-par IPO for Rs.4.50 cr. and its shares were listed on BSE since then. It got its shares listed on NSE in 2014. Now it is coming out with a RI for Rs. 48.94 cr. to meet its funding requirements. This is the 2nd RI from it. The last RI was in December 2021.

ABOUT COMPANY:
Som Distilleries & Breweries Ltd. (SDBL) is primarily engaged in the production of beer and blending and bottling of Indian Made Foreign Liquor ("IMFL"). It offers a broad portfolio of products at different price points to cater to the varied preferences of consumers. SDBL's product portfolio consists of various options across beer, rum, brandy, vodka, and whisky categories.

SDBL's flagship brands include Hunter, Black Fort, Power Cool and Woodpecker in the Beer segment and Milestone 100 whisky and White Fox vodka in the IMFL segment. Other IMFL brands include Legend, Pentagon, Black Fort, Genius, Sunny, Gypsy and Blue Chip. 91% of its revenues came from beer sales for nine months period that ended December 31, 2022. Hunter and Woodpecker brands are supplied as draught beer to all major hotels in Madhya Pradesh and Karnataka. 

It has recently launched 'Woodpecker' Wheat Beer, India's first filtered wheat beer. SDBL's manufacturing unit is located in Bhopal (Madhya Pradesh). As on December 31, 2022, it had a total installed capacity of ~152 lakhs cases of beer per annum and ~6 lakhs cases per annum of IMFL (excluding subsidiaries) which is sold to domestic and international customers. Alongside, it has 100% subsidiary companies, Woodpecker Distilleries & Breweries Private Limited located in Hassan, Karnataka and Som Distilleries & Breweries Odisha Private Limited located at Barpada, Odisha. As of December 31, 2022, it had 170 employees on its payroll. 

ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 3495952 equity shares of Rs. 5 each at a fixed price of Rs. 140 per share to mobilize Rs.48.94 cr. The issue opens for subscription on April 26, 2023, and will close on May 11, 2023. It is offering the right shares in the ratio of 10 for 211 shares held by the eligible stakeholders as of the record date of April 14, 2023. The full amount is to be paid on an application for the number of shares applied. Post allotment, shares will be listed on BSE and NSE. SDBL is spending Rs. 0.65 cr. for this RI process, and from the net proceeds, it will utilize Rs. 40.05 cr. for working capital, and Rs. 8.24 cr. for general corporate purposes. 

Vivro Financial Services Pvt. Ltd. is the sole lead manager for this RI and Mas Services Ltd. is the registrar of the issue. 

Post-RI, SDBL's current paid-up equity capital of Rs. 36.88 cr. will stand enhanced to Rs. 38.63 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 1081.65 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, SDBL has (on a consolidated basis) posted a turnover/net profit - (loss) of Rs. 509.66 cr. / Rs. - (38.07) cr. (FY21), and Rs. 656.50 cr. / Rs. - (9.84) cr. (FY22). For 9M of FY 23 ended on December 31, 2022, it earned a net profit of Rs. 44.43 cr. on a turnover of Rs. 1016.54 cr. Thus it has turned the corner for the current fiscal with higher top lines and a sharp rise in the bottom line. As per recent reports, expansion at its wholly-owned subsidiary is already in operation and is contributing to its revenues. 

DIVIDEND POLICY:
The offer document is silent on SDBL's dividend policy. It will adopt a prudent dividend policy post listings of RI shares based on its financial performance and future prospects. 

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 507514 (FV Rs. 5).
The scrip last closed on cum-right basis at Rs. 156.25 on April 12, 2023, and opened on an ex-right basis at Rs. 153.45 on April 13, 2023. Since then, it has marked a high/low of Rs. 174.80 / Rs. 149. The scrip last closed at Rs. 171.05 as of April 21, 2023. For the last 52 weeks, it has posted a high/low of Rs. 174.80 / Rs. 53.58. 

The promoters' holding has increased a bit to 33.11% as of March 31, 2023, against 32.72% as of December 31, 2022. The counter is well managed above the par value to lure investors.