Monday, October 19, 2009


The Alcohol Goliath

Investment Highlights
The Indian liquor industry, traditionally dominated by low-end country liquor, has shifted to IMFL (Indian Made Foreign Liquor).

The IMFL industry has grown at a higher rate, particularly during the last three years, led primarily by opening up of distribution in key markets in North India and banning of country liquor in the southern states.

Strong entry barriers, such as ban on advertising and restrictions on interstate movement of the products, have restricted the entry of global spirit players.

USL has continued to be the leading player in the IMFL industry with consistent volume share on a standalone basis of nearly 55% during the last four years.

The Indian beer industry has been witnessing steady growth of 8% CAGR per year over the last five years led by strong beer segment, which contributes approximately 63% of the total beer volumes in India. This has aided UB's leading position in the industry.

Indian alcoholic beverages poised for long term growth led by low per capita consumption, higher young and working population clubbed with increase in disposable incomes.

We initiate, coverage on United Spirits with a BUY recommendation and a target price of INR1,092, while coverage on United Breweries Ltd. with a HOLD recommendation with a target price of INR142.

To see the full report: FMCG SECTOR