SABMiller India

SOM Distilleries to dilute 15% stake

The Financial Express, 11-August-2008

The liquor industry in India continues to be on the radar of private equity players. Bhopal-based SOM Distilleries & Breweries Ltd (SDBL) is learnt to be in talks with a private equity firm to dilute about 15% promoters’ stake to raise funds for their proposed expansion plans. As of now, promoters hold 65% stake in SDBL.

SDBL, a beer manufacturer with focus on North India, is learnt to be in the final stages of negotiations with the PE player and the deal is expected to be signed in a month.

The company is expanding its business to become the third largest beer manufacturer in India, following Kingfisher and SABMiller. Plans include setting up three greenfield breweries each in states such as Maharashtra, Andhra Pradesh and Punjab with total cost of Rs 250 crore. Apart from Hunter, its flagship beer brand, company sells other beer brands such as Legend, Woodpecker, Black Fort and Power 10000. The valuation of the company is yet to be ascertained.

Confirming the development, JK Arora, chairman and managing director, SDBL said, “We are still negotiating with the PE players, but nothing has been finalised so far. We wanted to increase capacity to about 15 million cases of beer by 2010, when the breweries start functioning. Within the next two years, we want to be the third largest beer manufacturer in India.”

Apart from the capacity expansion, SDBL plans to expand its portfolio of whisky brands with launching a new brand, ‘Milestone’ in the semi-premium category. Also, it plans to launch a wine and a vodka brand this year.

Beer consumption in India is still very low, but the market has been growing at 15-20%, making room for capacity expansion. Earlier, UK-based beer manufacturer SABMiller had announced its plans to more than double its capacity in India from 50 million cases a year, to around 105 million cases by the end of 2013 at an investment of around Rs 2,000 crore. UB Group is also investing Rs 1,000 crore in a three-year span for increasing brewing capacity by about 20%, including setting up two greenfield breweries.