3RD MOTILAL OSWAL

Think Equity Think QGLP Contest 2019

Application Form

For more details & clarifications, email thinkQGLP@motilaloswal.com

Terms & Conditions
By filling up this Application Form, you agree to abide by the following terms & conditions:
• Participation in the “3rd Motilal Oswal Think Equity, Think QGLP Contest 2019” is open to students
currently pursuing MBA or equivalent degree at any Indian business school.
• Only one entry (3-member team) per business school will be accepted.
• If there are entries from more than one team, the business school will need to internally screen the
entries and select the best team to participate in the contest. Motilal Oswal AMC will not be responsible
for the internal screening process followed by the respective business schools.
• All applications will need to be submitted strictly in the format annexed here in subsequent slides.
• The last date for submission of entries is Monday, 2nd September 2019. Submit your Application Form
and financial model in Excel at www.motilaloswalmf.com/QGLPcontest/2019 (20th August onwards).
• All the entries received will be assessed by an internal team of Motilal Oswal led by Mr Raamdeo Agrawal,
Chairman, Motilal Oswal AMC. The 10 best entries will qualify for the contest finals to be held on
Tuesday, 1st October 2019, at IIM Ahmedabad’s ‘The Red Brick Summit’.
• Team members of the qualifying 10 entries will be provided accommodation in Ahmedabad for the night
of 30th September 2019. All other costs including airfare, conveyance and sundries will need to be borne
by the team members or participant schools.
• The qualifying teams will need to present their stock pitch to a three-member jury, chaired by
Mr Raamdeo Agrawal. Based on the presentation, the jury will finally select the top three winning teams.
• The prizes are: Winning team – INR 500,000/-, First runner-up – INR 300,000/-, Second runner-up –
INR 150,000/-, and 7 other teams INR 50,000/- each. All finalists will receive a Certificate of Appreciation.
• All material submitted by participants as part of this contest may be used by the Motilal Oswal Group in
the manner it deems fit.
• In all matters related to the contest, the decision of Motilal Oswal Group will be final and binding on
all participants. 2
Terms & Conditions

IMPORTANT: Details related to the stock pitch submitted –

• The stock should be listed on the BSE and/or NSE, with a minimum market
capitalization of INR 3,000 crores as on the date of application.
• The pitched stock should ideally offer return CAGR of 20% or higher over the
next 3 years.
• The final submission should include —
1. This Application Form duly completed; and
2. An Excel file carrying the financial model with –
(a) Past earnings, balance sheet and key ratios for at least 5 years
(b) Projected earnings, balance sheet and key ratios for at least 3 years.
• Judges will look for sync between the ‘narrative’ (investment argument) and
‘numbers’ (financials).
• For more details and clarification, email thinkQGLP@motilaloswal.com.

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Jury members – Brief profile
Mr Raamdeo Agrawal
Mr Raamdeo Agrawal is the co-founder and Joint Managing Director of Motilal Oswal
Financial Services Ltd and Chairman of Motilal Oswal Asset Management Company
(MOAMC). A Chartered Accountant, he is a pioneer of equity research in India and has
been authoring the Annual Motilal Oswal Wealth Creation Study for the last 23 years.
Under his Chairmanship, MOAMC’s assets under management have grown rapidly to
the current level of over INR 35,000 crores.

Mr R Srinivasan
Mr R Srinivasan joined SBI Funds Management as a Senior Fund Manager in May
2009; he is now the Head of Equity and also directly manages a number of funds.
He has 27 years experience in equities having worked with Future Capital Holdings,
Principal PNB Asset Management, Oppenheimer & Co (later Blackstone), Indosuez WI
Carr and Motilal Oswal, among others. Mr Srinivasan is a post graduate in Commerce
and has an MFM degree from the University of Mumbai.

Mr Pankaj Tibrewal
Mr Pankaj Tibrewal is Senior Vice-President and Fund Manager with Kotak Mahindra
Asset Management Company. He manages schemes such as Kotak Emerging Equity
Fund, Kotak Small Cap Fund and Kotak Equity Hybrid Fund. He has been featured by
Outlook Business as one of the top 10 fund managers in India for four consecutive
years from 2016 to 2019. He is a commerce graduate from St Xavier's College, Kolkata,
and also holds a Master’s degree in Finance from Manchester University. 4
Institute & Screening Authority Details

Name of Institute _____________________________________________

Address of Institute _____________________________________________

_____________________________________________

Screening Authority Details

Name _____________________________________________

Designation _____________________________________________

Phone _____________________________________________

Email _____________________________________________

Declaration
I hereby confirm that I have screened this Application Form and shortlisted it as the final entry
from our Institute to the “3rd Motilal Oswal Think Equity Think QGLP 2019” contest.
5
Team Details

Name of Institute Indian Institute of Management, Ranchi

Team Member #1
Name : Obenesh Hazra
Mobile : 7016971204
Email : obeneshh@gmail.com, obenesh.hazra18@iimranchi.ac.in
Team Member #2
Name : Shubham Gupta
Mobile : 7338802061
Email : shubham.gupta18@iimranchi.ac.in
Team Member #3
Name : Harshit Chandra
Mobile : 8528432031
Email : harshit.chandra18@iimranchi.ac.in

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Radico Khaitan Ltd
Brief company background
1. Radico Khaitan was earlier know as Rampur Distillery Company, which commenced in 1943
2. Radico is the Oldest and Largest manufacturer of Indian Made Foreign Liquor (IMFL)
3. Company has gone through three phase of growth
4. First Phase (1943-1996) – From volume to value - Manufactured high quality whiskey for premium brand and
army canteen.
5. Second Phase (1997-2006) – Established Platform for branded journey – Launched first brand 8 PM (IMFL),
becoming millionaire brand within one year and Old Admiral, became leading brand in canteen. Expanded
Rampur facility and created pan-India distribution channel.
6. Third Phase (2006 – Present) – Growth to Premiumisation - Launched Magic Moment, Magic Moment Verve,
After Dark, Rampur India Single Malt and Jaisalmer India craft Gin with plethora of success and continuing
7. Completed 75 Years of Existence

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QGLP Analysis
QGLP in a nutshell

“QGLP – Quality, Growth, Longevity, reasonable Price”

Quality of business x Quality of management Growth in earnings
• More than 50% market share of Vodka Industry • High Volume growth of IMFL
• Old Admiral 5th largest selling Brandy worldwide (10.8%) and P&A (21.8%)
• Decrease in Debt to equity ratio from 0.9 to 0.25 in five • Driving of margins due to
year premiumisation and market share
• Promoter held 40% share for a decade • EBITDA margin increase by 678
• Double growth rate than industry basis points in last 3 year
in premium segment • Expected PAT growth of 21% over
QGLP next 3 year

Price Longevity – of both Q & G

• P/E ratio of 21.8 which is significantly lower than • Radico’s Competitive Advantage (Quality
industry average product with value for money)
• Target Price of 538 (FY 22) • Industry has growth potential of 6% with
• Expected 3-Year Return is 20-25% premium category at 9%.
• 20-25% Earning CAGR over the period of 3-Year • Continued focused on building distribution
network
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Q – Quality
 Quality of Business
10 0.9
Debt Repayment 1
0.85

Debt to Equity Ratio

8 9.05 0.8
0.64

Interest Cover
6 0.6
0.46
4 0.4
0.25
3.74
2 0.2
1.97 2.16 2.35
0 0
15 16 17 18 19
Debt Equity Ratio Interest Cover
Year

• 67% of Indian Population is under legal drinking age and median age in 28. Furthermore,
rapid urbanisation, rising affluence and changing consumption pattern toward higher
quality product.
• Magic Moment has more than 50% market share of Vodka Industry in India
• Morpheus Brandy has more than 60% market share of super premium alcohol segment
• High market excitement after the full scale launch of Rampur India Single Malt and
Jaisalmer Indian Craft Gin in premium segment
• CARE A rating for long term showing stable long term outlook and Care A1 (highest
quality) for short term credit facilities.
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 Q – Quality
 Quality of Management
Asset Turnover Ratio
 Unquestionable Integrity
• Radico Khaitan has complied with all the requirement of
1.27
Stock Exchange and SEBI. 1.09
0.94 0.99 0.97
• Promoter has held 40% share for more than a decade and
very high presence of institutional investors up to 28 %.
15 16 17 18 19
• Good history of timely payment of dividend for last five
year.
Constant increase of Asset utilization
 Demonstrable Competence efficiency
• Strong focus on enhancing the Free Cash Flow by
generating long term assets and brand value Margins
• Recent restructuring by deleveraging(Reducing long term 16.7
14.79
debt from 326 Cr(2015) to 21.66 Cr (2019), making 11.44
12.57
11.36
investment in growth.
• Reduction of Debt-to-Equity ratio from 0.9 to 0.25 over 8.96
past five year. Current Long-Term Debt to asset ratio is 6.77
4.54 4.44 4.76
0.01.
15 16 17 18 19
 Growth Mindset Operating Profit Margin(%) Net Profit Margin(%)
• Introducing to new product and creating brand in high
growth and premium segment of business especially in
Constant increase of Operating Margin
IMFL (India Made Foreign Liquor) and Net Profit Margin due to economics
• Volume growth of 12% in IMFL segment while the industry of scale and premiumisation. 12
growth rate was 6%
G – Growth
• Radico’s IMFL (Indian Manufactured Foreign Liquor) has shown a high volume growth
of 10.8% in 2018-2019.
• Prestige and Above (Premium and Super Premium Segment) has shown a volume
increase of 21.8% in FY2018-2019.
• Radico has aggressively spend behind its brand to drive premiumisation and gain
market share.
• Increase of EBITDA margin by 670 bps from 9.92 to 16.7 in last 3 year, which lead to
increased net profit margins
• Magic Moment Verve is a premium category Vodka has increased at a faster growth
rate than industry for last 3 year.
Prestige and Above Volume (Million Cases) Net Revenues
1.57 3511.91
1.46 3179.38
1.32 1.41 1.28 1.32 1.38
2878.34
1.13 2605.80
2359.07
2096.94
1796.85

Q1 Q2 Q3 Q4

FY18-19 FY19-20 18 19 20E 20E 22F 23F 24F

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G – Growth

EBITDA PAT
941.58
441.18

707.91
333.81
545.81 266.63
444.03 222.60
390.50 188.06
350.33
273.84 127.54

50.00

18 19 20E 20E 22F 23F 24F 17 18 19 20E 21E 22F 23F

Product Mix : Radico Khaitan

Jaisalmer India Footprint in over Magic Moment 56% market share Morpheus Blue Super Premium
Craft Gin 30 countries of Vodka in India Brandy Product
Price: INR 5-7 K Price: INR 400-600 Price: INR

Rampur India Footprint in over Magic Moment 20% market share Old Admiral 5th largest selling
Single Malt 20 countries Verve of premium vodka Brandy worldwide
Price: INR Price: INR 1-1.5 K Price: INR
Whisky
8 PM Premium Premium version Morpheus 56% market share After Dark One Life, One
Black Whiskey of 8PM Whiskey Brandy of premium brand Passion
Price: INR Price: INR Price: INR 600-800 14
L – Longevity

 Longevity of Quality
• Radico has competitive advantage of providing better quality product with value for money
proposition
• Indian spirit industry should remain attractive for a long time, given both domestic and global
opportunities
 Longevity of Growth
• Indian spirit industry has potential to grow at 6% in future with IMFL (India Made Foreign Liquor) at
11% and Premium Segment product at 9%.
• One of the largest spirit manufacturers. Operates three distilleries and two in joint venture.
Continuously, increasing it capabilities
• Radico has continued its focus in building Sales Distribution Network
– Strategically located five Own and 5 Contract Bottling Unit
– Distribution network of 75,000 Retail outlet and 8,000 on premise outlet
– Strong distributive tie up with army canteen

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P – Price

• P/E ratio of 21.80 which is significantly lower than industry average of 53.05.
• We believe the valuation defendable:
• 20% Earning CAGR over the period of FY19-22E
• Expansion of ROE by 150-200 Basis Point over next 3 year
• Lean Balance sheet with almost zero long term debt
• Continued increase of Profit margin due to premiumisation and decrease of debts
• Target Price of INR 538 per share (FY22 F)

INR Crores FY19 FY22F CAGR

Revenues 2096 2878 11.2%
EBITDA Margins 16.71 18.96
PAT 188 333 20.9%
Exit P/E (x) 21.80 22.39
Mkt Cap 4102 7189 20.5%
Stock Price 307 538 20.5%
(Calculated) 16
Financial Summary
.

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Financial Summary

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Risks & Concerns
• Regulatory Environment
• Indian spirit industry is the most regulated sector in India
• Subject to different laws, regulation, taxes and licensing environment from state to state
• Ban on direct advertisement restrict the promotion of new and existing brands
• Increasing Raw Material Price
• Price volatility of ENA, one of the key raw material
• Lower than anticipated production of sugarcane or any sharp rise of molasses
• Foreign Currency Rate Variation
• Radico export in more than 70 countries, major fluctuation of exchange rate effects revenue.
• Customer Preference Change
• Due to rise of health conciseness among people, customer may shift to health concise beverages
• Change in Legal Drinking Age
• Any change in legal drinking age will affect the volumes of industry, though the lower side of legal age
consumption is low
• Competition from International Players
• Alcohol industry has significant growth potential in India, which provide huge opportunities for foreign
players to enter India.

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Conclusions & Investment View

• Robust Volume Growth

• IMFL volume growth of 10.8%
• P&A volume growth of 21.8% Current Target Price
• Driving Premiumnisation
• Company is focusing increasing market share in
premium segment with substantial market share in 385
Vodka category
(25% Upside Potential)
• Building Strong Distribution Network
• Strategically located five owned and 23 contract
bottling unit
• Distribution network of 75,000 Retail outlet and
FY22 Target Price
8,000 on premise outlet and growing

• Strong Financial Performance in Last 5 year

• Debt to Equity ratio decrease from 0.92 to 0.25
538
• 800 Basis point improvement of EBITDA Margin (20.5% CAGR)
• Decrease in long term loan from 326 Cr to 21Cr
• Significant increase in PAT margin

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