Associated Alcohols & Breweries : Transcript of Analysts/Institutional Investor Meet/Con. Call

Associated Alcohols & Breweries Limited

Conference Call

October 06, 2022

Moderator:	Ladies and gentlemen, good day and welcome to the conference call with Associated Alcohols
	& Breweries Limited to discuss merger with Mount Everest Breweries Limited hosted by
	Valorem Advisors. As a reminder, all participant lines will be in the listen only mode. And there
	will be an opportunity for you to ask questions after the presentation concludes. Should you
	need assistance during the conference call, please signal an operator by pressing "*" then "0"
	on your touchtone phone. I now hand the conference over to Mr. Chaiti Gujarati from Valorem
	Advisors. Thank you and over to you.
Chaiti Gujarati:	Good afternoon everyone and a warm welcome to you all. My name is Chaiti Gujarati from
	Valorem Advisors, we represent the investor relations of Associated Alcohols & Breweries
	Limited. On behalf of the company, I would like to thank you all for participating in the
	company's conference call to discuss the merger of Associated Alcohols & Breweries Limited
	with Mount Everest Breweries Limited. Before we begin, I would like to mention a short
	cautionary statement.
	Some of the statements made in today's concall may be forward-looking in nature. Such
	forward-looking statements are subject to risks and uncertainties, which could cause actual
	results to differ from those anticipated. Such statements are based on management's beliefs
	as well as assumptions made by and information currently available to management.
	Audiences are cautioned not to place undue reliance on these forward-looking statements in
	making any investment decisions. The purpose of today's earnings conference call is purely to
	educate and bring awareness about the company's fundamental business and financial quarter
	under review.
	Now, I would like to introduce you to the management participating in today's call and give it
	over to their opening remarks. We have with us Mr. Tushar Bhandari, Whole Time Director. I
	will hand over to Mr. Tushar Bhandari for his opening remarks.
Tushar Bhandari:	Good evening everybody, it is a pleasure to welcome you to the conference call to discuss the
	merger of Associated Alcohols & Breweries Limited with Mount Everest Breweries Limited. Let
	me first start off by briefing you on the highlights of the company's major achievements in last
	few years, which ultimately has benefited and maximize the shareholders value. In the year

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2015 we have implemented the integrated SAP ERP across all functional areas, being one of the few companies to do so in the liquid space.

In 2016, we started focusing on value added premium segments by introducing premium products and entered new markets. Further the Board of Directors has announced the bonus of 1:1 share. In 2017 to support and consolidate in the value added segment. The company has taken the series of popular range products of USL in it's kitty on franchisee basis. In 2018. We had embarked the expansion project and completed with optimum utilization within a year and we are continuously working on consolidation. Looking to the opportunities in 2021, we have embarked and diversified into ethanol project, which is expected to be operational and commercialized by Q4 FY23. Looking at the demographic challenges and opportunities, these are the continuous input time to time received from the stakeholders. The management decided to examine the synergy of merger of promoter controls beer company Mount Everest Breweries Limited with Associated Alcohols & Breweries Limited and accordingly post recommendation of exploring possibilities from the post during the November 21. And after detailed examination of various possibilities, advantages and opportunities, it was decided to go ahead with the merger.

Now let me take you through the factor of proposed amalgamation. First, let me give you some highlights of the beer industry in India. Beer is being increasingly accepted as a social drink and the urban use in particular favors it as a preferred alcohol beverage on account of low alcohol content. Increase in consumption of beer is attributed to change in lifestyle, rapid urbanization and rise in disposable income. Consumption of beer is expected to double in the next five to seven years. Introduction of draught beer has further increased the consumption as draught beer is fresh and unpasteurized. In India bottle beer is most popular but recently most of the breweries have taken up canning. Draught beer is becoming popular particularly in places where breweries are situated. The proposed amalgamation represses amalgamation of resilience Indian spirit company with one of the largest and fastest growing Indian beer company.

MEBL is the largest manufacturer of its own brand in Madhya Pradesh, and caters to more than 50% of the total market share in Madhya Pradesh, with expanding reach across other states as well. It is pertinent to mention that MEBL started with a capacity of one lakh case a month and in a decade has reached around 50 lakh case a month, making it the fastest growing beer company in the country. MEBLs potential to write the huge Indian consumption potential sector is critical decision matrix for the AABLs management, since the same would facilitate growth of both products that is spirit and beer in future years. The merger would result in creation of a unique Indian Alko grif company to refer (Inaudible)6:14 ENA, ethanol, beer, branded liquor and outsourcing relationship.

It would result in enhanced business upscalability through ---6:25 off take of product. The merger would also result in progression of AABL from primary B2B company to a higher B2C

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	focused company, while also resulting in natural expansion of our product basket and
	continued thus widening access to retail consumers to cater to mass opportunity. This would
	allow us a portion size for enhanced cross selling synergies through a range of customer
	engagement programs. We believe there are levers and possibility of increasing margins due
	to infusion of the wider basket or branded products. The scheme involving merger of AEBL into
	AABL, subject to the resist of requisite approvals from statutory authority and respective
	stakeholders and creditors has been undertaken by the management, with a considered view
	to create one of the largest alcohol beverage supermarket entity, hosting both spirit from AABL
	and beer from MEBL under one company, which will act as an enabler for future untapped
	growth opportunities. The proposed amalgamation will foster a generic progression of AABL
	from an existing B2B company to B2C company, with the inclusion of MEBL as well established
	company in the beer industry, and have an installed capacity of 15 lakh hectoliters with 1.5
	million cases per month.
	The amalgamated entity is expected to be able to better compete with the global players on
	account of economies of scale. And resulting a huge amount of synergies, further the team is
	expected to benefit all the stakeholders including banks, financial Institute's, creditors,
	employees, workers over and above its shareholders, as it gives an opportunity to consolidate
	the business and attain higher profitability margins, and to create one of the largest Alko
	breviary supermarket in India. Most importantly, on the corporate governance front, a
	consolidated entity results in higher transparency of the promoter group business under one
	roof as a listed company.
	Last but not the least, please note that the management have undertaken this path, which has
	been debated and requested over various investor calls to create a full bouquet of alcohol
	company which would cater to both B2B and B2C. With a brief background, I request the
	investor, shareholder attendees and open the call for Q&A.
Moderator:	Thank you. We will now begin the question-and-answer session. Ladies and gentlemen, we will
	wait for a moment while the question queue assembles. You have a first question from the line
	of Manish Dhariwal from Fiducia Capital Advisors Private Limited. Please go ahead.
Manish Dhariwal:	I would like to understand firstly, the markets that the businesses of spirits and beer is serving
	and what kind of synergy can emerge on the market front, on the sales front.
Tushar Bhandari:	Good afternoon Manish. Manish, just to give you larger answer to your question in a brief, the
	markets which both beer and MEBL and AABL are so AABL presents are both are primary
	predominantly one of the largest companies in central part of the India and AABL is present in
	Madhya Pradesh, Chhattisgarh, Delhi and Kerala right now, and beer is present and the
	brewery is one of the fastest growing breweries in central part of the India and holds the
	majority stake in the market in Madhya Pradesh, and has got its presence in Chhattisgarh, in
	UP, recently started in Assam and Northeastern states, and has the potential to grow in other

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states as well. So, majorly we at the synergy is what we are looking into is while going into other states, there are huge opportunities, there are seasonal opportunities which are available, as during summer season there's a shortage of beer. So at that point of time, beer products are huge in demand. And a retailer is looking for a person who has complete bouquet of products. So that's why we will be a one stop shop for all the liquor products to any retailer. So in during summers, if you require beer we will provide them beer which will help AABLs other products to write on the beer, this is in case of entering the new markets which we enter. And similar case is during the winter, the sale of rum is highest, and there's a shortage of rum. So with a rum portfolio of associated alcohol, we will be able to sell beer. So there'll be cross synergy in both the products and help to gain the market share in different areas. Plus apart from that, it will also give us an economies of scale while entering into any new market, because when you enter into new market, there is a fixed cost which you have to incur. So if the sale is higher as beer is a volume business, so if the sale is higher so per case overhead cost reduces substantially in both the cases. So that will synergize in both the product. And plus apart from that what is happening is that, there is an advantage in the beer is that there's a huge entry barrier in the beer because for any beer industry to supply, they have to set up an entire unit which involves huge capital investment. So there are very few beer players in the market. So that will boost the growth of AABL also to a greater extent.

Manish Dhariwal: Okay. So if I can ask a follow up. So what kind of see these are all state subjects like your alcohol, business, the spirit business is a state subjects, you need to take the license on the state, state government to start the business, so what kind of, how does it work in the beer industry?

Tushar Bhandari: So, beer industry we expect to grow almost we expect to double in the next five years, as the demand of beer is growing across the state. So just to give you an example of this season that is the April, May, June first quarter, so there was a shortage of beer across the state and the beer industry in the first quarter has grown almost across the country of around 20% to 30% growth we have seen and we expect the growth to be robust in the country, and there is a huge opportunity in the beer. So, in beer, what we are doing is that as I told that it is one of the fastest growing company in central part of India so beer is a continuously investment process. And from one lakh cases within a decade, this MEBL company has moved to 1.5 lakh that is almost 15 times growth. So in MEBL they have been trying to look the market and where the market is growing and keep on expanding their businesses. So we are also expecting a further expansion in MEBL businesses and there might also be an opportunity to set up a brewery in other states also.

Manish Dhariwal: Okay. So, to start selling beer in any state do you need approval from the State governments, respective departments?

Tushar Bhandari: So, we are contemplating and we are talking to the state government there is, we are planning to set up a brewery.

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