Globus Spirits IPO

IPO Open and Close Date

Globus Spirits IPO opens on the August 31^st 2009, and will remain open till September 2^nd.

IPO Grading

This IPO has been graded 3 out of 5 by CARE, which denotes average fundamentals.

Price Band: Globus Spirits

The issue is priced between Rs. 90 and Rs.100, and the face value of a share is Rs.10.

Business of Globus Spirits

Globus Spirits manufactures, markets and sells country liquor, Indian Made Foreign Liquor, and Industrial alcohol comprising of rectified spirit and extra – neutral alcohol. It was incorporated in 1993, and its registered office is in New Delhi.

Globus sells country liquor, and some of its brands are Rana, Rajasthan No.1, Ghoomar, Samalkha etc. It also sells Indian Made Foreign Liquor (IMFL), and some of the better known brands that they cater to are: Officer’s Choice Prestige Whiskey, Officer’s Choice Classic Whiskey, Officer’s Choice No.1 Brandy, and Officer’s Choice XXX Rum.

It has also launched its own IMFL brands in Haryana, Rajasthan, Chandigarh, Uttar Pradesh, Kerala, Andhra Pradesh and Karnataka.

Globus has two distilleries located in Alwar, Rajasthan and Panipat, Haryana. The capacity of each of these plants is 144 lakh bulk litres and these plants have their own bottling capacity as well. Globus has additional tie – ups with the IMFL brands for bottling their branded products.

Financials of Globus Spirits

The company had total income of Rs. 28,140.17 lakhs for the year ended March 31^st 2009, Rs. 23,526.01 lakhs in 2008 and Rs. 11,666.70 lakhs for 2007. The net profit after extraordinary items for last three years was: Rs.1,293.15 lakhs, Rs. 1,264.16 lakhs and Rs. 865.52 lakhs.

The company has generated positive cash flows in its operations for the last five years. For 2009, this was Rs. 2089.4 lakhs, Rs.274.80 lakhs in 2008, Rs.695.93 lakhs in the year before that and Rs. 822.38 lakhs in 2006. At the same time there were negative cash flows owing to investing activities from 2004 – 05 to 2007 – 08.

The EPS for the last year was Rs. 10.55, Rs.10.58 in 2008, and Rs.11.25 in 2007. Based on last year’s EPS, the P/E multiple range comes out between 8.53 and 9.48 (lower and higher end of the offer).

Objective of the Globus IPO

Money raised from the IPO will be used for expansion and modernization of the plants in Haryana and Rajasthan, and to develop and acquire IMFL brands.

A second objective of the IPO is to raise funds to acquire the registered IMFL brands of Canteen Stores Department (CSD), which total Rs.300 lakhs.

Risks Facing Globus

Molasses is a key raw material for the company, and molasses is itself a by-product of sugar. Sugar prices have been going up, and the company faces the risk of rising raw material costs which could dampen its profitability.

The company in involved in certain civil, regulatory and other proceedings, which can have a negative impact on it if decided against it.

Disclaimer: This is just a summary of the Globus Spirits IPO based on the prospectus it filed with SEBI. It is not a buy or sell recommendation on the IPO.