Buy Tilaknagar Industries Ltd for the Target Rs.650 by Choice Broking Ltd
Imperial Entry: TLNGR’s Royal Leap Beyond Brandy
TLNGR’s acquisition of Imperial Blue (IB), the world’s 4 th best-selling Whisky, for INR 41.5Bn, marks a transformational leap beyond its southern Brandy dominance. The deal instantly gives TLNGR a strong foothold in the high-volume Whisky category and unlocks pan-India access, especially in North India, where it had minimal presence. This deal is aimed at increasing TLNGR’s revenues by ~50% and EBITDA margins to grow by ~17% in FY26. TLNGR, which is present only in12 states, gains synergies in distribution with IB’s presence in 27+ states & UTs. This strategic move elevates TLNGR from a regional player to a formidable multi-category, national AlcoBev contender.
Brandy Dominance and Strategic Partnerships
TLNGR dominates India’s Brandy market (91% of revenue), with 86% of volumes coming from South India which is the country’s alcohol consumption hub. With Brandy leadership well established, TLNGR is now diversifying into high-growth IMFL categories. For example, in 2023, it acquired 10% in Spaceman Spirits Lab (Samsara Gin, Sitara Rum) for INR 97.5Mn, with plans to raise this to ~20% through a follow-on INR 131Mn investment (starting Sep’24), backed by royalty-based distribution rights. TLNGR also acquired ~36% in Bartisans, marking its entry into the fast-growing RTD cocktail mixer space.
From Survival to Growth Investment – Financial Turnaround
TLNGR has turned around from a peak debt of INR 8.1Bn in FY19 to being net debt-free by FY25, led by strong cash flows, disciplined repayments, and debt restructuring. Finance costs dropped from INR 1.8Bn to INR 121Mn, and CFO/EBITDA improved from -3.7x to 0.7x. With a clean balance sheet, TLNGR is now making a bold move by acquiring Imperial Blue, backed by robust cash flows and margin expansion. While it involves fresh debt, Net Debt/EBITDA is expected to stay below 1.0x, with positive FCF from FY29. This marks a shift from debt resolution to valuedriven growth.
Investment View: Truly Pouring Growth
The volume upside from acquisition of Imperial Blue gives plenty of headroom for synergies. We forecast Revenue / EBITDA / PAT CAGR of 43.0% / 36.9% / 18.9% over FY25–28E. We initiate coverage with a BUY rating and a target price of INR 650, implying a 28.7% upside, based on DCF valuation. Further, our valuation implies a PE of ~62x / ~43x on FY27E / FY28E EPS.
Key Risks Prag Distillery with 6 lakh case capacity in AP, faces potential impairment due to its non-operational status. While TLNGR is exploring recommissioning, losing Prag could impact regional manufacturing and bottling capabilities.
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