Punjab-based Jagatjit Industries, a prominent player in the Indian liquor industry, is undertaking a financial restructuring to spur growth and expansion. The company plans to raise around ₹250-300 crore from private equity funds in the first half of 2024 to dilute equity, a strategic decision following an increase in promoter holding from 74% to 88% owing to a GDR conversion.
“Conversations are on, and we hope to raise the money by no later than June-July,” says Roshini Jaiswal, promoter & executive director, in an interaction with Fortune India. A third-generation entrepreneur -- granddaughter of founder, Ladli Prasad Jaiswal, and daughter of Karamjit Jaiswal --Roshini has turned around the fortunes of one of oldest liquor companies since joining in 2015 as the company’s chief restructuring officer.
Known for its IMFL brand Aristocrat, Jagatjit has since seen net sales doubling from ₹286 crore in FY19 to ₹507 crore in FY23. The company also operates a food division with focus on malted milk food manufacturing, producing nutritional powder for renowned brands such as Horlicks and Boost. Further it also has a distillery to produce ENA for alcoholic beverages, besides a presence in commercial real estate.
The company got back into profit (before exceptionals) of ₹7.1 crore in FY23 against a loss of ₹66 crore in FY19. Market cap has since jumped more than 5x from ₹180 crore in March 2019 to ₹930 crore currently, while share price went up from ₹39 to ₹200. Incidentally, India is one of the fastest growing liquor markets globally. In 2022, it overtook France to emerge as the largest market of scotch whisky by volume.
Jaiswal reflects on the transformation of the Indian liquor industry, particularly highlighting the rejuvenation of companies that were once on the brink of collapse. About six to seven years ago, she notes, Radico Khaitan (₹22,801 crore), Tilaknagar Industries (market cap of ₹4,629 crore), and Jagatjit were all prominent Indian companies teetering on the edge of failure. Radico's revival is a standout story; with new funding, it underwent a complete turnaround, diluting around 10% of its stake. Tilak Nagar's resurgence followed a similar trajectory, driven by the legacy and following of its brands such as Mansion House, and 8 PM. She sees Radico's success as an inspiring blueprint. "We have seen the transformation at Radico and believe that it's absolutely possible to do something similar at Jagatjit," says Jaiswal.
The fundraise is primarily aimed at clearing the debt, which has come down from ₹220 crore to ₹160 crore over the past two years. “We are incurring an interest cost of 11.5%. Once we pay that off, our cash flows will improve significantly,” says Jaiswal.
Recently, the company launched Royal Pride whisky in the premium segment in Delhi with promising results initially and plans to expand its presence throughout India. Another brand, Damn Good Scotch, following test trials in Andhra, is also slated for a nationwide rollout. Another product, Royal Medallion has been launched in a single state but is intended to be distributed more widely. These brands, priced in the range of ₹900 to ₹1,200, reflect the company's new mass-premium positioning. "The additional money through the fund-raise will also give us a very strong marketing budget to bump up in terms of premiumisation as contribution margins from premium bands are significantly higher," says Jaiswal.
What will also aid growth at Jagatjit is the entry into ethanol, backed by a ₹180-crore loan from the IREDA. "Construction will start this December, and we are looking at a nine-month timeframe for the plant to become operational," says Jaiswal. This business is expected to contribute around ₹380-400 crore as revenue in full year of operation.
Shedding light on the company's operational strategy, particularly the franchise model, Jaiswal says: "The franchise model is revenue that our franchise partners book in as their turnover, while we get a brand royalty of ₹1.8-2 crore per month." This franchisee approach, a learning from her earlier F&B stint, has been instrumental in sustaining the brand during challenging times. “That's how the company and the brands survived the tough times,” says Jaiswal.
The company plans to bring at least a couple of states back under the company’s fold from 6-7 franchisees who are operating in seven geographies. “The moment you do that, our revenue will jump by an additional ₹200-300 crore just from IMFL,” says Jaiswal. For instance, the franchisees of Jagatjit clocked a turnover of ₹536 crore in FY22, which ideally would have been recorded on its books. “We are likely to end the year (FY24) with a revenue of around ₹750-770 crore,” says Jaiswal.
Revival of markets such as Assam and Kerala, and the strategic re-entry into states such as Mumbai and West Bengal, underlines the company's intent to reclaim its presence across diverse geographical regions from the current 18. It is now eyeing the biggest market in the country -- Uttar Pradesh. “In the first year itself, we can pick up revenues of about ₹120 crores as we can enter into 2-3 different segments,” says Jaiswal.
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With the recent addition of a Chief Technology Officer to the team, the company gears up to leverage data and AI to drive efficiency and innovation across various segments. The aim is to utilise technology to gain consumer insights, improve marketing strategies, and enhance operational efficiency.
Before joining the family business, Jaiswal had donned her entrepreneurial hat by introducing India to its first lounge bar, 180 Proof, in Bengaluru in 2000. In 2005, she also co-founded JSM, well-known for its portfolio of Hard Rock Cafe, California Pizza Kitchen and Shiro.
Incidentally, in the early '90s, Jagatjit had an equal-stake venture with Canadian distiller Hiram Walker & Sons that ended in a few years, followed by a similar deal with the US-based Brown-Forman Corporation which, too, was wound up as reportedly both the partners' plans to take over the company fizzled over valuation differences.