Globus Spirits Ltd

IPO Note August 31, 2009

Background & Operations:

Issue Snapshot:
Issue period: Aug 31 – Sept 02, 2009
Price Band: Rs. 90 – Rs 100
Globus Spirits Ltd (GSL) is amongst the leading players in the Alcohol industry in
North India. Since its inception in 1992, GSL has been in the business of
manufacturing, sales and marketing of Indian Made Foreign Liquor (IMFL),
Industrial Alcohol and Country Liquor.

Issue Size: Rs. 67.5 cr – Rs 75 cr GSL is engaged in the business of manufacture, marketing and sale of Industrial
Alcohol comprising Rectified Spirit and Extra-Neutral Alcohol, Country Liquor, and
Indian Made Foreign Liquor (IMFL). GSL has established its identity in Country
Issue Size: 75,00,000 equity shares Liquor and IMFL business with steady growth and production of high quality liquor.
GSL has a brand portfolio of its own in the Country Liquor segment, and caters to
QIB upto 37,25,000 eq sh
reputed Indian brands in the IMFL segment. GSL has already launched its own
Retail upto 26,07,500 eq sh
Non Institutional upto 11,17,500 eq sh IMFL brands in the north Indian state of Haryana and proposes to launch the
Employee 50,000 eq sh brands in six more states in North India and four states in South India.

GSL has two modern distilleries at the following locations:

Face Value: Rs 10 § Behror, District Alwar, Rajasthan: The facility is built on an area admeasuring
17.97 acres of land. The unit has its own captive supply of water and power.
Book value: Rs 54.29 (June 30, 2009) § Samalkha, District Panipat, Haryana: The facility is built on an area admeasuring
16.575 acres of land. The unit has its own captive supply of water and power.
Bid size: 70 equity shares and in multiples thereof
At present both the units are capable of manufacturing alcohol from both molasses
100% Book built Issue
and grain. Both the Units have licensed and installed capacity of 144 lakh Bulk
Capital Structure: Litres (BL) p.a. each aggregating to 288 lakh BL.
Pre Issue Equity: Rs. 12.25 cr
Post issue Equity: Rs. 19.75 cr The plants are currently engaged in the manufacturing of Industrial Alcohol
(comprising Rectified Spirit, and Extra Neutral Alcohol (ENA); Country Liquor (CL);
Listing: BSE & NSE and Indian Made Foreign Liquor (IMFL).

Both the distilleries have modern bottling facilities equipped with bottling machines,
Lead Manager: SREI Capital Markets Ltd which caters to its own production of Country Liquor and IMFL brands. Also, the
Keynote Corporate Services Ltd Company has tie-ups for bottling IMFL products for other brand owners.

GSL’s major brands are as under:

Shareholding Pattern Country Liquor
Rana
Pre issue Post issue Rajasthan No.-1
Shareholding Pattern % % Ghoomar
Promoters 96.41 59.81 Samalkha No.-1
Public (incl. Others) 3.59 40.19 Samalkha Ki Saunfi
Total 100.00 100.00 Kinnu
Commander
CARE IPO grading: 3/5 indicating average
IMFL
fundamentals
White Lace Gin White Lace Dry Gin
White Lace Duet Gin GR 8 Times Dry Gin Samurai Gold Extra Rich Blend Whisky
Samurai Premium Whisky 20-20 Premium Whisky
20-20 Superior Whisky *
GR 8 Times Whisky
GR 8 Times XXX Rum
Hannibal Legendry Rum
Hannibal Legendry XXX Rum *
Samurai XXX Rum
Samurai Grape Brandy
Samurai Superior Grape Brandy *
Samurai Superior Whisky *
Academy Deluxe XXX Rum
Academy Deluxe Brandy
(* = blended and bottled by Tracstar Invesments Pvt Ltd., the licensee in
Karnataka)

Please read important disclosures on the last page

Retail Research 1
GSL has already entered the IMFL segment by launching its own brands in Haryana, Rajasthan, Chandigarh, Uttar Pradesh, Kerala,
Andhra Pradesh and Karnataka. The Company also proposes to launch the brands in two more states/Union territory in North India and
one state/Union Territory in South India. The Company envisages that its presence in more and more states of the Country will give it a
better competitive position in the IMFL segment.

Objects of Issue:
The Objects of the Issue are as stated below:
§ Installation of a Multi-Pressure Distillation Plant to produce quality Extra Neutral Alcohol (ENA) of 35,000 Litres per day from both
Molasses and Grain at Behror U nit in Rajasthan
§ Installation of a Multi-Pressure Distillation Plant to produce quality Extra Neutral Alcohol (ENA) of 35,000 Litres per day from Grain at
Samalkha Unit in Haryana
§ Capacity expansion of Total Spirit-based Starch Liquefaction section from 60 KLPD to 75 KLPD, with modernization at Behror Unit,
Rajasthan
§ Installation of a High-Pressure Boiler and Back–Pressure Turbine, which would use Biogas and Biomass as fuel; and implementation
of Green House Gas Abatement project at both units
§ Brand development for marketing IMFL brands in 10 more States/Union Territories
§ Acquisition of Canteen Stores Department (CSD) registered IMFL Brands
§ Revamping of existing storage/bottling capacity at Samalkha Unit
§ To meet the expenses of the issue
§ To list the equity shares on the Bombay Stock Exchange Limited (BSE), the Designated Stock Exchange; and National Stock
Exchange of India Limited (NSE), which will enhance GSL’s brand name and provide liquidity to its shareholders

Cost of Project: Rs. Cr

S. No. Particulars Amount
Multi-Pressure Distillation Plant to produce quality Extra Neutral Alcohol (ENA) of 35,000 Litres per day from both Molasses and
1
Grain at Behror Unit 6.76
Multi-Pressure Distillation Plant, including Slurry mixing and Liquefaction, saccharification cum-Fermentation along with
2 auxiliaries etc., to produce quality Extra Neutral Alcohol (ENA) of 35,000 Litres per day from Grain at Samalkha Unit 26.65
3 a. Total Spirit based Starch Liquefaction section of 15 KLPD capacity at Behror Unit i.e., capacity expansion from 60 KLPD to 75
KLPD 3.33
b. Fermentation Modification Work in existing Grain based Distillery at Behror Unit 0.66
4 a. Powerpac Travelling Grate Furnace Boilers at Behror & Samalkha 9.18
b. 2000 KW / 415V Bleed-cum-Back Pressure Turbine at Behror & Samalkha 4.50
c. Green House Gases (GHG) Abatement Project under the Clean Development Mechanism (CDM) of the Kyoto Protocol at
Behror & Samalkha 0.15
5 Brand Development for Marketing of IMFL Brands 28.51
6 Acquisition of Canteen Stores Department (CSD) registered IMFL Brands 3.00
7 IMFL Bottling Section at Samalkha Unit 2.62
8 IMFL Bottling Section at Behror Unit 3.52
9 Miscellaneous Civil Structures 0.40
Total 89.28
(Source: RHP)

Schedule of Implementation:
S. No. Particulars Commencement Completion
Multi-Pressure Distillation Plant to produce quality Extra Neutral Alcohol (ENA) of 35,000 Litres per
1
day from both Molasses and Grain at Behror Unit May 2007 March 2010
Installation of a Multi-Pressure Distillation Plant, including Slurry mixing and Liquefaction,
saccharification-cum-Fermentation along with auxiliaries etc., to produce quality Extra Neutral Alcohol
2 (ENA) of 35,000 Litres per day from Grain at Samalkha Unit in Haryana May 2007 March 2010
Capacity expansion of Total Spirit-based Starch Liquefaction section from 60 KLPD to 75 KLPD with
3 modernization May 2007 March 2010
4 Installation of a High-Pressure Boiler, which would use Biogas and Biomass as fuel January 2007 March 2010
5 Back-Pressure Turbine January 2007 March 2010
6 GHG Abatement project under the clean development mechanism (CDM) of the Kyoto Protoco November 2006 March 2010
7 Brand promotion & IMFL launch operations in North & South India December 2006 March 2010
8 Acquisition of CSD registered IMFL brands August 2007 March 2010
Completed in March
9 IMFL Bottling Section at Samalkha Unit January 2007 2009
10 IMFL Bottling Section at Behror Unit August 2008 March 2010
Completed in March
11 Civil & Structural May 2007 2009
(Source: RHP)

Please read important disclosures on the last page

Retail Research 2
Triggers:

Geographical presence in N orth and South India:

GSL has established presence in 7 states of the country in Northern and Southern parts of India namely Chandigarh, Rajasthan,
Haryana, Delhi, Kerala, Andhra Pradesh and Karnataka. The company has a well established position in domesti c country liquor (CL)
segment with significant market share (22%, 17% and 20% share in Rajasthan, Haryana and Delhi respectively) and has made its
presence in IMFL segment by taking up contract bottling to cater to the renowned Indian players. The Company has in FY09 sold
19,93,342 cases of Country Liquor in Rajasthan and 17,28,500 cases of Country Liquor in Haryana. The Company also sold 1201200
cases of Country Liquor in Delhi in FY09. Going forward, GSL envisages that its presence in more and more states of the country could
give it a better competitive position in the IMFL segment.

Multifeed Stock (Grain and Molasses):

GSL’s facilities produce alcohol from both molasses and grain. Grain primarily comprises broken rice, ground wheat flour (atta), jowar,
bajra etc. As regards Grain, GSL procures its Grain requirement from Delhi’s wholesale Grain market. Grain is procured through
dealers/stockists in Delhi. GSL expects no shortage and full availability of grain throughout the coming years. The price-trend of the
grain is also expected to remain stable throughout the year, and no volatility is expected. GSL is constantly endeavouring to procure
raw materials at the lowest prices using its experience, relationships with the suppliers and economies of scale enjoyed. Hence is
relatively insured as compared to single feedstock using companies against the fluctuating prices and seasonality of the raw materials.

Knowledge of Industry - Commercial & Technical:

GSL is a well-established company in this line of activi ty for the last 16 years. It has been growing since inception. GSL has some
reputed companies in this industry as its customers. The Distillation plant capacity is based on Fermented wash from Grain-based
Fermentation and an alcohol concentration of minimum 8% v/v in Wash. It uses Multi-Pressure Distillation scheme with minimum steam
consumption of just 3.25 kg/litre Total Spirit. Reboilers have been provided alongside the main columns to avoid direct steam sparging,
in order to reduce the effluent volumes and better quality output. This also helps in Steam condensate recovery. Higher level of
instrumentation has been offered based on PLC-SCADA system. The Extra Neutral Alcohol coming out of the plant is of superior quality
and is acceptable to all the major IMFL manufacturers. This goes to prove GSL’s technical expertise in the field and the superior quality
of alcohol produce.

Country Liquor – Dominant Position in North India:

GSL is the market leader in the North India in country liquor. Sale of country liquor gives as high as 20% margins to GSL and
constitutes the largest pie (36% in FY09) in the sale of its alcohol beverages. Recently it has lauched a portfolio of 7 brands in the
Northern states of Haryana, Rajasthan, Chandigarh and Delhi. It sells as high as 4.4 lacs cases/month or 5 mn cases p.a.

Market Share - North

3 28%
25%
Million cases per

20%
annum

15%
%

1.5 14%
15%

0 0%
Rajasthan Haryana New Delhi Chandigarh
State
LHS - Million Cases per annum RHS - Market Share%

(Source: RHP)

Low Overhead cost:

GSL is amongst few Indian manufacturers that have completely streamlined multi -feedstock (coarse grain and molases) abilities
thereby reducing costs. Experienced manpower and rigorous quality protocols ensure consistent high quality produce. Its production
facilities can utilise either molasses or grain or both, thus mitigating the dependence on any specific raw material. This could enable it to
manage margins in a scenario of rising input prices, given that raw materials account for over 60% of costs. Better sourcing has also
helped maintain EBITDA margins at around 13%, on average of the last three years. Going ahead, Globus’ increasing focus towards
IMFL could also provide cushion to margins.

Please read important disclosures on the last page

Retail Research 3
Bottling high quality IMFL products:
GSL doesn’t have its own brand presence in the IMFL space. But it does bottling for some of the big well-known brands like Officer’s
Choice and Aristocrat. It has now entered the IMFL segment by launching its own brands in Haryana, Rajasthan, Chandigarh, Uttar
Pradesh, Kerala, Andhra Pradesh and Karnataka. GSL also proposes to launch the brands further in two states/Union territory in North
India and one state/Union Territory in South India. It envisages that its presence in more and more states of the Country will give it a
better competitive position in the IMFL segment.

Established Strong Value Chain:

GSL has a strong established value chain, which takes care right from distilling of alcohol to the distribution of the same. The value
chain in a distillery industry comprises of raw material suppliers (Sugar Mills), distillers, and intermediaries (Govt., wholesalers and retail
dealers). The important end users are institutional (e.g. Armed Forces) and retail buyers. GSL has its two distilleries located at
Samalkha, Haryana and Behror, Rajasthan, which is situated in North India and hence gives it easy access to raw materials viz,
molasses and grains. Also the North India is a good market for sale of alcohol beverages, which gives GSL a ready market.

Value Chain

Raw Materials – Molasses & Consumer

Grain

Government/Private
North India

Distillery – Rajasthan & Haryana

Retailer

Conversion to alcohol
Government/Private

Bottling at existing distilleries Packaging in-house Despatch to Distributor

G
R To be a branded player in IMFL and has
O launched a portfolio of brands as an
W initiative
T
H
Maintain leadership in country liquor, which
S is currently growing at 7-8% p.a.
T
R
A
T Strengthen IMFL franchise and ENA
E business
G
Y

Please read important disclosures on the last page

Retail Research 4
Industry:
The alcohol industry is very important from the Government’s revenue perspective. It generates an estimated Rs. 30,000 crores per
annum in spite of the fact that the per capita consumption of liquor in India ranks among the lowest in the world. Indian Made Foreign
Liquor (IMFL) accounts for only a third of the total liquor consumption in India. Most IMFLs are cheap and are priced below Rs. 200 per
bottle. Alcohol sale proceeds account for 45% of the total revenue collection in the country. Whisky accounts for 60% of the liquor
sales; while rum, brandy and vodka account for 17%, 18% and 6% respectively. MNC's share is only 10% and they have been
successful only in the premium and super premium range. (Source: A Tipsy Liquor Policy by. H.B. Soumya; from
www.ccsindia.org/RP01-6.html)

Liquor industry is unique as th ere are certain key variable factors that influence its viability and growth such as duty structures, excise
rules and regulations, product-pricing, marketing initiatives to promote the brand, distribution and several regulatory issues like licenses
to manufacture, labelling etc. On issues of excise and duties, these are fast coming to World Trade Organization (WTO) levels. The
industry does not have many entry barriers and with the opening up of the economy there are multiple ways of market entry; it could be
Bottled in India (BII) or Bottled in Origin (BIO) or Bulk Import and locally bottled. While this will enable world-class quality brands to
enter India, there is a fear that the stagnating markets overseas may trigger dumping of cheap liquor into the In dian market, which will
not be a healthy trend for both the Indian consumer as well as the domestic liquor players.

Taxation being a major contributing factor to the increase in the price at the consumer level, the trend to go in for cheaper products in
key whisky and rum segment has been on the increase of late. The lower category whisky segment has been growing rapidly in recent
years. The lower per capita consumption in India, the high volume in the unorganized cheap segment of the spirits business with its
likely transition into the organized sector, the changing consumer perception of alcohol and the progressive regulatory changes are the
key drivers to the growth of this industry

Indian Alcohol Industry

The Indian potable alcohol market has high entry barriers, largely due to government regulations. The policies and levies on alcohol
vary from State to State. In most of the States, the distribution of alcohol is regulated by the concerned State Government. Being a
state subject; within India itself, the policy on alcohol retail differs from state to state. While some states such as Maharashtra, Uttar
Pradesh, and Tamil Nadu have a liberal policy, other states such as Haryana and Andhra Pradesh have had very bitter experiences in
trying to make these states dry and have eventually had to withdraw the policy.

Each State levies taxation and duties on alcohol at its own decided rates. Each State also levies excise duties and also regulates
distribution channels of alcohol in its own way. Liquor happens to be a major contributor to the state’s exchequer. Some states, have, in
the past, taken firm action in terms of banning the sale of alcohol within their state, but their decision had its own political fallout, and the
ban had to be withdrawn.

Currently the industry is dominated by 3 brewers, the United Breweries, Shaw Wallace and Mohan Meakins. However, a number of
international brewers are starting to become established. Joint ventures could continue to be more important as the distribution network
in India is complex.

India is the largest producer of sugarcane in the world and sugar industry is the second largest agro-based industry of India, textiles
industry being the largest. Production of molasses has increased from 0.4 million tonnes in 1950-51 to 8.29 million tonnes in 1995-96.
The Government has already decontrolled the prices and movement of molasses. (Source: Financial Appraisal Report of SBI dated
September 5, 2008)

Advertising of alcohol and alcohol-related products is officially banned and considered illegal. Major liquor manufacturers, however,
spend heavily on surrogate brands under the same brand names such as glasses, mineral water, music items, fashion articles etc.
Satellite and cable television however, being uplinked from outside India, have allowed liquor advertising by Indian brands.

As regards the distribution system, all outlets have to be licensed; Wholesalers, Retailers, Bars and Restaurants, and Bonded
Warehouse operators. The Distribution system is still the same for Beer as for Spirits and Wine. They pay the, varying, States licence
fees. These can, at present, only sell Indian-made Liquor over most States. It continues to be expected that Beer and Wine may shortly
be permitted to sell in more outlets.

The liquor industry is suffering from over-taxation and over-regulation, which has impeded the profitability even in the face of continuing
growth in demand for liquor products. Further widening the scope of service tax and increase in the rate of service tax has had a direct
impact by way of increased expenditure on the Company.

Distribution of IMFL is also regulated in some states either through auctions or through government procurement agencies (as in Tamil
Nadu and Andhra Pradesh etc.) These regulations create monopolistic environment, stifle entrepreneurship spirit and hamper growth.
The present distribution system is affecting the revenue collections of the states, and the state governments are increasingly looking to
liberalize the distribution system. Uttar Pradesh is a good case in point where the excise revenues witnessed a substantial jump once

Please read important disclosures on the last page

Retail Research 5
the distribution system was de-regulated in financial year 2001-02. Stagnating excise revenues (from liquor) are also forcing state
governments to re-look at archaic systems.

Future Demand Drivers and Outlook

With rapid growth in the middle class segment, increasing consumerism, rising disposable income levels, rising standards of living,
increase in number of discerning customers, and increase in the number of liquor brands and categories available to the consumer,
there will invariably be an increased growth of all segments of liquor industry.

The foreign players are likely to have market grip over the super premium and premium segments and the Indian manufacturers would
see a reduced market share. The domestic majors will nevertheless upgrade the large Country Liquor market into IMFL. Local players
have all along dominated the Country Liquor segment wherein there are no large players or multinationals coming in to this specifi c
segment.

Even amongst the various IMFL segments, Vodka, White Rum, and Brandy are expected to grow at above-industry growth rates albeit
on a very low base.

The demand for Alcoholic Beverages has been growing at a steady pace of approximately 10% p.a. and (this growth rate) is expected
to continue to grow at this rate in the future. Supply is expected to match the demand over the medium term. The overall profitability of
the industry would continue to be subject to the prices of molasses and the extent of competition besides the duties levied by State
Governments. (Source: Financial Appraisal Report of SBI dated September 5, 2008)

Concerns:
§ Constraint in the availability of and increase in prices of raw materials viz., Molasses and Grain may affect the Company’s
operations and in turn the profitability of the Company:
Alcohol industry being a raw material intensive industry, the Company is exposed to possible unpredictability in the supply of raw
materials, be it molasses or grain. Disruption in the supply of raw material may lead to hampering of the production process flow.
Uncertainty over the availability of raw materials such as molasses, grain and other sources such as water, power, skilled manpower
etc may also affect the Company’s operations and in turn the future profitability of the Company, which cannot be quantified.
Shortage of sugar cane and drought like conditions may result in higher prices of molasses and grains.

§ Strict Pollution Control Norms:

Effluent Related Issues as the Central Pollution Control Board have strict pollution control norms and as per the norms set by the
Central Pollution Control Board all the distilleries have to follow zero discharge of water. Though at present both the distilleries of
GSL have installed the necessary equipments for zero discharge facility, but there may be stricter norms in future and the distilleries
may need to further strengthen the effluent issues of water and air.

§ IMFL industry is heavily regulated by the Government

The business of the Company is subject to the respective State government‘s policy on excise. Changes in the fiscal policies of the
Government could have an adverse impact on the profitability of the Company. A significant change in the Government liberalization
and deregulation policies could affect business and economic conditions in India and the business of the Company in particular.
Adverse changes in other regulation such as the distribution norms may affect the operations of the Company. States may
individually decide to impose prohibition on the sale of alcoholic beverages including IMFL, as has been done in the past in a couple
of states.

§ Entry of more domestic and multinational players in the IMFL industry may force the Company to reduce the prices of its products
which may reduce its revenues and margins which could have a materially adverse effect on its business, financial condition and
results of operation.

§ The company as of date has no major brand presence in the IMFL segment and has a limited distribution network in the IMFL
segment.

§ The IMFL industry has negative perception in the Indian cultural context. This leads to circumstances like ban on advertising of
alcoholic beverages in the print/TV media, which is not conducive to business development.

§ The promoters have interest in 3 other distillery/alcohol businesses. In future there could arise potential areas of conflict due to this.

Please read important disclosures on the last page

Retail Research 6
Financials:
Rs.Cr.
Particulars Q1FY10 FY09 FY08 FY07 FY06
Gross Sales 92.3 281.4 235.3 116.7 86.8
Excise Duty 29.2 84.3 78.3 4.7 0.0
Net Sales 63.1 197.1 156.9 112.0 86.8
Increase/(Decrease) in stock 1.0 2.2 1.9 1.2 -0.6
Total Income 64.1 199.3 158.8 113.2 86.2
Expenditure 54.5 173.3 137.1 98.2 77.7
% of sales 86.4% 87.9% 87.3% 87.7% 89.5%
Operating Profit 9.6 26.0 21.8 15.0 8.5
OPM % 15.2% 13.2% 13.9% 13.4% 9.8%
Other Income 0.7 2.7 2.8 0.5 0.2
Interest & Financial Charges 0.6 3.0 1.1 0.5 0.4
Depreciation 1.7 5.7 3.9 2.7 2.1
PBT 8.0 19.9 19.5 12.3 6.2
PBTM % 12.7% 10.1% 12.4% 10.9% 7.2%
Tax (incl. FBT & DT) 1.3 7.0 6.9 3.6 1.0
Effective Tax Rate % 15.6% 35.1% 35.2% 29.3% 15.3%
PAT 6.8 12.9 12.7 8.7 5.3
PATM % 10.7% 6.6% 8.1% 7.7% 15.3%
Equity 12.3 12.3 12.3 7.7 5.3
EPS (on pre-issue equity) 5.5 10.5 10.3 11.3 6.8
EPS (on fully diluted equity) 3.4 6.5 6.4 4.4 -
(Source: RHP)

Book
Net Sales (Rs. Value RONW CMP
Cr) OPM % NPM % (Rs) % (Rs) EPS (Rs) P/E (x)
Company Q1FY10 FY09 Q1FY10 FY09 Q1FY10 FY09 FY09 Q1FY10 FY09 #Q1FY10 FY09
Associated Alcohol 23.4 105.0 9.5% 8.0% 3.0% 2.3% 47.5 19.3% 22.7 0.8 2.6 7.3 8.7
Khoday India 27.2 116.5 6.2% 15.0% -13.2% -1.0% 26.4 - 62.3 0.0 0.0 - -
Radico Khaitan 183.5 655.4 18.5% 12.3% 5.8% 1.0% 106.3 - 226.5 1.0 0.6 54.4 353.8
Tilaknagar Industries* 52.5 237.0 14.6% 19.6% 5.5% 9.0% 106.3 41.6% 226.5 4.6 37.1 12.4 6.1
United Spirits 1241.7 4089.5 24.2% 16.9% 14.1% 7.3% 228.8 18.6% 955.1 16.5 27.5 14.5 34.7
At Rs. 90-6.6 At Rs. 90- 13.8
GSL$ 156.93 112.00 13.9% 13.4% 8.1% 7.7% 48.8 21.6% 90-100 3.4 6.5At Rs. 100-7.4 At Rs. 100- 15.4
*=Consolidated for FY09, $= EPS calculated on fully diluted equity, # = P/E for Q1FY10 for all companies calculated on annualised EPS
(Source: Capitaline, RHP)

Conclusion:
Alcohol industry is relatively insulated from the economic cycles as compared to other industries. Increasing disposable incomes,
favourable demographics and lower penetration of alcohol in the country offers opportunities for players in the sector. GSL has clocked
about 35% growth both in the bottom line and top line on an average in the last five years. As GSL’s facilities works on molasses and
grain, it could be able to maintain its margins through the lean sugar season expected. Launch of its own IMFL brands and increasing
it’s spread on a Pan-India basis, could help improve numbers. Its presence in Rajasthan and Haryana give it a locational advantage.

However, the industry suffers from excessive regulation by the different state governments. It faces stiff competition from established
brands in the states in which it has l aunched its brands.

GSL appears less expensive when compared to peers on an annualised EPS basis as of Q1FY09. At the upper price band, GSL is
valued at 7.4x Q1FY10 annualised EPS and at the lower price band at 6.6x, which is cheaper than big players like United Spirits and
other small players who are of similar size as GSL like Tilaknagar Industries, Radico Khaitan, etc. However only 6-7% of its sales
currently are from its own IMFL brand sales and the rest from bottling for other breweries, own brand country liquor sales and industrial
liquor. The margins in own brand sales is apparently higher than those earned on others. Valuation may expand over time as its gets a
larger pie of sales from own IMFL brands,

The issue looks fairly priced given the growth opportunities and the growth strategy of GSL. While possibility of listing premium cannot
be ruled out, the share price may not rise majorly in the near term from the initial listing price. Medium term appreciation in price could
happen once the strategies laid out are implemented over the next few quarters.

Please read important disclosures on the last page

Retail Research 7
Analyst: Sneha Venkatraman (sneha.venatraman@hdfcsec.com)
RETAIL RESEARCH Tel: (022) 6661 1700 Fax: (022) 2496 5066 Corporate Office
HDFC Securities Ltd. Trade World, C. Wing, 1st Floor, Kamala Mills Compound, Senapati Bapat Marg,
Lower Parel, Mumbai 400 013 Phone: (022) 66611700 Fax: (022) 2496 5066 Website: www.hdfcsec.com

Disclaimer: This document has been prepared by HDFC Securities Limited and is meant for sole use by the recipient and not for
circulation. This document is not to be reported or copied or made available to others. It should not be considered to be taken as an
offer to sell or a solicitation to buy any security. The information contained herein is from sources believed reliable. We do not
represent that it is accurate or complete and it should not be relied upon as such. We may have from time to time positions or options
on, and buy and sell securities referred to herein. We may from time to time solicit from, or perform investment banking, or other
services for, any company mentioned in this document. This report is intended for Retail Clients only and not for any other category of
clients, including, but not limited to, Institutional Clients

Disclaimer: HDFC Bank (a shareholder in HDFC Securities Ltd) is associated with this issue in the capacity of Refund Bankers to the issue and will
earn fees for its services. This report is prepared in the normal course, solely upon information generally available to the public. No representation is
made that it is accurate or complete. Notwithstanding that HDFC Bank is acting for Globus Spirits Ltd. this report is not issued with the authority of
Globus
PleaseSpirits
read Ltd. Readers of
important this report are
disclosures onadvised
the lastto take
pagean informed decision on the issue after independent verification and analysis.

Retail Research 8