Summer Internship Report

Fundamental Analysis on Radico Khaitan

Submitted By
Sonali
2K22/DMBA/127

Under the Guidance of

Dr. Archana Singh
(Head of department)

DELHI SCHOOL OF MANAGEMENT

Delhi Technological University
Bawana Road Delhi 110042
Executive summary
Company Overview:
Radico Khaitan, a prominent player in the Indian alcoholic beverages industry, has a rich
heritage spanning over seven decades. The company is engaged in the production, marketing,
and distribution of a diverse range of alcoholic beverages, including Indian-made foreign
liquor (IMFL), Indian-made Indian liquor (IMIL), and premium products. Radico Khaitan has
successfully established a strong presence in both domestic and international markets.

Financial Performance:

Revenue Growth: Radico Khaitan has consistently demonstrated robust revenue growth,
driven by its extensive product portfolio and effective marketing strategies. The company's
ability to capture market share and adapt to changing consumer preferences has contributed
to its revenue expansion.

Profitability: The company has maintained a steady and healthy profitability. Sound financial
management, cost control measures, and a focus on efficient production have resulted in
strong profit margins.

Debt Management: Radico Khaitan has effectively managed its debt, maintaining a favorable
debt-to-equity ratio. This prudent financial approach has contributed to the company's
financial stability and sustainability.

Market Position:

Brand Portfolio: Radico Khaitan boasts a diverse and well-recognized brand portfolio,
including popular products such as Rampur Indian Single Malt, Magic Moments Vodka, 8
PM Whisky, and Morpheus Brandy. This extensive product range allows the company to
cater to a wide spectrum of consumers, establishing a strong foothold in the market.

Market Expansion: The company has not only solidified its presence in the Indian market but
also expanded internationally. Radico Khaitan's global aspirations indicate its commitment to
diversifying revenue streams and capitalizing on emerging markets.

Industry Analysis:

Regulatory Environment: The alcoholic beverages industry in India is subject to stringent

regulations and excise duties. A thorough understanding and compliance with these
regulations are essential for Radico Khaitan to navigate the industry successfully.

Market Growth: The Indian alcoholic beverages industry continues to experience steady
growth, driven by evolving consumer preferences and a burgeoning middle-class population.
Radico Khaitan is well-positioned to capitalize on this growth trend.

Competitive Landscape:
Competition: Radico Khaitan faces competition from both domestic and international players.
The company's success hinges on its ability to innovate, maintain product quality, and
effectively market its brands in a highly competitive environment.

Distribution Network: The company has established a strong and extensive distribution
network, enabling it to reach a broad customer base across India and beyond.

Risks:

Regulatory Risks: Changes in alcohol-related regulations or excise duties could significantly

impact Radico Khaitan's operations and financial performance.

Economic Factors: Economic fluctuations or downturns may influence consumer spending on

alcoholic beverages, affecting the company's revenue.

Conclusion:
Radico Khaitan is a well-established and thriving company in the Indian alcoholic beverages
industry, with a diverse brand portfolio and a consistent track record of financial
performance. Despite regulatory challenges and fierce competition, the company's prudent
financial management, market expansion efforts, and commitment to quality position it
favorably for future growth. However, potential investors should remain cautious of
regulatory risks and economic factors that could impact the company's prospects.
Introduction
1.1 Background
a) Industry overview
India is one of the alcoholic beverage markets with the quickest growth.
Numerous elements, such as a sizable middle-class population with greater
purchasing power, rising urbanisation, shifting consumer preferences, and fewer
cultural restrictions on drinking, have all contributed to a rise in the demand for
alcoholic drinks. Taxes on sales in this industry provide income that is among the
top-three revenue-generating industries for state governments, and the industry
produces substantial employment, both direct and indirect.
The states regulate the entire alcoholic beverage supply chain, from production
and distribution to registration and licencing procedures, labelling and packaging
specifications, and sale, through their excise policies. One of the main ways that
the states operate is through price regulation regulating this industry. Although
pricing guidelines and governance frameworks differ between nations, this creates
multiple channels for getting to market. Policy changes are frequent and sporadic,
which results in unpredictability and discouraging manufacturers and distillers
from making advance business plans. The differences differences in operational
procedures and laws among states have increased the burden of players
throughout the supply chain, which results in a low level of business comfort.
India is the outcome of it decreasing the idea of India as a single market by
becoming a fragmented market.
The industry is further divided into 4 broad categories :
• Indian Made Foreign Liquor(IMFL): These are the type of the liquor that
are domestically produced apart from the indigenous alcohol beverages,
for any alcohol to be categorized as IMFL it has to have a minimum of
42.5% alcohol in it.
• Beer: This segment consists of all kinds of beers ranging from strong to
mild, where in the market is highly dominated by the United Breweries.
• Wine: India is a huge market for the wine industry both produced
domestically or the ones being imported, the three main categories are –
red wine, white wine and rose wine. The majority of the consumers of this
segment belongs to the middle-class urban population.
• Indian Made Indian Liquor (IMIL) or Country Liquor: These are the ones
that are produced domestically or locally in the country. Almost every
state in India has its regional drinks that are consumed locally.
The Industry is drived primarily by the following factors:

Driver 1 – Income growth

Middle class expansion and Transformation of consumption
emergence of a sizeable High-Income profile.
segment
Driver 2- Rapid Urbanization
Dispersed urbanization and rural Growth of rural consumption and
income growth breakdown of the urban-rural
paradigm
Driver 3 – Favourable dynamics
A working age majority A more aware and aspirational young
millennials
Driver 4 – Technology and Innovation
Existing technology backbone New tech and business model
innovations
Driver 5 – Evolving Consumer Attitudes
Preferences led by lifestyle and Alcobev becoming more socially
premiumization in addition to acceptable
necessities, health & leisure
Spirits industry In india

b) Market dynamics
One of the world's fastest-growing marketplaces for beverages, India's spirits business has
recently seen unheard-of expansion. The Indian Council for Research on International
Economic Relations (ICRIER) anticipated that the market for alcoholic beverages in India
would be worth 52.5 billion USD (or around Rs. 4 lakh crore) by 2020. Between 2020 and
2023, the market is anticipated to expand at a CAGR of 6.8%. The third-largest alcoholic
beverage market in the world is found in India. Compared to the global average of 6.2 litres,
India's per capita alcohol consumption is quite modest at little under 5.5 litres. Numerous
causes, like escalating urbanisation, increased disposable income, and shifting consumer
preferences, can be linked to this growth.
In India, the rate of alcohol use has increased during the past three decades. The quick
recovery of alcohol during the epidemic demonstrates the enormous domestic market. Due to
India's rapid population growth, 13 million persons of legal drinking age are born each year;
of these, at least 3-5 million will eventually consume alcohol, indicating a significant rise in
the country's overall alcohol consumption rate.
Due to the alcohol industry's rapid growth, consumption patterns are drastically altering, with
new, unexpected trends appearing every year. Indians are the world's biggest whisky
consumers, according to data. India is also the ninth-largest alcohol consumer in the world in
terms of volume of consumption.
Emerging players in the market
In order to capitalise on the development potential in this business, numerous new Indian
companies have joined the market with a variety of fresh concepts and intriguing new
alcoholic beverages.
In order to carve out a position in the market, certain made-in-India firms have begun to
emphasise authenticity, craftsmanship, and innovation in their products. In this sense, two
categories—high-quality local liquor created in India and typical craft booze—have formed
within the premium and semi-premium markets.
Due to this, the Indian alcohol sector is seeing a wave of locally produced, premium-level
brands enter several categories and perform far better than their imported equivalents.
Challenges faced by Indian Liquor Industry:
1. Regulatory Hurdles - The liquor industry in India is heavily regulated, with a
complex web of laws and regulations governing production, distribution, and sale.
This can make it difficult for companies to navigate the system and can lead to delays
and bureaucratic red tape.

2. High Taxes - The liquor industry in India is subject to high taxes, which can drive
up the cost of production and reduce profit margins. In addition, taxes can vary widely
from state to state, making it difficult for companies to plan and budget effectively.

3. Changing Consumer Preferences - As India's economy grows and consumer

tastes evolve, companies in the liquor industry must adapt to changing trends and
preferences. For example, there is a growing demand for premium and craft spirits, as
well as low-alcohol and non-alcoholic beverages.

4. Distribution Challenges - The distribution system in India is highly fragmented

and can be difficult to navigate, particularly for small and medium-sized companies.
This can make it challenging to get products to market and can limit the reach of
companies in the industry.

5. Competition - The liquor industry in India is highly competitive, with several large
players dominating the market. This can make it difficult for new and innovative
companies to gain a foothold and compete effectively.

c) Company overview
Formerly known as Rampur Distillery, RKL commenced its operations in 1943 and over the
years, emerged as a major bulk spirits supplier and today, it is one of the most admired liquor
brands across the country.

One of the country’s most prestigious and valuable companies with a strong brand portfolio,
Radico Khaitan Limited is also one of the largest providers of branded IMFL to the Canteen
Stores Department (“CSD”), which has significant business barriers to entry. The company
has been successfully building its brand equity in international markets and currently exports
its products to over 85 countries.

The Company currently has two distilleries- Rampur Distillery in Rampur (Uttar Pradesh)
and Radico NV Distilleries Maharashtra Limited, a joint venture with RNV in Aurangabad
(Maharashtra). The company has a total capacity of over 157 million litres and operates 28
bottling units, spread across the country.

All the leading publications including The Economic Times, Business Today Magazine, The
Financial Express, Business Standard, Forbes and Fortune listed Radico Khaitan Limited
among the top 500 in the list of India’s most valuable companies. In one of the significant
achievements in 2020, when the entire industry and the economy were trying to overcome
numerous challenges, Radico Khaitan managed to become a Fortune 500 company as well.

Radico Khaitan Limited currently has four millionaire brands in its portfolio; 8 PM Whisky,
Magic Moments Vodka, Contessa XXX Rum and Old Admiral Brandy.
The company's robust brand portfolio also includes Rampur Indian Single Malt Whisky,
Jaisalmer Indian Craft Gin, Magic Moments Verve Vodka, Morpheus Premium and
Morpheus Blue Super Premium Brandy, 8PM Premium Black Whisky, After Dark Whisky,
Pluton Bay Rum, Regal Talon Whisky, Whytehall Brandy, 1965 - Spirit of Victory Rum to
name a few.

The chart depicts that among its peers Radico Khaitan hold a market share of about 7% of the
alcoholic beverages market .

Company Journey
Manufacturing and Distribution Platform
Strong backward integration to secure quality long term raw material supply

Brand Portfolio
Most brands launched in the last 15 years have been in the premium category.
Broad choice of the consumers with focus on premium brands.
1.2) Problem Statement
Financial performance is an arbitrary process describing how effectively it uses its resources,
increases revenue, and manage its debts. Any company’s financial health can be evaluated
through its analysis. An extensive analysis of a firm’s financials such as capital appreciation,
expenses and borrowings, income and financial results can be calculated by using the variety
of financial formulae to give users a true image about its future’s efficacy.
These financial statements are created to understand the financial situation at year’s end and
their performance over the years. These thus are a crucial historical document describing the
events that have occurred over a specific period of time.

However, the most important information for most of the users of financial statements are
concerned with forecasting the future through comparative evaluation and analysis.

Radico being the 4th largest and fast growing liquor industry in India has been gaining
significant market share and profit margins as a result of growing youth population, growing
brand awareness and growing consumer knowledge. Pandemic had an effect on various
businesses around the globe, liquor being the one specifically affected along with pharma
industry etc., while most of the stores, shops, business was moving towards decline and at a
halt, liquor industry was the one that was operating with minimum changes in its operating
mechanisms. Thus, for uncertain events and smooth functioning of business, company needs
to study significantly the Y-O-Y% growth, distribution of profits of its segment in order to
take the strategized and improved decisions. Hence the project focuses on analysing the
financial performance, future expected growth and strategies followed by the company.

1.3) Objective
1. To analyse the Financial performance of Radico Khaitan Ltd. , which includes
assessing the solvency position and financial viability , profitability, liquidity,
utilisation of fixed assets , working capital management and return on capital
employed.
2. To study the strategic management aspects of the organization.
3. To perform SWOT , PESTEL and PORTER’S 5 FORCES model of the company
4. Comparative analysis of year 2021 and 2023.
1.4) Scope of the study
Financial statements are a medium to know about a company’s financial stability and its
growth potential which is the rate at which it shall grow in the near future. Making decisions
entails the process of reviewing and analysing these statements and reaching on to a
conclusion. Stakeholders can make better investment decisions by using the financial analysis
to evaluate a company’s overall performance , thus , to check the effectiveness and
performance of Radico Khaitan Ltd. the report provides a thorough financial report. The
primary goal to the study is to analyse 3 years worth of data on Radico Khaitan performance
to find trends.

The purpose of the report is to provide stakeholders with information about the financial
performance of the company, including its weakness as well as strengths as well as other
matters, and to support management by providing financial performance analysis, paving the
way for making through financial performance predictions and providing management and
the relevant government body with ideas for setting and industry’s benchmark.

Thus , the scope of the report is to disclose the financial performance condition of the firm to
its stakeholders paving the way to make comprehensive financial performance future
predictions and to give supportive idea to the management. The project will also be useful
because it makes a comparison between the year’s data and last year’s data, showing the
various trend analysis.
LITERATURE REVIEW
1. Gopalkrishna Gururaj, Melur S. Gautham, Banavaram A. Arvind(2021)aimed at
analysing the burden of alcohol use in India. A relationship between the taxation and
pricing policies were established stating that the taxation policy and pricing policy
were revenue oriented. Policies are needed to address the aggressive and innovative
marketing strategies of the alcohol industry. It was also found that the prevalence of
alcohol use varied across states with considerable impact on the nation. The per-capita
alcohol consumption among individuals aged 15+ years was 5.7 L, which increased
over time. Stating that alcohol use and its public health impact would continue to
increase in India in the absence of effective policy and programs. Also, the burden of
alcohol usage and its effects have been less than entirely managed by the country's
current alcohol control laws and programmes. To effectively direct and support the
Indian states in regulating alcohol and easing the accompanying burden, a
comprehensive, evidence-based, and consensus-driven national alcohol control policy
is required. The key to its success is how well these policies are put into practise.
2. V. M. Anantha Eashwar, R. Umadevi, and S. Gopalakrishnan (2020) concluded
that alcoholic beverage is one of the most important products of global addiction.
Alcohol consumption tends to be a major issue in developing nations like India
because of the nation's diverse socio-cultural practises, the states' various alcohol
policies and practises, the community's lack of awareness of alcohol-related problems,
the deceptive mass media's portrayal of alcohol use, the variety of alcohol consumers'
drinking habits, and the emergence of social drinking as a habit due to the country's
pervasive urbanisation. To minimise alcohol consumption, authorities must enact
strict alcohol laws. Additionally, people must be made aware of the many negative
impacts alcohol intake may have on their body, mind, and spirit. This review article
focuses on the cost of alcohol usage in relation to its many negative effects on the
body and mind with a comment on national alcohol laws. The study also focused on
the various medical complications due to alcohol: Gastrointestinal, cancer, changes in
genitourinary system, muscular changes, neurological complications, psychiatric
complications.
3. Abhijit Nadkarni , Arjun Kapoor , Soumitra Pathare (2020) concluded that
alcohol use is a complicated and unforeseen result of the lockout that has implications
for the economy, society, medicine, and ethics. People with alcohol dependence had
withdrawal symptoms, alcohol was sold illegally, and in extreme cases, people
committed suicide as a result of the lockdown and accompanying acute lack of access
to alcohol. The health issues associated with this situation are both biological (such as
putting people in potentially fatal alcohol withdrawal situations, drinking illicit or
other non-consumable alcohol), as well as psychosocial (such as isolation increasing
the risk of relapses, loss of control over the decision to abstain, which can be harmful
to recovery, and restriction of access to services for alcohol problems). The legal and
rights-related conundrums revolve around whether States have the right to infringe on
individual autonomy for the sake of public health, the ability of health systems to
provide adequate services to deal with those who will struggle with the lack of
alcohol, the constitutionality of the Central government infringing on state jurisdiction
under the guise of a health emergency caused by the pandemic, and the ability of the
State to conduct. The best course of action might involve maintaining access to
alcohol for those who want to keep drinking while adhering to all physical
 segregation norms required during the pandemic, and implementing novel strategies
like tele-counselling for those who don't want to start drinking again.
4. Jim McCambridge , Rachel Coleman , & Julie McEachern (2019) concluded Six
studies from high-, middle-, and low-income nations that were completed and
published between 2000 and 2015 were determined to be appropriate for this study.
Whether at the corporate, sectoral, or industry level, business interests dominate
political strategy, and CSR initiatives may be incorporated into overarching plans.
Because of the rising concentration of global producers competing in increasingly
oligopolistic marketplaces, there is a high level of collaboration in the formulation of
political strategies between businesses. There are little methodological data and few
insights into the dynamics of market competition. PHS studies are helpful in
identifying parts of alcohol industry strategy that call for more in-depth and
meticulously planned research as well as in clarifying the implications for world
health. Additional PHS and other types of research will support initiatives to lessen
the global burden of alcohol-related disease.
5. Dr. Sandeep Sachdeva, Pt B. D. Sharma(2014) About 150 (43.5%) of the
individuals knew something about the harmful effects of drinking. Of the total
number of participants in the study, 326 (94.4%) were men, and 66.3% of these men
drank country spirits. Nearly 239 people (73.3%) drank at their own houses or the
homes of their friends. A total of 281 respondents (86.2%) purchased alcohol from a
store in the hamlet; 132 respondents (40.5%) reported spending an average of Rs 500–
900 per month; and 38.3% of subjects did not pair their alcohol intake with any
snacks. 194 (59.5%) males reported that drinking had become a habit, but according
to their own assessments, 131 (40.2%) of them thought that drinking was a problem
and that they wanted to stop.
6. B. M. Tripathi ,Pertti J. Pelto & H.K. Sharma(2010) This paper delves into the
historical trajectory of alcohol production and consumption in India, spanning from
ancient times to the contemporary era. The intricate and often contradictory attitudes
towards alcohol use in India are traced through four key historical periods. The Vedic
era laid the foundation, followed by the emergence of Buddhism and Jainism,
introducing anti-alcohol doctrines. The Islamic influence period showcased a complex
interplay between widespread alcohol use and Quranic opposition. The fourth period,
spanning British colonial rule to present times, reveals contradictions in alcohol use
patterns, ranging from acceptance in certain societal sectors to prohibitions, especially
among the Brahmin caste. The study highlights the need for a nuanced understanding
of India's complex history of alcohol use, given the current challenges, including
increased consumption and health risks.

7. Binod K. Maitin(2022) The predominant alcoholic beverage in India is whisky,

categorized under Indian-made foreign liquor (IMFL), which includes whisky,
brandy, rum, gin, and vodka. Indian whiskies are unique, often blended with extra
neutral alcohol (ENA) derived from cane molasses, though there's a recent shift
towards using grain-based ENA for premium blends. Economy whiskies use ENA and
flavorings, while premium blends may include Indian and/or Scotch malts. Some
whiskies are exclusively Indian malts. The chapter explores the sensory and chemical
aspects of Indian whiskies, emphasizing the benefits of ENA in terms of hangovers
and metabolism for East Asians. It also discusses the increasing popularity of
premium whisky, the younger demographic's interest, the role of social media, rising
female consumption, and challenges posed by government regulations and taxation.
8. Palak Aggarwal , Rajeev Kumar , Ramesh Kumar Pandey , Mahipal Singh
Sankhla(2020) paper primarily focuses on the various types of adulterants
found in liquors and outlines different tests and techniques for their detection.
The objective is to ensure the safety and quality of alcoholic beverages while
protecting consumers from potential health hazards associated with
adulterated liquor consumption. India ranks as the world's third-largest liquor-
producing country, with a significant distinction between country-made and
Indian-made foreign liquors (IMFLs). Government policies have imposed
restrictions on foreign liquors, leading to a surge in country-made liquor
production. However, country-made liquors are often plagued by quality
issues and adulteration due to cost-cutting measures.
Adulteration in liquors primarily serves the purpose of reducing production
costs. It can manifest in two ways: altering the concentration of the beverage
or adding substances like methanol. Additionally, some hard compounds,
such as fusel oil and urea, may naturally occur during manufacturing, while
others like iron and copper can be introduced during blending. Furfural is
another impurity that may result from fermentation. Unfortunately, there is a
lack of proper purification processes to eliminate these compounds.

9. Pham, Cuong V. ; Tran, Hanh T. D. MEpi; Tran, Ngan T. (2018)MPH41.1% of

people reported drinking alcohol in the month before the interview, with 75.1% of
men and 17.3% of women. 31.7% of the 41% of alcohol consumers who reported
binge drinking in the previous 30 days. Additionally, it was discovered that men were
more likely than women to binge drink. There was a statistically significant
correlation between current drinkers and binge drinkers and gender, neighborhood,
educational attainment, and family income level.
Research methodology
The project is based on analysis-based research where the research is made by using facts or
information already available, and further evaluation has been made. The project depends on
existing data for research work and analysis revolves round the material collected or available
The financial performance analysis is based on annual report from span of year 2020 to 2023
for accurate result and correct interpretation to analyse the financial performance of Radico
Khaitan Ltd which includes assessing the solvency position and financial viability,
profitability, liquidity. utilisation of fixed assets and working capital management.
In year 2019, Covid 19 resulted in formidable outbreak result in massive losses to businesses
around the world but the liquor industry however wasn't much affected. People were still
consuming alcohol infact more at home as a result of being confined to their homes and,
which had increased the demand for alcohol, long cues were also seen for the same. After the
lockdown, consumers continued to stay at home out of fear of contracting an infection, which
helped to keep demand for these products steady as they also thought that liquor somehow
keeps one from getting mutated with the virus. So, the project will also analyse the strategies
followed by Liquor industry and Radico Khaitan to survive the pandemic and comparative
study from 2020 and year 2023.
Accurate sales forecasts keep management content, your company growing, and sales team
motivated. Making informed, deliberate sales decisions will be facilitated by having a general
understanding of what to anticipate because sales are the backbone of any company structure.
Radico’s growth will be compared with Liquor Industry average and historical/past trends to
forecast future sales and profit at Radico in order to help management take informed
decisions.
Data collection
The study is based on secondary data that was gathered from paper articles, webpages, and
the company's annual reports from financial year 2019-20 to financial year 2022-2023
Microsoft Excel will be used to compile and tabulate the data, and it is also used to present
the information using informative charts and graphs.

Financial analysis is used to assess economic trends, establish financial guidelines, create
long- term business activity plans, and pinpoint potential investment opportunities. This is
accomplished by combining financial data and numbers. A financial analyst will carefully go
over the income statement, balance sheet, and cash flow statement of a company. Both
corporate finance and investment finance environments are suitable for conducting financial
analysis.

Calculating ratios from the data in the financial statements to compare against those of other
companies or against the company's own historical performance is one of the most popular
methods for analysing financial data.
Data Analysis
The process of analysing financial data using a variety of accounting tools and techniques in
order to assess the risk and profits of a company is known as data analysis and its
interpretation

5.1 Common size Statement

Financial statements expressed as proportions are a common size statement. A typical size
income statement would therefore treat the base figure as 100%. The income statement's
expenditure will then be broken down into percentages of sales. Similar to this, the total
assets figure is regarded as 100% in common size balance sheets. The percentage of the same
is used to express everything else.
As per the calculation the following has been concluded:

• There has been an 8% increase in the Total non-current assets indicating that a
company has acquired more long-term resources or assets such as property,
• There has been an 8% increase in the borrowings, total non-current liabilities
indicating that public debt will go up and risks a larger fiscal deficit on account of
higher interest payments. , where as an increase in the non-current liabilities has a
considerable level of long term debt, which raises the chance of default
• A 7% increase in the capital work in progress indicating that the company is in
process of constructing and developing long-term assets
• There has been a decline of 4% in the trade receivable signifying that the company
has been facing the issue of recovering the money from its debtors.
• A significant 9% decline in the equity indicating the probability of accumulates losses
, assets write downs, an increase in liabilities , share re-purchases or dividend
payments.
Profitability analysis :
A profitability analysis provides the details necessary to fully understand an organization's
ability to generate income. It provides how well a company is performing 'under the hood'
and it helps to identify where the company is doing well, and where gaps exist.

The analysis above concluded that:

• There is a decline in PBDIT margin by 33% indicating low profitability and cash flow
problems in the organisation.
• The net profit margin of the company declined in the year 2023 when compared with
2019 by 27% stating that the company is presently ineffective cost structure and/or
poor pricing strategies.
• A decline on return on capital employed of 48% and a decline of 34% in return on
assets indicating that the company isn’t using its capital efficiently and isn’t
generating a high return on investment
• There is a 28% increase in the total debt/equity indicating that the company is highly
leveraged.
• Asset turnover ratio that measures how effectively a company is using its assets to
generate revenue, as there is a decline of 99% in the year 2023 as to compared with
2019 indicates that the company’s inefficiency in using its assets to generate sales .
Liquidity Analysis :
Liquidity is required for a business to meet its short term obligations. Liquidity ratios are a
measure of the ability of a company to pay off its short-term liabilities. Liquidity ratios
determine how quickly a company can convert the assets and use them for meeting the dues
that arise.

On assessing the various liquidity ratios, it was concluded that:

• There is steady rise of 130% in the dividend payout ratio(NP) indicating the dividend
payout ratio calculated on the basis of Net Income as the basis, a rise of 109% in
dividend payout ratio(CP) taking free cashflows as the basis, a steep rise indicates
that the company is paying out a larger proportion of its earnings as dividends , i.e
also paying more than its earnings.
• There has also been seen that the organisation has a decline of 48% in inventory
turnover ratio indicating that the company is overstocking it’s inventory and
indicating weak sales

DIVIDEND PAYOUT RATIO

14.56

10.11
19.61
8.23
6.89 6.97
12.72
9.87 8.54
8.48

Mar-23 Mar-22 Mar-21 Mar-20 Mar-19

Dividend Payout Ratio (NP) (%) Dividend Payout Ratio (CP) (%)

Graph depicting the trend in the dividend payout ratio

• The liquidity ratios can be used to evaluate a business's ability to turn its product into
cash or the effectiveness of its operating cycle. Companies with slow asset turnover or
difficult receivables collections may have cash flow problems as in oder to cover their
debts. For good health companies, acceptable current ratio standards typically fall
 between 1 & 3. A higher ratio shows that the company is capable of meeting its
obligations, similarly , radico’s current ratio over the year have ranged between 1-3.
• Radico’s quick ratio stands at 1.07 implies that company is sutaibly meeting its short
term debts.

Valutaion Ratio Analysis :

The valuation ratio measures the relationship between the market value of a company or its
equity and some fundamental financial metric. The point is to show the price one is paying
for some stream of earnings, revenue, or cash flow.

The following has been concluded on conducting the valuation ratio analysis:

• An increase of 98% is observed in EV/R indicating that the market has faith in the
company and is willing to pay money for its products or on sales.
• There is an increase in the price/BV of the company by 85% indicating that the stock
is expensive in nature that is the market value is higher that its book value
• It was observed that there is an increase of 109% of Market Cap/ Rev ratio indicating
that there is a potential that the company is overvalued in the market.
• A decline can be observed in the retention ratio of the company by 12% implying that
the company is retaining less and paying out more in its dividends and employing the
less funds in the long term assets or future plans.
 Roe & Du-Pont Analysis:
Roe calculation:

The ROE analysis shows that over the years from 2014-23 the average ROE is of 11.02%
whereas there is a decline when compared with the year 2022 of (25.25%) though when
compared to the year ‘14-’23 there is a slight increase of 4%.

Du-Pont Analysis:

ROE when broken down via the du-pont analysis , shows that there is significant increase in the
interest burden over the years , a slight increase in the tax burden and the asset efficiency whereas a
significant decline in the leverage margin.
 Fundamental analysis of the company
a) Economic analysis
The economy is affected by several macro economic factors, these macroeconomic
factors act as the unsystematic risk for the company.
These factors are:
i) Inflation: With persistent inflation and high taxation the alcohol industry slowly moves
into the deep crisis . With the lack of pricing freedom the industry seems to be slowly
crippling. Industries ranging from automobiles to pharmaceuticals have raised prices to
counter inflation, but the liquor industry doesn't have that liberty. Thus as with the
inflation rising and the profit margins for the alcohol industry shrinking , it therefore
leads to more cost bearing for Radico Khaitan in the industry.
ii) Industry Production: The alcohol industry’s production is derived and dependent on
the molasses and the grains, though the raw materials are readily available to the
company but as the government has started its orientation towards green initiatives thus
the production from molasses have shifted towards production from the granules thus
increasing the cost for the company in raw material procurement and production
iii)Fiscal Policy: Monetary policy is shaped by large financial institutions in both the
public and private sectors. Large banks and government agencies make decisions that
impact interest rates, inflation and federal budgets. This guides the flow of money in
circulation within an economy.
iv)Taxation Policy: State excise policies play a significant role in shaping the landscape
for alcohol producers, distributors, and consumers. High taxes and strict regulations can
lead to increased prices for consumers and operational challenges for businesses. On the
other hand, lenient policies may promote growth in the industry but could also raise
concerns about public health and social issues related to alcohol consumption. Thus, this
leads to determining the prices for Radico as well as the whole industry.
v)Employment: The unemployment rate of a country offers an indication of the
economic health of a nation. A higher employment rate versus those unemployed
indicates a stronger economy. When a majority of citizens are employed, their spending
increases the amount of money in circulation and boosts the economy.Thus, with the
increase in the spending levels of the consumers, the consumption capacity also increases
leading to higher sales for both the industry and the Radico.
b) Industry analysis
● SWOT Analysis:

STRENGTHS WEAKNESS

• Strong brand recognition • Low loyalty among suppliers

• Success of new product mix • High turnover of employees
• Talent management • Gross margins & Operating
• Track record of innovation margins
• High margins • Low investment into customer
• Market leadership position oriented services
• Depletion of niche markets
• High cost of replacing existing
experts

OPPORTUNITY THREATS

• Fast changing consumer • Distrust of institutions and

preferences increased threat of legal actions
• Rapid expansion of economy • Changing political environment
• Local collaboration. • Competitors catching up with
• Accelerated technological product development.
innovation and advances • Commoditization of product
• Opportunity in online space segment
• Trend of customers migrating to • Competitive pressures.
high end products
 ● PESTEL Analysis:

PESTEL Analysis is a framework specifically for analysing the macro-economic factors that
impact a business or industry. It is further divided into Political, Economic, Social,
Technological, Environmental and Legal analysis.

Political:
Regulatory Environment: Radico Khaitan operates in an industry heavily regulated by
government policies, including licensing, taxation, and advertising restrictions. Changes in
alcohol-related regulations can impact the company's operations and profitability.

Taxation Policies: Fluctuations in alcohol excise duties and taxes can affect the pricing and
demand for Radico Khaitan's products.

Other stakeholders: Such as non-government organizations, protest & pressure groups,

activist movements play critical roles in policy making in India. Radico Khaitan should
closely collaborate with these organizations so that it can contribute better to the community
goals as well as with corporate goals.

Economic:
Economic Conditions: The company's performance is influenced by the overall economic
health of India and other markets where it operates. Economic downturns can lead to reduced
consumer spending on discretionary items like alcoholic beverages. The volatile exchange
rate of India can impact Radico Khaitan investment plans not only in the short term but also
in the long run.

Exchange Rates: As Radico Khaitan expands internationally, fluctuations in exchange rates

can impact its profitability, especially if it imports raw materials or exports products.

Availability of core infrastructure in India : Over the years India government has
increased the investment in developing core infrastructure to facilitate and improve the
business environment. Radico Khaitan can access the present infrastructure to drive growth in
the Consumer/Non-Cyclical sector in India.
Social:
Changing Consumer Preferences: Health and wellness trends may lead to shifts in
consumer preferences towards lower-alcohol or alcohol-free beverages. The company must
adapt to changing consumer demands.

Cultural Factors: Cultural attitudes towards alcohol consumption vary across regions, which
can impact the acceptance and consumption of Radico Khaitan's products.

Attitude towards health and safety : With increasing liberalization the attitude towards
health and safety are getting lax. Radico Khaitan needs to stay away from these attitudes as
the cost of failure is too high in India.

Education level : The education level is high in India especially in the Radico Khaitan
sector. Radico Khaitan can leverage it to expand its presence in India.

Media outlets play a critical role in influencing the public opinion in India. Both traditional
media and social media are rapidly growing in India. Radico Khaitan can leverage this trend
to better market and position its products.

Leisure interests : the customers in India are giving higher preferences to experiential
products rather than traditional value proposition in Consumer/Non-Cyclical sector. Radico
Khaitan can leverage this trend to build products that provide enhanced customer experience.

Technological:
Technological innovation is fast disrupting the supply chain as it is providing greater access
to information to not only supply chain partners but also to wider players in the
Consumer/Non-Cyclical industry.

5G and its potential : Radico Khaitan has to keep a close eye on the development and
enhancement of user experience with increasing speed and access. This can completely
transform the customer user experience in the Beverages (Alcoholic) industry.

Maturity of technology: The technology in the Beverages (Alcoholic) sector is still not
reached maturity and most players are vying for new innovations that can enable them to
garner higher market share in India.

Technology transfer and licensing issues for Radico Khaitan :In the Consumer/Non-
Cyclical sector there is no strong culture of technology transfer and companies often are
reluctant to transfer or license technologies for the fear of creating competitors out of
collaborators.
Environmental:

Recycling: Recycling is fast emerging as a norm rather than a good thing to do in India
economy. Radico Khaitan has to make plans to adhere to regulations and expectations in the
Consumer/Non-Cyclical sector.

Extreme weather is also adding to the cost of operations of the Radico Khaitan as it has to
invest in making its supply chain more flexible.

Regular scrutiny by environmental agencies is also adding to the cost of operations of the
Radico Khaitan.

Renewable technology is also another interesting area for Radico Khaitan. It can leverage
the trends in this sector. India is providing subsidies to invest in the renewable sector.

Waste management especially for units close to the urban cities has taken increasing
importance for players such as Radico Khaitan. India government has come up with strict
norms for waste management in the urban areas.

Customer activism Greater awareness among customers have also put environmental
factors at the center of Radico Khaitan strategy. Customers expects Radico Khaitan to adhere
to not only legal standards but also to exceed them to become responsible stakeholders in the
community.

LEGAL

Legal protection of intellectual property, patents, copyrights, and other IPR rights in
India.

Health and safety norms in India and what Radico Khaitan needs to do to meet those norms
and what will be the cost of meeting those norms.,whether the employees working in the
distillery are working in a safe or hazardous environment or within the safety standards.

Business Laws The business laws procedure that India follows. Are these norms consistent
with international institutions such as the World Trading Organization, European Union etc.
 ● PORTER’S 5 FORCES MODEL

Porter's Five Forces model is a framework used to analyze the competitive forces within an
industry that can affect a company's profitability and competitive position. Here's a Porter's
Five Forces analysis of Radico Khaitan Limited within the alcoholic beverage industry:

Threat of New Entrants:

High Barriers to Entry: The alcoholic beverage industry often has high barriers to entry,
including regulatory approvals, significant capital requirements for production facilities,
distribution networks, and brand development.

Established Brands: Radico Khaitan has established brands like Magic Moments, Rampur
Indian Single Malt, and Old Admiral, making it difficult for new entrants to compete on
brand recognition.

Bargaining Power of Suppliers:

Limited Supplier Power: Radico Khaitan likely has a relatively lower bargaining power of
suppliers since it sources raw materials like grains, water, and packaging materials from a
variety of sources.
Switching Suppliers: The company can switch suppliers relatively easily, reducing supplier
power.

Bargaining Power of Buyers:

Moderate Buyer Power: Buyers in the alcoholic beverage industry can have some
bargaining power due to a wide range of choices available. However, brand loyalty and
differentiated products can reduce this power.

Price Sensitivity: Consumers can be price-sensitive, especially during economic downturns,

affecting demand.

Threat of Substitutes:
Moderate Threat: There are potential substitutes for alcoholic beverages, such as non-
alcoholic beverages and other forms of entertainment. However, alcohol often serves specific
social and cultural purposes, reducing the threat of substitution.

Health Trends: Increasing health-consciousness may lead to consumers seeking non-

alcoholic or low-alcohol alternatives, but this threat varies by market segment.

Rivalry Among Existing Competitors:

High Rivalry: The alcoholic beverage industry is highly competitive with several established
players. Radico Khaitan competes with both domestic and international brands.

Product Differentiation: Differentiation is essential in this industry, with companies

continually introducing new flavors and products to stay competitive.

Advertising and Marketing: Rivalry extends to advertising and marketing efforts to capture
consumer attention and market share.

In summary, Radico Khaitan faces a competitive landscape with high rivalry and the need
for product differentiation. While the threat of new entrants is relatively low due to barriers to
entry, the bargaining power of suppliers is also moderate. The bargaining power of buyers is
influenced by brand loyalty and price sensitivity. The threat of substitutes is present but may
not be as significant in certain market segments. To maintain its competitive position, Radico
Khaitan must continue to invest in brand building, innovation, and marketing while managing
supplier relationships and monitoring changing consumer preferences.
Ref:

https://onlinelibrary.wiley.com/doi/abs/10.1111/dar.13179

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7014857/

https://www.sciencedirect.com/science/article/pii/S0160252720300388

https://www.jsad.com/doi/full/10.15288/jsad.2019.80.149

https://journals.lww.com/mjdy/Fulltext/2014/07020/Alcohol_consumption_practices_amongst_a
dult_males.4.aspx

https://link.springer.com/article/10.1007/s10461-010-9727-7

https://www.sciencedirect.com/science/article/abs/pii/B9780128220764000279

https://journals.lww.com/jphmp/abstract/2018/03001/alcohol_consumption_and_binge_drinkin
g_among_adult.10.aspx