Nikhil Kamath podcast: Billionaire investor and co-founder of Zerodha, Nikhil Kamath, spoke of his investment in Radico Khaitan, makers of alcohol brands such as Magic Moments vodka, 8PM whiskey, Rampur premium Indian single malt whiskey and Jaisalmer Indian craft gin.
Speaking at the latest episode ‘WTF, Alcohol is a $70B Business in India?’ of his podcast, ‘WTF is’, Nikhil Kamath said that he has around 1.6-1.7 per cent stake in Radico Khaitan. Abhishek Khaitan, MD of Radico Khaitan was one of the guests in the latest episode, along with Minakshi Singh, co-founder of SideCar, Shuchir Suri, co-founder of Gin Explorer’s Club, and Suraj Shenai, founder of Goa Brewing Co.
Introducing Khaitan, Kamath said, “We are a very small, miniature partner to Abhishek in his business as an equity partner. It is an investment that has done very well for us. We have never spoken about it publicly – I think it (the stake) is 1.6-1.7 per cent.”
The stake, he revealed, was bought in the open market, and is around Rs 400 crore. “We have Rs 400 crore of Abhishek’s stock – Radico, which is a great investment for me, so don’t blame me for being a bit nicer to him,” he jested.
As Kamath said, Radico has indeed done rather well. In fact, analysts are largely positive on the alcoholic beverage industry. They see strong premiumisation-led growth for players like Radico Khaitan over the next three years.
In a note on June 19, Antique Stock Broking said Radico Khaitan outperformed peers with a strong premiumisation trend. It noted that Radico's millionaire brands grew 7 per cent year-on-year in 2023. During the year, 1965 Spirit of Victory Rum crossed a million cases, taking its total millionaire brands to seven.
"Even on a four-year CAGR basis, Radico Khaitan has outperformed peers with 7 per cent CAGR versus it being flat for United Spirits and 2 per cent for Pernod Ricard. The opening of restaurants and bars (on-trade) led to strong recovery of Magic Moments vodka driving volume growth of 29 per cent YoY to 6.2 million cases. Magic Moments is now the 6th largest vodka brand globally. Radico Khaitan's focus on upgrading consumers from 8PM to 8PM Premium Black is gaining traction as the latter’s volume grew 18 per cent to 3.3 millioncases, while 8PM’s volume declined 2 per cent to 8.9 million cases," it noted.
THE RADICO KHAITAN STORY
The company, one of the oldest and largest manufacturers of Indian Made Foreign Liquor (IMFL) in India, had much humbler beginnings. Abhishek Khaitan’s father, GN Khaitan, bought the company from Sanjay Dalmia, Chairman of the Dalmia Group, in 1973. Khaitan said that his family has been in the alcohol business ever since.
Abhishek Khaitan said that since his school days, he had wanted to create a brand. “I love alcohol. That’s why I am happy because I practice what I preach. I love each kind of alcohol,” he said. Although he wanted to be a Chartered Accountant, his mother dissuaded him.
“So I landed up in Bangalore for my engineering and I think the kind of homework I did there by visiting the pubs, everything helped me very well. I think Bangalore has been my biggest inspiration of what Radico is today because Bangalore has always been known as the pub city. Every street had its own pub,” he said, asserting that the liquor consumption at that point – in the 90s – was not like what it is now. Alcohol was not looked at as a FMCG product. Alcohol was not a consumer’s choice, it was more of a theka system, he said. “But Bangalore was the only city where you could see liquor as FMCG,” he said.
Khaitan said that after completing his engineering in 1996, he joined the company. But eevrythig that could go wrong, went wrong for him. “We got Rampur Distillery. The turnover of the company then was Rs 70 crore, we had a liability of Rs 50 crore, and profit was kind of zero. That’s when I joined the company. We also had a bottling contract with one of the leading players in India, which got over. So our revenue system was over, the company was kind of in losses with Rs 50 crore liability. I went to one of the largest bottlers with dad, who made us wait for 5-6 hours and wanted a stake in the company,” he said.
Khaitan said he approached his father to reason with him. “I told him ‘hum mar toh gaye hai, our back is against the wall and I really want to create a brand, so let me do it’,” he said.
The intervention of the 22-year-old Khaitan propelled the company into brands. The biggest challenge, he said, was getting the leadership to agree to changing the name of the company. “It took 3-4 presentations to my senior team to suggest changing the name of the company from Rampur Distillery and Chemical Company to Radico, an abbreviation.”
(With inputs from Amit Mudgill)