RED HERRING PROSPECTUS Dated August 24 ... - Globus Spirits

Indian IMFL Industry has undergone a sea change ever since the world markets opened up.
World famous Scotch whisky brands are now manufactured across the country. Seagram, Liquor
Company of international repute, manufactures all its brands from grain-based ENA.
New IMFL brands are now being launched using grain ENA as raw material. The Company is in
the process of negotiating with all such buyers who need grain as raw material for their wellknown
brands. The Company feels that over a period of time Country Liquor will be
manufactured using ENA as raw material. Demand for ENA is therefore likely to go up.
The Indian alcohol industry comprises Indian Made Foreign Liquor (IMFL) like Whisky, Rum,
Brandy, Gin, Vodka, etc., which together sell 100 million cases a year; Beer sells another 90
million cases per year and Wine sells only around 5 lac cases per year.
India is emerging as the largest global market for whisky, registering sales of more than 60
million cases per annum. Other Spirits (Brown – Brandy/Rum; White – Gin, Vodka, Rum)
constitute the rest 40% of IMFL market.
Of late, white spirits although currently placed at only 5% of the market are growing at a much
faster pace of 40% p.a. as against 10% p.a. growth of the overall IMFL market.
The demand for Alcoholic Beverages has been growing at a steady pace of approximately 10%
p.a. and 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
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)
MARKETING ARRANGEMENTS FOR BY-PRODUCT
Globus is running the distillery in which Carbon-dioxide (CO2) gas is produced, which is being
vetted out.
The Company has entered into a Memorandum of Understanding (MOU) on November 16, 2005
with M/s Rishi Gase, A-401, Young Area, Sector –7, Dwaraka, New Delhi. The salient features of
the MOU are as under:
Rishi Gase has offered to purchase the waste CO2 gas and purify the same by installing
necessary plant required for the purpose for onward selling in the market. The sale of CO2 shall
be on the terms and conditions:
1. The Company will provide raw CO2 gas after covering their fermentation vessel and
scrubbing it with water to remove alcohol via pipeline upto the CO2 liquefaction plant of
Rishi Gase.
2. The Company will provide 600-800 Sq. metre of land in its premises to Rishi Gase free of
cost for putting up the required plant.
3. The Company will also construct a shed of size 70 feet by 50 feet on the above land.
4. The Company will also provide waste steam to Rishi Gase at actual cost.
5. Rishi Gase will install complete plant for purification of the gas supplied to them on the
Company’s premises including arrangements for filling the same in cylinder/tankers.
6. Rishi Gase will lift minimum of 200 MT of CO2 gas per month from the Company subject to
uninterrupted supply of gas from the Company. In case of distribution in the supply of the
gas on part of the Company, the minimum lifting will be calculated accordingly on pro rata
basis. The minimum lifting of CO2 should be based on 25 working days i.e., if the
Company is able to supply the gas for 25 days in a month Rishi Gase assures minimum
200 MT of lifting.
7. Rishi Gase shall pay to the Company the price of the gas at Rs. 500 per MT on monthly
basis. The purchase price will be first revised after a period of two years from the date of
commercial production of liquid CO2 and subsequently there will be revision after every
two years based on the prevailing market prices. The market price will be determined on
the basis of difference in bulk selling price of liquid CO2 gas of similar distillery based
liquid CO2 plants i.e., M/s Jubilant Organosys Limited etc. during the revision in prices of
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