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

Status of alcohol industry in India
In earlier years the policy of the Indian government was to discourage the consumption of
alcoholic beverages. This even went so far as to involve total prohibition in some states.
However, the resulting problems of illicit distillation, the leakage of government excise revenue
and the problems involved in enforcement, led to a review of this policy.
The import of potable alcohol is subject to government licensing. Alcoholic drinks carry a very
heavy tax burden which is itself a major source of revenue for state governments.
Liquor manufactured in India is categorised as beer, country liquor and Indian Made Foreign
Liquor (IMFL). IMFL production includes wines, whisky, rum, vodka, gin and brandy. Draught
beer has been recently introduced and has done well in the places in which it has been
introduced. Canned beer is an even more recently introduced new beverage.
Production of Alcohol drinks from non-molasses sources is very small in the country compared to
the total production of Alcoholic drinks. It is in this context that Government of India encourages
foreign investments as well as upgradation of technology in the field of non-molasses based
alcoholic drinks and beer, provided the Indian partner is in possession of a valid Industrial
License under Industries (Development & Regulation) Act, 1951. (Source: Ministry of Food
Processing Industries, Government of India)
According to the Reserve Bank of India’s latest report on ‘State finances: A study of budgets of
2006-07; liquor (excise) alone is slated to yield Rs. 29,533.48 crore, making it the largest
revenue source for States after sales tax (Rs. 1,20,709.15 crore). (Source: AIDA Newsletter,
February, 2007)
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 sales 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)
Industry Structure and Developments
In India, alcohol is largely produced from sugarcane molasses. 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.
The distillery industry today consists broadly of two parts, one - potable liquor and two -
industrial alcohol.
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