Financial Daily from THE HINDU group of publications
Thursday, Mar 03, 2005
Khodays close to signing deal to hand over spirits biz rights
Bangalore , March 2
THERE is more big news pouring in from the Indian spirits industry.
The House of Khodays, the domestic liquor powerhouse of yesteryears, is close to signing a deal to hand over the marketing, distribution and manufacturing rights of its popular Indian Made Foreign Liquor (IMFL) brands to a strategic ally on a long-term arrangement.
The deal, with significant ramifications for the Indian liquor industry, will see the potential ally gaining access to the 10 bottling plants owned by Khodays across the country, as it garners the manufacturing rights of the Khoday brands except in Karnataka.
Informed sources said Mr Harminder Singh Bagga, the Hyderabad-based cash rich liquor distributor, has emerged as the front-runner and is likely to shell out Rs 30 crore upfront (besides royalty on sales) to snap up the deal, which would give him the rights to manage brands such as Peter Scot Whisky, Red Knight Whisky, Hercules Rum and Khodays Rum.
If Mr Bagga takes home the transaction, he would have pipped the likes of Bacardi Martini India Ltd, the Ramesh Vangal managed Mason & Summers and the Kishore Chhabria promoted BDA Ltd, which were in talks with Khodays to corner the deal.
Sources said Khodays and Mr Bagga are likely to sign memorandum of understanding on March 10. When contacted, Mr Bagga confirmed talks but said there was no final agreement yet.
The Bangalore-based Khodays occupied significant space in the Indian liquor industry for almost three decades starting the latter half of the `60s. Its frontline brands such as Peter Scot and Red Knight were touted as one among the first Indian whiskies of international standards and carved out a respectable share in the premium end along with Shaw Wallace's iconic Royal Challenge Whisky. The brands suffered setbacks in the last one-decade as Khodays splintered their focus with diversification into power, biotech and call centre businesses.
However, the brands continue to enjoy high recall in most markets, which had prompted current domestic heavyweights - UB - and multinationals like Bacardi to look at it.
In the context, the latest move by Khodays to handover the rights of its spirits brands on a long-term arrangement is a significant development in the 100 million cases strong IMFL industry.
Mr Bagga and his family is considered as one of the powerful liquor distributors in the country after handling the portfolio of UB and Shaw Wallace for many years.
But a likely transaction with Khodays would require new skills and may prompt putting up a team to sustain the brands.
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