Dolly Khanna's New Bet is this Multibagger Liquor Stock. Do You Own?

On Wednesday, 12 April 2023, Som Distilleries share price opened marginally higher at Rs 158.8 against its previous close of Rs 155.

To put things into context, shares of the company are currently trading near their 52-week high, but way below their all-time high level.

In 2023 so far, Som Distilleries shares have gained 30% while over the past year they're up 120%.

Out of the blue, why are we suddenly highlighting this liquor stock?

Well, the latest shareholding pattern of Som Distilleries shows that seasoned investor Dolly Khanna has picked up a substantial stake in the company in the quarter gone by.

Dolly Khanna, as we know, is renowned for choosing undervalued midcaps and smallcaps that are not well known known. She has been trading in equities since 1996.

Her portfolio is managed by her husband, Rajiv Khanna, who is usually inclined towards more conventional stocks in manufacturing, textile, chemicals, and sugar. This impressive stock-picking style has always lured investors.

Let's go a step ahead and understand why Dolly Khanna picked stake in Som Distilleries in the March 2023 quarter.

Why Did Dolly Khanna Invest in Som Distilleries?

The latest shareholding pattern of Som Distilleries shows that Dolly Khanna's stake in the company is above 1% as of March 2023. Khanna now holds a 1.3% stake in the company worth Rs 148 million (m).

Prior to this, her name was missing from the shareholders list. As per the rules, a company must disclose the identity of all shareholders who hold more than 1% of its shares.

In accordance with the latest corporate shareholdings filed, Dolly Khanna publicly holds as many as 15 stocks with an estimated net worth of more than Rs 2.4 billion (bn).

You can check out the Dolly Khanna portfolio and her top five stocks here.

Coming back to why she bought stake in Som Distilleries...

While we don't know why Khanna bought shares of the alcohol and breweries company, there are some reasons that we can guess.

If insiders of the company are buying shares from the open market, here are the general assumptions:

• It shows confidence in the company's future prospects.
• It signals to the market that the company is undervalued.
• It can lead to increased investor confidence and demand for the stock.

The latest shareholding pattern of Som Distilleries shows that the insiders or promoters have increased their stake for five consecutive quarters.

In December 2021, they held a 24.5% stake which has increased to 33.1% for the quarter that ended on 31 March 2023.

Som Distilleries Promoter Holding

Quarter Ending	21-Dec	22-Mar	22-Jun	22-Sep	22-Dec	23-Mar
Total promoter holding (%)	24.48	29.29	30.11	30.41	32.72	33.11

Data Source: Ace Equity

So one reason why Dolly Khanna bought stake can be due to the company's promoter holding on the rise. Constantly!

Some other reasons could be the company's big expansion plan and its rights issue.

In December 2022, Som Distilleries approved a proposal to set up a new canning facility and expand its existing utilities at Bhopal with an investment of Rs 1 billion (bn).

The company's expansion plan also includes expanding the brewing facility in the Hasan Plant of Woodpecker Distilleries and Breweries.

The board also approved a rights issue to fund the expansion plan. The company will issue fully paid-up equity shares of Rs 5 each, aggregating to Rs 490 m.

Healthy outlook

As demand picked up, Som Distilleries reported growth across segments for the nine months ended December 2022. The company saw strong volume growth in its key markets such as Madhya Pradesh, Karnataka, and Odisha.

The growth in Madhya Pradesh was noteworthy, which came on the back of reduction in excise duty and maximum retail prices by around 10%.

This year, the company also saw its market share go up, which came down drastically during the early pandemic days.

Going forward, the company is planning to leverage from the additional capacity expansion, particularly in the canning segment, which will enable it to capture more market share.

After delivering good set of numbers in Q3, the company mentioned in its concall that it looks to repeat the feat in Q4 given healthy volume. It's aiming for 20-25% growth in FY24.

How Som Distilleries share price has performed on the bourses

Som Distilleries shares are on a roll in the past one year, gaining over 120%.

Som Distilleries has a 52-week high of Rs 162 touched on 3 April 2023 and a 52-week low of Rs 54 touched on 12 May 2022.

Here's a table comparing Som Distilleries with its peers:

Comparative Analysis

Company	Som Distilleries	Globus Spirits	Sula Vineyards	Tilaknagar Ind
ROE (%)	-3.0	27.3	15.0	158.4
ROCE (%)	1.0	31.8	15.1	15.1
Latest EPS (Rs)	6.9	61.7	6.2	6.2
TTM PE (x)	22.5	14.1	57.1	18.7
TTM Price to book (x)	3.1	-	2.0	4.7
Dividend yield (%)	-	0.3	1.4	0.1
Industry PE	48.6
Industry PB	7.2

Data Source: Ace Equity

About Som Distilleries

Som Distilleries and Breweries manufactures and sells spirits, beer, and alcopop in India and internationally. The company offers beer, whisky, rum, vodka, brandy, etc.

It also offers ready-to-drink products under the Cosmo Cranberry, Naughty Orange, Passion Fruit, and Tangy Lemon brand names.

To know more, check out Som Distilleries financial factsheet and its latest quarterly results.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...