Khoday to Acquire Australian winery for $50 million

After UB and Indage, another Indian company is planning to buy an overseas winery. Bangalore based liquor giant, Khodays is about to acquire a winery worth $50 million in Australia, reports the Economic Times.

Indage acquired the Australian-based Tandou winery for an estimated $10 million last year. Vijay Mallya owned United Spirits' acquired the Loire Valley bubbly producer Bouvet Ladubay this year for € 15 million, which has been the biggest purchase of an overseas winery so far, making Khodays' planned purchase the largest.

Khodays has been showing interest in developing a wine business for the last couple of years and has held talks with several overseas wine producers to sell their wines but with negotiations making no headway.

In fact, due to operational problems within the family, business has taken a back seat. The company has been trying to bring the liquor business, having popular labels like Peter Scot and Red Knight, back on tracks.

The move to buy a winery of this size is rather surprising. Australian wine industry has gone through a major glut and is barely recovering. The imported wine industry in India has a future with several challenges. With lack of experience in wine marketing, the company lags behind the existing importers. Sustaining a winery of this size may be rather challenging.

"We have kept aside Rs 1,000 crore ($250 million) for acquisitions and expansion over the next two years," says Mr. L Srihari, MD of Khodays, without giving any details.

Perhaps, the company is riding high and is flush with funds and has a lot of confidence with the share prices sky-rocketing from Rs. 35 last year to Rs 262. It plans to take advantage of the high prices and rake in Rs.620 million ($15.5 million) from the market. Market sources also indicate that resources will be generated internally by selling some pieces of land and also raising some debt.

The Australian wine industry has been grappling with the excess problems. Howling Wolves had announced entry into India through a partner. Burmans-owned Dabur has also forged alliance with the Australian wineries. However, Khodays will be treading a difficult path because of the high cost of acquiring and the market uncertainty.

Khoday India reported the revenue of Rs 1200 million ($30 million) in 2006-07. It hopes to double the sales this year with a target of Rs 2500 million during 2007-08.
The company which has business interests in engineering, construction, glass and bottle manufacture, biotechnology, agriculture and power is also looking at leveraging its land bank to enter the hospitality space. They are already in talks with a few global brands to build a luxury hotel in Bangalore.





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