The Indian arm of Danish brewer Carlsberg is likely to file for an IPO seeking valuations close to at least Rs 10000 crore as per bankers. However, the final multiples at which it will hit the market is yet unknown. But the street is expecting the stock of UBL to get re-rated once the IPO of Carlsberg hits the market. A comparative study of Carlsberg and UBL on 3 aspects viz- Volumes, Market share and Reach draws some important conclusions:
Volumes: From the period 2011 to 2017, the volumes of UBL has grown at a CAGR of 2.5% from 125 million cases sold in FY2011 to 145 million cases sold in FY2017. Carlsberg however has grown its volumes at a scorching pace of 23.9% in this period. Although one can argue that this growth was mainly due to lower base but another player like SabMiller who is also in a nascent stage has grown its volumes by mere 4.1%. Hence Carlsberg has actually done a tremendous job as far as volumes expansion is concerned.
Market share: Although UBL has been a leader with >50% market share upto FY18, based on our estimates Carlsberg has been able to increase market share from 6% to 17%. However, UBL has been able to increase market share gains for 9 consecutive quarters in a row and hence
Reach: UBL scores on this part as it has access to all liquor vends in India (~86000 stores) while Carlsberg exact reach is not yet known but as per Industry experts it is way behind UBL on this front. One should keep in mind that Carlsberg has increase its volume at such high CAGR even with limited reach which draws an important fact that the acceptance rate of Carlsberg brand among the consumers in the market where its is operating is quite high.
The stock of UBL (CMP: Rs 1179, M.cap: Rs 31176 cr, 52x FY20E PE) already trades at a high valuation and hence the chances of re-rating are less. But ultimately it will depend on what valuations does Carlsberg seek for its listing. One would also give more weightage to the management of Carlsberg than UBL (Although UBL is being completely managed by Heineken, the ghost of Vijay Mallya is still fresh in minds of Indian investors).