Kaya Spirits - Best Distillers 2018 Kaya Spirits Annual Information Memorandum 2019 | Page 23

Frequently Asked Questions by
Investors/Distributors
Q. Turnover of Kaya blenders and distillers is
not there in the past financial year
A.Liquor is one of the hardest businesses to get
into in India. It is due to the fact, that liquor is a
State Government Controlled Business. In India,
each state/union territory, has their own State
Excise Norms while doing business in the
respective state/union territory. Last year, most
of our stock, was being manufactured in Punjab
State at BCL Industries, Bhathinda. The Punjab
State Excise Policy norms state that any
Manufacturing Company ( Seagram's, Radico
Khaitan, KBDL, etc. ) who do not have their own
Bottling plants in Punjab State, cannot do billing
of the sales in their books and the sale is being
done through the bottling plant. This is the
compulsory condition that each Liquor
Manufacturing company has to follow while
doing business in Punjab. Thus, all the
transactions have been made in books of BCL
Industries Ltd. Therefore, no turnover of the
sales is reflected in the books of Kaya Blenders
and Distillers Limited (KBDL). All products
manufactured are the Intellectual Property of
KBDL. KBDL reserves the Trademark Rights of all
the products and the Excise Documents
(Permits, Indents, etc.) are of our Trademarked
and Patented Products and their Blends. All the
steps of production and marketing are done by
KBDL only – including Blending, Quality Control,
Raw Material Procurement, Logistics,
Marketing, Promotional Campaigns, etc.
Q.New Brands will not do well in the Market
A.India is the largest consumer of the whisky in
the World and still the Liquor Industry is growing
at a CAGR of 8.8%. In the whole liquor Industry,
certain segments like Wine and Vodka are
growing at a Remarkable 22% CAGR. Also, as
the Social Acceptance of Liquor is increasing and
the addition of new individuals in the Millennia,
who are willing to try and taste new products as
this Millennial is an Experimental Class. This
phenomenon is backed by the Growth in the
Wine and Vodka segment. Another point to
consider is that the Competition in the Liquor
Industry is less than any other industry. In Liquor
Industry, there are only 2-3 Brands that give
competition in each segment, thus, the place to
establish a new product is wide open as
penetration into the market and the store
Visibility of the product is much higher than in
any other industry.
Q. How can Royal Patiala and Old professor
whisky can compete with the Royal stag and
44 Kaya Blenders & Distillers Limited
royal challenge brand which are well
established.
A.The segments of Royal Patiala, Old Professor,
etc. are being set by the specific state excise
department only. For example, if our brand Old
Professor has been placed in the Royal
Challenge Segment, it means that our brand is
no less than Royal Challenge in quality wise. As
we are SME, our top priority focus is on Quality
Control and there is a complete uniformity in
our blends. Given the fact, that our blends are of
equal quality to that of Royal Challenge, the
customer's satisfaction is guaranteed and the
customers won't find it hard to shift on our
brand and this will be a new and different
change from their existing brands. Also from
Marketing point of view, Stakeholders like
Wholesalers and Retailers are more interested
in our product as without compromising on
quality we offer them much higher rebates than
established brands like Royal Stag and Royal
Challenge. Selling our brands means more profit
to them as well, thus they are keener on placing
our products and doing secondary sales. Thus,
our market penetration also gets easier.
Q. Are there any new brands in the past who
has been able to make the presence in the
market?
A. Bira91 is one of the most prominent example
of establishing its name in the market. Bira91 is
able to capture huge market share of
competitors like Kingfisher and Haywards. The
millennials wanted a new product and they got
that in Bira. Bira exploited the Craft Beer
Segment and placed the product into the Craft
Beer Category with 7% Alcohol Intensity.
Q. How is he investment of investor is secure
? As there is no asset in the company and no
collateral with the company
A.Investing in any Business is not just investing
in Collaterals, its investing in the ideas, the
people and the team. But also keeping in mind
the hesitation of the Investor in a comparatively
new company like us, we have developed a
Minimum Risk Investment Proposal. The money
raised through the investor, is kept in a Joint
Bank Account, whose Power of Attorney can
also be shared with the Investor. This Joint Bank
Account can be used to pay the duties to the
State Governments and proceeds of the sales
from the government come directly into this
account only. Thus, the investors' money is
secure and he can also keep a check on his ROI
and utilisation of the funds taken from the
Frequently Asked Questions by
Investors/Distributors
Investor.
In another module, the investor can
directly invest in the company through Private
Equity/Hybrid Capital wherein there is a
minimum ROI that can be achieved through the
investment and as due to the High Turnover
Nature of the Liquor Industry, the sizes of the
company grow manifold with each passing day,
that ensures a good probability of getting higher
than usual profits. Also, new company like BIra,
got millions of funding without any collateral
and sale only. The investors just saw the
potential in the product and the trajectory and
cap size of the market.
Q.What if company is not able to get the license
of the target state as it is very difficult to get the
license?
A. KBDL currently has licenses in 13 states in
India. And all these licenses have been procured
within a span of 1 year only. Our in house expert
team of Legal Consultants, Financial Consultants
and Liquor Trade Experts, along with an
aggressive expansion strategy of the Core
Management Team has lead us to procure
licenses in 13 states in India. The above fact, acts
a proof of our abilities and speaks volumes
about the efficacy and competency of our team
in getting through labyrinth of Governmental
Procedures. In the worst case scenario, if there
is any delay in procuring the Licenses, the
company ensures a minimum ROI to the
investor till the licenses have been approved in
the respective state.
Q.How will company manage the logistics
part?
A. The company currently has a state of the art
MIS that manages all the operations of the
company centrally throughout India and
Overseas as well. The company has tie-ups with
all the leading logistics firm in different part of
India for Domestic Transportation and for
Export Orders as well. The company takes full
responsibility of Transporting the Orders from
the Manufacturing Unit to the Warehouse of
the respective state. The cost of logistics,
protection of the goods while transportation,
timely delivery of the consignment and all the
other things related to logistics are the
responsibility of the company.
Q. What is risk if government godowns are
loaded with company stock and no sale
happens ?
A.First of all, the company ensures a proper
marketing and promotional strategy that is
deployed in the respective state after doing
various rounds of Market Research of the
market and the flow of the movement of the
product. After keeping all the nitty gritty in
mind, a proper marketing strategy is developed.
The process of Sales Generation in a
Corporation Market is of that the orders have to
be placed to Government Godown by the
retailers. Our marketing team ensures that
orders are being placed by the Retailers in
Government's Godowns. Subsequently, for
repeat orders, attractive schemes for the
primary consumers are also launched from time
to time. And all the other necessary strategies
and plans are taken and kept into provision
while doing business in any state. But, even after
all the efforts done by us, in the worst case
possible scenario, the stock is not uplifted from
the Government's Warehouse, then the
company will bear the loss of the stock.
Q.Reason for less Paid up capital V/S
authorised Capital
A. The reasons for less Paid Up Capital against
the Authorised Capital are that since the
company in its existence of 3 years, has not
taking any kind of loan or funding in the past,
thus, the funds generated through doing
business was being utilised as Working Capital
towards expanding the base of the company
rather than building the Capital of the Company.
This is also a silver lining for the investors, that if
the investors are directly investing into the
Capital of the company, the probability of
getting high returns is also increased manifold.
Q.What will be the ROI on the investment
made by investor?
A. KBDL gives 10% of the EDP to its State
Business Channel Partners/Investors of the sale
in the particular state. The 10% of EDP is
dependent upon the quantum of sales and can
be up to even 30%-40% with just capturing 1%-
2% of the market share. However, KBDL ensures
that minimum 15%-18% ROI (depending on
state to state and subject to the amount and
nature of investment) is given to the Investors
on his investment.
Q.In case of refund or exit how can one have his
investment back ?
A. In the MoU of the deal, all the probable Exit
Options/Buy-Out Options are made available to
the investor depending upon the size and the
nature of the investment. There is a time limit
clause in the MoU that adheres both the parties
to mutually settle their accounts within a
specific period of time. At this stage, KBDL has
kept the Exit and Refund Clauses very flexible to
ensure the Guarantee and Safety of the
Investment. All the Security Deposits also are
Refundable Adjusted Security Deposits to the
ensure safety of the investment.
Q.What will be the breakup of Investment and
mode of paying amount to investor?
A. The break-up of the Investment is contingent
upon situation subject to the size and the nature
of the Investment. The Mode of the payment to
the investor can be through RTGS/NEFT at the
time of Exit or Buy-Out.
Q.What about the excise and payment from
government? In how many days payment will
come and in which bank account the
government will pay the Payment ?
A. In each state, the Company has to nominate
one account to the Government from where all
the Excise payments in the Form of DD (Demand
Draft) will be made to the government and the
Government in turn, after the sale will deposit
the Complete Amount of the Sales in the same
bank account only. In this Joint Account, the
investors can also have Signing Authority and
deposit their funding in this account only, that
will be used just for Excise Payment and then the
Investor, has to transfer the surplus in our
Centralised Bank Account. The Credit Time
period in each state is different. The time period
after which the payment will come, ranges from
3 days – 30 days.
Q.Why consumer will prefer new brands at
same price ?
A. India has amongst the youngest population in
the world. 60% of the population is under the
age of 30. Further, over 50% of the population is
in the working age of 22- 54. And Drinking is fast
becoming as increasingly Social Acceptance
Factor due to the modernization. Per Capita
Consumption of alcoholic drink is increasing at a
record high 15% CAGR. And the consumers,
prefer new and home-grown brands. To justify
this, here is a little case study from the Liquor
Industry: - “Even international giants like SAB
Miller and Carlsberg have not been able to grow
their own brands significantly. SAB Miller
leveraged its acquired Indian brands like
Haywards, Knock Out and Royal Challenge to
become a leader in the industry.” Thus, with just
6-7 market leaders in Pan India, the market is
ripe and according to the experts, “it is one of
the most profitable time to invest in the Liquor
Industry as the Demand is increasing rapidly and
the supply is not met, which leaves a gap for the
entry of the new players in the market.”
Q.How can we say that our brands re in same
segment of royal stay or royal challenge or
blenders pride?
A. This statement is not what we are claiming.
The State's Beverages Corporations, while
registering the new brand and providing
licenses to the companies, asks the
Manufacturers to submit the Cost Sheet and List
of Raw Materials, along with this, samples of
products are produced in from the Government
to justify our Cost Card. Then, the government,
after their own neutral evaluation place the
products into different segments like Royal Stag,
Royal Challenge, Officer's Choice, Blender's
Pride, etc. The government does this so after
calculating EDP ( Ex-Distillery Price ) from the
Cost Sheet shared by the manufacturer.
Q.What will be the assurance that consumers
will like the taste of new blends ?
A. A lot of Research and Development goes into
the development of Blends at KBDL. Our in-
house R&D Team has their own Blend Banks and
day-in &day-out, they continuously keep on
developing the blends formulas after putting
various Permutations and Combinations into
consideration. These Blend Formulas are then
made into sample products and a complete
Market Consumer Research is done in the Pilot
Test Markets through various tests like Blind
Taste Test, FGDs, Stakeholder's Interview, etc.
After getting research feedback from the
market, the blends have to be again approved by
the Management Committee after studying the
Quality Control Measures put in place to ensure
the uniformity of the Blends approved. And this
R& D is a continuous process, even before the
launch of the product into the market, according
to the feedback of the Research Team, minor
tweaking is done in blend (while maintaining its
authentic nature) according to the Taste and
Pellets of the consumers of the market. This
research keeps going on even after the Post-
Launch so that the company is abreast to the
changing and the dynamic demands of the
consumers.
Q. Since the company is new and brands are
also new , How can the investor be assured of
investing in the company ?
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