Happy hours have started for India’s third largest player in the beer market. The Danish Brewery Carlsberg that goes by the tagline of “probably the best beer in the world” is planning to launch initial public offerings (IPO) of its Indian businesses. With 13.7% market share and 8 breweries in India, Carlsberg seems to have its all pints full.
Founded in 1847 by Jacob Christian Jacobsen, Carlsberg entered Indian market in 2006 though it was widely consumed since 1900s through various companies. With brewery expansion, market penetration, quality brands and strong teams, Carlsberg India saw initial success by becoming the number 3 player in the market within its first 4 years of operation.
Attracted by the high valuations in the Indian stock market, the Danish brewer is now interviewing potential arrangers for the share sale over the next few weeks in the Indian stock market. India’s beer market is expected to grow to $10.7 billion by 2020, up from $8.6 billion last year, according to Euromonitor International. Further according to data compiled by Bloomberg, United Breweries listed on the Indian stock market, trades at about 73 times this year’s estimated earnings which probably is the reckoning force behind Carlsberg’s plan to list its business on the Indian exchange.
Rising disposable incomes and changing attitudes toward alcohol among young urban consumers make this a well-timed move on Carlsberg’s part but the question that still remains is that of timing. The company needs to quicken its move before the market’s thirst for new stocks is quenched by increasing interest rate by U.S. Federal reserves. The other big hurdle to growth is taxes. Having surrendered control over most other sales charges to a nationwide goods and services tax, Indian states will increasingly rely on liquor levies to create fiscal space for discretionary spending. Passing on this cost increases to consumers in a price-sensitive market like India will also delay the explosive volume growth the Danish would hope to see.
With general elections due next year, any irrational increase in taxes is not expected. Overall, the time is ripe to enter the market and if everything goes well, Carlsberg beer as well as shares might be quenching our thirst for foreign equity this summer. Cheers!