Mumbai: Tilaknagar Industries Ltd, the maker of Mansion House Brandy and Madira Rum, is in talks with a large European liquor company to form an Indian joint venture (JV) to become a diversified branded spirit company in the local market.

“We are in discussions with an international company that currently does not have a presence in India. This company is currently one of the top manufacturers of spirits globally by volume, and their brands will complement ours," said Lalit Sethi, chief finance officer, Tilaknagar Industries.

Sethi did not disclose the identity of the potential foreign partner and whether the talks have reached an advanced stage.

“If the alliance is formed, Tilaknagar Industries may float a separate joint venture with the international company," said Sethi, adding that the structure of the new alliance is yet to be finalized.

In the last two years, Tilaknagar Industries has doubled its manufacturing capacities by investing 200 crore. Its debt to equity ratio is 1:1. Over the past five years, the firm has also increased its distribution from one million cases in fiscal 2007 to 11 million cases now.

“The Indian company, as part of its planned expansion in the branded spirit market, has been exploring a tie-up for adding some global brands to its own portfolio for sometime now, and one of the companies that was in discussion with Tilaknagar was apparently a big distiller having distilleries in Scotland and a few other locations in Europe," said an investment banker, who did not want to be identified.

“Tilaknagar Industries is the fastest growing Indian-made foreign liquor (IMFL) company in India," said Arnab Mitra, analyst, India Infoline Ltd.

The company has a compounded annual growth rate of 40% for the past three years, which is better compared with rivals Pernod Ricard India Pvt. Ltd’s 27% and 32% growth posted by Allied Blenders and Distillers Pvt. Ltd. Market leader United Spirits Ltd posted an increase of 15% for the same period, said Mitra.

But, 85% of Tilaknagar’s sales still largely come from south India. Also, the portfolio is largely rum and needs to be more widespread to include different kinds of spirits and price points so as to appeal a wider section of consumers, said Mitra, while explaining that the new partnership would benefit the company to utilize its growing distribution network.

In the Indian liquor industry, the two existing key joint ventures between a domestic and an international firm are United Breweries Ltd (UBL) and Diageo Radico Distilleries Pvt. Ltd. While UBL, which is the largest beer maker in the country, has been quite successful, Diageo Radico is yet to make its strong presence felt in the domestic market.

With a manufacturing and bottling base of 34 units and a distribution network of 71, Tilaknagar Industries’ almost 90% sales are currently generated from south India.