Perpetual says cheers with Mendis

Dubbed as the new kid in the market Perpetual Capital Ltd., of young Arjun Aloysius fame, last week acquired the controlling interest of well known liquor manufacturer W.M. Mendis and Company.

The acquisition though of an unquoted venture is the most significant by Perpetual which has made a sensation with a series of strategic investments in listed stocks.

The deal is also expected to have good synergies between Perpetual and Freelanka Group, a top importer of spirits and wines, with which the former has close relations.

W.M. Mendis is among the four major players in the country’s liquor industry dominated by business tycoon Harry Jayawardena-controlled Distilleries. The other two are International Distilleries, and Rockland.

The price paid for controlling stake in Mendis and Company by Perpetual is believed to be over Rs. 1 billion and industry analysts said that given the new focus, dynamism and strategic inputs, more consumers are likely to say cheers with the Mendis brand.

Mendis also appears to be the latest strategic buy of a growing portfolio of Perpetual.

Among its equity portfolio are 15% stake in HDFC Bank, 11% in Central Finance, 12.8% stake in Lanka Ashok Leyland, 12.8% stake in Bairaha Farms, around 3% stake in LOLC, 4% stake in DIMO as well as stakes in CIC  Holdings.

Analysts consider liquor business as a ready-cash generator though highly competitive and often inflicted by taxation which drives commoners to illegal spirits. That apart, the strategy of focusing on private equity and synthesising it with capital markets could be the rationale of Perpetual in its foray into liquor business via W.M. Mendis and Company acquisition of control.

The market is also seeing a shift to locally manufactured foreign liquor segment.  In 2010/11, Distilleries enjoyed a Rs. 41 billion turnover from its beverage business, up from Rs. 31.4 billion in the previous year.

Originally a top contender to the market share W.M. Mendis together with Harry J were bidders for the jewel in the liquor industry Distilleries. Subsequently the Mendis brand of liquor faced numerous handicaps as well as disadvantages but given the true entrepreneurial spirit, founder Mendis had remained a steadfast fighter and the brand has struck some recent success.

Headquartered at Narahenpita W.M.Mendis & Co. Ltd. has its distillery in Beruwela whilst the fully automatic bottling plant with German inputs is at Welisara. It is among the most renowned liquor manufacturers in Sri Lanka. Among the pioneers the company established in 1960 claims to produce the finest arrack in the world with Mendis Special as the most favourite among consumers.

The company’s product range has 27 varieties and includes pure coconut arracks, old arracks, blended arracks and foreign liquors. Many of these spirits are exported, and are increasingly becoming popular around the world.

The unhurried traditional process used in producing arrack distinguishes the Mendis range from all other products.

Mendis Special Arrack which is the first product manufactured by the Company in the year 1960, and the arrack is distilled in the Pot Still manufactured in France and matured for a minimum period of 3 years in casks and vats made of Oak wood. It is also sold in Singapore, Japan, Spain, Portugal, and the United Kingdom and other European countries like France, Germany and Italy. Mendis also bottles Brandy, Dry Gin, Lemon Gin, Vodka, Rum, Red Velvet Coconut Whisky and Coffee Liqueur.