Radhakishan Damani owns 29% of this debt-free FMCG cash machine. But there’s a catch

While it might not seem so, these are not random side bets. Both businesses sit in the same bucket of Indian consumption that Damani has quietly favoured for over 10 years now – habit-led, cash rich, light on capex and hard to disrupt. While the broader market debates AI plays and defence multibaggers, the founder of Avenue Supermarts is sitting on a tobacco-plus-beer pair that prints cash through every part of the economic cycle.

The thread running through both names is simple. Demand for affordable smokes and accessible beer does not collapse in a slowdown, and it does not explode in a boom. It just keeps moving. Both companies have proven pricing power, both pass on government tax hikes without losing volumes, and both have low capital needs once their plants are running. For a man who built his fortune on slim retail margins, owning the cash-printing end of the Indian consumer is a perfectly logical hedge.

#1 VST Industries: The 29% Holding That Mints Crores in Dividends

Incorporated in1930 as Vazir Sultan Tobacco Company, VST Industries Ltd is in the business of manufacturing and trading cigarettes and tobacco products. With a market cap of around Rs 4,388 cr, the Hyderabad-based company is the third largest cigarette player in India, with a volume share of close to 8%. Its key brand Total is among the top 10 in the country, and its regional strength runs deep in West Bengal, Andhra Pradesh, Telangana, Bihar and UP.

The promoter on paper is British American Tobacco, which holds 32.16% through its arms. But the largest individual shareholder is Damani, with a 29.1% stake worth roughly Rs 1,277 cr as on 24^th May 2026. This is the second biggest line in his publicly disclosed book after Avenue Supermarts, and it has been built patiently through the years.

Apart from Damani, Parag Parikh ELSS Tax Saver Fund also bought a 1.9% stake in the company as per the filings for March 2026.

Why Damani refuses to sell: The cash machine behind the smoke

The numbers tell a clear story about why this is more about cash flow than glamour.

The company is debt-free. Borrowings on the balance sheet have stayed at zero for over a decade. The dividend payout has been parked between 65% and 80% for years now, with the FY25 payout at 75%. That gives the stock a dividend yield of about 4.7%, which is exceptionally high for an FMCG name as the industry median is barely 0.8%.

The 10-year average ROE is 30%, and even the recent 3-year ROE has held at 23%, though last year it slipped to about 16.5% as profits compressed.

Operating margins, while down from the 33-37% peaks of FY20-FY22, are still in the 20-23% range. Cash flow from operations as a percentage of operating profit was 101% in FY25, which is the kind of conversion most consumer companies can only dream about.

The numbers behind the dividend magic

Looking at the long-term financials, the picture is one of plateau rather than growth. This is exactly the sort of business that throws off cash without needing to be fed.

Consolidated 5-Year Financials for VST Industries

Financial Year	FY21	FY22	FY23	FY24	FY25	FY26	5-Yr CAGR
Sales/Rs Cr	1,111	1,178	1,292	1,420	1,398	1,465	6%
EBITDA/Rs Cr	411	412	383	353	279	450	2%
Net Profit/Rs Cr	311	320	327	302	290	292	-1.3%

The slow growing sales CAGR explains why the stock has underperformed in the broader rally. Volumes have been hit by sharp excise duty hikes and a surge in illicit cigarette trade, while raw material costs and the National Calamity Contingent Duty have squeezed margins.

But here is the twist. In April 2026, the company reported FY26 net cigarette revenue growth of 25%, EBITDA growth of 61% and net profit of Rs 292.3 cr. The stock jumped close to 19% in a single session on the back of this turnaround, suggesting that the volume recovery is finally showing up on paper.

The share price of VST Industries Ltd was around Rs 300 in May 2021 and as of closing on 22^nd May 2026 it was Rs 258. In the last 1 year, the stock has logged a fall of close to 21%. That is what makes the current setup interesting for a long-term holder.

Share Price of VST Industries Ltd

The Valuation Setup

The current PE is 15x, which is the same as the current industry median. The 10-year median PE for the company sits closer to 20x, while the broader industry has historically traded at about 22x for the same period, with ITC and Godfrey Phillips both fetching richer multiples.

The market is essentially valuing VST at a discount to its own long-term average, despite the company being almost debt-free, paying out three-quarters of its profits, and operating in a category with very limited new competition.

For Damani, this works on three levels. The dividend yield alone covers part of his opportunity cost. Pricing power acts as a natural inflation hedge, since the company passes on tax hikes through MRP revisions. And the asset-light model means cash thrown off does not get re-invested in heavy capex, leaving more for shareholders.

The flags worth tracking are working capital days, which have stretched from around a negative 58 days in FY21 to 285 days in March 2026. The cash conversion cycle has also more than doubled from 148 days to 305 days in the same period.

#2 United Breweries: The Quiet 1.2% India’s Largest Beer Maker

If VST is the cash cow, United Breweries Ltd is the growth optionality in the barbell. Incorporated in 1915 and headquartered in Bengaluru, UBL is the country’s largest beer maker, with the iconic Kingfisher franchise and the Heineken portfolio under licence. Its brand stable includes Kingfisher Premium, Ultra, Strong, Ultra Max, Heineken Silver and Amstel Bier.

With a market cap of around Rs 34,775 cr, the company commands a beer market share north of 50% across most major states. The promoter is Heineken International, which controls 70%. Damani’s arm Derive Trading and Resorts has held around 1.2% in UBL for more than 10 years now, valued at roughly Rs 428 cr at current prices.

Small Stake, Big Impact

The argument for owning UBL is not the absolute size of Damani’s position, but the structural story he is buying into. Beer consumption in India is still a fraction of what it is in markets like China, Brazil or Mexico on a per-capita basis. State-level liberalisation, the slow shift towards premium variants and the rise of metropolitan drinking culture together provide a long, slow tailwind.

What makes UBL interesting from a Damani lens is that it shares the same DNA as VST. It is a near-monopoly business in its category, with brand loyalty that is hard to break. Excise duties keep climbing, but the company has been able to take price hikes in most states without losing volumes. Aluminium and barley inflation is a recurring headache, but localisation of premium supplies and productivity gains pushed gross margins to 45% in Q3 FY26, which the company has called the highest in three years.

Financials for UBL show that the company bounced back from a tough patch.

Consolidated 5-Year Financials for United Breweries Ltd

Financial Year	FY21	FY22	FY23	FY24	FY25	FY26	5-Yr CAGR
Sales/Rs Cr	4,243	5,838	7,500	8,123	8,915	9,240	17%
EBITDA/Rs Cr	381	697	616	696	841	806	16%
Net Profit/Rs Cr	114	366	305	411	442	413	29%

While FY21 was heavily impacted by the pandemic as bars and restaurants stayed shut for months, the company’s five-year recovery has been anything but muted. Sales have compounded at a stellar 17% CAGR, while EBITDA and Net Profit clocked impressive CAGRs of 16% and 29% respectively.

This structural growth is further validated by recent momentum: three-year sales growth stands at 15%, and the sales of Rs 9,240 cr is the highest in the company’s history. Operating margin has successfully crept back to around 9% from its lows.

In the most recent quarter, the company posted a 4% rise in net sales, aided by selective price hikes and a better product mix. Looking ahead, management has guided for 6-7% volume growth over the medium term. Combined with an aggressive push toward premiumisation, this volume runway could lift operating margins materially higher.

The share price of United Breweries Ltd was around Rs 1,275 in May 2021 and as of closing on 22^nd May 2026 it was Rs 1,315, which is a small jump in 5 years. The stock is however down about 38% over the last year, sliding from 52-week highs of around Rs 2,135 to Rs 1,315 as on 22^nd May 2026.

Share Price of United Breweries Ltd

This dip has come on the back of slower volumes in some southern states, an Andhra Pradesh tax overhang, and a GST demand of Rs 32 cr that the company is contesting. UBL also won a Maharashtra Sales Tax Tribunal appeal in May 2026, where a demand of around Rs 275 cr for FY18-19 was reduced to nil.

The Valuation Conundrum – Trap or Opportunity

This is where it gets uncomfortable. UBL trades at a PE of roughly 93x, while the industry median currently is about 32x. Even by FMCG standards, this is rich. The 10-year median PE for the company is also 109x and the industry median for the same period is 21x,

The market is paying up for two things. First, the scarcity premium. There are only a handful of large listed alcohol-beverage plays in India, and UBL is the biggest pure beer name. Second, the Heineken parentage, which keeps capital allocation disciplined and brings global know-how.

Damani has held his position through all of this without visible trimming, which tells us he is watching the volume cycle and not the headline PE.

Why the Sin & Solace Barbell Works for the DMart Owner

When you put VST and UBL side by side, the design becomes clear. Both are addictive consumption businesses, both have dominant market positions, both are run by professional managements with foreign parentage, and both throw off cash without needing constant fresh capital.

The dividend stream from VST, going to Damani is steady and tax-efficient income. UBL provides longer-duration growth on the premiumisation trend, even if today’s multiples are demanding.

For a man whose own listed firm DMart is constantly hungry for store expansion capital, having a defensive cash machine like VST and a slower-growth, brand-led optionality like UBL is the kind of structural balance most retail investors miss. Damani is not chasing the next theme. He is owning the parts of the Indian consumer story that compound quietly, year after year.

Investors looking for fireworks in his portfolio will keep being disappointed. The man is running a long-duration bet on the unglamorous Indian consumer. The cigarette buyer in tier-3 towns, the Kingfisher drinker at a Mumbai bar, the DMart shopper in Thane. These habits do not change with election cycles or interest rate moves. They just keep showing up, week after week.

A smart way to not miss out on any big movements in these stocks is to add them to a watchlist and keep a vigilant eye on them.

Disclaimer

Note: We have relied on data from www.Screener.in and www.trendlyne.com throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.

The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.

Suhel Khan has been a passionate follower of the markets for over a decade. During this period, He was an integral part of a leading Equity Research organisation based in Mumbai as the Head of Sales & Marketing. Presently, he is spending most of his time dissecting the investments and strategies of the Super Investors of India.

Disclosure: The writer and his dependents do not hold the stocks discussed in this article.

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