Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 120.00 Crs. of Accord Distillers & Brewers Pvt. Ltd(Formerly known as AM Breweries Pvt Ltd)
ParticularsFacilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
---|---|---|---|---|---|
Previous | Present | Previous (02 Sep 2020) |
Present | ||
Fund Based | 85.00 | 100.00 | Long Term |
BWR BBB-
/Negative Removal from Credit Watch |
BWR BBB -
/Negative Reaffirmation |
Non Fund Based | 6.50 | 20.00 | Short Term |
BWR A3
Removal from Credit Watch |
BWR A3
Reaffirmation |
(20.00) | (20.00) | ||||
Grand Total | 91.50 | 120.00 | (Rupees One Hundred Twenty Crores Only) |
BWR has reaffirmed its rating on the bank facility of Accord Distillery and Breweries Pvt Ltd at BWR BBB-/Negative/BW A3
Outlook~ Negative
BWR expects the company to benefit from its promoter's extensive experience in the liquor industry and its market positioning in Tamil Nadu state. The outlook can be revised to stable if there is sustained growth in the revenue with improvement in operating profitability. While the outlook might change to positive if there is significant decline in exposure to group companies and improvement in financial risk profile.
KEY RATING DRIVERSCredit Strengths:
The management is well experienced in the Indian Made Foreign Liquor segment and they are supported by a team of experienced professionals. The company benefits from synergies from the Chennai based Accord group which has presence across Education, Healthcare, Hospitality, Realty, Information Technology, Liquor, Brewery, Pharmaceuticals, Power etc.
ADBPL has an established track record of nearly a decade in liquor manufacturing business and has established its brands in Tamil Nadu. The company sells its products only to TASMAC (Tamil Nadu State Marketing Corporation) owned by the Govt of Tamil Nadu. The company is well established in the IMFL and Breweries market in Tamil Nadu with a market share of around 16% in the IMFL segment and 18% in the Breweries segment.
The company’s margins remain exposed to the changes in input prices like neutral spirits, other spirits, molasses, packing materials etc in the absence of any pricing flexibility with retailers. Operating margin declined to 17.57% in FY18 against 23.77% in FY17 further declined to 12.6% in FY20 due to increase in raw material prices. Also, net profit margin declined to 4.21% in FY18 against 8.93% in FY17 and 4.77% in FY20. In FY21 the operating margin is reported at 21% on a provisional basis, the sustenance of operating margin will remain a critical factor going forward.
The Indian alcohol industry is characterized by stringent regulations and is primarily regulated by the respective State Governments. Energy state has its set of regulations with respect to distribution and retail channels, registration, taxation and pricing of alcohol. Licenses to produce and bottle are particularly scarce and contract manufacturing is a well-established market entry strategy. Government regulations will have a significant impact as the majority of the revenue is from TASMAC. Furthermore, players within the industry are susceptible to high excise duties; any adverse change in excise duties can weaken profitability, and consequently, affect its credit risk profile.
Revenue is entirely derived from Tamil Nadu, which exposes the company to geographical concentration risk. Moreover, TASMAC is the apex body that controls wholesaling, retailing, and pricing of IMFL in the region. The company supplies 100% of its production to TASMAC, resulting in revenue concentration to a single customer. Further, state regulations relating to the IMFL segment are prone to change from time to time.
The company has significantly increased its exposure towards the group entities as loans and advances from Rs 165 crores in fiscal 2018 to Rs 381 crores in fiscal 2021. The exposure to group companies is a credit monitorable factor as such investments are not yielding returns, constrains the liquidity and financial flexibility of the company.
BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale). The company does not have any subsidiaries.
RATING SENSITIVITIES
Upward factor
1- Improvement in scale of operation and operating profitability, strengthening its liquidity position.
2- Improvement in current ratio to above 2 time.
Downward factor
1- Significant increase in exposure to group companies.
2- Deterioration in TOL/TNW to more than 2 times.
LIQUIDITY INDICATORS - Adequate
The company has adequate liquidity majorly supported by high unencumbered cash and bank balance of nearly Rs 14 crore as on March 31, 2021. Further bank lines are moderately utilised on an average 70-80% in the past 12 months ended March 2021. The company is estimated to report net cash accruals of around Rs 95-110 crores in fiscal 2022 and fiscal 2023 which is sufficient against its repayment obligation in the respective period. BWR believes that unutilised bank lines, unencumbered cash and bank balance and net cash accruals is sufficient to meet its repayment obligations and any incremental working capital requirements.
ABOUT THE ENTITYAccord Distillers & Brewers Private Limited (ADBPL) was incorporated in 2010 and is located at Mahalingapuram, Chennai, Tamil Nadu. ADBPL is engaged in the production and sale of alcoholic beverages. The company produces two types of liquor viz., Indian Made Foreign Liquor (IMFL) and Brewery (beer). The Company sells its products to TASMAC (owned by the Government of Tamil Nadu). IMFL Unit manufactures ‘Indian Made Foreign Spirit’ near Kanchipuram, with a capacity to manufacture 13 lakh cases per month. Brewery Unit is a 300 HL Automatic Brewery. The unit is currently capable of producing 1 Million Hectolitres per annum which translates to 1 million cases per month. Mr J Sundeep Anand and Mrs J Srinisha are the directors of ADBPL.
KEY FINANCIAL INDICATORS (Standalone)Key Parameters | Units |
FY 20-21 (Provisional) |
FY 19-20 (Audited) |
---|---|---|---|
Operating Revenue | Rs.Crs. | 828.42 | 930.64 |
EBITDA | Rs.Crs. | 175.01 | 117.22 |
PAT | Rs.Crs. | 77.59 | 44.37 |
Tangible Net Worth | Rs.Crs. | 563.65 | 468.53 |
Total Debt/Tangible Net Worth | Times | 0.30 | 0.22 |
Current Ratio | Times | 0.93 | 0.82 |
Facilities | Current Rating (2021) | 2020 | 2019 | 2018 | |||||
---|---|---|---|---|---|---|---|---|---|
Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
Fund Based | LT | 100.00 |
BWR BBB-/Negative
(Reaffirmation) |
02Sep2020 |
BWR BBB-/Negative
(Removal from Credit Watch) |
02Apr2019 |
BWR BBB-/Stable
(Upgraded) |
NA |
NA
|
NA |
NA
|
13Jul2020 |
BWR BBB-
(Credit Watch with Term Loan Developing Implications) |
NA |
NA
|
NA |
NA
|
||
NA |
NA
|
02Apr2020 |
BWR BBB-/Negative
(Reaffirmed) |
NA |
NA
|
NA |
NA
|
||
Non Fund Based | ST | 20.00 |
BWR A3
(Reaffirmation) |
02Sep2020 |
BWR A3
(Removal from Credit Watch) |
02Apr2019 |
BWR A3
(Upgraded) |
NA |
NA
|
NA |
NA
|
13Jul2020 |
BWR A3
(Credit Watch with Term Loan Developing Implications) |
NA |
NA
|
NA |
NA
|
||
NA |
NA
|
02Apr2020 |
BWR A3
(Reaffirmed) |
NA |
NA
|
NA |
NA
|
||
NFB SubLimit | ST | (20.00) |
BWR A3
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
Grand Total | 120.00 | (Rupees One Hundred Twenty Crores Only) |
BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.
Hyperlink/Reference to applicable CriteriaAnalytical Contacts | |
---|---|
Avinash Nagesh Poojari Ratings Analyst avinash.np@brickworkratings.com |
Vidya Shankar Principal Director - Ratings Board : +91 80 4040 9940 vidyashankar@brickworkratings.com |
1-860-425-2742 | media@brickworkratings.com |
SL.No. | Name of the Bank/Lender | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) |
---|---|---|---|---|---|
1 | HDFC Bank | Cash CreditSanctioned | 50.00 | _ | 50.00 |
Sub-Limit (letter of credit) Sanctioned | (20.00) | ||||
2 | Punjab National Bank | Cash CreditSanctioned | 35.00 | _ | 35.00 |
3 | Punjab National Bank | Letter of CreditSanctioned | _ | 6.50 | 6.50 |
4 | Punjab National Bank | Cash CreditProposed | 15.00 | _ | 15.00 |
5 | Punjab National Bank | Letter of CreditProposed | _ | 13.50 | 13.50 |
Total | 100.00 | 20.00 | 120.00 | ||
TOTAL (Rupees One Hundred Twenty Crores Only) |
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