Rating Rationale
Brickwork Ratings reaffirms ‘BWR BBB’ & ‘BWR A3+’ of John Distilleries Private
Limited’s Bank Loan Facilities revised from ₹202.50 Cr to ₹176.44 Cr.
Brickwork Ratings has reaffirmed the Ratings1 of John Distilleries Private Limited’s (JDPL or
the ‘Company’) Bank Loan Facilities revised from ₹ 202.50 Cr to ₹ 176.44 Cr at ‘BWR BBB’ for
Long Term Bank Credit Facilities of ₹ 166.94 Cr & ‘BWR A3+’ for the Short Term Bank Credit
facilities of ₹ 9.50 Cr as:
Facility
Term Loan
Corporate Loan
Fund Based
Working Capital –
CC/EPC/FBD
Non Fund Based
Working Capital –
Bank Guarantee
Non Fund Based
Working Capital –
Letter of Credit
Total
Previous Present
(₹ Cr)
(₹ Cr)
10.50
9.44
65.00
57.50
115.00
100.00
12.00
7.00
-
2.50
202.50
176.44
Tenure
Rating
Long Term
Reaffirmation
BWR BBB
(Pronounced BWR Triple B)
(Outlook: Stable)
Short Term
Reaffirmation
BWR A3+
(Pronounced BWR A Three Plus)
INR One Hundred Seventy Six Crores and Forty Four
Lakhs only
Note: The term loan/Corporate Loan is Outstanding as on Oct 2014; Continuation of Export packing Credit (EPC)
of Rs.2Cr as a sublimit of CC (Stocks); Foreign Bills Discounting (FBD) Non LC of Rs.3Cr as a sublimit of CC
(Receivables); Break-up of the Bank Loan facilities is as per Annexure;
BWR has principally relied upon the audited financial results of John Distilleries Private
Limited for FY13, FY14 and projected financials for FY15 and FY16, publicly available
information and information/clarification provided by the Company management.
The rating factors in the strength of the promoters and key management personnel, increasing
capacities to tap the market during FY15 and timely servicing of its debt obligations. The rating
is however constrained by, the near- stagnant topline and reduced profitability in FY14 due to
limited capacity in capturing the changing the market preference from bottle to tetra pack in
quantum of 90 ml and 180 ml, competitive industry, volatility in raw material prices and ability
to improve the company's margins and liquidity position and maintain profitability while
achieving the envisaged growth.
Background
John Distilleries Private Limited (JDPL), incorporated in 1996, is engaged in the business of
distillation, packaging, distribution, marketing and sales of Indian Made Foreign Liquor. JDPL
1
Please refer to www.brickworkratings.com for definition of the Ratings
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has its presence in eleven States and does business through multiple models like own, lease &
tie- up facilities. It also exports to Middle East & African Nations, apart from tie-ups with
European nations.
JDPL operates with its owned units located at Bangalore, Goa, and Maharashtra, and leased
units located at Haryana, Hyderabad ,Telangana, ) and Davangere. JDPL's Original Choice
Whisky is the seventh largest-selling liquor brand in India and among the 20 largest selling
brands globally, with production capacity of ~9.82 lakh cases per month which is expected to
increase to ~11.53 lakh cases per month. JDPL has around four per cent share in the 260million-cases of Indian Made Foreign Liquor (IMFL) market. JDPL, promoted by Mr. Paul P.
John, is a Company with a net revenue of ~Rs.455 Crores (FY14).
Promoters Background
Mr. Paul P John, has presence in Hospitality Industry and currently has two properties viz.,
“Kumarakom Lake Resort”, Kerala and “The Paul” in Bangalore. Apart from Beverages &
Hospitality segments, he has business interests in US, with a furnishing fabric trading house,
real estate & construction business based in Tampa, Florida, that has a distribution network
across the US and Canada. Post 2006-07, JDPL has strengthened its management team with
professional and experienced functional heads.
Business Prospects
JDPL operates in a highly regulated industry, wherein prices are regulated by policies followed
by respective state governments. In Southern States especially Karnataka and Andhra Pradesh
(AP), due to regulations the liquor manufacturer has to route the sales through the State
Beverage Corporations. The Beverage Corporations sell onward to distributors and retailers.
Indian made Foreign Liquor (IMFL) industry in Karnataka is pegged at 4.30 mn cases / month,
of which, presently 55% of volumes are from ‘Tetra Pak’ segment (Both 180 ml & 90 ml). In FY
13 it was 35% and FY 14 it was 46% and as of October 2014 it is around 55 % of the total volumes
from Tetra Segment and expected to grow substantially.
With the bottle industry showing a decline by 24% in FY14 and Tetra industry witnessing a
growth of more than 36% in FY 14, the Company prudently shifted its focus to Tetra pack since
FY13. The Company continued its foray with expansion in Tetra packaging for its products, both
in 90ml and 180ml for FY14, considering the increase in demand for the tetra packed products it
plans further expansion going forward.
Tetra package has its advantage of portability and lesser carrying cost, with reduced breakages
and retention of product quality. To increase its tetra capacity and as a cost effective technique,
the Company is acquiring machines in a mix of owned basis and financial lease basis.
Considering the potential in Tetra packaging, JDPL invested in Tetra Pak during FY13 with 2
Nos low speed Tetra Pak machines from Tetra Pak India Private Limited, under finance lease
(FL) model as a cost cautious call. As a cost effective approach, JDPL placed order for 6 Tetra
Pak machines with Chinese ‘Tetra Pak’ manufacturers during FY13. Subsequently, JDPL’s Tetra
Pak suppliers introduced new A3 High Speed machines which had 3 times capacity compared to
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low speed machines and JDPL has decided to take 2 High Speed Machines under finance lease
model. Since, market share in ‘ Tetra Pak’ was going up drastically, JDPL have decided to import
additional 6 machines from China to increase the installed capacity again with the combination
of debt & equity and accordingly, fresh term loan proposal of Rs.10.50 Cr was submitted to State
Bank of India and got sanctioned in November 2013. Of which 4 machines commenced
operations in Q4FY14 and balance 2 machines in Q1FY15.
Financials
The Company’s performance for FY14 has been less encouraging. The Gross Sales grew marginal
at 3.4% over FY13. The bottom line has been abysmal, showing a drop of 84% over FY13. At
operating levels, although there has been a minor ~5.62% increase in operating expenses,
relatively less improvement in the turnover has led to reduction in operating profits by ~15%.
Further, despite efforts to reduce the interest cost by ~2%, follow through of reduced operating
profits and increased depreciation has reduced the net profits drastically to Rs.1.65 Cr. The Net
cash accruals (NCA) although at Rs.17.44 Cr for FY14 suffice the debt obligation of Rs.16.43 Cr.
The benefits of enhanced capacities have started becoming visible in H1FY15. The y-o-y basis
H1FY15 financials over H1FY14 indicate an increase in Sales volume by 23% and in value by
41%, although operating expenses increased by 42%, the operating profits improved by 32%
while profits before tax improved substantially. The total income has increased from Rs.208.77
Cr in H1FY14 to Rs.294.25 Cr in H1FY15. The Operating profit has increased from Rs.18.44 Cr in
H1FY14 to Rs.24.25 Cr in H1FY15 and the Profit before tax increased from Rs.2.08 Cr in H1FY14
to Rs.5.83 Cr in H1FY15.
Rating Outlook
The outlook is expected to be stable, although the projected relatively high gearing does appear
to be a matter of concern.
Going forward, ability of JDPL to successfully commission the on-going spirits division,
premiumization, effective utilization of existing and new capacities, effectively manage volatility
in raw material prices and its availability are essential to improve the company's margins and
liquidity position and maintain profitability while achieving the envisaged growth would remain
the key rating sensitivities.
Analyst Contact
Relationship Contact
[email protected]
[email protected]
Phone
Media Contact
1-860-425-2742
[email protected]
Disclaimer: Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources,
which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it does not examine the precision or
completeness of the information obtained. And hence, the information in this report is presented “as is” without any express or implied warranty
of any kind. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by BWR
should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses
incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at any time for any
reasons.
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John Distilleries Private Limited-BLR-Rs.176.44 Cr
Annexure
September-2013 (Rs. Cr)
Facility- State Bank of
Existing
India
Proposed
Position on October-2014 (Rs. Cr)
Sanctioned/
Total rated in
Renew/
O/s Oct
Sep'13
Reviewed/ Nov 2014
2013
Rating Review
Oct'14
Term Loan
0.00
10.50
10.50
10.50
9.44
9.44
Corporate Loan
65.00
0.00
65.00
65.00
57.50
57.50
95.00
20.00
115.00
100.00
93.00
100.00
7.00
5.00
12.00
7.00
4.00
7.00
-
-
-
2.50
1.92
2.50
167.00
35.50
202.50
185.00
165.86
176.44
Fund Based Working
Capital –CC/EPC/FBD
Non Fund Based working
Capital - BG
Non Fund Based –Letter
of Credit
Total
Note: Continuation of Export packing Credit(EPC) of Rs.2Cr as a sublimit of CC ( Stocks) and Foreign Bills
Discounting (FBD) Non LC of Rs.3Cr as a sublimit of CC (Receivables)
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