Kals Distilleries Private Limited
Kals Distilleries Private Limited
Kals Distilleries Private Limited
Non-convertible debentures
375.00 CARE BBB+; Stable Assigned
(Proposed)
Details of instruments/facilities in Annexure-1.
However, ratings are constrained by the moderate leverage and debt coverage indicators on the back of delay in price hike by
TASMAC, while there had been significant increase in inputs costs. The large-sized debt-funded acquisitions, concentration risk
towards product and geography, volatile raw material prices, presence in a highly regulated industry, and refinancing risk
associated with the proposed non-convertible debenture (NCD) issue also constrain ratings.
Positive factors
• Increasing total operating income (TOI) beyond ₹1,200 crore with profit before interest, lease rentals, depreciation and
taxation (PBILDT) margin of more than 15%.
• Improving debt/PBILDT below 2.50x.
Negative factors
• Significant delay in merger of TASL and TEL with KDPL.
• Inability to improve its debt/PBILDT below 3.50x by FY25-end.
• PBILDT margin below 13% in FY25.
Outlook: Stable
The stable outlook reflects CARE Ratings’ expectations of KDPL’s significantly improving revenue and profitability in the near term
on the back of sizeable price hike provided by TASMAC, which in turn, is expected to improve its leverage and debt coverage
indicators.
1
Complete definition of the ratings assigned are available at www.careedge.in and other CARE Ratings Ltd.’s publications
With TASL and TEL commencing operations, about 60% of the extra-neutral alcohol (ENA) requirement of KDPL will be met
captively. Post-merger of TASL and TEL with KDPL, KDPL will also have sizeable savings of Goods and Services Tax (GST) on
procurement of extra-neutral alcohol (ENA), the merger of which is expected to be completed by FY25-end. Promoters acquired
Samyu Glass Private Limited (Samyu), a glass bottle manufacturing company, which is expected to meet about 80% of the glass
bottle requirements of KDPL going forward.
Plans for debt refinancing with additional debt to improve liquidity profile
To fund the capex for refurbishing TASL’s units, funding its increased working capital requirement and fast-tracking the process
for merging TASL and TEL with KDPL, the management is at an advanced stage of raising ₹375 crore through NCD issue in FY24.
Tying-up the NCD issue on time and merging TASL and TEL will be key rating monitorable.
Liquidity: Adequate
The adequate liquidity is marked by refinancing and additional debt to be availed by KDPL for an aggregate amount of ₹375 crore
via NCD issue, which is expected to also meet the medium-term working capital requirements and capex requirements. KDPL will
have minimal term debt repayments in FY25 for outstanding term debt and NCD issue as against sizeable growth in its cash
accruals due to recent price hike of IMFL, providing comfort to its liquidity. KDPL’s working capital cycle stood comfortable at 28
days in FY23, however, it is expected to increase in the medium term, mainly due to higher inventory and receivables with TASL
and TEL commencing operations. KDPL receives payment from TASMAC against IMFL supply in about 15 days, against which
payments to creditors are made within 25-30 days. Working capital requirements are mainly funded through borrowings, leading
to an average utilisation of about 90% for last 12 months ended February 2024.
Key weaknesses
Product and geography concentration
KDPL manufactures IMFL under its own brands in the ordinary, medium, and premium segments, in Tamil Nadu. A single product
– Black Pearl brandy in the ordinary segment – contributed about 62% of its total income in FY23 and 70% in 9MFY24. Such high
concentration towards a single product and geography exposes KDPL to geographical concentration risk.
also deteriorated, marked by total debt (TD)/gross cash accruals (GCA) and interest coverage ratio (ICR) of 24.14x and 1.94x,
respectively, for FY23 (PY: 2.98x and 5.98x, respectively). TD/PBILDT also weakened to 10.06x as on March 31, 2023, against
2.03x as on March 31, 2022. Going forward, with refinancing of debt and expected improvement in profitability, TD/PBILDT is
expected to improve to below 3x by FY25-end.
Moderate profitability on the back of delayed price hike with rising input costs
KDPL’s profitability had been impacted through FY21-23 owing to the increase cost of ENA and glass, while IMFL prices remained
constant. PBILDT margin was reported at 12.49% in FY21, which declined to 10.73% in FY22, and further to 4.84% in FY23. The
cost of raw materials increased from 71% of the TOI in FY21 to 79% of the TOI in FY23. The moderation in profitability was
mainly due to the rising cost of ENA (key raw material) from ₹63 per litre in FY22 to ₹72 per litre in FY23. Sales volumes also
declined to 73 lakh cases in FY23 from 77 lakh cases in FY22 on the back of increasing MRP by the end-customer, TASMAC.
Refinancing risk
KDPL has proposed to avail NCD of ₹375 crore for a tenor of five years. However, ₹145 crore of the NCD’s repayment obligation
at the end of the 18th month from the date of placement exposes KDPL to refinancing risk in FY26.
Applicable criteria
Consolidation
Definition of Default
Liquidity Analysis of Non-financial sector entities
Rating Outlook and Rating Watch
Manufacturing Companies
Financial Ratios – Non-financial Sector
Industry classification
Macro-economic Indicator Sector Industry Basic Industry
Fast-moving consumer goods Fast-moving consumer goods Beverages Breweries and distilleries
Incorporated on November 12, 2007, KDPL is a closely held family-owned company. It commenced commercial operations in
2009 by setting up a distillery unit in Pudukkottai, Tamil Nadu. The company’s primary business activity is manufacturing of IMFL
products in Tamil Nadu. As on December 31, 2023, KDPL’s production capacity is about 10 million cases per annum of IMFL.
Brief Consolidated Financials (₹ crore) March 31, 2022 (A) March 31, 2023 (A)
Total operating income 665.83 664.67
PBILDT 71.43 32.18
PAT 41.16 8.31
Overall gearing (times) 0.54 1.23
Interest coverage (times) 5.98 1.94
A: Audited. Note: These are latest financial results available.
A. Financial covenants -
B. Non-financial covenants KDPL’s TD should not exceed ₹525 crore
1 Kals Distilleries Carnataka Private Limited (KDCPL) Full These entities are
2 Mount Shivalik Industries Limited (MSIL) Full strategically important for
3 Thiru Arooran Sugars Limited (TASL) Full KDPL’s business and have
4 Terra Energy Limited (TEL) Full strong operational and
5 Sivachandra Industries Private Limited (SIPL) Full financial linkages with KDPL
6 Trinetra Beverages Private Limited (TBPL) Full
Note on complexity levels of rated instruments: CARE Ratings has classified instruments rated by it on the basis of
complexity. Investors/market intermediaries/regulators or others are welcome to write to [email protected] for any clarifications.
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