Table of Contents
COMPANY INFORMATION
Associated Alcohol share is one of India’s most comprehensive players in the Indian liquor sector.
At one end, the Associated alcohol share addresses the vast resource segment of the sector through manufacturing of extra neutral alcohol (and proposed manufacture of ethanol). At the other end, the company manufactures and markets liquor brands that address wide consumer needs.
This complete business model has been directed to enhance margins, value-addition and business sustainability.
The Company was founded by late Mr. Bhagwati Prasad Kedia in 1989.
Associated Alcohols & Breweries Limited is the flagship company of the Associated Kedia Group, convoluted in manufacturing and bottling of liquor.
The Company took over the distillery operations of the promoter group and extended to manufacture premium liquor products.
VISION OF ASSOCIATED ALCOHOL SHARE
To be a pioneer in liquor manufacturing, distillation and bottling in India and to further strengthen the foothold in the liquor industry as one of the most reputed manufacturing and marketing Company.
MISSION
Associated Alcohol share undertakes to dedicate itself and all its resources to achieving global excellence in the present sectors of operations and seeking growth.
On 31st March 2021, ENA manufacturing capacity was 45 million liters.
32 Bottling lines.
12.5 (Million) bottling capacity as on 31st March, 2021.
FOR MORE SUMMARY OF ANNUAL REPORT DO CHECK THE BELOW LINKS
KIRLOSKAR FERROUS: Important points of Annual report. (learntwotrade.com)
ANNUAL REPORT: KPR MILL – Learn Two Trade
PRINCE PIPES SHARE: Summary of Recent Annual Report (learntwotrade.com)
BUSINESS SEGMENTS
One, the manufacturer of grain-based ENA that is consumed in the production of liquor.
Two, the production of liquor that is marketed through proprietary brands.
Three, the production of liquor that is marketed through franchised brands/contract manufacturing agreements. This complement of three businesses makes the company one of the most exciting in India’s liquor sector.
MARKET PRESENCE
Associated alcohol share is one of the largest distillers in India.
It possesses a large geographic presence in five states across the sectoral value chain.
The Company’s principal revenues are derived from the States of Madhya Pradesh and Kerala.
The company’s proprietary brands contribute 70% to the packed portable segment’s revenue.
CAPITAL APPRECIATION
PRODUCTS
Premium extra neutral alcohol/ Triple distilled ENA.
Indian made Indian liquor (IMIL).
Indian made foreign liquor (IMFL).
Contract manufacturing partner (for Diageo – USL).
BUSINESS FACILITIES
The Company’s state-of-the-art manufacturing facility is located in Khodigram (Barwaha district, Khargone, Madhya Pradesh) and is responsible for alcohol production, bottling and packaging liquor.
All business operations are overseen by the corporate office in Indore.
FINANCIAL PERFORMANCE
| FINANCIAL KEY METRICS | VALUE |
| MARKET CAPITALIZATION | ₹ 783 Cr |
| STOCK P/E | 12.9 |
| INDUSTRY P/E | 24.8 |
| ROE | 21.5 % |
| ROCE | 28.2 % |
| DEBT TO EQUITY RATIO | 0.02 |
EXPANSION PLANS
As on 31st March,2021 the Company possessed a capacity of 45 million litres per annum (on following Phase I expansion).
And in Phase II expansion there has been a proposal to convert from 45MLPA to 75 MLPA where there is a dual mode to facilitate the manufacture and sale of ethanol to oil and petroleum marketing.
GIVEAWAY TO SHAREHOLDERS
CLIENTS
Diageo/ United Spirits Limited.
Government-regulated retail contractors/agencies (both IMFL and IMIL).
Kerala State Beverages Corporation.
Chhattisgarh State Beverage Corporation.
LICENSED / FRANCHISED BRANDS
Bagpiper Deluxe Whisky.
Directors Special Whisky.
Flavored White Mischief.
Director’s Special Gold Whisky.
McDowell’s No. 1 XXX Rum.
PROPRIETARY PRODUCTS
Central Province Whisky.
Titanium Triple Distilled Vodka.
James McGill Whisky.
Jamaican Magic Rum.
Super Man Series.
Bombay Special Series.
CONTRACTED MANUFACTURING BRANDS
Black Dog Scotch Whisky.
VAT 69 Scotch Whisky.
Smirnoff Vodka.
Black & White Scotch Whisky.
GROWTH IN EXTRA NEUTRAL ALCOHOL (ENA) BUSINESS
Even as the ENA business of the company contributed 22% of revenues, it accounted for 15% of the company’s total EBIDTA during the year under review (FY 2020-21).
The business reported 53% capacity utilisation during the weak first quarter of FY2020-21. The business delivered a capacity utilisation of 70%, 100% and 100% during the Q2, Q3 and Q4 quarters of the year, a reflection of its traction among customers.
OUTLOOK
Associated alcohol share cautious validated during the financial year (FY 2019-20) when, despite a decline in revenues, the company increased its surplus. The company continues to seek growth opportunities without compromising its conservative capital management framework.
STRATEGIC GOAL ACHIEVEMENTS
Stabilised ENA capacity expansion and achieved better capacity utilisation.
Strong growth reported in the Kerala market.
Entered the Uttar Pradesh market.
Strengthened the franchised business.
Increased proprietary brand offtake.
BUSINESS STRATEGIES
Enter new markets.
Grow the share of owned brands.
Seek franchisee agreements in other markets.
And on schedule ( June 2022) Commercialize ENA / ethanol production.
GROWTH STORIES OF ASSOCIATED ALCOHOLS SHARE
Invested accruals generated in its business in the five years ending 2020-21 without debt or equity dilution.
Grew its three revenue engines every single year of the three years ending 2020-21.
Grew revenues on the one hand while deleveraging long-term debt on the other.
Consistently reported possibly the highest ROCE among peer companies in the sector.
Now engaged in building a robust foundation for long-term sustainability.
FUTURE VISION
EXTRA NEUTRAL ALCOHOL
4.5 Crore litres per annum, FY 2020-21.
9 Crore litres per annum, FY 2024-25 (estimated).
FRANCHISE LIQUOR BUSINESS
8.5 Lakh cases throughput, FY 2020-21.
15 Lakh cases throughput, FY 2024-25 (estimated).
PROPRIETARY LIQUOR BUSINESS
9 Lakh cases throughput, FY 2020-21.
30 Lakh cases throughput, FY 2024-25 (estimated).
PLATFORMS FOR LONG TERM BUSINESS SUSTAINABILITY
Low indebtedness.
Capital cost per litre.
Operating leverage.
Return on Relationship.
PLATFORMS FOR COMPETITIVENESS
Optimal resource consumption.
Economies of scale.
Captive power generation.
Multi-grain access.
LOCATIONAL ADVANTAGE FOR ASSOCIATED ALCOHOL SHARE
Equidistant to most ENA consuming markets.
Proximate to liquor bottlers in South India.
Proximate to the grain basket of India.
GRAIN ACCESS PLATFORMS
Access to all major grain types.
Access within 400 Kilometer radius.
Flexible responsiveness.
Cash-rich Balance Shee.
7,500 MT storage capacity.
Access to FCI grain.
Direct benefit to farmers.
EMERGING ETHANOL PLATFORM
Dual technology.
Grain-based manufacture.
Government incentives.
Contributing to a cleaner world.
Broad based risk.
Reduction of crude import and forex outgo.
SECTORIAL GROWTH PLATFORM
B2C and B2B exposure.
ENA GST opportunity.
Liquor consumption growth.
Return on Relationship.
B2B supermarket.
RISKS AND CONCERNS
Increased competition could be a risk to profitability.
Mitigation:
The Company operates in regulated markets with high entry barriers. Its products are competitively priced because of its ability to effectively optimise costs, resulting in a protective coat.