CRISIL has assigned its ‘BB/Stable/P4+’ ratings to Madhusala Drinks Pvt Ltd’s (MDPL’s) bank facilities. The ratings reflect MDPL’s moderate financial risk profile, marked by weak debt protection metrics; the ratings also factor in MDPL’s exposure to risks related to working-capital-intensive operations and implementation of projects. These rating weaknesses are partially offset by the benefits that MDPL derives from its promoters’ experience and from its established position in the liquor distribution business.

For arriving at its ratings, CRISIL has combined the financial risk profiles of Johal & Co (Wine sales) Pvt Ltd (JCPL), Madhusala Drinks Pvt Ltd (MDPL), R G Shaw and Sons Pvt Ltd (RGSSPL) and Madan Wine Stores Pvt Ltd (MWSPL). This is because these entities, collectively referred to as the Johal group, are under a common management, and have strong operational and financial linkages among them.

Outlook: Stable
CRISIL believes that the Johal group will continue to benefit over the medium term from its healthy distribution network and its promoters’ experience in the Indian-manufactured foreign liquor (IMFL) distribution business. The outlook may be revised to ’Positive’ if the group scales up its operations, and improves its profitability sustainably. Conversely the outlook may be revised to ’Negative’ if the group’s profitability declines considerably, or if significant project implementation delays result in deterioration in the group’s financial risk profile.

About the Company
The Kolkata-based Johal group primarily manufactures and trades in IMFL, exclusively for United Spirits Ltd and United Breweries Ltd (UB group) and accounts for almost 45 per cent of sales of UB Group’s sales in West Bengal. Mr. Joginder Singh Johal and his brothers, Mr. Surjit Johal and Mr. Devinder Johal, founded the group in Dhanbad in 1971 in the form of a partnership concern, Johal & Co. In 1979, the firm was converted into a private limited company, JCPL, and the operations were shifted to Kolkata. In 2007, MDPL was acquired to undertake contract manufacturing of IMFL. Currently, the business is looked after by the second generation of promoters, Mr. Sarbjit Johal and Mr. Maninder Johal. Other group companies, RGSSPL and MWSPL also trade in IMFL.

The group reported a provisional profit after tax (PAT) of Rs.71 million on net sales of Rs.5282 million for 2009-10 (refers to financial year, April 1 to March 31) against a PAT of Rs.48 million on net sales of Rs.4156 million for 2008-09.