| Amrit Bottlers Private Limited | ||||||
| Ratings reaffirmed at 'CRISIL A- / Stable / CRISIL A2+ ' | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed rationale CRISIL Ratings has reaffirmed its 'CRISIL A-/Stable/CRISIL A2+' ratings on the bank facilities of Amrit Bottlers Private Limited (ABPL).
However, the business risk profile is supported by improvement in the earnings before interest, tax, depreciation and amortisation (Ebitda) margin by 300 basis points in fiscal 2020 and sustenance of the same in fiscal 2021 despite sharp decline in the topline. Though the margin may moderate by 400-500 bps in fiscal 2022 on account of passing on of profit to group company SLMG Beverages Pvt Ltd, the margin is expected to remain healthy at 21%-22% over the medium term.
The credit risk profile is supported by robust financial risk profile supported by healthy gearing of 0.20 time and strong networth of Rs 444.7 crore as on March 31, 2021. Debt protection metrics remained comfortable with interest coverage and net cash accrual to total debt ratios at 38.7 times and 0.89 time, respectively, in fiscal 2021. The large, unencumbered reserve estimated over Rs 200 crore as on November 15, 2021, in the form of cash balance, fixed deposits and mutual funds provides strong support to liquidity. |
Key rating drivers and detailed description Strengths: Stable business risk profile, supported by the established brand position of Coca-Cola and healthy profitability: Demand will likely remain stable driven by the leadership position of Coca-Cola in the non-alcoholic beverages segment in India. Revenue declined to Rs 322.4 crore in fiscal 2021 from Rs 637.6 crore in fiscal 2020 because of the pandemic and nationwide lockdown in the first quarter of fiscal 2021. The company changed its business model and started supplying exclusively to SLMG on pre-determined cost plus margin basis, leading to reduced trading sales.
The promoter’s experience of three decades in the aerated drinks business and strong understanding of market dynamics helped maintain healthy operating margin despite drop in topline and fluctuations in raw material prices. The operating margin was at 27.3% in fiscal 2021 and is expected above 20% over the medium term.
Healthy financial risk profile: The total outside liabilities to adjusted networth ratio was healthy at 0.35 time as on March 31, 2021, aided by accretion to reserves. Surplus net cash accrual supports liquidity and the financial risk profile. The company does not plan any significant debt-funded capital expenditure over the medium term. Debt protection metrics were comfortable reflected in interest coverage and net cash accrual to adjusted debt ratios of 38.7 times and 0.89 time, respectively in fiscal 2021.
Weaknesses: Limited potential for revenue growth and high dependency on SLMG: Under the revised arrangement, ABPL supplies exclusively to SLMG. This restricts ability to expand operations. Also, revenue growth is directly linked to SLMG’s ability to increase penetration in Uttar Pradesh. This is also likely to impact the operating efficiency of ABPL.
Vulnerability to competition, government regulations, changes in customer preferences and seasonality: ABPL remains susceptible to government regulations regarding content of aerated drinks and growing environmental concerns over water depletion and discharge of effluents by bottling plants. It also faces stiff competition from PepsiCo India and other aerated and non-aerated beverage manufacturers in that region. The carbonated soft drink segment also faces competition from natural and sugar-free beverages as people are turning health conscious and prefer non-aerated and non-sugary beverages. |
Liquidity: Strong Liquidity is supported by substantial investment in mutual funds, fixed deposits, and cash and equivalent as on March 31, 2021. Cash accrual is likely to be more than Rs 78 crore in fiscal 2022 and Rs 100 crore in fiscal 2023 against yearly debt obligation of Rs 5-7 crore. Liquidity is also supported by cushion in bank limit, which was utilised just 4.7% on average for the 12 months through November 2021. |
Outlook: Stable CRISIL Ratings believes ABPL will continue to benefit from the extensive experience of the promoter. |
Rating sensitivity factors Upward factors: * Operating income of more than Rs 500 crore and operating margin sustained above 20% * Improvement in operating efficiency metrics such as return on capital employed
Downward factors: * Decline in revenue or operating margin leading to lower-than-expected cash accrual * Investment in group companies exceeding more than 70% of networth |
About the company Incorporated in 1982 and promoted by Mr L D Ladhani, ABPL is a franchisee bottler for Coca-Cola for its carbonated soft drinks, fruit-based drinks, and packaged drinking water for 20 districts in Uttar Pradesh and two in Bihar.
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Key financial indicators
*Provisional |
Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure: Details of instrument(s)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | |||||||||||||||
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Criteria Details
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