Rating Rationale
July 07, 2021 | Mumbai
Blue Ocean Beverages Private Limited
Rating migrated to 'CRISIL BB+/Stable'
 
Rating Action
Total Bank Loan Facilities RatedRs.14 Crore
Long Term Rating&CRISIL BB+/Stable (Migrated from 'CRISIL BB+/Stable ISSUER NOT COOPERATING*')
& *Issuer did not cooperate; based on best-available information
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

Due to inadequate information, CRISIL Ratings, in line with the Securities and Exchange Board of India guidelines, had migrated its rating on the long-term bank facilities of Blue Ocean Beverages Private Limited (BOBPL) to ‘CRISIL BB+/Stable Issuer Not Cooperating'. However, the management has subsequently started sharing the requisite information necessary for carrying out a comprehensive review of the rating. Consequently, CRISIL Ratings is migrating its rating from ‘CRISIL BB+/Stable Issuer Not Cooperating’ to ‘CRISIL BB+/Stable’.

 

BOBPL has demonstrated scale up in its operations in fiscal 2021 driven by increased scope of work and foray into Karnataka market for its key Principals. The company has reported strong rise in gross sales to Rs.426.1 crore in fiscal 2021 from Rs.98.8 crore in previous year due to high excise duty associated with sales in the state. The net operating income increased to Rs. 128.5 crore in fiscal 2021 from Rs.76.38 crore in previous year. The company has strong presence in the Indian-made foreign liquor (IMFL) manufacturing and bottling segment in Goa. Recently the company has forayed into new territories in southern India which has helped the company to grow. The company is likely to record over 30% growth in its revenue in current fiscal 2022 as well driven by its ramping up sales in new geographies. With strong scale-up; the incremental working capital requirement augmented and hence reliance on short-term debt has also increased. Thus, financial risk profile has moderated from historical levels: gearing moderated to over 2 times as on March 31, 2021, from around 1 time as on March 31, 2020.

 

The rating continues to reflect the extensive experience of the promoters of BOBPL in the IMFL segment, improving scale of operations supported by geographical diversity in revenue, and healthy relations with key principals. These strengths are partially offset by the susceptibility to regulations, large working capital requirement, and moderate financial risk profile.

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive experience of the promoters: Benefits from the promoters' experience of about decades, and established relationships with suppliers and key customers should continue to support the business. The operations are run and managed by promoters and an experienced team which has helped the company to showcase growth year on year.

 

  • Improving scale of operations supported by enhanced geographical diversity and healthy relations with key principals: Revenue increased in fiscal 2021 mainly because of geographical expansion. The company’s operations were earlier concentrated in Goa. In recent years, the company received manufacturing and marketing rights from Mohan Meakin for sale of Old Monk rum in Goa and later (2020) in Karnataka, Kerala, Pondicherry and Telangana. BOBPL has also received bottling contracts from Beam Suntory and has established relations with state beverages corporations. The company is also planning to set up a new bottling unit in Karnataka to support its growth. The improving scale and established relations with key principals support the business risk profile.

 

Weaknesses:

  • Moderate financial risk profile: The financial risk profile has moderated in recent past because of increased reliance on debt to fund the growth. Capital structure is moderately leveraged with gearing and total outside liabilities to total networth of 2.1 times and 3.3 times respectively as on March 31, 2021. Further, the debt protection metrics remain just adequate with net cash accruals to total debt of 0.07 times and interest coverage ratio of around 2 times for fiscal 2021 and these have also moderated from historical level.

 

Incremental working capital requirement will be large over the medium term given strong expected revenue growth. Further with large excise duty component in sales into new geographies, especially Karnataka and moderate credit period of over 45-55 days offered to customers, company’s reliance on debt has increased which is expected to continue going forward as well. Thus financial risk profile is expected to remain at similar level over medium term.

 

  • Susceptibility to regulations: The Indian liquor industry is highly regulated at almost every stage of value chain. Moreover, every state has its set of regulations with respect to distribution and retail channels, registration, taxation, and pricing of alcohol. The business risk profile of players remain exposed to regulatory changes

Liquidity: Adequate

Bank limit utilisation is high at around 92.11 percent for the past eight months ended May 2021. The company plans to enhance its working capital limit to support its revenue growth. Timely enhancement in bank limits remain critical. Cash accrual are expected to be over Rs 5 crore which are sufficient against term debt obligation of Rs 1.2-2.2 crore over the medium term. Current ratio was adequate at 1.2 times on March 31, 2021. Also promoters have infused funds to support the business scale up in the recent past.

Outlook: Stable

CRISIL Ratings believes BOBPL will continue to benefit from its geographical diversification and extensive experience of the promoters.

Rating Sensitivity Factors

Upward factor

  • Sustained improvement in scale of operation with stable operating margin
  • Improvement in financial risk profile with TOL/TNW ratio of less than 2.75 times

 

Downward factor

  • Sharp drop in operating profitability and cash accruals less than Rs.3 crore
  • Witnesses a substantial increase in its working capital requirements thus weakening its liquidity & capital structure

About the Company

Incorporated in 2007 and promoted by Mr PC George Joseph and Mr Albin P Mathew, BOBPL manufactures IMFL at its facilities in Margao, Goa. The company has presence in Goa, Karnataka, Andhra Pradesh, Telangana, Kerala etc.

Key Financial Indicators

As on/for the period ended March 31

Unit

2021

2020

Net operating income

Rs.Crore

128.51

76.38

Reported profit after tax

Rs.Crore

2.98

1.56

PAT margins

%

2.32

2.04

Adjusted debt/adjusted networth

Times

2.16

1.01

Interest coverage

Times

2.10

2.06

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)

ISIN

Name of instrument

Date of allotment

Coupon rate (%)

Maturity date

Issue size (Rs.Crore)

Complexity Levels

Rating assigned with outlook

NA

Cash Credit

NA

NA

NA

11

NA

CRISIL BB+/Stable

NA

Term Loan

NA

NA

Mar-2024

3

NA

CRISIL BB+/Stable
Annexure - Rating History for last 3 Years
  Current 2021 (History) 2020  2019  2018  Start of 2018
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 14.0 CRISIL BB+/Stable   -- 27-05-20 CRISIL BB+ /Stable(Issuer Not Cooperating)* 28-02-19 CRISIL BB+/Positive   -- CRISIL BB+/Stable
All amounts are in Rs.Cr.
* - Issuer did not cooperate; based on best-available information
 
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Cash Credit 11 CRISIL BB+/Stable Cash Credit 11 CRISIL BB+ /Stable(Issuer Not Cooperating)*
Term Loan 3 CRISIL BB+/Stable Term Loan 3 CRISIL BB+ /Stable(Issuer Not Cooperating)*
Total 14 - Total 14 -
* - Issuer did not cooperate; based on best-available information
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Assessing Information Adequacy Risk

Media Relations
Analytical Contacts
Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000
saman.khan@crisil.com

Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000
 naireen.ahmed@crisil.com
Rahul Subrato Kumar Guha
Director
CRISIL Ratings Limited
D:+91 22 4097 8320
rahul.guha@crisil.com

Shirish A Mujumdar
Associate Director
CRISIL Ratings Limited
D:+91 20 4018 1934
shirish.mujumdar@crisil.com

Venkatesh Joshi
Rating Analyst
CRISIL Ratings Limited
B:+91 20 4018 1900
Venkatesh.Joshi@crisil.com		Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com

 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL Ratings. However, CRISIL Ratings alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.


About CRISIL Ratings Limited (A subsidiary of CRISIL Limited)

CRISIL Ratings pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and innovation, we set the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 33,000 large and mid-scale corporates and financial institutions. We have also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and infrastructure investment trusts (InvITs).
 
CRISIL Ratings Limited ("CRISIL Ratings") is a wholly-owned subsidiary of CRISIL Limited ("CRISIL"). CRISIL Ratings Limited is registered in India as a credit rating agency with the Securities and Exchange Board of India ("SEBI").
 
For more information, visit www.crisilratings.com 



About CRISIL Limited

CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We are India's leading ratings agency. We are also the foremost provider of high-end research to the world's largest banks and leading corporations.

CRISIL is majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide

For more information, visit www.crisil.com

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK

CRISIL PRIVACY NOTICE
 
CRISIL respects your privacy. We may use your contact information, such as your name, address, and email id to fulfil your request and service your account and to provide you with additional information from CRISIL.For further information on CRISIL’s privacy policy please visit www.crisil.com.

DISCLAIMER

This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale (each a "Report") that is provided by CRISIL Ratings Limited  (hereinafter referred to as "CRISIL Ratings") . For the avoidance of doubt, the term "Report" includes the information, ratings and other content forming part of the Report. The Report is intended for the jurisdiction of India only. This Report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL Ratings providing or intending to provide any services in jurisdictions where CRISIL Ratings does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this Report does not create a client relationship between CRISIL Ratings and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Ratings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL Ratings assumes no obligation to update its opinions following publication in any form or format although CRISIL Ratings may disseminate its opinions and analysis. Rating by CRISIL Ratings contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional advice before acting on the Report in any way. CRISIL Ratings or its associates may have other commercial transactions with the company/entity.

Neither CRISIL Ratings nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, "CRISIL Ratings Parties") guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL Ratings Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Report. EACH CRISIL RATINGS' PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Ratings Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. CRISIL Rating's public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee - more details about ratings by CRISIL Ratings are available here: www.crisilratings.com.

CRISIL Ratings and its affiliates do not act as a fiduciary. While CRISIL Ratings has obtained information from sources it believes to be reliable, CRISIL Ratings does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL Ratings has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL Ratings has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: http://www.crisil.com/ratings/highlightedpolicy.html

Rating criteria by CRISIL Ratings are generally available without charge to the public on the CRISIL Ratings public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL Ratings you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL Ratings.

All rights reserved @ CRISIL Ratings Limited. CRISIL Ratings Limited is a wholly owned subsidiary of CRISIL Limited.

CRISIL Ratings uses the prefix ‘PP-MLD’ for the ratings of principal-protected market-linked debentures (PPMLD) with effect from November 1, 2011 to comply with the SEBI circular, "Guidelines for Issue and Listing of Structured Products/Market Linked Debentures". The revision in rating symbols for PPMLDs should not be construed as a change in the rating of the subject instrument. For details on CRISIL Ratiings' use of 'PP-MLD' please refer to the notes to Rating scale for Debt Instruments and Structured Finance Instruments at the following link: www.crisil.com/ratings/credit-rating-scale.html