| SNJ Distillers Private Limited | ||||
| Rating upgraded to 'CRISIL A- / Stable' | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has upgraded its rating on the long-term bank facilities of SNJ Distillers Private Limited (SNJD; part of the SNJ Group) to 'CRISIL A-/Stable' from 'CRISIL BBB+/Stable'.
The upgrade reflects sustained improvement in credit risk profile of the SNJ group. Revenue is expected to increase over 45% in fiscal 2022 driven by faster ramp-up of operations in the newly acquired Empee Distilleries Ltd (EDL) and sustained improvement in other companies in the group. EDL was acquired in 2020 by the SNJ group and has quickly ramped up with the experienced management. The group reported gross revenue of over Rs.5000 crore in the first eleven months of fiscal 2022. Due to price revision and higher capacity utilisation, the operating profit rose to 12.3 in Fiscal 2021 from 9.2 percent in fiscal 2020 and expected to further improve over the medium term due to favourable raw material prices. Enhanced operating performance would result in larger accretions and hence improved financial risk profile. Further, with the increasing penetration in different geographies and faster ramp up in EDL, the group’s dependence on Tamil Nadu has reduced to about 65% of total sales and will gradually decrease over the medium term.
The rating reflects the group’s established market position in the liquor industry in Tamil Nadu (TN), and an above-average financial risk profile. These strengths are partially offset by the vulnerability to high regulatory risk, geographical concentration in revenue, and volatile input prices with limited pricing power. |
Analytical Approach For arriving at the rating CRISIL has consolidated SNJD with its group entities -- SNJ Breweries Pvt Ltd (SNJB), SNJ Sugars and Products Ltd (SNJS) and Empee Distilleries Ltd (EDL) -- (together referred to as the SNJ group) because they have a common management and significant financial fungibility.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Established market position in TN: The SNJ group has diversified its business since inception in 1969. The promoters’ strong focus on expanding the brand’s market share has led the group to successfully acquire and set up SNJB, SNJS and EDL. SNJ group has is expected to achieve revenue of around Rs.1950 crore in fiscal 2022. The SNJ group has prominent presence in the IMFL and beer segment in Tamil Nadu. The group’s revenue share has increased with the acquisition of the EDL in fiscal 2020 and same is expected support the growth over the medium term. Further, the group is diversifying its presence through penetration to new territories apart from Tamil Nadu, which include Karnataka and Kerala.
Above-average financial risk profile: Capital structure is healthy marked by estimated gearing at 0.62 times as on 31st March 2022 (0.72 times as on 31st march 2021) despite availing term loan of Rs.170 for acquisition of EDL and is expected to improve further, aided by healthy accretion to reserves and repayment of term debt. Debt protection metrics continued to remain comfortable, with estimated interest coverage ratio and net cash accruals to adjusted debt ratio of 5.22 times and 0.29 times in Fiscal 2022 (5.21 times and 0.26 times in fiscal 2021)
Weakness: Exposure to high regulatory risk and geographic concentration in revenue: The exposure towards TN remains high at 65 percent where the state-owned Tamil Nadu State Marketing Corporation entirely controls the distribution. Thus, any regulatory changes or implementation of the current government's proposal to prohibit liquor sales in a phased manner could adversely affect the business risk profile. However, this risk is partially mitigated by the fact that the group has started to venture into new geographies with the acquisition of EDL.
Volatile input prices and limited pricing power: The key raw materials include molasses, malt and barley for the IMFL and brewery segment, while it is sugar cane for SNJS. All the materials are agro based and is dependent upon the vagaries of the monsoon; consequently, their prices remain volatile. The group has limited pricing power as the prices are governed by the regulatory authorities. |
Liquidity: Strong Liquidity remains strong, with cash accrual expected at over Rs 165 crore, against repayment obligation of about Rs 60-70 crore on an average, per fiscal over the medium term. The surplus cash generated would be used to fund capital expenditure and incremental working capital requirement. Average utilisation of the bank limit of Rs.240.86 crore was moderate at an average of 59% during the 12 months through February 2022. |
Outlook Stable CRISIL Ratings believes that the group will continue to benefit from its established position in South India and the promoters’ extensive experience. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Group SNJDS manufactures IMFL in TN and beer in AP. SNJB, set up in 2009, operates a brewery in Kancheepuram (TN). Set up in 1994, SNJS manufactures sugar. It also has a facility for distilling extra-neutral alcohol and operates a co-generation power plant. Operations of all the three companies are overseen by the managing director, Mr S N Jayamurugan.
Empee Distilleries was established over 4 decades back by Mr.M. P. Purushottaman was into manufacturing of liquor. The company was acquired by the SNJ group in 2020. |
Key Financial Indicators: Consolidated
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Status of non cooperation with previous CRA: SNJDS has not cooperated with Brickwork Ratings India Private Limited (Brickworks), which led to its classification as 'issuer not cooperative' vide release dated April 16 2021. The reason provided Brickworks is non-furnishing of information for monitoring of ratings. |
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 – List of entities consolidated
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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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