Associated alcholols & breweries ltd

repected members Namaskar to all I came across this company ASSOCIATED ALCHOLS & BREWRIES LTD when i was searching for companies with revenue growth of more than 30% on 5 yr basis and here is the following
The company has 5 yr revenue cagr > 35%
5 year profit cagr > 40% yoy revenue growth > 35% profit growth > 100%
Promoter holding > 57% recently increased 6% in open market
No pledge no warrants no equity dilution no preference capital.
FY 15 results is 300 cr revenue 33cr EBITA and np 13cr
Debt reduced to 38 cr DER < 0.6 and fy 15 ROE > 18% and ROCE > 23%.
The general reserve at 58 cr and net block 95cr gross block at 145 cr
Authorised capital is 1.1 cr issued0.9 cr 58% holding by promoter in public category 17 lac shares holded by two entities
This company manufacture ENA, country liquor and bottling ENA supply is done to even radico and Tilak Nagar, the speciality seems in manufacturing triple distiller extra grain based spirit for vodka which they are suppling to leading brands like Smirnoff absolute grey goose and they are bottlers for haig scoth whisky and single malt glen Drummond.
Now the negatives there is no information about the company or its promoters in public domain to the full extent
They have not declared any dividends so far
Even in fy 15 the quarter result there is sudden spike in employees cost with no explanation. With this the sector is also little worry some but the promoter Prasanna KUMAR KEDIA seems to decent and got some name in INDORE
I kindly request senior members to please go thru this and post there views please regards Indirachita

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@indirachitra

At first glance the numbers look great and might need to be studied in further detail.

But a few points that concern me:-

  1. FY15 Q4 profits have been boosted tremendously by exceptional item of 3.4 crores and net profit is just over 3 crores compared to Q3 profit of 2.7 crores.
  2. Debt/Equity has gone up from 0.6 in 2010 to >1.5 and debt has more than trebled from 25 cr to 83 cr.
  3. Company has not paid dividends since 2008 - Why?
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Hi indirachitra,

I agree with you that there has been a good consistent improvement in the financial performance of the company and it deserves a closer look. I have been following it for sometime and do own some shares. I tried finding more about the company but there is very limited information out there.

In 2008 the company seemed to have conducted some analyst meet, here is a summary - http://www.capitalmarketplus.com/cabnas/Cabstory.asp?SNo=237824&opt=

Though nothing material happened after that for some years. It was only in 2010 that the company hinted about modernization and completed the same in 2011. In 2012 the company again hinted of backward integration, ambitious plan for modernization. Since this year we have seen consistent growth and material improvement in the company.

On the negatives - 1. the sector is such that its not easy to find great companies 2. in past there have been several auditor comments and qualifications 3. need to understand the business and operations of the company better - very limited information is available. 4. Need to understand about their arrangement with a group co - Mount Everest Breweries.

Regards,
Ayush
Disc: I hold

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Mr Gurjit and Ayush thank you for your comments Gurjot the debt as per fy 15 is 38 cr corresponding net block is increased.

My worry is not that as Ayush mentioned if anybody can throw some light on the promoter and the buisness model that will help to understand this better
As Ayush pointed out Mount Everest BREWRIES is shown as investment in there annual report How it will impact the parent company.
Secondly these bottling guys when they sign MOU they agree for non disclosure may be that is reason the company web site is not fully operational to hesitant to mention the names. If they are supplying grain spirit to leading brands and that if confirmed by third source that it is worth opportunity to look into.
Disl I have not invested neither do I look at the share price until I understand the buisness here iam trying to understand whether really there is value to this because of the consistent growth and no complaints against the company.

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Hai ayush after repeated email I got a reply from one Ashish Kumar Gadia from AABL quote
As regards your query on rise in employee benefit cost I would like clarify that is in tandem with our expansion plans kindly verify the annual report of Fy 15 which we will presenting for full details.
As regards your query on Mount Everest breweries it is an associate company not an subsidiary in which we have investment which is also clearly stated in our annual report of fy 14 please refer
As regards your query on dividends I can assure you that the management has always worked hard to reward the share holders we have reduced our debt level in Fy 15 and interest cost and improved our operating cash and margins we expect to sustain our historical growth in fy 16 and improve or cash flow and at that time board may consider appropriate announcement in this matter.
Unquote
I just got only reply for three points even though my mail had nearly ten listed questions hope something is better I request you also sent a mail from your end to check for the reply

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Thats good. Thanks for sharing.

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Hi Indirachitra … the company looks reasonably valued, but there is no immediate reason for any rerating of the company. If you purely look for value buy , all the companies, Radico, Tilaknagar , Globus etc. are valued cheaply currently. If you want to play on Alcohol Sector, there is one company Agribiotech Industries Limited ( this is a very fast growing alcohol company which does bottling for Officer’s Choice and also supplies ENA to UB, Radico, Tilaknagar etc. and closely comparable to Associated Alcohol) . Interesting thing is this is a closely held unlisted company and if you want to ride on the growth of this company , you have to buy RCCL ( Rajasthan Cylinders and Containers Limited) which holds 49% in Agribiotech Industries and still available only at 8 crore market cap. There is a huge valuation anomaly as Agribiotech has grown its turnover from 70 crore to 165 crore in 5 years , profits of 4 crores and and the value of 49% stake in this company will be at least 40 crore , while RCCL ( the holding company is available only at 8 crore mcap) Read my detailed write up few days back on the same forum here on Rajasthan Cylinder and Containers Limited … you will understand why its a near certain opportunity to multiply wealth.

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Thank u Abhisek for your reply I will certainly look into this and post my feed back. But let me tell you I have been an investment banker for more than 20 yrs and some of stocks which when I bought were not even having trading volume of 500 to name a few oriental carbon, Tcpl, kse,triton, rss, lg Balakrishnan etc.
What I first look is five year consistent growth above 25% with growing OPM whereas Tilak Nagar radico have shown growth corresponding debt has been a big damper in gm case virtually growth is stagnant in this sector I have seen growth of 35% in only AABL case and corresponding debt reduction with capex improvement and revenue scaling. I generally watch the company for three years before digging further and two years to understand the quality of promoters once these two are ok then only I look at the share price and once bought I don’t sell for 3 yrs minimum without any drastic change
Here in AABL case I am convinced of the growth especially I like it because it is in sought of CRAMS space like Pharma now with help of forum members iam trying to understand the quality of promoters to take a final call maybe iam bit slow because of my age but that have really helped me in building a good portfolio of small and mid cap stocks because iam a staunch believer that growth will come from small cap mid cap patience and research is the key.
Thanks and regards

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I got the reply from the mail id of gen@associatedalcholols.com but I sent
it pkedia@associatedalcholols.com

Mr ayush did you get any reply and one more interesting point out of 90 lac issued equity promoter holding 53 lac two entities 17 lac and corporate holding (23 lac - 17 lac) is 5 lac people holding more than 10000 2.5 lac so virtually 12 lac is only floating and from jan 2015 total delivery volume approx 5 lac shares if we exculude the sudden spike of volume and price in jan than nearly 2.5 lac shares delivers in price band of 78/94 with the market volatility I can smell something is cooking from experience but I don’t know what is it trying still to pin point in case you get any reply kindly post thank you regards

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Hello everybody I am new to the forum but have learned good things from this forum and have invested and iam happy to say all your suggestion were good. Thank you very much.
Iam in F & B buisness and associated with liquor industry for past 10 years. Earlier I was trying to find a good liquor stock with my experience but always failed to narrow down any good stock. But I am also tracking this stock for two years and even did scuttle but since now I work in INDORE.
First I went upto manikara from INDORE the disterlerry is in Barwaha after umaria on the INDORE Khandawa road you can see it in google map.
This is functioning and looks recently renovated. The same company has a disterlerry in the name of Mount Everest BREWRIES ltd in simhrol distelling beer. they have there corporate office in main Indore own building three floors rented to shoppers stop and fourth floor a full fledged nice office with 70/80 staff I visited them as an investor and try to get some info.
They are reluctant to disclose for whom they are bottling but confirmed that they are the major suppliers of grain spirit to vodka brands and bottling for international whiskey brands and 55% of the production is supplied to these companies with whom they have an understandings.
Apart from this the promoter Prasanna kumar kedia is a known name in Indore and looking after day to day operations and has no bad history like other liquor company promoters and has more than two decades of experience in liquor industry.
I asked them about there web site that informed that it will be operational soon they are typically media shy no public relations guys is available otherwise they seem to decent and the fly by night or the kind who boost about there company on the contrary they are silent about there clients.
I checked up with my banker friend he confirmed that it is good account with no problem operational for 15 years with good credit history.
The central excise website also confirms the enchanted capacity of the company and MP pollution control board website also has given full approval for the enchanted capacity.
There disterlerry has added more than 75/ 100 employees newly this year in technical and manufacturing side.
The IMFL brand is JAMES MC GILL whiskey LONDON BRIDGE GIN, jamagian rum which is selling in Indore as far as I checked with the suppliers who are connected they are confirming that these people are good
Only think I can add is they are supplying for SMIRNOFF AND ABSOLUTE VODKA. I can’t confirm whether they are bottling BLACK DOG but for sure HAIG,JOHNYWALKER AND GLENDRUMMOND.

Since iam in F&B buisness I can tell you manufacturing triple disitelled grain spirt requires a good experience and that can be a MOAT for this company and also all lover India ther is investment happening in Grain spirit because after some time even here people will, understand that a good whiskey has to be from grain spirit and not from molasses
With bottling agreement with reputed brands and supplying its production to good brands and having cash cow in liquor sales this one company I found to be in all the verticals of this sector which will help them to overcome any pitfalls
As regard the valuation I request senior members to look into and any further ground enquiry I can perform since iam in indore
Regards prakashiyer.

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Wow thank u Prakash that is good ground work next time around kindly check up
What is there understanding with Mount Everest brewries ltd
Whether they will give segment results such as bottling, country liquor, and imfl
Do they have own capitive power generation
Pedigree of the promoter
By any chance a third party confirmation of the auditors creditablity you know how are they such kind of thing
What is buisness model and scalablity chances
Regards indirachitra

indirachitra
Its amazing fy15 balance sheet shows their working capital needs are zero. for a small company with biggies as their clients- very few debtors is really commendable. it may signify they are supplying them with some specialized items as you above pointed out triple distilled grain spirit. Also creditors are allowing good credit to them.
I have seen this trait before in many companies and it proves to be tipping point where they become multibaggers but it must be sustainable in future years for that more data points are needed which shows us revenue growth will sustain in coming years.
Please scratch it more. It might turn out really good stuff.

Indira
First of all this company should not be confused with another KEDIA associate that is a different one with some other promoter not related to this company.
Secondly when I checked I came to know that they are the owners of Mount Everest breweries and its beer disterlerry supplying to some big guy which I think must be sabmiller but they have not confirmed this. I don’t know what you mean by understanding
They have there own power generation Vedanta energy generating power I think from biomass and also they have some sort of vermi post from molasses waste which was done by lazeres enviro pvt ltd as csr
There auditor is m d Agarwal both MP Agarwal and Girish Agarwal seems to have a resonable good name in Indore
Regarding pedigree I think they were origanilly from England that why they have this Scottish disterlerry connection now settled in Saket INDORE
This is important there registered office is in Calcutta I don’t know why and if you watch keenly in public holding 18% is held by garnet trade link pvt ltd and attic deal on pvt ltd both Howrah based having same address and email id. This somehow for me looks like promoter holding thru proxy.
Mr ayush can confirm whether it is bad sign or what it implies on technical grounds I may be wrong also
If ayush can look into this it’s good why would somebody hold 17% if promoter is holding thru somebody for what is that a way to circumvent the sebi regulation
otherwise I did not find anything alarming I also happen to speak with one my guys working there from that it seems that fy/16/17 450 to 500 cr revenue with 13/14% Opm looks possible without any additional capex burden or debt with depreciation and fiancé cost coming in the region of 15/17 cr a net profit of 30 cr seems a possibility
Ayush can you reply for my query on that 17% holding.

REGARDS

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Hi,

Can’t say anything specific till we have more information about this pvt co.

Generally speaking, till there is no downward change in such kind of pvt holding, one shouldn’t be too concerned.

Regards,
Ayush

Prakash in the previous post itself I mentioned this but I did not want to speculate about the ownership as long as it is not confirmed and also as ayush mentioned the holding has never reduced from the last four years and no change in qtrly shareholding pattern that shows its not used for trading and even if it is proxy holding as doubted by you than on the contrary I feel it is good sign and thank u for your addl info.

Thanku ayush and Indira
Indira regarding your query for segment results
Bottling IMFL AND ENA are all reportable under potable alcholol only as per cenvat code if the bottling is not done on royalty basis here bottling is done under contract manufacturing and not royalty basis even in revenue reconition as per central excise rules the bottling revenue is accountable to the bottler if it’s a contract manufacturing and even in ENA SALES these guy supply it is ingredient to the OEM guys under agreement and hence it is also classifies under potable ALCHOLOL only
Iam still not able to find what you or ayush meant by understanding with Mount Everest BREWRIES ltd I know that it is owned by AABL with full investment but I don’t know whether that revenue is included or will be included let me check
Correct me if iam wrong is that you want check ayush

Thank you ayush and Prakash for your help since as of today I have invested in AABL i will not be posting anything further
Prakash last one thing please do find out whether these guys have made any new investment in disterlerry food park in KOTPULI, RASJATHAN.
if I come across anything important I will post further otherwise once again thanku

it is really a amazing forum guys after reading forbes magzine i registered with you and since the time i bought a bottle of haig were it was mentioned bottler as associated alcholols i was wondering which company is this. after this i checked up my friend in nk distellery he confirmed to me this guys are have a very niche product that is triple distelled grain spirit which is main ingredient in white spirit like vodka and gin these people are very popular in that area it seems with many white spirit manufactures also recently many people are investing in grain spirit like gulshan indian glycol alllied distellery but these guys are pioneer in this field
with grain spirit whiskey popularity on rise in india the demand is going to overrun the supply

another good thing is only in this forum the person who has intiated the thread nor the other guys have ever spoken about share price you guys are really amazing

but with this niche area and demand i think your team has identified another multibagger

goodluck

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Dear Friends,

I got a call from couple of friends asking about my interested in Associated Alcohol. Just want to clarify that I’m not recommending or endorsing any idea (specifically Associated Alcohol). Like I have mentioned in my ppt - many often we just buy starting quantities based on the good numbers and past performance of a company to understand it better. And similarly we have a small exposure in this which we bought probably 6-7 months back based on the consistent good performance being delivered by the co.

There are several negative also in this co (like mentioned above) - 1. Lack of transparency 2. Industry is such that there haven’t been many cases of big winners 3. Volatile numbers (I was quite not happy to see the sudden jump in Q4FY15 results with no explanation in the notes to acs).

So please be careful, do your own homework, understand the context of the discussion, and don’t take any/every mention as an endorsement.

Thanks & Regards,
Ayush

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