ASSOCIATED ALCOHOLS & BREWERIES LTD - doubts regarding the transparency

First I would like state That even though there is a thread in this same name I started this new because I wanted to highlight the aspect accounting problems and number fudging in Various small cap companies I have already posted the positive aspects of this company many times in this forum and hence felt responsible to bring this to the notice of members.
This time when I was in Indore again I visited them and asked the following doubts from the AR 2015
As per the ar the median salary is 1.28 lac for 301 employee the key management consists only of two people Ashish Gadia and Deepak drawing only around 7 lac
Whereas the two directors are taking 3 cr each
The related party transaction shows 6 cr as salary paid
The other expenses fy 15 67 cr also shows a substantial increase and you basis there is drastic increase In other expenses even though they have captive power.
My question was to them to explain the above.
I also raised the doubt about 32 cr loan and guarantee extended to the related party.
Thirdly the Independent auditor remark regarding the the transactions under taken in related party names
And about the even segmenting the revenue under bottling and capative that is under licence do manufacturing and only bottling as per cenvat requlations
None of the above questions were answered by there CFO nor anybody is willing to share any sort of info ration regarding the sudden increase in employee cost I even went to there auditors office there also same story.
Above all they were rude and dismissed me by telling that if don’t like sell the share and go away why worry.
This I wanted to bring to notice of the forum members because I thought I am also responsible since I have given earlier positive feed back about this company and I started anew thread with this mind.
I may be wrong because of my limited knowledge in accounting procedures but I was worried at the transparency level of the management and there attitude towards a minority share holder shows there is something wrong in the quality aspect
I think this is what ayush was also trying to highlight hope it is helpful
I want senior members to highlight to retail investors like us to find such accounting problems in various small cap companies.

Discl. Not invested as of now


Dear Prakash,

Thanks for sharing your observations. I also noticed the above and didn’t feel comfortable and exited. It’s great on your part to try and educate the fellow investors.

Thank you,



Was never tracking or invested in the said business but @prakash123 it is so wonderful to see such an honest post.


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Thank u Prakash but other than the salary portion there is no big negative today the CARE has improved the company credit rating and they have announced that the board will consider bonus shares
Board to consider bonus shares 13/01/2016
Revision in Credit Rating 13/01/2016
Financial Results & Limited Review Report for Sept 30, 2015 (Standalone) 14/11/2015
Board Intimation for Results & Closure of Trading Window 02/11/2015
Appointment of Company Secretary and Compliance Officer 31/10/2015
Also see below the CARE RATING DETAIL
Amount (Rs. crore)
Long-term Bank Facilities
CARE BBB+ (Triple B Plus)
Rating suspension revoked and revised from CARE BBB- (Triple B Minus)
Short-term Bank Facilities
CARE A2 (A Two)
Rating suspension revoked and revised from CARE A3 (A Three)
(Rupees Forty Four crore and Eighty lakh only)
Rating Rationale
The revision in the ratings assigned to the bank facilities of Associated Alcohols and Breweries Limited (AABL) takes into account continuous increase in its scale of operations on the back of steady growth in the sales volume of country liquor (CL) and Extra Neutral Alcohol (ENA). The revision in the ratings also factors improvement in its profitability, leverage and debt coverage indicators during FY15 (refers to the period April 1 to March 31).
The ratings continue to derive strength from the long-standing experience of the promoters of AABL in liquor industry, established operations in the state of Madhya Pradesh along with assured off-take of CL on back of district-wise quota system and favourable demand outlook for alcoholic beverages in India due to increase in per capita income as well as changing lifestyles.
The ratings are, however, constrained on account of susceptibility of its operating margins to volatility in the prices of its agro-based raw materials, geographical and product concentration risk as well as its presence in a highly regulated alcoholic beverages industry characterized by high taxes and stringent government controls.
AABL’s ability to maintain growth in scale of operations along with increase in sales volume of high margin IMFL and ENA segments, expand its geographical presence and improve its profitability margin by managing volatility associated with its agro-based raw materials amidst a competitive and highly regulated environment would be the key rating sensitivities.
Incorporated in 1989, AABL is a public limited listed company and the flagship entity of the Indore-based Kedia group promoted by late Mr Bhagwati Prasad Kedia. AABL is the second largest distillery in Madhya Pradesh (MP) and is engaged in the manufacturing of potable alcohol, ie, Rectified Spirit (RS), ENA, CL and IMFL with an installed capacity of 104 kilo litre per day (klpd) and undertakes bottling of IMFL for Diageo India Private Limited (Diageo). AABL’s distillery and bottling facility is located at Khargone, MP. AABL also has a wind-based power plant of 0.75 megawatt in Tamil Nadu.
In 2009, the Kedia group had also setup a brewery unit under AABL’s associate company, Mount Everest Breweries Limited [MEBL; rated ‘CARE BBB+ (SO) / CARE A2 (SO)’]. MEBL undertakes contract manufacturing of beer for United Breweries Limited (UBL); apart from manufacturing and selling beer under its own brands ‘Le Mont’, ‘Mount’s 6000’ ‘Dabang’ etc. Having sold more than 1 million cases of ‘Mount’s 6000’ in a calendar year, it has become a millennium brand for MEBL. The company has an assured off take arrangement to the extent of 18 lakh-cases of beer per annum with UBL. MEBL operates with an installed capacity of 4 lakh Hectoliters (51.28 lakh cases) of beer per annum at its facility located at Memdi, Indore, MP.
The Kedia group is currently owned and managed by Mr Anant Kedia and Mr Prassan Kedia along with their family members/associate concerns. For analytical purpose, CARE has taken a combined view of AABL and MEBL due to their managerial (common promoters) and financial linkages (AABL has extended a corporate guarantee for the bank facilities availed by MEBL); apart from being present in similar business (alcoholic beverages).

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this further to my post regarding the way i was treated in there office i have posted a strongly worded email explianing this to one mr.prasanna kumar kedia promoter director giving my local address and mobile number (i was staying in sayaji hotel indore)
to my pleasnt surprise i got a call from one sumit jaitley telling me that he is newly appointed cfo and my interaction was with some accounts guy and he is not the cfo even though he was sorry if somebody has not answered my querry.
and also he further stated that the director salary commensurate with there vast experience in the field and unlike other companies were the directors are paid commission on profit and extra benefits like club membership etc here the company has calculated the total CTC basis for salary (cost to company).
as regards the salary to the related party he said that it is decalred in the annual report that they have associate company mount everest breweries ltd and namada distellery werein the parent company has a substanial holding by way of unquoted equity and directors do hold positions and the salary is extended to mangerial cadre under the provisions of associate company salary and it is properly decalred
secondly he said that that the investments made by the parent comapny in mount everest breweres ltd which is producing mainly beer for the local market under brand name le mount and supplying to UBL will bear benefits in future to the parent comapny by way of dividends or interest accural on loans or option of amalgamation.
he also reminded me that now they have fully functional web site and decalred dividend and board is also considering bonus issue for the benenfit of investors.
also he further stated that they increased employee strength and with full capacity utilisation they can improve the top line in coming years and cost reduction in power and raw material and production will drastically improve the bottom line in coming years.
i was happy that they responded hope this post is useful


What is the bonus record date for Associated Alcohol?Did they mention about this?

The bonus has already been given. The share is quoting ex bonus now and is looking good for medium to long term investment. Recently, the company has received the license to increase its capacity from 314 lac litres to 900 lac litres. Also, they have sold one of their non performing subsidiary. Overall, the company is performing good.

Not sure why it’s still up with 16%

I have went through the numbers in depth, looks an interesting story that has played out in last 10 years, although concerned about some points such as sudden spike in promoter remuneration 2015 onwards.

I will be meeting the management soon, I have the following questions to the management. Please add on if anyone has.

Professional development expenses to the tune of 20-25 lacs. Can you throw some light on it?
What led to increase in Gross margins? Any change in product mix?
Why has promoter remuneration shot up in FY15 and FY16?
Contingent liability is very high always. It has reduced 2019 onwards. Throw some light on it.
In 2017 and 2018 approx 1.67 crores each year in Long term deposits were written off what were those?
2018 was highest margin year? Any reason for minor dip afterwards
Why are inter corporate loans very high?
Two public shareholders Garnet Tradelink Private Limited and Attic Dealcom Private Limited, have the same directors, hold approx 8%. Who are they?

I believe, some are very common red flags in all small companies, like promoter remuneration, but i guess in India, we have to live with it. Even groups like Garware are known for remuneration of that kind.

I am yet to work on it a bit, but i guess company has the potential to generate free cash flows from hereon.


The company has informed the Exchanges of an Investor meet on 26th Nov. Good for who are interested to understand the company in detail.

2a990f53-8e31-4894-a8f4-2cc6df2215f4.pdf (6.5 MB)

Hi Nikhil,

Curios to know, whether you manage dto get the answers to your listed questions and what is your take on AABL ?


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Hi Raj,

Will share the summary over weekend. Also, the meet was moderated by IR so they didnt take the dubious questions, and i was asked to ask those questions in one to one meet.

Apologies for the delay in response, travelling with intermittent access to internet.

results are out - look good on margin front not sure if sustainable.

Hi Nikhil,

Looking forward to it.

SInce you had interaction with the management, I am curious to know your opinion on the management?


Hi Raj,

3-4 things which i highlighted above are just a cause of concern for me.

Next time, i meet, would be more keen in understanding why are promoters not part of board. Why is promoter not willing to gain wealth through share price appreciation, rather taking money through remuneration.

Also, will share the summary, its basic about business, since it was a group meet, above questions were not taken. I have the recording, will need to take notes for them and share.

Commenting on overall business, i feel Tushar bhandari seems confident enough. Recent Mcdowell hiring can strengthen their network capabilities outside MP. I have tracking position in the stock, will add more on convincing answers from management.


Thank you Nikhil, highly appreciated. I am waiting for the recent concall transcripts to be uploaded on the bse website.

The concerns that you raised above - did you manage to get answer form the management ?

I look forward to your notes :slight_smile:

Hi Raj,

I was able to get the video of the meet i attended.


The Co. has been growing rapidly over the last several quarters. The increased Sales from value added products like growing its own brands/ franchise brands in each successive quarter resulting in higher operating margins is the key investment thesis here.

The constantly increasing ENA capacities is at the heart of the growth story. Increasing branded Sales then ensures progressively less commodity (ENA) sales going forward. The Co. adds a new state every year, consolides it’s position there and moves on. The last few years it has adopted this strategy moving into Orissa, Kerala, UP etc.

The increased ENA capacity can also be used to meet the ever increasing ethanol demand. This could be an additional trigger but there are enough tailwinds going for the Co. in its core area of operations like demographics, social acceptance about consuming liquor with more n more women joining the party!

While there is no denying that there may be a few concerns on the corporate governance front, but one has to look at the larger picture as these issues get resolved as the Co. grows. It has appointed an IR firm so is clearly sending a message out that it’s looking for market cap! The current valuations of a single digit multiple for the current year (2021-22) clearly leaves enough room for growth there as well!!


Hi, this video isn’t playing for me. Could you (or anyone more knowledgeable than me) please provide a brief summary on what answers you got from the management? You mentioned that the promoters were happy drawing salaries rather than be a part of the growth story which in long term could create more wealth for them. Is that still a red flag? Also, how do you think Associated fares against Globus spirits which is also a small cap and trades at a similar PE? Thanks.