Vintage Coffee: Brewing Profits

Stock Opportunities Untested - but worth a good look
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Screener does not have their credit report, but I found this information. There may be something more current too, but I have not found it.Google Search
Vintage Coffee & Beverages Ltd (VCBL), formerly Spaceage Products Ltd, is a company that has undergone some changes in its financial health and creditworthiness. The company’s credit rating status is reported as “Issuer not cooperating,” meaning ratings agencies have requested data but have not received it from the company, according to Acuite Ratings. Promoters have also pledged a significant portion of their holdings, and debtor days have increased.

Here’s a more detailed breakdown:

  • Credit Rating: The company has been flagged as “Issuer not cooperating” by rating agencies like Acuite Ratings and others, indicating a lack of information sharing.
  • Promoter Pledging: A substantial portion of promoter holdings (27.4%) has been pledged, which can be an indicator of financial strain.
  • Increased Debtor Days: The company’s debtor days have increased, meaning customers are taking longer to pay, which could impact cash flow.
  • Tax Rate: The company’s tax rate appears to be low.
  • Return on Equity: The company has a low return on equity over the last 3 years, at 11.7%.
  • Dividend Yield: The current dividend yield is 0.08%.
  • Capitalizing Interest Cost: The company may be capitalizing interest costs, which could be a way to manage financial reporting but might also indicate difficulties in meeting interest obligations.
  • Stock Trading: The stock is trading at 4.00 times its book value.
  • Promoter Holding Decrease: Promoter holdings have decreased over the last quarter by -1.38%.

These factors, taken together, suggest that VCBL may be facing financial challenges and that its creditworthiness could be under scrutiny. The “Issuer not cooperating” status is a significant red flag, as it suggests a lack of transparency and potential reluctance to address financial concerns.

Disclaimer: I have got out of the stock yesterday.

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Disclaimer: I have got out of the stock recently.

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Massive capacity expansion:

Current capacity : 6500MTPA (4500 +2000) - 2000 MTPA started production from Jan 2025.
proposed : 4500MTPA (spray dried ) - operational by march 2026
Additional : 5000 MTPA (freeze-dried) - just announced after raising money via preferential issue to investors and promoters.

https://www.bseindia.com/xml-data/corpfiling/AttachLive/aab5151e-fab6-437a-9ee8-c5bb7423d026.pdf

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Without visible cash generation how is this company expanding its manufacturing capacity with internal accruals?

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Fund raise through QIP and preferential allotment of warrants - https://www.bseindia.com/xml-data/corpfiling/AttachLive/1a0dcc96-dc3a-4bea-a443-01d4665f0702.pdf

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Why are everyone ignoring huge Equity Dilution which has happened in the last 2 years.

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These guys seem very fishy to me. The Compliance officer just resigned after they are issuing a lot of preferential warrants at Rs 124 per share.

Also, the website has no IR information. I was trying to find their IPO RHP to look at any active cases against promoters, but couldn’t locate it. On BSE, I only see current year’s annual report. Not sure why they don’t have past annual reports and filings since the comapany has been listed since 2019

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Hello, wanted to understand the nature of contracts the company has with the suppliers - are the longer term contracts or shorter term contracts or back to back against orders?

Since the coffee prices have been volatile and the management had raised a point in one of their con calls that their suppliers tend to default on delivery against the agreed contracts if the prices have increased - ultimately causing delays and supply chain problems.

Is this the reason the price has been falling despite announcements of capacity expansion?
and whether the rise in coffee price hedged by the contracts with the customers?

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This was a takeover situation what’s the company owner bought a listed company and reverse merger was done.

The main problem is frequent equity dilution and pledge of promoter shares

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For small companies, pledge of promoter shares is not unusual.

Equity dilution is a big worry. 15-20% hit on EPS just because of that. Short term, it is definitely a bad sign. Medium term, I guess the expectation is that new capacity will offset dilution.

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Even after such bumper growth in Q2 results, stock has not shown drastic price increase? Is the growth priced in or there are some red flags in this stock?

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This result is anticipated by the market and it is already priced in. Next two quarters will be same as current quarter, since company is at full utilisation. I feel only when new capacity starts generating revenue this might start moving again

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Couldn’t find any PPT for Q3 and don’t know if they will be having concall or not. For now here are my notes from Q3 results and previous quarter 2’s concall.

Vintage Coffee Q3 Results

1. Revenue growth 71% (Coffee prices in Q3FY26 were higher by ~25-30% on average from Q3FY25)

PAT growth 53% (Slower than revenue growth on account of tax rate normalisation to 24% vs last year’s 9%)

2. The 4500 MTPA Spray dried & agglomerated capacity expansion is on track to be commissioned by FY26 end. Currently they are running on full capacity utilisation since 4-5 quarters.

3. Another capacity expansion of 5500 MTPA for freeze dried coffee is underway, currently machines have been ordered and land has been allotted. As per previous concall, it is expected by FY27 end or start of FY28.

4. EBITDA margins in freeze dried are expected to be higher at 22%-24% (for reference spray dried is 16%-18%)

5. They will not do any further equity dilution (mentioned in q2 concall), and are looking to fund further capex through internal accruals and debt route.

Key things to track:

1. The management has repeatedly said in previous concall that fall in coffee prices does not affect their EBITDA margins, as they do cost+profit structure in contract pricing.

However, from what I understand, even though it will not affect EBITDA as a percentage of sales, but it will definitely impact Sales. So, if coffee prices come down too much, Revenues could fall and EBITDA could fall while staying same as a percentage of the recenues. So coffee prices are a key metric to track.

2. The increasing capacities could offset small part of falling coffee prices through volume. So, need to track if capacity expansion comes live on time and utilised quickly given the high demand.

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Vintage Coffee Q3FY26 Concall Update

Cash Flow and working capital

  1. Cash flow from operating activities turned positive in Q3FY26, and expected to be positive going forwards.
  2. Inventory days marginally improved and further small improvement expected.

Revenue Mix

  1. Currently the revenue mix is 50-50% between bulk and consumer pack. But for Q3 and Q4 onwards they are focused more on consumer pack, which is margin accretive. Going forwards their target would be to reach and maintain 65-70% consumer pack and remaining bulk.
  2. For the first year of freeze dried, ~70% revenue is expected from bulk and ~30% from consumer packs.

Freeze Dried and capacity utilisation

  1. There is rising demand in freeze dried coffee as well as better margins. Realisations are higher by 40% over spray dried.
  2. For Freeze dried coffee, 65% - 70% average capacity utilisation expected in first year of commissioning. (Slow at start, 100% after 3-4 quarters, so average 65-70%).
  3. Phase 2 start (another 5500 MTPA for freeze dried) expected by FY27 end. And capacity expansion completion planned by mid of FY28-FY29.
  4. For capex of 450 cr. for freeze dried, 300 cr. will be funded by debt, and the interest cost is expected around 6-7% which will start showing up in P&L from FY27 end and FY28 onwards.
  5. Targeted countries for freeze dried will be like south korea, middle east, australia, new zealand, Indonesia etc. Dicussions at advanced stage with customers.

Other Highlights

  1. 80-85% of raw materials are being sourced domestically, rest imported. Going forward they plan to source 60% domestic and 40% imported. The plan is to add imports from Indonesia and countries in Africa by Q2FY27. This will diversify their raw material sourcing.
  2. Tax rate normalised to ~24% this quarter and expected to stay normalised around 25% going forward.
  3. Full capacity utilisation expected for additional spray dried capacity of 4500 MTPA within first quarter.
  4. Coffee price fluctuations have minimal impact on profitability of the company, as the contracts are signed quarterly on cost+ basis, based on average and current coffee prices.
  5. As per order book, Q4 is already fully sold out.

Overall good execution and great outlook. Capacity ramp up/utilisation, Coffee prices, Revenue mix remain the key trackables.

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My 2 cents on the business:

1. Key man risk:
The entire business seems dependent on Balakrishna Tati. He is drawing a salary of ₹1cr+, while the next highest-paid employee, the CFO, is earning around ₹35 LPA. It’s a little hard to believe that in case of any issue, there is any other competent person who can run the business effectively.

2. Moat of the business:
What exactly is the moat of this business? I’m not able to clearly determine it. Essentially, it appears to be a processing business where money is made on EBITDA per tonne. Is the business resilient enough? What is the switching cost for the customer?

CCL says that the blend they provide makes the end customer habitual, and that’s why the brand does not switch and continues buying from them. But then the question arises - who controls the blend recipe? Is it patented? Confidential? Or is that information shared with the customer?

If I’m a brand and I know the recipe of the blend, why can’t I go to someone else and ask them to replicate it, if they can provide me a better price?

3. Mistakes in the balance sheet (AR FY25 and FY24):
The total assets and total liabilities do not match in the annual report. The company had inflated debt by 4x in the liabilities section. They corrected this mistake in the H1FY26 balance sheet, but it raises a very important question about the competence and independence of the auditor.

I’m not a CA, but even a 12th-pass person knows that the assets and liabilities should match in a balance sheet. I understand that mistakes can happen, but making such a basic error in a listed company’s financials raises serious red flags.

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On Rev -Consolidated revenue for the quarter stood at INR1,505 million as against INR881 million last year, registering a year-on-year growth of 71% vs 136cr QoQ. EBITDA for the quarter increased by 79% year-on-year to INR287 million Vs 22cr QoQ as against FY 25 INR161 million with EBITDA margin improving to 19.1%

On Cash Flow - he shortfall of INR189 Million reported in H1 FY '26 is expected to be fully offsct, resulting in a breakeven cash flow position for FY 26,

Q on Current GM Increased from 202 to 240cr - earlier we were mostly focused on bulk sales. Now we are more focused on consumer packs. The consumer packs are packed in doy-packs, tins, and glass jars. That is giving higher revenue and higher realization,. It is a valuc-added product that we are giving to them. That’s the reason for the higher realization and the higher EBITDA levels as well.

Q on Bulk vs Consumer Mix - are doing it in a 50-50 ratio — 50% bulk and 50% consumer pack. But in Q3 and Q4, we are focused more on increasing consumer packs, which is coming to around a 60 : 40 ratio. 60% is consumer packs and 40% is bulk.

Q on Finacing 450cr Capex - We have raised around INR 102 crores through equity for the FDC project. This is being utilized for equipment purchases, land and building, and other related cxpenses. We have also tied up with another financial institution from Europe for debt, where we are getting a lower interest rate component for the equipment and related items. think the interest component between 6% to 7% in total.

Q on RM - We are right now procuring around 80%-85% domestically and 15%-20% imported coffec beans. But obviously, going forward, we plan to have around 60% Indian beans and 40% imported beans.

Q on Price Difference Spray Vs FDC - he price differential between the spray and the freeze-dried is approximately around 40% higher.

Q on Tax Rate - From Q3 onwards, we are at the ful tax rate of 25%.

Q on 2 yrs Back Realisation was 700/kg and Now 840kg - Two years ago, we were doing almost 80%-85% in bulk and 10%-15% in consumer packs. Today, we are doing almost 50%-55% in consumer packs, and the rest is in bulk. Going forward, we are planning to do 70% in consumer packs and 30% in bulk. Moreover, two years ago, we were more focused on spray-dried coffee, which is slightly lower priced. Now, we are focusing more on agglomerated and gramulated coffee, which arc higher priced.

Q on Order Book -As of today, the company has almost sold out the entire Q4. Even the additional capacity of 4,500 units has almost been confirmed through quantity commitments from customers.

My Take – From Q1 fy 27 onwards, can see EBDITA of 40cr/Qtr, 11000 Capacity at current EBIDTA rate of 170 would be able to generate 180cr/Annum. Current EV 1806, trading near 10X fwd**. Negative, 26% pledge by mgt and didnt participate in pref issue. No major Instn avl on concall.**

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Any one done in depth research on mgt quality ??

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Stock is falling continuously and didn’t recover during the april rally as well. Company’s 25-30% revenue comes from Middle East and Africa region. I think the market is pricing in some of the impact which might have happened during the March month. Their Q1Fy27 no may also get impacted because of the war.

Additionally, prices of coffee has fallen in the recent months which may impact their margins.

Any thoughts?