CHANDIGARH DISTILLERS & BOTTLERS LTD.
Short Term Debt / Commercial Paper (CP)
Rating
CARE has retained the ‘PR1+ [PR One Plus]’ rating
assigned to the Short Term Debt (STD)/Commercial
Paper (CP) Programme for Rs.5 cr of Chandigarh
Distillers & Bottlers Ltd. (CDBL). The STD/CP
Programme of Rs.5 cr would be within the overall
working capital limits (fund based) sanctioned by the
banks. Instruments with this rating would have strong
capacity for timely payment of short-term debt
obligations and carry lowest credit risk. CARE assigns
‘+’ or ‘-’ signs to be shown after the assigned rating
(wherever necessary) to indicate the relative position
within the band covered by the rating symbol.
The rating takes into account consistent track record of
company, CDBL’s broad product portfolio, low gearing,
adequate cash flows and marketing tie-up.
Going forward, any adverse change in debt profile of
CDBL in view of its propensity to support promoter group
companies which are setting up power projects and its
ability to adapt to changing dynamics in the regulatory
environment would be the key rating sensitivities.
Background
Chandigarh Distillers & Bottlers Ltd. (CDBL) was
promoted by Shri Suresh Kumar Modi and his son Shri
Amit Kumar Modi in April 1986. The manufacturing unit
of the company is situated at Banur (Patiala). Initially,
CDBL was only engaged in bottling of potable alcohol
and country liquor. As a step towards backward
integration, the company set up facilities in 1991 for
manufacture of Rectified Spirit (RS), Extra Neutral
Alcohol (ENA), Industrial Alcohol (IA) and Denatured
Spirits (DS). Over the years, CDBL has increased the
capacity of its distillation plant as well as bottling unit.
Existing capacity of the Rectified Spirit (RS) plant is
1,08,900 KL per annum and that of the bottling plant is
18,000 cases per day.
The products manufactured by CDBL are well accepted
in the market. CDBL has a licensing arrangement with
United Spirits Ltd., a UB group company to manufacture
CREDIT ANALYSIS & RESEARCH LIMITED
PR1+
various brands of Indian Made Foreign Liquor (IMFL) at
its facility.
Operations of the Company
The activities of CDBL are divided into three categories:
bottling and sale of IMFL for United Spirits Ltd.
(McDowell and Triumph), sale of own brands of IMFL &
Country Liquor and sale of RS, ENA, IA and DS.
United Spirits Ltd. (USL) uses the facility of CDBL to
produce and sell its products in the Northern India. CDBL
is one of the largest distilleries for USL. CDBL is
presently utilizing about 60% of bottling capacity and
15% of distillation capacity for USL’s products. Company
has switched over to grains as main raw material during
FY06 as against molasses used in FY05 owing to better
yield and availability of grains. In FY08, around 29% of
the gross revenue of CDBL was contributed by bottling
operations for USL. The contribution from this business
is the service charges plus contribution from the ENA
which the company uses to manufacture various brands
of IMFL for USL.
CDBL is a regional player in the liquor industry. It
manufactures and sells ‘After 7 PM’, ‘Chandni’ in the
IMFL category and ‘Lalpari’ and ‘Jalwa’ under the country
liquor segment. These brands are among the popular
country liquor brands in Punjab.
The RS and ENA are sold to various leading
manufacturers of potable alcohol viz. UB Group, Mohan
Meakins through commission agents. Prices of ENA and
RS are not regulated by excise authorities and hence
are market driven. IA/DS is sold to the bulk consumers
viz. Ranbaxy, ICI, Trident, Ind-Swift Laboratories etc.
under the permit issued by the Excise Commissioners.
The product commands ready market and entire
production is booked in advance.
CDBL operates in an industry which is characterized
by a high degree of Government regulation. In
addition, frequently changing taxes and duties levied
by different states impact the players’ profitability. The
market has also witnessed aggressive pricing
1
competition in the recent years, which has had an Financial Results
impact on the industry profitability. In addition, the (Rs. In crore)
State Governments exercise their control by imposing For the year ended March 31, 2006 2007 2008
various levies and duties on liquor. As a result, the
pricing flexibility of distilleries is very low. CDBL has Total Income 254.9 326.9 424.9
tried to mitigate these risks by having a broad PBILDT 11.4 18.0 22.6
product-mix encompassing a broad range with high Interest 0.9 1.4 3.9
capacity utilization. Operating Profit 6.0 11.8 12.4
The raw material prices (molasses and grains) have PAT 6.7 8.0 10.6
been quite volatile especially in the last one year. Net Cash Accruals 12.2 14.5 20.3
Company switches to molasses/grain based on Tangible Networth 55.9 76.3 90.4
procurement prices and yield combination. Total Capital Employed 83.3 121.3 135.8
CDBL had set up a 8.25 MW biomass (biogas and rice Key Ratios
husk) power plant in Aug 2007 at a cost of Rs.31.7 cr. PBILDT / Total Income (%) 4.48 5.50 5.32
The project has been funded through term loans of Rs.20 PAT / Total Income (%) 2.64 2.46 2.49
cr and the balance through internal accruals. Ministry Return On Capital Employed (%) 9.99 14.81 13.99
of Non-Conventional Energy Sources (MNES) has
Total Gearing ratio (x) 0.49 0.59 0.50
sanctioned a subsidy of Rs.4.9 cr and the same is
Interest Coverage (x) 7.86 9.28 4.20
expected to be released after achieving the capacity
utilization of 80%. The criterion for granting of subsidy Current Ratio (x) 1.32 1.31 1.38
by MNES is Rs.80lacs/MW subject to a maximum of Average Collection Period (Days) 30 23 21
Rs.5 cr. CDBL anticipates receipt of capital subsidy of
generation from operations. Total income of the company
Rs.4.9 cr. during FY10.
rose 30% during FY08 due to increase in demand for
its products portfolio and ability to meet the same due
Projects
to increased capacity.
The company has undertaken capex to enhance effluent
PBILDT margin of the company marginally declined to
treatment capacity of the company and improve profitability.
5.32% during FY08 mainly due to higher selling
The project cost of Rs.12.5cr is being financed through debt
expenses and fuel cost.
from Canara Bank (Rs.10 cr) and internal accruals (Rs.2.5
cr). The project is under trial run. PAT margin marginally improved to 2.49%, despite steep
increase in interest expenses, on account of other
CDBL is also setting up a grain milling plant of 20 tons per
income. Profit from futures and options (stock)
hour capacity for grinding of grain (broken rice) as a step
derivatives (Rs.2.83 cr.) formed major proportion of other
towards backward integration. The project cost is estimated
income (Rs.4.26 cr.). Any adverse financial implications
to be Rs.4.5cr. to be funded through internal accruals. The
of investment in futures and options (stock) derivatives
same is likely to be operational in April 2009.
may have impact on credit profile of CDBL.
Promoters of CDBL are setting up small hydel projects
Overall gearing of the company has typically remained
in other group companies and intend to utilize surplus
low in the past mainly on account of continuous equity
funds available with CDBL as part of equity infusion for
infusion and healthy internal accruals of the company.
these projects apart from contribution from promoters
Overall gearing was comfortable at 0.50 times as on
and other group companies. As per estimates, CDBL is
Mar 31, 2008.
likely to invest around Rs.10 cr during FY10 backed by
receipt of capital subsidy of Rs.4.9 cr. Interest cover has declined to 4.20 times during FY08.
The current ratio has been satisfactory at 1.38 times as
Financial Performance on Mar 31, 2008.

The financial profile of CDBL is comfortable with Net sales increased by 18.5% to Rs.377cr. during the 9
consistent operating margins and steady cash flow month ended Dec 31, 2008, period-on-period, on

2 CAREVIEW
account of increase in capacities and consequent
demand for its products.
Profitability margins of the company marginally declined
on account of high raw material prices and increase in
power cost (high husk prices). Consequently, PAT
margins also declined during the period.
Industry Outlook
The IMFL market consists of whisky, rum, vodka, brandy
and gin. India is one of the very few liquor markets in
the world where the growth rates have been positive.
IMFL market is dominated by brown spirits viz., whisky
(56%), rum (24%) and brandy (16%). White spirits
comprising gins, white rums and vodkas have a mere
4% share of the IMFL industry. The cheap whisky
segment has recorded the maximum volume growth in
the whisky segment over the past years.
The liquor industry is suffering from over taxation and over
regulation, which has impeded the profitability even in the
face of continuing growth in demand for liquor products.
Moreover, inter State sales of IMFL attracts export duty in
the State of manufacture and import duty in the State of
sale. This results in high prices at the consumer level and
acts as a big trade barrier. Therefore, for all practical
purposes a manufacturer has to have a presence in a State
to sell in that particular State.
A rapidly increasing middle class population, rising
income levels, shifting consumer preferences and
increase in the number of choices available to the
consumer will further improve the above average growth
in the semi-premium and premium segment. Similarly
progressive regulations and decline in the below poverty
line population is expected to increase the market for
country liquor and cheap IMFL.

The country liquor market is a regional market with small Last one year has seen sharp increase in prices of raw
manufacturers spread across the country but it is estimated material (molasses and grain). Besides, availability of
to be around 2.5 times the IMFL market. molasses has been limited.

For Further details please contact at : March 2009

CREDIT ANALYSIS & RESEARCH LIMITED

4th floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway, Sion (E), Mumbai - 400 022.
Tel.: (022) 6754 3456
Fax : (022) 6754 3457
E-mail : care@careratings.com

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CREDIT ANALYSIS & RESEARCH LIMITED 3