| Experienced management and long track record of operations
The group started its operations in 2005 and has developed an established market position in Mumbai and Goa. The group is one of the major distributors of Pernod Ricard India Private Limited (Pernod) in the western and some central line areas of Mumbai and Goa, wherein more than 5,000 hotels, restaurants, and permit rooms are served by Pernod. Furthermore, the group has also commenced operations in Rajasthan in FY2026, which is also expected to support the group's scale of operations over the medium term. In addition, the promoters have over four decades of experience in the liquor distribution industry, which has benefitted the company to have established relationships with the suppliers. Acuité believes that the group will continue to derive benefit from its established track record of operations and experience of the management.
Moderate Financial Risk Profile
The financial risk profile of the group is moderate, marked by net worth of Rs.123.12 Cr. as on March 31, 2025 against Rs.119.12 Cr. as on March 31, 2024 on account of accretion of profits into reserves. The capital structure of the group is marked by gearing ratio, which improved and stood at 0.72 times as on March 31, 2025 as against 0.93 times as on March 31, 2024. The coverage indicators are reflected by the interest coverage ratio and debt service coverage ratio, which stood at 1.83 times and 1.63 times respectively as on March 31, 2025. Further, Total Outside Liabilities/Tangible Net Worth (TOL/TNW) stood at 1.53 times as on March 31, 2025 as against 1.75 times as on March 31, 2024 and Net Cash Accruals/Total Debt (NCA/TD) stood at 0.08 times as on March 31, 2025 against 0.10 times as on March 31, 2024. Acuite expects the financial risk profile of the group to remain in similar range with no major debt-funded capex plans in the near to medium term.
Efficient Working Capital Operations
The working capital management of the group remained efficient, marked by GCA days of 67 days as on 31st March, 2025. The group needs to maintain adequate inventory, as and when required, despite the same, the inventory levels remained efficient at 28 days as on 31st March, 2025 as against 27 days as on 31st March, 2024. Subsequently, the debtor days stood constant at 33 days as on 31st March, 2025 and 31st March, 2024 and the creditor days stood at 20 days as on 31st March, 2025 as against 17 days as on 31st March, 2024. Acuité expects the working capital operations to remain in similar range in the near to medium term, supported by the efficient debtor collections and inventory level management of the group.
|
| Decline in operating income albeit improved operating profitability margins
The revenue of the group stood at Rs.1553.95 Cr. in FY2025 as against Rs.1777.61 Cr. in FY2024 on account of decrease in sales volume of liquor cases in FY2025 compared to the previous year since the group has closed its operations in West Bengal. Consequently, the group is tapping opportunities in new locations to bridge the gap caused by this closure and commenced operations in Rajasthan in August, 2025 (FY2026). The EBITDA margin of the group improved and stood at 1.30% in FY2025 as against 1.00% in FY2024 supported by the increase in sales price realization in FY2025. Further, the PAT margin stood at 0.39% in FY2025 as against 0.58% in FY2024 on account of decrease in income from other sources in FY2025. However, the operating PBT margin of the group increased and stood at 0.50% in FY2025 as against 0.15% in FY2024. Moreover, the group has clocked Rs.763.30 Crore till H1 FY2026 as against Rs.711.84 Crore till H1 FY2025 and expects the revenue and profitability to improve over the medium term, supported by the expected increase in sales volume by operations being started in Rajasthan along with existing operations in Mumbai and Goa. However, the ability of the group to improve its profitability margins while scaling up its operations in the near to medium term will remain a key rating sensitivity.
Supplier concentration risk
Candy Group relies heavily on its primary principle, Pernod Ricard India Private Limited (Pernod) which contributes 65% of the total stock-in-trade of the group, exposing the business to supplier concentration risk. Despite its two-decade partnership with Pernod, any changes in the essential supplier's policy can have an impact on the operations of the group.
Vulnerability to regulatory changes
The liquor industry is administered through a strict license regime for liquor production and distribution. Any adverse change in the government's license authorization policy, such as discontinuing or limiting the renewal of licenses or substantially increasing license fees, could affect the profile of players such as the Candy group.
|
