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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 200.00 | ACUITE BB- | Stable | Reaffirmed | - |
| Total Outstanding | 200.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed the long-term rating to "ACUITE BB-" (read as ACUITE double B Minus) on the Rs. 200 Cr. bank facilities of JAGATJIT INDUSTRIES LIMITED (JIL). The outlook is 'Stable'.
Rationale for Rating The rating reaffirmation takes into account the benefits derived from the established presence of the Company in the domestic market and steady scale up of operations and benefits derived from diverse revenue streams. . The company’s revenue increased to Rs. 507.49 Cr. in FY2023 as against Rs. 443.23 Cr. in FY2022. Further, the company has achieved revenues of around Rs. 733.96 Cr. ended March 2024 (Provisional). The increase in revenue in FY2023 is attributable to better pricing in IMFL segment. The operating margin of the company increased to 1.86 % in FY2023 as compared to (2.21) % in FY2022. The increase in operating margin in FY2023 is on account of cheaper raw material procurement and decline in overall direct cost as compared to the last. Additionally, PAT margin stood at 1.70 % in FY2023 as against 0.18 % in FY2022. However, the rating is constrained due to moderate financial risk profile and intense competition and highly regulated nature of liquor industry and susceptibility of profitability due to the raw material's prices. |
| About the Company |
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Jagatjit Industries Limited (JIL) was incorporated in 1944 in the state of Punjab by Mr. L.P. Jaiswal under the name of Jagatjit Distilling and Allied Industries Limited, Subsequently the name was changed to the present one. JIL is engaged in manufacturing, distributing and selling Indian Made Foreign Liquor (IMFL), Country Liquor (CL), Malted Milk Food (MMF) & Malt Extract (MEX) and managing of owned Real Estate assets. JIL sells country liquor in Punjab, has 40 IMFL brands selling across 17 States and 2 Union Territories in domestic market, and 13 countries including U.S.A., Italy and U.A.E, to name a few. Further, JIL leases out owned 2.11 LPSF area to tenants and manufactures intermediates for products manufactured by HUL.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profile of JIL to arrive at this rating. Further, Acuité has also considered the presence of DSRA (Debt Service Reserve Account) and escrow mechanism with a well-defined waterfall mechanism, as specified in the loan sanction letter while arriving at the rating. |
| Key Rating Drivers |
| Strengths |
| Established presence in the domestic market:
JIL is managed by Mr. Ravi Manchanda (Managing Director), Mr. Deepankar Barat (President) along with Mr. Anil Vanjani (CEO & CFO) and Ms. Roshni Jaiswal (Promoter Family). Ms. Roshni Jaiswal belongs to a business family, which has been in the AlcoBev industry for over seven decades. The promoters are very resourceful and have supported the entity with the funding as and when required. The seven decade track record of operations in the AlcoBev and Food industry has helped JIL establish presence with entities like HUL and a geographic presence across 17 States and 2 Union Territories in domestic market, and 13 countries including U.S.A., Italy and U.A.E, to name a few. Steady scale of operations The operating income of the company is generated through 3 Divisions namely: 1) Food Division; 2) Liquor Division; 3) Rental Division. JIL reported operating income of Rs. 507.49 Cr. in FY2023 as against Rs. 443.23 Cr in FY2022. Further, the company has achieved revenues of around Rs. 733.96 Cr. ended March 2024 (Provisional). The increase in revenue in FY2023 is attributable to better pricing. The operating margin of the company increased to 1.86 % in FY2023 as compared to (2.21) % in FY2022. The increase in operating margin in FY2023 is on account of cheaper raw material procurement and decline in overall direct cost as compared to the last year. Going forward, the company expects that the margin would remain at similar levels over the medium term. Further, PAT margin stood at 1.70 % in FY2023 as against 0.18 % in FY2022. The ROCE levels stood comfortable at 14.31 % in FY2023 as against 11.33 % in FY2022. |
| Weaknesses |
| Moderate Financial Risk Profile
The financial risk profile of the company is marked by improving net worth, high gearing and moderate debt protection metrics. The tangible net worth of the company stood at Rs. 62.28 Cr. as on FY2023 as compared to Rs. 47.13 Cr. as on FY2022 due to accretion to reserves. The gearing of the company stood high at 3.55 times as on FY2023. The Total Outside Liabilities/Tangible Net Worth (TOL/TNW) has decreased but still remained high at 7.00 times as on FY2023. The debt protection metrices of the company remain moderate marked by Interest coverage ratio (ICR) of 1.61 times and debt service coverage ratio (DSCR) of 1.51 times for FY2023. The net cash accruals to total debt (NCA/TD) stood healthy at 0.08 times in FY2023. Going forward, Acuité believes that the financial risk profile will remain moderate over the medium term, supported by steady accrual, moderate capital structure and debt protection metrices. Intense competition and highly regulated nature of liquor industry: JIL revenues will continue to be impacted by increasing competition in the domestic IMFL market from global players as well as regional players. In addition, The Indian alcohol industry is highly regulated at almost every stage in the value chain. Furthermore, every state has its set of regulations with respect to distribution and retail channels, registration, taxation, and pricing of alcohol, ban on advertising, raw material availability, varying tax structures in different states pose challenges and restrict the industry’s growth. The industry is also administered through a strict license regime. Different licenses are mandated at stages of production and distribution, including separate ones for manufacturers, distributors, and retailers. Any adverse change in the government's license authorisation policy, such as discontinuation or caps on renewal of licenses or sharp hike in license fees, could affect the entity. Susceptibility of the profitability due to the Raw Material's Prices JIL is into the business which requires raw material like barley. Raw material being agri commodity is susceptible to price volatility as can be seen from the past trends. The company would have incurred net losses had it not been the case that the company recovered substantial number of provisions made for doubtful debts and non- active creditors. The company has mitigated the price difference by negotiating the price revision with HUL however the volatility in RM price and company’s ability to pass it on to end customer in a timely manner remains a key monitorable. |
| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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The company has adequate liquidity marked by net cash accruals of Rs 18.62 Cr. as on FY2023 as against long term debt of Rs. 2.01 Cr. over the same period. The cash and bank balance stood at Rs. 10.93 Cr. for FY 2023. Further, the current ratio of the company stood at 0.54 times in FY2023. The working capital cycle of the company is marked by Gross Current Assets (GCA) of 72 days for FY2023 as compared to 66 days for FY2022. The bank limit of the company has been ~76.97 percent utilized for the last six months ended in January 2023. The management has financial flexibility to bring in the funds in the business. As on March 31, 2023, the unsecured loan in the business were at Rs. 29.96 Cr. Acuité believes that the liquidity of the company is likely to remain stretched over the medium term on account of low but steady cash accruals, term debt repayments and financial flexibility of promoters to bring in funds in business over the medium term.
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| Outlook: Stable |
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Acuité believes that JIL will maintain a 'Stable' outlook in the near to medium term on account of its established track record supported by extensive experience of the promoters of the entity and its diversified revenue profile. The outlook may be revised to 'Positive' if the entity registers higher-than expected growth in revenues, profitability margins and net cash accruals while improving its debt protection metrics and financial risk profile. The outlook may be revised to 'Negative' in case the entity registers substantial decline in revenues, or profitability margins or if the financial risk profile deteriorates due to higher than expected working capital requirements resulting in deterioration of the capital structure.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 507.49 | 443.23 |
| PAT | Rs. Cr. | 8.61 | 0.79 |
| PAT Margin | (%) | 1.70 | 0.18 |
| Total Debt/Tangible Net Worth | Times | 3.55 | 4.59 |
| PBDIT/Interest | Times | 1.61 | 1.37 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Manufacturing Entities: https://www.acuite.in/view-rating-criteria-59.htm • Service Sector: https://www.acuite.in/view-rating-criteria-50.htm |
| Note on complexity levels of the rated instrument |
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In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in
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