The Next ASSOCIATED ALCOHOLS AND BREWERIES LIMITED 31st Annual Report 2019-20 Level Contents Corporate snapshot...... 2 Milestones...... 5 How we grew attractively in the last few years...... 6 AABL and governance...... 9 Letter to shareholders...... 10 Taking AABL to the next level...... 13 Our strategic goals and blueprint...... 27 Management discussion and analysis...... 28 Notice...... 32 Directors’ Report...... 40 Corporate Governance Report...... 60 Financial Statements...... 73 The big picture
India is the second most populous country at the point of a sweeping transformation in incomes, perceptions and lifestyles. Markets that are at inflection point present the largest and most profitable opportunities. In India, the lifestyle opportunity is likely to be the biggest; the alco-beverage industry resides at the pinnacle of this lifestyle opportunity. India is one of the most compelling alco-beverage opportunities anywhere in the world. This reality is expected to create a growing appetite for raw materials, products and brands. At Associated Alcohols, we have created a business model that is addressing all three opportunities. Corporate snapshot Associated Alcohols. One of the most exciting alco- beverage companies in India.
Our ethos Background Big numbers Vision The Company was founded by the late To be a pioneer and become an industry Shri Bhagwati Prasad Kedia in 1989. leader in liquor manufacturing, distillation Associated Alcohols & Breweries Limited 45 and bottling in India and to establish a is among of the flagship companies of (mn litres) ENA manufacturing capacity foothold in the liquor industry as one of the Associated Kedia Group involved in the most reputed manufacturing and the manufacture and bottling of liquor. marketing Companies. The Company took over the distillery 32 Mission operations of the promoter group Bottling lines Associated Alcohols & Breweries Limited and extended to the manufacture of undertakes to dedicate itself and all its premium liquor products. resources to achieving global excellence 12.5 (mn) Bottling capacity in the present sectors of operations and Promoters seeking growth. The promoters of the Company Values possesses more than three decades To cultivate the highest standards of experience. The promoters of the of professionalism, fairness and Company comprise Mr. Anand Kumar total customer satisfaction in all our Kedia (Head – Business Promotion and transactions and dealings. Development) and Mr. Prasann Kumar Kedia (Head– Operation and Business To create a profound and everlasting Development). impact on our customers through quality products, commitment and Market presence sincerity. The Company is one of the largest To continue the ongoing journey distillers in India. It possesses an extensive towards honesty, sincerity and geographic presence in 4 states across integrity with all our stakeholders. the sectoral value chain. The Company’s principal revenues are derived from the To spread our wings all across the States of Madhya Pradesh, Kerala and country and play a dominant role in Delhi, who account for more than 80% of the liquor industry in India. the Company’s revenues.
2 | Associated Alcohols and Breweries Limited Products Expansion Proprietary brands The Company widened its product The Company has undertaken expansion James McGill Whisky portfolio to cater the various alco- initiatives to address the growing needs Central Province Whisky beverage needs of people belonging of domestic and international customers. to all strata of society. Its business range The Company possesses an expanded Jamaican Magic Rum comprises: capacity of 45 mn litres per annum. Bombay Special Series Premium extra neutral alcohol/ grain Clients Titanium Triple Distilled Vodka with spirit Diageo/ United Spirits Limited Orange and Green Apple flavor Indian made Indian liquor (IMIL) Kerala State Beverages Corporation Contracted manufacturing Indian made foreign liquor (IMFL) Government-regulated retail brands Rectified spirit contractors/agencies (both IMFL and Black Dog Scotch Whisky IMIL) Contract manufacturing partnership VAT 69 Scotch Whisky (Diageo – USL) Licensed brands/franchised Smirnoff Vodka brands Facilities Black & White Scotch Whisky The Company’s state-of-the-art Bagpiper Deluxe Whisky Royal Challenge Whiskey manufacturing facility is located at Directors Special Whisky Khodigram (Barwaha district, Khargone, Mcdowell’s Platinum Whiskey Madhya Pradesh) and responsible Flavoured White Mischief Signature Whiskey for alcohol production, bottling and Director’s Special Gold Whisky packaging liquor. All business operations Credit rating are overseen from the corporate office in DSP Black Special Whisky CARE reaffirmed its A-/A2 credit rating on Indore. McDowell’s No. 1 XXX Rum. the Company for bank borrowings.
Annual Report 2019-20 | 3 4 | Associated Alcohols and Breweries Limited Milestones 1989 2016 Incorporated as public limited company Issued bonus shares in the ratio of 1:1 1990 2017 Commenced the manufacturing and Embarked on an ambitious expansion marketing of potable alcohols project from 31.4 MLPA to 45 MLPA 1995 2018 Modernised and expanded the distillery Completed the 45 mn litres per annum ENA expansion project 2012 Revamped manufacturing facilities and 2019 processes as per prevailing requirement Operated on the expanded ENA capacity for the first full year. 2015 Listed on NSE Created a complete integrated system including implementation of SAP-ERP
Annual Report 2019-20 | 5 How we grew attractively in the last few years
Revenues (H crore) EBITDA (H crore)
325.24 331.00 411.58 535.00 42.72 54.57 61.84 79.90
FY16-17 FY17-18 FY18-19 FY19-20 FY16-17 FY17-18 FY18-19 FY19-20 Definition What does it mean? Definition What does it mean? Growth in sales net of GST. Aggregate sales increased 30% Earnings before the deduction Helps create a robust growth to a record H535 crore in 2019-20 of fixed expenses (interest, engine and sustain profits. Why is this measured? due to higher throughput from depreciation, extraordinary items It is an index that showcases the Value impact the expanded capacity. and tax). Company’s ability to maximise The Company reported the offtake and enhance revenues. Value impact Why is this measured? sharpest EBITDA increase in The Company performed It is an index that showcases the its existence, almost doubling considerably better than the Company’s ability to generate a from the level of 2016-17 and sectorial average. surplus following the expensing reporting a 29% YoY in 2019-20. out of operating costs.
Net profit (H crore) EBITDA margin (%)
16.91 25.18 30.26 49.33 14.5 16.5 15.0 15.0
FY16-17 FY17-18 FY18-19 FY19-20 FY16-17 FY17-18 FY18-19 FY19-20 Definition What does it mean? Definition What does it mean? Profit earned during the year Ensures that adequate surplus is EBITDA margin is a profitability This demonstrates adequate after deducting all expenses and available for reinvestment. ratio used to measure a buffer in the business expressed provisions. Company’s pricing strategy and as a percentage, which, when Value impact operating efficiency. multiplied by scale, enhances Why is this measured? The Company reported a 63% surpluses. This measure highlights the increase in net profit in 2019-20, Why is this measured? strength of the business model in almost doubling from the level of The EBITDA margin provides Value impact enhancing shareholder value. two years ago. a perspective of how much The Company reported a steady a Company earns (before EBITDA margin during 2019-20 . accounting for interest and taxes) on each rupee of sales.
6 | Associated Alcohols and Breweries Limited ROCE (%) Gearing (%)
17 21 20 25 0.16 0.09 0.09 0.04
FY16-17 FY17-18 FY18-19 FY19-20 FY16-17 FY17-18 FY18-19 FY19-20 Definition What does it mean? Definition What does it mean? It is a financial ratio that measures Enhanced ROCE can potentially This is derived through the This measure enhances a a company’s profitability and the drive valuations and perception. ratio of debt to net worth (less perception of the borrowing efficiency with which its capital is revaluation reserves). room within the Company, the Value impact employed in the business. lower the gearing the better. The Company reported a 500 bps Why is this measured? Why is this measured? increase in RoCE during 2019-20 This is one of the defining Value impact ROCE is a useful metric for following increased surplus. measures of a Company’s The Company’s gearing improved comparing profitability across financial solvency. on account of debt repayment companies based on the amount and increased net worth, making of capital they use – especially in it virtually debt-free. capital-intensive sectors.
Interest cover (x) Net worth (H crore)
10.5 14.25 27.5 38 98 121 149 195
FY16-17 FY17-18 FY18-19 FY19-20 FY16-17 FY17-18 FY18-19 FY19-20 Definition What does it mean? Definition What does it mean? This is derived through the A Company’s ability to meet its This is derived through the This indicates the borrowing division of EBITDA by interest interest obligations, an aspect accretion of shareholder-owned capacity of the Company and outflow. of its solvency, is arguably one funds. influences the gearing (which in of the most important factors turn influenced the cost at which Why is this measured? Why is this measured? in assuring sizeable returns to the Company can mobilise debt). Interest cover indicates the Net worth indicates the financial shareholders. Company’s comfort in servicing soundness of the Company – the Value impact interest – the higher the better. Value impact higher the better. The Company’s net worth The Company’s interest cover strengthened 30% during the strengthened by 1050 bps during year, almost doubling in the short the year. space of three years.
Annual Report 2019-20 | 7 8 | Associated Alcohols and Breweries Limited