Rating Rationale

Brickwork Ratings assigns ‘BWR BBB+’ for the existing & proposed Bank Credit Facilities amounting to ₹ 100 Cr of Pincon Spirit Limited.

Brickwork Ratings has assigned the following Rating1 for the existing and proposed Bank Loan facilities of Pincon Spirit Limited (PSL).

Existing Proposed Total Facility Tenure Ratings Limits (₹Cr) Limits (₹Cr) Limits (₹Cr)

BWR BBB+ Fund Based: (Pronounced BWR 49.50 50.50 100.00 Long Cash Credit Triple B Plus) Term

(Outlook - Stable)

Total 49.50 50.50 100.00 INR One Hundred Crores only

BWR has essentially relied upon the audited financial results of PSL up to FY14, estimates and projections for FY15 and FY16 and information and clarifications provided by the company.

The ratings assigned to the bank facilities of Pincon Spirit Limited (PSL) factors primarily the experience of the promoters in liquor and FMCG business, consistent growth in revenues from company’s own ‘PINCON’ brand of IMFL and trading of other IMFL brands, diversification into FMCG Sector (edible oil), high entry barrier benefit, low gearing, strong coverage ratios and the geographic presence with its own brand at multi-state level. The rating also factors the successful launch of PSL’s new products, in the premium category. However, the rating is constrained by highly regulated nature of liquor business, high level of competition from existing players in all states, volatility associated with the raw material and working capital intensive nature of business operations.

Background: Based Pincon Spirit Ltd (PSL) was initially incorporated as Sarang Viniyog Ltd in 1978. Pincon group acquired it in 2009-10 and renamed it to ‘Pincon Spirit Ltd’ (in 2011). The Group is promoted by Mr. Monoranjan Roy; who has diverse business interests.

1 Please refer to www.brickworkratings.com for definition of the Ratings

www.brickworkratings.com 1 8 Jul 2014

PSL is engaged in blending, bottling, manufacturing and also Wholesale Distribution of Indian Made Foreign Liquor (IMFL). In Q1 of FY 2013-14, the Company has added FMCG division for manufacturing edible oil.

The Company operates from its corporate and registered office located in West Bengal, and also through its regional offices at Bangalore and New Delhi for its South India and North India operations respectively. PSL has expanded its activities to various States including , Andhra Pradesh, , and New Delhi.

Management Profile: PSL is a public limited company and its shares are listed in Stock Exchange. The Board of PSL consists of three directors including Mr. Monoranjan Roy, the Chairman & Managing Director who has over a decade long of experience in the industry. Other two Directors namely: Mr. Arup Thakur (Director Finance & CFO) and Mr. Subrata Basu are overseeing the production, quality and financial aspects of the business operations. The promoters are supported by qualified and well experienced personnel in-charge of key functional areas.

Business activities and Performance: PSL has a strong foothold in the trading of domestic IMFL segments as well as with its own brand with dominant presence in West Bengal. PSL is a wholesale distributor of Indian Made Foreign Liquor (IMFL) such as United Breweries Ltd, Seagram India Pvt Ltd, and Radico Khaitan etc.; through a network of over 2800 licensees. Pincon sells its products under several own brands viz. Pincon Highland Blue , Pincon XXX Matured, Pincon Select No.1 Whisky, etc. Pincon Highland Blue is the highest selling product amongst them Revenue from sale of traded (products) constituted around 60%, around 29.67% from Own Blend and Rest was generated from FMCG (Edible oil) in FY’14.

Group Activities: PSL is a part of Pincon group (which consists of Paul Distributors Pvt Ltd, Pincon Developers Ltd and Priya Laboratories Pvt Ltd), with a diversified business profile engaged in in housing infrastructure development, real estate development, packaging and manufacturing & distribution of FMCG products.

www.brickworkratings.com 2 8 Jul 2014

Financial Performance Turnover during FY14 has increased to ₹382.57 Cr from ₹320.09 Cr in FY 13 registering a 19.51% growth. PAT has also improved to ₹9.95 Cr in FY’14 from ₹8.48 Cr in FY13. Operating profit margin has improved to 4.93% in FY14 from 4.66% in FY’13 mainly on account of growth in revenue from own brand, contribution from FMCG and improvement in operating efficiencies. However, on account of increasing interest costs and higher tax, PAT margins were slightly lower at 2.60%. Net worth of the company was moderate at ₹69.58 Cr. Receivables are comfortable at less than a month (for FY’14:16 days). The gearing ratio (Debt/TNW) was comfortable at 0.47x.

Rating Outlook: The Company’s performance over the next year is expected to be stable. Being a raw material intensive business where prices are volatile, the Company’s profitability is linked to their ability to pass it on to end consumers. Going forward, ability of PSL of improving and establishing PSL’s presence in various states and compete with the existing players in the domain will be one of the key rating sensitivities The ability to manage consistent growth, achieving the projected level of revenues with improved profit margins, managing raw material price risk and optimally use the bank loan facilities will be the key rating sensitivities.

Analyst Contact Relationship Contact

[email protected] [email protected]

Phone Media Contact

1-860-425-2742 [email protected]

Disclaimer: Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources, which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented “as is” without any express or implied warranty of any kind. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by BWR should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at any time for any reasons.

www.brickworkratings.com 3 8 Jul 2014