CRISIL updates ratings of Tilaknagar Industries Ltd

Tilaknagar Industries Limited (TI) (BSE: 507205) (NSE: TI), a leading Indian-Made Foreign Liquor (IMFL) manufacturer, has been assigned a ‘CRISIL A-/Stable' for its Rs 200-crore long-term bank facilities by credit rating agency, CRISIL.

CRISIL Ratings has taken a consolidated view of Tilaknagar Industries Ltd and its wholly owned subsidiaries, Vahni Distilleries Pvt Ltd, PunjabExpo Breweries Pvt Ltd and Prag Distilleries Pvt Ltd, collectively referred to as the TI group. The rating has factored in the company's established market position in the brandy segment of Indian manufactured foreign liquor (IMFL) industry, its adequate financial risk profile and the long-established track record and extensive experience of the promoters in the distillery industry.

The rating assigned reflects the healthy business risk profile of TI which has emerged to be a market leader in the brandy segment, led by robust demand for its flagship brands Mansion House and Courrier Napoleon. The strong business performance has helped significantly improve the company's operating efficiency as well as financial risk profile. While assigning the rating, the agency has also taken into account the constrained geographical and category diversity in the highly regulated alcohol industry and volatile input prices coupled with limited pricing power.

In terms of ‘outlook', CRISIL Ratings has given ‘Stable' to the company. It believes that TI's business risk profile will continue to be steady with strong brand recall, robust demand and the prevailing premiumisation trend, which benefits the company. This coupled with healthy cash generation and absence of any major debt funded capex plans over the medium-term will keep the financial risk profile stable.

The rating agency has also given a ‘Strong' outlook to the company's ‘Liquidity'. CRISIL ratings expects that cash accrual of Rs 160-170 crore over the near-to-medium term will be adequate to meet annual capex requirements of approximately Rs 20 crore and balance repayment obligations of Rs 10 crore in fiscal 2024 and Rs 30-40 crore per annum fiscal 2025 onwards. Further, company also had cash surplus of Rs 40 crore as on September 30, 2023.

TI is one of the largest manufacturers of premium brandy in India with presence in other IMFL categories as well. As per the CRISIL report, during fiscal 2023, the company's revenue improved by 48 per cent to Rs 1,164 crore from Rs 784 crore in fiscal 2022.

The company's revenue expansion continued in the first half of fiscal 2024 with company recording 30 per cent year-on-year growth to Rs 658 crore. As per Crisil, the revenue is expected to grow in double digits over the near-to-medium term driven by strong demand for existing products, increasing revenue contributions and geographic penetration from new product launches and category-first innovations in the premium category.

As on September 30, 2023, Tilaknagar Industries' gross debt significantly reduced to Rs 188 crore, down by Rs 161 crore from Rs 349 crore in the corresponding period a year ago. The company's net debt has come down by Rs 350 crore over the past two and a half years. On March 2019, TI's gross debt stood at close to Rs 1200 crore.

In the quarter ended September 2023, the company completed the refinancing of its debt with Edelweiss Asset Reconstruction Company. Tilaknagar Industries refinanced the approximately Rs 176 crore-debt with a fresh term loan of Rs 130 crore raised from Kotak Mahindra Bank. This move gave the company the flexibility to better manage its cash flows, without significantly increasing the interest burden.

As a result of significant debt reduction, there is visible improvement in operating performance leading to higher cash generation which has benefitted key debt protection metrics. The interest cover has improved to 6.2 times in the first half of fiscal 2024 in comparison to 3.51 times in fiscal 2023 while the total debt/earnings before interest, tax, depreciation and amortisation (EBITDA), improved to 1.09 times in the first half of fiscal 2024 from 1.83 times in fiscal 2023 and 5.06 times in fiscal 2022. The credit rating will help the company in significantly lowering its finance cost.

The company expects to be near net debt-free by March 2025.

Shares of Tilaknagar Industries Limited was last trading in BSE at Rs. 251.70 as compared to the previous close of Rs. 251.05. The total number of shares traded during the day was 162004 in over 2914 trades.

The stock hit an intraday high of Rs. 255.80 and intraday low of 246.60. The net turnover during the day was Rs. 40784464.00.

Source : Equity Bulls

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TilaknagarIndustries INE133E01013 RatingUpdate CRISIL Longterm BankFacilities