ASALCBRNSE10 October 2022

Associated Alcohols & Breweries Ltd.

7,216words
74turns
7analyst exchanges
1executives
Management on call
Chaiti Gujarati from Valorem Advisors. Thank you and over to you. Chaiti Gujarati
Good afternoon everyone and a warm welcome to you all. My name is Chaiti Gujarati from
Key numbers — 40 extracted
rs,
d afternoon everyone and a warm welcome to you all. My name is Chaiti Gujarati from Valorem Advisors, we represent the investor relations of Associated Alcohols & Breweries Limited. On behalf of the c
50%
y. MEBL is the largest manufacturer of its own brand in Madhya Pradesh, and caters to more than 50% of the total market share in Madhya Pradesh, with expanding reach across other states as well. It
50 lakh
ion that MEBL started with a capacity of one lakh case a month and in a decade has reached around 50 lakh case a month, making it the fastest growing beer company in the country. MEBLs potential to write
15 lakh
usion of MEBL as well established company in the beer industry, and have an installed capacity of 15 lakh hectoliters with 1.5 million cases per month. The amalgamated entity is expected to be able to
1.5 million
ablished company in the beer industry, and have an installed capacity of 15 lakh hectoliters with 1.5 million cases per month. The amalgamated entity is expected to be able to better compete with the global
20%
he state and the beer industry in the first quarter has grown almost across the country of around 20% to 30% growth we have seen and we expect the growth to be robust in the country, and there is a h
30%
e and the beer industry in the first quarter has grown almost across the country of around 20% to 30% growth we have seen and we expect the growth to be robust in the country, and there is a huge o
1.5 lakh
ously investment process. And from one lakh cases within a decade, this MEBL company has moved to 1.5 lakh that is almost 15 times growth. So in MEBL they have been trying to look the market and where the
rs 21
be a realistic comparison because the main season which was there April, May, June of both the years 21 and 22 (Inaudible) 17:58 COVID lockdown and beer is a product which has got a shelf life. So for e
82%
the merged entity? Tushar Bhandari: The promoters holding in the merged entity would be around 82%. Harsh Shah: Okay, and what would be the timeline to get it down to 75% because as per the SEBI
75%
entity would be around 82%. Harsh Shah: Okay, and what would be the timeline to get it down to 75% because as per the SEBI regulations? Tushar Bhandari: Yes, as per the SEBI regulations that w
2 lakh
. Harsh Shah: Understood sir. And if I look at annual report of Associated Alcohol, in FY22 the 2 lakh shares of Mount Everest Breweries were valued at 4.5 crores in FY21 those are valued at 2.5 crore
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Guidance — 20 items
Tushar Bhandari
opening
“We had embarked the expansion project and completed with optimum utilization within a year and we are continuously working on consolidation.”
Tushar Bhandari
opening
“Looking to the opportunities in 2021, we have embarked and diversified into ethanol project, which is expected to be operational and commercialized by Q4 FY23.”
Tushar Bhandari
qa
“So that's why we will be a one stop shop for all the liquor products to any retailer.”
Tushar Bhandari
qa
“So with a rum portfolio of associated alcohol, we will be able to sell beer.”
Tushar Bhandari
qa
“So, beer industry we expect to grow almost we expect to double in the next five years, as the demand of beer is growing across the state.”
Tushar Bhandari
qa
“So just to give you an example of this season that is the April, May, June first quarter, so there was a shortage of beer across the state and the beer industry in the first quarter has grown almost across the country of around 20% to 30% growth we have seen and we expect the growth to be robust in the country, and there is a huge opportunity in the beer.”
Harsh Shah
qa
“And what will be the promoters holding in the merged entity?”
Tushar Bhandari
qa
“Yes, as per the SEBI regulations that will be done and the timeline is one year.”
Keshav
qa
“Sir, is it the correct understanding that for every 1000 shares of AABL, the shareholders will be given 770 shares of MEBL?”
Tushar Bhandari
qa
“Definitely we will be providing you the data, but as per the valuation is that after the examining the various possibility, and from the independent adviser and consultant looking into the prospect to create one of the most valuable company this valuation was created and was done by reputed valuator and in data terms, we will definitely provide you the data of that, and also the first quarter data of the MEBL has already been provided, the same has been provided and uploaded.”
Risks & concerns — 4 flagged
Just my concern is that associated is a 25% plus ROC business, is that a 4 to 5x book value compared to MEBL at least, and the margins are also at least comparable.
— Keshav
So, I'm sorry sir this is my personal point of view and as of now, it's very difficult to make sense of the swap ratio to start with and if you can provide better quality data maybe past few years and not just one presentation and whatever you shared it will be great and hope you continue doing calls also.
— Keshav
I'm sure that the same will apply even to MEBL, it is not that AABL is able to buy at higher cost and the other company is able to buy at lower cost, because the same pressure would be faced by AABL also.
— Manish Dhariwal
Now, are we saying that the EBITDA margin of the beer company was upward to 22%, 23%, because the same cost pressure that is being faced by alcohol company is also borne by the beer company.
— Manish Dhariwal
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Q&A — 7 exchanges
Q
I would like to understand firstly, the markets that the businesses of spirits and beer is serving and what kind of synergy can emerge on the market front, on the sales front.
Tushar Bhandari
Good afternoon Manish. Manish, just to give you larger answer to your question in a brief, the markets which both beer and MEBL and AABL are so AABL presents are both are primary predominantly one of the largest companies in central part of the India and AABL is present in Madhya Pradesh, Chhattisgarh, Delhi and Kerala right now, and beer is present and the brewery is one of the fastest growing breweries in central part of the India and holds the majority stake in the market in Madhya Pradesh, and has got its presence in Chhattisgarh, in UP, recently started in Assam and Northeastern states, a
Q
It’s been share the financials of Mount Everest Breweries for last two years, mainly for FY21 and FY22, revenue and EBITDA?
Tushar Bhandari
You want me to share? Revenue and EBITDA of Mount Everest Breweries, FY21 and FY22. So, basically we've already shared the data on the exchange, you asked whenever they will provide you but what has happened in the beer specially is that over last 10 years beer has been growing continuously and MEBL has pioneers in specializing and in creating their own brand, which is one of the key aspects in the beer industry, because if you have a good brand, the volumes will start flowing in. We have seen companies in the similar industry wherein companies have bled to create a brand, I cannot name those
Q
Sir, is it the correct understanding that for every 1000 shares of AABL, the shareholders will be given 770 shares of MEBL?
Tushar Bhandari
Yes. So, is the understanding correct that the enterprise value being given to MEBL is 30% more than AABL? Pardon. Is the enterprise value being given to MEBL is it 30% more than what is been given to AABL? Yes. So, sir then what is the assumption for having higher value to MEBL, because the bottom line for last year, I understand that COVID was pretty bad on breweries, but it was low single digit so maybe if you can get some data of 2018 and 2019 to make sense of it. Definitely we will be providing you the data, but as per the valuation is that after the examining the various possibility, and
Q
My question is related not to the merger, merger per se it's good for both the company, but regarding the valuation of the shares of the said ratio, which has been decided by you. Let me share some of the past financial performance of both the company's. Total revenue of AABL in 2021-22 was 528 crore versus MEBL 287 crore. In case of AABL is 33:63 versus Rs.1.96 in MEBL. Good value for associated Rs.152 whereas Rs.41 for MEBL. PAT is Rs.60 crore for associated versus Rs.4 crore for MEBL. How do we justify the said ratio. You have taken, your valuer has taken CCM methods of reservation which is
Tushar Bhandari
The execution which was there was done by one of the most reputed and government approved valuator and by evaluating different mechanisms. So, there were a couple of mechanism which were there and as you said that there are only one beer company in the listed space. So, apart from that, and there is no company which has got both beer and spirit together. So, again AABL and as the management and Board of Directors stand on the path to create a unique company and to create unique valuation for some of the stakeholders. So, there is no company which is under listed space, which has got the entire
Q
Thank you. See, I taking the cue from the previous investors who have shared their thoughts. See, I also notice that the EBITDA margins of associated alcohol which were at a healthy 20%, 24% have been consistently coming down and in the first quarter they have come down to abysmal 11% which we have not seen right from so many years, otherwise the average used to be about 17% to 18% and the EBITDA margin of the beer company is taken at 18.75%. Now, the numbers have been shared by the previous participant. So, we are not able to understand as to what has suddenly happened that the performance of
Management
No, that is also a professionally managed company completely. Okay. So, is it that the promoters will come on the board of the listed company, which is going to be the merged company? That will be an appropriate call at that point of time we will take, but most of the key person of AABL would be there. So, basically the swap ratio doesn't seem to be at all favorable to the shareholders of AABL. So, we would like to basically understand in more detail as to how this has been worked out? Mr. Dhariwal just before Mr. Tushar is going to take, one small point is as far as AABL profitability is conc
Q
My saying is that, in Mount Everest you have given loan in this year which you have taken it back and you have shown uncoated investment 4,51,54,000 right?
Tushar Bhandari
Can you please speak slowly your voice is not audible. Sir I wanted to say that in Mount Everest you have shown investment in Associated Alcohols balance sheet and now it’s shows as loan. Nominal 2 lakh shares held by Associated Alcohols at the beginning when the unit was created. Is it of just one promoter? Yes. Is it the same promoters? Yes. One more thing is, Mount Everest and I saw that AB is negative and Associated is a debt free company almost and you have shared about equity ratio, the benefit is of the promoter, promoter is increasing the holding. So, I didn’t understand who the valuer
Q
I would like to thank you personally all the people who've joined on this conference call and have taken out their precious time, in case you have any other further queries and wanted any specific data, you can please get in touch with Valorem Advisor our IR, Investor Relations team. Thank you very much.
Management
Speaking time
Tushar Bhandari
27
Moderator
9
Manish Dhariwal
9
Management
8
Harsh Shah
7
Keshav
7
Ritesh Mehta
5
Chaiti Gujarati
1
Manoj Buram
1
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Opening remarks
Chaiti Gujarati
Good afternoon everyone and a warm welcome to you all. My name is Chaiti Gujarati from Valorem Advisors, we represent the investor relations of Associated Alcohols & Breweries Limited. On behalf of the company, I would like to thank you all for participating in the company's conference call to discuss the merger of Associated Alcohols & Breweries Limited with Mount Everest Breweries Limited. Before we begin, I would like to mention a short cautionary statement. Some of the statements made in today's concall may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings conference call is purely
Tushar Bhandari
Good evening everybody, it is a pleasure to welcome you to the conference call to discuss the merger of Associated Alcohols & Breweries Limited with Mount Everest Breweries Limited. Let me first start off by briefing you on the highlights of the company's major achievements in last few years, which ultimately has benefited and maximize the shareholders value. In the year 2015 we have implemented the integrated SAP ERP across all functional areas, being one of the few companies to do so in the liquid space. In 2016, we started focusing on value added premium segments by introducing premium products and entered new markets. Further the Board of Directors has announced the bonus of 1:1 share. In 2017 to support and consolidate in the value added segment. The company has taken the series of popular range products of USL in it’s kitty on franchisee basis. In 2018. We had embarked the expansion project and completed with optimum utilization within a year and we are continuously working on co
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