ASSOCIATED ALCOHOLS & BREWERIES

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1 ASSOCIATED ALCOHOLS & BREWERIES LTD Result Update (PARENT BASIS): Q4 FY18 Index Details Stock Data Sector Breweries & Distilleries BSE Code Face Value wk. High / Low (Rs.) / Volume (2wk. Avg.) Market Cap (Rs. in mn.) Annual Estimated Results(A*: Actual / E*: Estimated) Years(Rs in mn) FY18A FY19E FY20E Net Sales EBITDA Net Profit EPS P/E Shareholding Pattern (%) As on Mar 2018 As on Dec 2017 Promoter Public Others 1 Year Comparative Graph ASSOCIATED ALCOHOLS & BREWERIES S&P BSE SENSEX CMP: JUNE 8 th, 2018 Overweight SYNOPSIS ISIN: INE073G01016 Established in 1989 Associated Alcohols & Breweries Ltd (AABL) is one of the largest distilleries in India headed by the Kedias of The Associate Kedia Group. The company has achieved a turnover of Rs mn for the 4 th quarter of the FY as against Rs mn in the corresponding quarter of the previous year, an increase of 18.26%. During the quarter, EBIDTA stood at Rs mn as against Rs mn in the corresponding period of the previous year, up by 9.65%. PBT stood at Rs mn in Q4 FY18 against Rs mn in the corresponding quarter of the previous year. During the quarter, net profit increased by 13.81% to Rs mn from Rs mn in the corresponding quarter ending of previous year. EPS of the company stood at Rs in Q4 FY18 as against Rs in the corresponding quarter of the previous year. The company has recommended a dividend of 10% i.e. Rs. 1.00/- per Equity Share of Face Value of Rs. 10/- each for the year ended March 31, During FY , the revenues of the company grew 11.74% to Rs mn as compared to Rs mn in previous financial year. In FY18, PAT of the company has increased by 48.94% to Rs mn from Rs mn in corresponding period of the previous year. Net sales and PAT of the company are expected to grow at a CAGR of 9% and 22% over 2017 to 2020E, respectively. PEER GROUPS CMP MARKET CAP EPS(TTM) P/E (X)(TTM) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Associated Alcohols & Breweries Ltd Som Distilleries and Breweries Ltd Globus Spirits Ltd Pincon Spirit Ltd

2 QUARTERLY HIGHLIGHTS (PARENT BASIS) Results updates- Q4 FY18, (Rs in million) Mar-18 Mar-17 % Change Revenue % Net Profit % EPS % EBIDTA % Revenue for the 4 th quarter stood at Rs million from Rs million, when compared with the prior year period, up by 18.26%. During the quarter, net profit was Rs million as compared to Rs million in the corresponding quarter ending of previous year, rose by 13.81%. Reported earnings per share of the company stood at Rs in Q4 FY18 as against Rs in the corresponding quarter of the previous year. Profit before interest, depreciation and tax stood at Rs million as against Rs million in the corresponding period of the previous year, up by 9.65%. Break up of Expenditure Break up of Expenditure Cost of Material Consumed Purchase of Stock in Trade Employee Benefit Expenses Depreciation & Amortization Expense Q4 FY18 Value in Rs. Million Q4 FY17 % Change % % % % Power &Fuel % Other Expenses %

3 COMPANY PROFILE Established in 1989 Associated Alcohols & Breweries Ltd (AABL) is one of the largest distilleries in India headed by the Kedias of of The Associate Kedia Group. The company has presence in every aspect of value chain: All varieties of portable alcohols, Country liquor, High quality rectified spirits, Extra Neutral Alcohol, Extra fine triple distilled grain spirit, IMFL in whisky brandy rum gin vodka categories, Bottling scotch whisky for international brands. The company has got the facility to blend and bottle both India made foreign liquor and country liquor, the core and focus has been mainly on country liquor segment. The company has added a premium range of IMFL brands to its portfolio. Company has great relationship with Liquor Majors which buy almost 60% IMFL produced by AABL and the remaining is used for direct supplies to branded suppliers across the country, apart from manufacturing its owned brands. AABL has someone of the top selling brands under its kitty, Top AABL licensed brands are: Blackdog, Smirnoff Vodka, Captain Morgan Rum, HAIG Scotch, Glen Drummond, Royal Crown. Many of these brands are owned by United Spirits Ltd. AABL apart from licensed brands also started a range of owned brands like: Mc Gill Whisky, Jamaican Magic Rum, Bombay Special, London Bridge gin, Red & White Whisky.

4 FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as of March 31, E FY17A FY18A FY19E FY20E ASSETS 1) Non-Current Assets a) Property, Plant And Equipment b) Capital Work in Progress c) Intangible Assets d) Financial assets i) Investments ii) Loans iii) Other Financial Assets e) Other Non -Current Assets Sub Total - Non Current Assets ) Current Assets a) Inventories b) Financial Assets i) Investments ii) Trade Receivables iii) Cash And Bank Equivalents iv) Other Balances with Banks v) Loans vi) Other Financial Assets c) Other-Current Assets Sub Total - Current Assets Total Assets (1+2) EQUITY AND LIABILITIES 1) EQUITY a) Equity Share Capital b) Other Equity Total Equity ) Non Current Liabilities a) Financial Liabilities i) Borrowings ii) Deferred Tax Liabilities (Net) b) Non -Current Tax Liabilities Sub Total - Non Current liabilities ) Current Liabilities a) Financial Liabilities i) Borrowings ii) Trade Payables iii) Other Financial Liabilities b) Other Current Liabilities c) Short-Term Provisions d) Current Tax Liabilities (Net) Sub Total - Current Liabilities Total Equity And Liabilities (1+2+3)

5 Annual Profit & Loss Statement for the period of 2017 to 2020E Value(Rs.in.mn) FY17A FY18A FY19E FY20E Description 12m 12m 12m 12m Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross profit Depreciation Profit Before Tax Tax Net Profit Equity capital Reserves Face value EPS Quarterly Profit & Loss Statement for the period of 30 th Sep, 2017 to 30 th Jun, 2018E Value(Rs.in.mn) 30-Sep Dec Mar Jun-18E Description 3m 3m 3m 3m Net sales Other income Total Income Expenditure Operating profit Interest Gross profit Depreciation Profit Before Tax Tax Net Profit Equity capital Face value EPS

6 Ratio Analysis Particulars FY17A FY18A FY19E FY20E EPS (Rs.) EBITDA Margin (%) 14.52% 16.78% 16.77% 16.61% PBT Margin (%) 9.34% 12.12% 12.25% 12.30% PAT Margin (%) 5.81% 7.74% 7.84% 7.83% P/E Ratio (x) ROE (%) 17.44% 20.86% 19.10% 17.60% ROCE (%) 25.80% 31.98% 30.16% 28.07% Debt Equity Ratio EV/EBITDA (x) Book Value (Rs.) P/BV Charts

7 OUTLOOK AND CONCLUSION At the current market price of Rs , the stock P/E ratio is at x FY19E and x FY20E, respectively. Earning per share (EPS) of the company for the earnings for FY19E and FY20E is seen at Rs and Rs respectively. Net sales and PAT of the company are expected to grow at a CAGR of 9% and 22% over 2017 to 2020E, respectively. On the basis of EV/EBITDA, the stock trades at 9.42 x for FY19E and 8.49 x for FY20E. Price to Book Value of the stock is expected to be at 3.80 x and 3.13 x for FY19E and FY20E respectively. Hence, we say that, we are Overweight in this particular scrip for Medium to Long term investment. INDUSTRY OVERVIEW GLOBAL BEVERAGE MARKET The global beverage market looks good with opportunities for alcoholic and non-alcoholic beverages. The global beverage industry is expected to reach an estimated US$1.9 trillion by 2021 and is forecast to grow at a CAGR of 3.0% from 2016 to Within global beverage industry, beer is expected to remain the largest segment by value. Acceptance of alcohol consumption by consumers, population base of the younger generation, and increasing per capita income are the major driving forces that spur growth for this segment over the forecast period. GLOBAL ALCOHOLIC BEVERAGE MARKET Technavio s market research analysts have estimated the global alcoholic drinks market to grow steadily at a CAGR of above 2% by The growing demand for premium alcoholic beverages is considered to be one of the primary drivers for this market. Due to the increase in disposable income of customers, alcohol use is being considered to be more of a

8 status symbol and the association of premium labels with quality as well as taste has led to premium brands being high on demand compared to economical drinks. Beer dominated the alcoholic drinks market and accounted for approximately 75% of the market share in the same year. Factors such as improvement in the quality, improvised marketing and advertising activities will drive this market segment s growth during the forecast period. Westernisation, increase in the young population, and the demand for craft beer are also expected to drive the growth of this segment in the next four years. Efforts by alcoholic beverage manufacturers for strengthening distribution channels and extension of purchase channels such as online stores, and convenience stores is also contributing substantially to the growth of the global alcoholic beverages market. However, a high degree of competition among major players to obtain the maximum market share is one of the major impediments to the growth of this market. This also restricts the entry of new players and their chances of sustenance if any in the highly competitive alcoholic beverages market. Other than this, increasing prices of raw materials, availability of non-alcoholic beverages, and stringent licensing requirements for the manufacture of alcoholic beverages are other factors restraining the growth of this market. ALCOHOL BEVERAGE MARKET IN INDIA India is the biggest manufacturer of alcoholic beverages in the world. Alcoholic beverages market matured in India over the years but still it is highly confined to limited varieties. There are around 10 million retail outlets and around 500,000 bars and pubs in the country. In past 5 years the alcoholic beverages market witnessed a growth of 18.22% from 2010 to India is the third largest liquor market in the world, with an overall retail market size of US$35 billion per annum. With the minimum drinking age varying from 18 to 25 across states, India had approximately 485 million people of legal drinking age in This is more than the population of the United States and Mexico combined. Another 150 million are predicted to join this group by According to a WHO report, nearly 30% of the Indian population consumes alcohol. The alcohol industry leaders have recognised that women and the young population are the key market segments and hence their marketing campaigns are specially focused on this segment. To attract this segment companies are launching new product categories such as flavored drinks and pre-mixed cocktails. Alcohol is becoming easily accessible thanks to availability of beer and wine at certain shopping malls and supermarkets. INDIAN MADE FOREIGN LIQUOR The Indian Made Foreign Liquor (IMFL) is the largest segment in the Indian alcoholic beverage industry. This market has been further bifurcated into Whisky, Rum, Brandy, Vodka and Gin. This industry has grown at an overall steady pace triggered by increasing population and disposable income, and also the fact that it is increasingly gaining social acceptance. The Indian Made Foreign Liquor (IMFL) segment was estimated to reach a market valuation in excess of H1,400 billion by FY end. This segment is estimated to be valued at more than H3,000 billion by 2026, expanding at acagr

9 of 5.2% over the forecast period Indians have preference for brown spirits in the IMFL segment (which is 95% by volume) over white spirits (which is 5% by volume). Brown spirits are categorised as whisky, rum, brandy and white spirits include gin, vodka, white rum. Whisky is the most popular drink, accounting for 57% of the IMFL Market. Whisky consumption is reportedly expected to grow %annually. The overall IMFL market is increasing at the rate of 9-10% annually. In India's 310 million cases strong spirits market, whisky sales overwhelmingly dominate with 175-million cases, accounting for 57% of the market. While the whisky market reported 6.7% growth in the last five years. Rum the second largest spirits category with 23 million in sales volume reported only a 1.3% growth in the same period. The market has undergone several positive changes in the past 5 years and has strongly positioned itself relative to other segments with several economies of scale. One notable factor in the IMFL segment is the tremendous growth in the vodka market. It is the fastest growing among all types of liquors.the growth drivers for white spirits include increasing consumption of white spirits among women and popularity of white spirits over brown spirits amongst the younger drinking population. Moreover, the per capita consumption of IMFL in India is 0.82 litres per annum which is very low as compared to the global average of 4.63 litres per annum, but the demand is growing since alcohol consumption is now socially accepted in India and also because of increase in disposable income of the citizens. INDIAN MADE INDIAN LIQUOR It is produced in local licensed distilleries and is made of cheap raw material, primarily rectified spirits of grains or molasses. As the production cost for country liquor is low, the excise duties are also lower than they are for other liquor. The idea behind country liquor was to provide cheap alcohol and thus check the illicit trade of alcohol. However, illicit production of country liquor is still fairly common in India. Some alcoholic drinks that are low in alcohol content are also made in homes in some tribal areas. Indian Made Indian Liquor (IMIL) is an attractive c onsumer play into India s large and growing bottom of pyramid consumers. Already at a substantial ~230 million cases (US$4.6billionin 2014), it is expected to reach 352million cases (US$8.4billion ) in next five years driven by positive demographics, improving consumer loyalty with branding and upward shift from illicit liquor with conducive regulations. IMIL has long been the liquor of choice for the price sensitive, lower income group (~40% of India s population excluding below poverty line). It is being further driven by positive demographics a young and growing population as well as upward shift from illicit liquor and toddy with increasing affluence. At the same time, IMIL is losing its hold in the total alcoholic beverages market in India. The segment is continuously witnessing a decline as number of consumers have started switching to premium and better-quality liquor in the IMFL segment with the rise in their propensity to spend and increased hygiene risk in the consumption of country liquor. Country Liquor is estimated to lose its market share in the long run to other segments.

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