Owing to the Time of Boom and Bust for the Liquor Industry; Vijay Distillery Turnover Decreases By Rs. 59.3 Crores for FY 2022

In the year 2022, Vijay Distillery Private Limited (VDPL), which manufactures liquor brands such as Ruslan Vodka, generated sales revenue of Rs. 2085 million.

Compared to FY 2021, the company's revenue has dropped by Rs. 59.3 crores. For the fiscal year 20/21, the company was able to produce sales revenue totaling Rs. 2678 (Million). The drop in sales margin, along with a high debt level, a rise in interest rates amid reduced banking sector liquidity, and an increase in promotional expenses for recently released products, have tempered VDPL's profit margin for FY2022.

According to ICRA, the pressure on margins and the rising amount of debt will probably tame the coverage indicators of VDPL. Additionally, in FY2022, the company’s operating revenue fell by 22%. Given the adverse economic forecast, higher excise taxes, and intense market rivalry, sales in FY2023 may remain subpar, which is still a rating concern.

VDPL has a high dependence on two products viz. Blue Diamond gin and Golden Oak blended whiskey (accounting for 60-80% of sales in FY2021 and FY2022), partly offsetting the steady decline in the sales of its former premium flagship brand (Ruslan vodka) starting FY2019.

Amid the moderate operating cash flow, the dividend outflow in FY2022 stretched the company’s liquidity profile and increased its reliance on borrowings, which is reflected in the borderline utilization of the company’s drawing power, offering limited cushion to absorb any liquidity shocks in the future.

Margin pressure could also be created from the steadily increasing excise duty and other taxes on alcoholic products and the limited ability of the company to pass on the increased cost to consumers amid competitive pressure. Taking all the matters into consideration, the net working capital has increased to 19% in FY 2022 from 3% from the FY 2021. The operating income on the other hand has come down to 8.9% in FY 2022 from 17% in the year 2021.

From the looks of it, VDPL is yet to firmly recoup its financial health following the slowdown of its premium brand, the impact of which continues to be seen in the form of lower sales, moderate margins, increasing working capital intensity, and rising debt levels. ICRA has assigned LBB rating to VDPL’s Long-term loans worth Rs. 556.66 Million and A4 ratings has been assigned to Short-term loans worth Rs. 355 Million.

About the company

Established in 2013 as a private limited company, Vijay Distillery Private Limited (VDPL) is the third distillery unit under the Jawalakhel Group of Industries (JGI), which has over four decades of experience in production and distribution of alcoholic beverages in Nepal.

It sources Extra Neutral Alcohol (ENA- the key ingredient in liquor manufacturing) mostly from Himalayan Distillery Limited (HDL - a sister concern of VDPL) for homegrown brands and imports from Europe for international brand. As present, the company’s distribution channel includes a national distributor with a network of over 240 sub-dealer outlets across the country.