GM Breweries Ltd is engaged in the activities of manufacturing and marketing of Alcoholic Beverages; such as Country Liquor (CL) and Indian made Foreign Liquor (IMFL). The company is growing steadily and has earned a dedicated customer base. GMBL is the largest manufacturer of country liquor in the state of Maharashtra with a sizeable market share. GMBL also contributes substantially to the state exchequer by way of excise duty and value added tax.
The Company’s products have been enjoying consistently good brand image and loyalty from the consumers for the past several years and the company enjoys virtual monopoly in country liquor in the districts of Mumbai and Thane. It is the single largest manufacturer of country liquor in the State of Maharashtra. The company has capacity to process 13.76 crore bulk litres of country liquor per annum out of which only about 43.39 % has been utilized last year. The company has got tremendous potential to utilize the balance capacity by penetrating into interior districts of Maharashtra taking advantage of its brand image.
Even though stringent steps have been taken by the various Government agencies, the parallel duty evaded market which eats into Company’s market share as well as Government’s revenue continues to be the main threat to the Company.
The Company has been facing difficulty also due to very high levels of taxation and frequent changes in laws. In fact the exorbitant rate of taxation is one of the factors, which breeds duty evasion. The high level of fluctuations in the prices of its main raw material namely Rectified Spirit and as well as acute shortage in the availability of Spirit are the constraints faced by the Company during the past several years. In the recent past company also faces the problem of exercise of concurrent and parallel juris- diction by more than one government agency like the State Excise Department, Legal Metrology Department and Food and Drugs Administration Department (FDA) which are conflicting in nature.
To overcome the problem of shortage, wide price fluctuation and heavy breakages in glass bottles, the Company has started marketing all sizes of country liquor in PET bottles which is slowly gaining acceptance from the consumers. However, during the last year the company faced the problem of fluctuation in the prices of PET bottles also due to increase in petroleum prices in the international market. During the year under review about 42.50% of the company’s total production & sale consisted of PET bottles. Company’s all bottling lines have been de- signed to handle both glass and PET bottles. During the course of the year the company installed
During the course of the year the company has completed the ambitious project of replacing all the MS tanks into SS tanks and also installed additional blending and water storage tanks. With this, the company will have the unique distinction of having all the blending, sprit storage & water storage tanks and the connecting pipelines in Stainless Steel. During the past three years, the Company has started using 180 Ml Glass bottles embossed with its Registered Logo and also taken adequate legal steps to ensure that, these bottles are not used by other liquor manufacturers. These measures have resulted in larger inflow of recycled bottles which has in turn helped the Company to cut overall cost of packing materials.
Barring the aforesaid deterrents, the company does not foresee any major threats to its growth and market share in the coming years. The existing capacity should take care of the company’s requirement at least for the next Five years and the Company does not foresee any technological obsolescence for its products.
The company achieved Net Sales of Rs 756.60 million for the 1st quarter of the financial year 2014-15 as against Rs. 668.10 million in the corresponding quarter of the previous year. The company has reported an EBITDA of Rs. 88.90 million in Q1 FY15. In the same period net profit was at Rs. 45.20 million against Rs. 52.80 million in the corresponding quarter of the previous year. The company has reported an EPS of Rs. 4.83 for the 1st quarter as against an EPS of Rs. 5.64 in the corresponding quarter of the previous year. The current quarter results are impacted by higher raw materials prices namely rectified spirit compared to corresponding quarter of previous year. We recommend ‘BUY’ for Medium to Long term investment.