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-CRISIL keeps ratings of Tripty Drinks.

BANKING AND CREDIT NEWS-December 10, 2010--CRISIL keeps ratings of Tripty Drinks(C)2010 M2 COMMUNICATIONS

10 December 2010 - India's CRISIL rating agency on Thursday retained the ratings on the bank facilities of Tripty Drinks Pvt Ltd at BBB+/stable/P2.

The agency issued the following press release:

Rs.85.00 Million Cash Credit BBB+/Stable (Reaffirmed)

Rs.193.00 Million Term Loan BBB+/Stable (Reaffirmed)

Rs.32.00 Million Proposed Long-Term Bank Loan Facility BBB+/Stable (Reaffirmed)

Rs.50.00 Million Letter of Credit P2 (Reaffirmed)

CRISIL's ratings on the bank facilities of Tripty Drinks Pvt Ltd (TDPL; part of the SMV group) continue to reflect the SMV group's strong market position as bottler for Pepsico India Holding Pvt Ltd's (Pepsi's) franchisee operations and its comfortable debt protection metrics, driven by strong revenue growth and healthy profitability. These rating strengths are partially offset by the SMV group's average operating efficiency, driven by weak demand in its distribution territories, its weak capital structure, and exposure to risks related to unfavourable regulatory changes in the soft drinks market.

To arrive at its ratings, CRISIL has combined the business and financial risk profiles of TDPL and its group companies Steel city Beverages Pvt Ltd (SCBPL), SMV Beverages Pvt Ltd (SBPL) and Nectar Beverages Pvt Ltd (NBPL). This is because all these entities, collectively referred to as the SMV group, are in the same line of business, with inter-company transactions and cross-holding of equity shares. These companies, at times, buy and sell products from each other, depending on availability of production capacity. SCBPL, for instance, acts as a hub for bottling of juices for the entire group. Also, there is fungibility of cash flows between the entities, in the form of advances to each other, as well as investments.

CRISIL has treated preference shares of Rs.720 million (along with accrued dividend payment and dividend distribution tax), issued by the SMV group to its principal Pepsi, as part of the group's debt because of an agreement with Pepsi, according to which the SMV group is to redeem these shares in a phased manner, starting from December 2010, over the next three years. The management has, however, indicated that the group has flexibility in payment of the preference shares and same will be funded through the group's surplus liquidity or from promoter's own resources. The promoters have already repaid Rs.200 millions through other group entities. CRISIL, therefore, believes that the redemption of the preference shares will not adversely impact the group's liquidity, despite treating the preference capital as debt.

Outlook: Stable

CRISIL believes that the SMV group will continue to derive benefits from its strong market position and its established relationship with Pepsi. The outlook may be revised to 'Positive' in case of any significant improvement in the group's capital structure or net cash accruals, on the back of strong increase in revenues. Conversely, the outlook may be revised to 'Negative' in case of pressure on the group's liquidity because of redemption of preference shares issued to Pepsi, larger-than-expected debt-funded capital expenditure/acquisitions, pressure on cash accruals, or in case of any diversion of funds from the group's bottling operations into the promoters' real estate ventures.

About the Group

The SMV Group, promoted by Mr. Surya Kant Jaipuria, is a franchisee bottler of Pepsi, with six bottling plants covering Chattisgarh, the Vidharbha region of Maharashtra, Jharkhand, Orrisa, and Karnataka (excluding Bangalore).

TDPL has a bottling plant in Cuttack (Orissa). It has capacities for bottling CSD in glass bottles (500 bpm), fruit juice in glass bottles (140 bpm), CSD in PET bottles (80 bpm) and packaged drinking water (40 bpm).

SCBPL has a bottling plant in Jamshedpur. This unit only has capacity for bottling of juices in PET and glass bottles. It is not into bottling of carbonated soft drinks (CSDs). SCBPL acts as a bottling hub for juices in PET packaging for the group. It has capacities for bottling of fruit juice in glass bottles (130 bottles per minute, bpm) and in PET bottles (60 bpm).

SBPL was incorporated in 1996 and has one bottling plant in Raipur (Chhattisgarh) and another in Nagpur (Maharashtra). It has capacities for bottling of CSD in glass bottles (480 bpm), in PET bottles (140 bpm), fruit juice in glass bottles (240 bpm) and packaged drinking water in PET bottles (55 bpm).

NBPL has a bottling plant in Dharwad (Karnataka). It has interchangeable capacities for bottling juices and CSDs in glass bottles (300 bpm), CSDs in PET bottles (100 bpm), and packaged drinking water in PET bottles (60 bpm).

The promoters also own two other bottling plants in Bhopal and Jamshedpur, through another company SMV Agencies Pvt Ltd, which, apart from bottling, has a del credre agency of Raymond's and is into real state development.

The SMV group reported a profit after tax (PAT) of Rs. 48.6 million on net sales of Rs. 2082.8 million for 2009-10 (refers to financial year, April 1 to March 31), against a PAT of Rs. 63.8 million on net sales of Rs. 1578.2 million for 2008-09.

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Publication:M2 Banking & Credit News (BCN)
Date:Dec 10, 2010
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