Aurangabad Dist. Management Discussions

Global Economy Overview

The global economy is showing signs of improvement but the upturn remains weak, amid significant downside risks. Lower energy prices are helping to bring down headline inflation and ease strains on household budgets, and the earlier-than-expected reopening of China has provided a boost to global activity. However, core inflation is proving persistent and the impact of higher interest rates is increasingly being felt across the economy.

Global GDP growth in 2023 is projected to be 2.7%, the lowest annual rate since the global financial crisis, with the exception of the 2020 pandemic period. A modest improvement to 2.9% is foreseen for 2024. Annual OECD GDP growth is projected to be below trend in both 2023 and 2024, although it will gradually pick up through 2024 as inflation moderates and real incomes strengthen.

Indian Economy Overview

India to witness GDP growth of 6.0 per cent to 6.8 per cent in 2023-24, depending on the trajectory of economic and political developments globally. Economic survey 2022-23 projects a baseline GDP growth of 6.5 per cent in real terms in FY24. Economy is expected to grow at 7 per cent (in real terms) for the year ending march 2023, this follows an 8.7 % growth in the previous financial year. Credit growth to the micro, small, and medium enterprises (msme) sector has been remarkably high, over 30.5 per cent, on average during Jan-Nov 2022. RBI projects headline inflation at 6.8 per cent in FY23, which is outside its target range. Capital expenditure (capex) of the central government, which increased by 63.4 per cent in the first eight months of FY23, was another growth driver of the Indian economy in the current year.

Surge in growth of exports in FY22 and the first half of FY23 induced a shift in the gears of the production processes from mild acceleration to cruise mode. Private consumption as a percentage of GDP stood at 58.4 per cent in Q2 of FY23, the highest among the second quarters of all the years since 2013-14, supported by a rebound in contact-intensive services such as trade, hotel and transport. The optimistic growth forecasts stem from a number of positives like the rebound of private consumption given a boost to production activity, higher Capital Expenditure (Capex), near-universal vaccination coverage enabling people to spend on contact-based services, such as restaurants, hotels, shopping malls, and cinemas, as well as the return of migrant workers to cities to work in construction sites leading to a significant decline in housing market inventory, the strengthening of the balance sheets of the Corporates, a well-capitalized public sector banks ready to increase the credit supply and the credit growth to the Micro, Small, and Medium Enterprises (MSME) sector to name the major ones.

Industry Overview

The alcohol industry has quickly recovered after lockdown, which is a sign of its robust and sizable consumer base. Numerous homegrown brands have carved out a place for themselves in the segment as alcoholic beverage companies have made their way into the domestic market. They are maximising the potential of digital media, which is assisting the segments expansion in numerous ways. In contrast to the past, alcohol brands can now advertise their goods through digital platforms, social media, concerts, events, and a variety of other venues.

Currently, this industry supports approximately 20 million jobs, and with its growing landscape, further employment opportunities are likely to be created. The alcohol industry is a significant sector of the Indian economy. It not only provides the states with up to 2 lakh crores in revenue, but it also directly supports nearly 40 lakh farmers.

ICRIER (Indian Council for Research on International Economic Relations) estimates that by 2030, 50% of Indian drinkers will continue to purchase more products in the same category of alcoholic beverages, 26% will switch to higher-end brands, and 24% will spend money on newer alcohol categories. With this robust growth prospective, India is likely to dominate the alcohol beverage market in the upcoming years.

About 2.7 billion litres of alcohol is produced by about 285 distilleries in India, serving as a basic chemical for a large number of chemical industries, therefore, increasing the demand for alcohol in the future.

One of the biggest alcohol trends to emerge in recent years is online ordering. The desire for convenience and safety has pushed many consumers to shop online and have their alcohol delivered.

Company Overview

As a prominent manufacturer in the industry, we specialize in the production of non-potable alcohol. Our diverse range of products, including Rectified Spirit, De Natured Spirit, Extra Neutral Alcohol, and Potash, caters to various sectors such as pharmaceuticals, cosmetics, fragrances, fertilizers, animal feed, and chemicals. Located in Walchandnagar, Aurangabad, our distillery operates primarily using molasses as a base. Since our establishment in 2000, we have continuously evolved under the stewardship of our current promoters, who acquired the company in 2005. One of our significant achievements has been pioneering the adoption of cutting-edge technology for converting spent wash, a by-product of Extra Neutral Alcohol production, into valuable resources. This includes the production of fertilizers, cattle feed, and the extraction/reuse of water, effectively minimizing waste and maximizing resource utilization.

Building upon our success, we are now actively expanding our product line and venturing into ethanol production, aiming to achieve comprehensive value creation.

Business Overview

Amidst Indias robust liquor industry growth, the Company has thrived and capitalized on the favorable conditions. With the industry witnessing unprecedented expansion and being one of the fastest-growing beverage markets globally, the Company experienced remarkable success.

The Companys sales in FY 2023 soared by an impressive 17.53%, a testament to its ability to leverage the advantageous environment in the alcohol industry. Furthermore, the companys financial performance was outstanding, with its Profit After Tax (PAT) reaching to Rs. 1,676.17 Lakhs for FY 2023, showcasing an impressive 86.61% increase compared to FY 2022, where it stood at Rs. 898.22 Lakhs.

This remarkable growth in profit is a clear indication of the Companys strategic acumen and ability to seize the opportunities presented by the thriving liquor industry in India. As the industry continues to grow at a Compound Annual Growth Rate (CAGR) of 6.8% between 2020 to 2023, the Companys position appears promising and well-positioned to continue benefiting from the positive attributes of the alcohol sector.



• Strength- The distillery industry has experienced a rise in demand for alcoholic beverages, including non-potable alcohol, both domestically and internationally. Distilleries have the flexibility to produce a wide range of alcoholic products with different flavors, strengths, and applications, catering to diverse consumer preferences.

• Challenges – Compliance with complex and evolving regulations, including licensing, labeling, production standards, and marketing restrictions, poses challenges for distilleries.

• Opportunities – Distilleries can explore international markets to expand their customer base and take advantage of increasing global demand for alcoholic beverages.

• Threats- highly competitive environment where several manufacturers vie for market dominance. However, our company has managed to establish itself as a formidable player and remain at the forefront of the industry.



As on

31 March 2023

As on

31 March 2022

Reason for variance more than 25%

Numerator Denominator

Current Ratio (in times)

Total Current Assets Total Current Liabilities 1.24 1.08 The ratio has improved during the year. However, there is no significant variation as the variance is less than 25%.

Debt-Equity Ratio (in times)

Debt consists of Long Term borrowings and Short Term borrowings Total Equity 0.63 0.70 The ratio has improved during the year. However, there is no significant variation as the variance is less than 25%.

Debt Service Coverage Ratio (in times)

Earning for Debt Service Debt Service 3.77 1.74 The ratio has improved during the year on account of increase in profit after tax.

Inventory Turnover Ratio (In times)

Cost of Goods Sold Average inventory 1.83 2.76 The variance is on account of reduction in consumption.

Trade Receivables Turnover Ratio (in times)

Revenue from operations Average trade receivables 52.16 68.90 There is no significant variation as the variance is less than 25%.

Trade Payables Turnover Ratio (in time)

Cost of purchases + Other expenses Average trade payables 4.21 4.85 There is no significant variation as the variance is less than 25%.

Net Capital Turnover Ratio (in times)

Revenue from operations Average Working Capital = Average of Current assets – Current liabilities 6.54 27.77 The variance is on account of trade advances given to suppliers of raw material for the next financial year.

Net Profit Ratio (in %)

Operating Profit for the year Revenue from operations 13.71 8.76 The variance is on account of decrease in cost of raw material purchased.

Return on Equity Ratio (in %)

Profit for the year less Preference dividend (Excluding exceptional item) Average total equity 29 20 The ratio has improved during the year on account of increase in profit after tax.

Return on Capital Employed (in %)

Profit before tax and finance costs (Excluding exceptional Items) Capital employed = Net worth + Total Debt + Deferred tax liabilities 24.41 17.83 The variance is on account of increase in net worth.

The distillery industry operates under stringent government monitoring and regulations, encompassing both central and state laws. The governments active involvement in overseeing the industry presents a unique set of challenges and risks for companies, including our own.

One significant challenge is the ban on liquor consumption in certain states. These prohibitions can significantly impact the market potential and revenue streams for distilleries operating in those regions. The restrictions limit the target market and create obstacles in expanding business operations, potentially hindering growth opportunities.

Moreover, the strict monitoring and regulation by government bodies require distilleries to adhere to numerous compliance standards, licensing requirements, and product quality controls. Failure to meet these regulatory obligations can result in penalties, legal consequences, and damage to the companys reputation.

Additionally, the evolving nature of laws and regulations in the distillery industry introduces uncertainty and the need for continuous adaptation. Changes in taxation policies, labeling requirements, production standards, or advertising restrictions can have a direct impact on business operations and profitability. Staying up to date with these legal developments is crucial to ensure compliance and avoid potential setbacks.

Given these circumstances, the risk profile for distilleries in this industry is amplified. Companies must navigate the complex regulatory landscape, monitor changes in government policies, and proactively manage compliance to mitigate risks effectively. Developing a thorough understanding of the legal framework and building strong relationships with regulatory authorities are essential steps to minimize business risks and maintain operational continuity.

Internal Financial Control

The Company has enlisted the services of an independent Chartered Accountant to conduct internal audits, ensuring the accuracy and adequacy of recording and reporting practices. This includes verifying the existence of internal controls within the system and implementing necessary measures to update and improve the internal control system. The objective is to ensure that all transactions are properly authorized, recorded, and reported.

Periodic exercises are undertaken to safeguard assets and protect against unauthorized use. The Companys policies, guidelines, and procedures are tailored to the specific nature, size, and complexity of its business operations. These measures contribute to a robust system of internal controls that incorporate automatic checks and balances.

The Company places significant emphasis on maintaining strong internal control systems for financial reporting. This resilience and focus are further reinforced by a comprehensive set of Management Information Systems. Internal audits, conducted either internally or by professional firms, closely monitor business operations to ensure strict adherence to policies, safeguarding of assets, and the timely preparation of reliable financial documents and reports.

Any deviations from established policies and procedures are promptly communicated to the management. In response, the Company takes timely and appropriate measures to address these deviations and maintain uninterrupted business operations.

Overall, the Companys commitment to internal control systems, supported by independent audits and professional oversight, ensures the integrity of its financial reporting, safeguarding of assets, and smooth functioning of the business.

Human Resource

Our Company places significant emphasis on recognizing the importance of its human resources as vital contributors to the Companys growth and success. We consider our employees to be valuable assets, and their achievements and goals are closely intertwined with the overall objectives of the Company. To uphold this belief, our Company consistently invests in the development of our human capital and strives to retain top talent. We have established well-defined HR policies that ensure the alignment of personal goals with professional growth opportunities. By providing a conducive work environment and offering avenues for career advancement, we encourage our employees to thrive and reach their full potential.

Our human capital encompasses a diverse workforce, including permanent factory workers. Throughout the reviewed period, employee relations have remained healthy, cordial, and harmonious across all levels within the organization. We are committed to nurturing positive relationships with our employees and maintaining an open and respectful work culture.

By prioritizing our human resources, we acknowledge their essential role in driving the Companys success. We will continue to foster an environment that promotes employee engagement, satisfaction, and career progression, as we recognize that a motivated and skilled workforce is instrumental in achieving our goals and maintaining our competitive edge.

For and on behalf of the Board of Directors of Aurangabad Distillery Limited

Amardeepsingh Triloksingh Sethi
Date: 4th September 2023 Chairman & Wholetime Director
Place: Chhatrapati Sambhajinagar DIN: 00097644