Som Distilleries Rating Downgraded to BBB+ by Infomerics on License Suspension

Rating Downgrade Announced

Infomerics Ratings has downgraded Som Distilleries & Breweries Limited's credit rating. Its long-term facilities have been revised from 'A-' to 'BBB+', and short-term facilities from 'A2+' to 'A2'.

The rating action is a direct consequence of the temporary suspension of the company's manufacturing license by the Excise Department.

Som Distilleries' subsidiary, Woodpecker Distilleries & Breweries Private Limited, has also seen a similar downgrade in its credit ratings.

Impact on Investors and Lenders

A credit rating downgrade signals increased risk for lenders and investors. It can lead to higher borrowing costs for the company.

This rating action highlights the financial impact of operational disruptions caused by the license suspension and other recent regulatory actions.

Background: Regulatory Challenges

This downgrade follows a series of significant regulatory challenges for Som Distilleries. The company acknowledged a suspension of manufacturing unit licenses at its Raisen facilities in February 2026, linked to an old legal case from 2012. In a separate development, on March 24, 2026, the Madhya Pradesh High Court upheld the cancellation of eight excise-related licences for Som Distilleries and its group entities, citing allegations of tax evasion through fraudulent transport permits.

Earlier, in June 2024, a distillery linked to Som Group faced a 20-day license suspension due to alleged child labor violations following an NCPCR raid.

Notably, just months prior to recent events, in September 2024, Infomerics Ratings had upgraded Som Distilleries' rating from BBB+ to A-, highlighting the sharp reversal in its creditworthiness assessment.

Recent financial performance has also shown strain, with the company reporting a 16.79% decline in net sales and a 76.0% fall in profit after tax for the December 2025 quarter.

Future Outlook and Concerns

Shareholders may face increased investor scrutiny and potential concerns about the company's ability to secure favourable financing terms.

The cost of debt for Som Distilleries is likely to rise due to the downgraded credit rating.

Investor sentiment may be negatively affected, potentially leading to increased stock price volatility.

The company's ability to pursue future expansion plans could be impacted if debt financing becomes more expensive or restricted.

Key Risks Ahead

The primary risk is the duration and conditions for the reinstatement of the suspended manufacturing licenses.

Further legal or regulatory actions from state authorities remain a significant concern for the company.

Operational disruptions and their impact on revenue and profitability are critical to monitor.

Competitive Landscape

Som Distilleries faces intense competition from established players like United Spirits, United Breweries, Radico Khaitan, and Allied Blenders. While these peers operate within the same regulated industry, they do not appear to be facing similar widespread license suspension issues as highlighted in Som Distilleries' recent regulatory entanglements.

Financial Snapshot

As of March 31, 2025, Som Distilleries had a Debt/Equity ratio of 22.94% and an Interest Coverage Ratio (ICR) of 15.93x.

For FY25, the company reported Net Sales of ₹ 794 Cr and Net Profit of ₹ 58 Cr, with a TTM Net Profit Margin of 6.90%.

Investor Watchlist

Investors will closely watch the company's progress in obtaining the reinstatement of its manufacturing licenses.

Updates on operational resumption and the financial performance in the upcoming quarters will be crucial.

Any further developments from ongoing legal proceedings related to tax evasion allegations are critical.

The company's ability to strengthen its compliance and governance practices will be under scrutiny.