Experienced management and established relationship with customers

Established in 2006, the company has a track record of operations for more than fifteen years. The key promoters, Mr. Hari Krishna Chaudhary and Mr. Gyanesh Chaudhary have been engaged in solar business for more than five decades. Moreover, the extensive experiences of promoters have helped the company to scale up in the past and maintain a robust order book. Acuité believes the company will continue to benefit from experienced promoters that will help to maintain long-term relations with customers and suppliers.

Healthy order book position

The company has an unexecuted order book position of around Rs. 8508.86 Cr. as on December 31, 2023. These orders primarily include supplying of PV modules in the domestic market as well as exports and a small portion of the EPC contracts. The company has stopped taking up new EPC contracts due to fixed price nature of these contracts. The company’s order book position continues to remain strong (4.22 times of FY 2023 revenues) as on December 31, 2023, which provides revenue visibility for the near to medium term. Acuité believes the company’s strong execution capabilities backed by its expertise, has helped the company in generating healthy orders over the years. These orders were primarily secured from large, reputed customers that reduce counterparty risks, and in turn, are expected to ensure timely realization of receivables.

Revenue growth and improvement in the profitability

The company’s operating income has increased by 18% to Rs. 2,015.68 crore in FY23 from Rs. 1,709.00 crore in FY22 mainly led by an increase in the contract execution Further in FY2024, the operating income increased to Rs. 2440.05 crore (provisional), marking ~18% growth over FY2023. The operating margin of the company has improved to Rs.192.15 Cr. in the FY2023(an operating margin of 9.53 per cent) as against EBITDA of Rs.61.66 Cr. (operating margin of 3.61 per cent  in FY2022) The company’s operating margins were impacted in FY2022 mainly with an increase in the key raw material i.e, solar cell prices along with a fixed price nature of the contracts. In FY2024, the company has reported revenues of Rs. 2440.05 Cr. and the profitability margins have improved further with an operating margin 11.75 per cent and PAT margin to 3.59% (provisional). Going forward, raw material price fluctuation risk would be largely mitigated due to value of contract being linked to price of Solar Cells in their supply contracts and the closure of the EPC contract business by the company which were largely fixed price contract.

Moderate financial risk profile

The company's financial risk is moderate, with a healthy net worth, moderate gearing, and moderate debt protection metrics. The tangible net worth stood at Rs. 460.70 Cr. as on March 31, 2023 from Rs. 435.62 Cr. as on March 31, 2022. Acuité views unsecured loans of Rs. 85.11 Cr. as quasi-equity, as management plans to keep this amount in the business over the medium term. The company's gearing is moderate, with a Debt-to-Equity ratio of 1.51 as of March 31, 2023, compared to 1.50 as of March 31, 2022. The coverage indicators though improved continue to remain moderate as reflected by Interest Coverage Ratio (ICR) improved to 1.64 times in FY2023 from 0.64 times in FY2022 and the Debt Service Coverage Ratio (DSCR) at 1.08 times as of March 31, 2023 as against 0.56 times in FY2022 respectively.

Working capital intensive nature of operations

The company’s working capital remains highly intensive as reflected  by Gross Current Assets (GCA) of 293 days as on March 31, 2023 as against 313 days as on March 31, 2022. The company-maintained inventory levels of around 68 days in FY23 and 58 days in FY22. The debtor’s collection period stood at 174 days in FY23 as against 193 days for FY22. The improvement in debtors is majorly due to reduction of share of fixed price EPC business in FY 2023. The inventory holding level is comfortable at 68 days as on March 31, 2023 as compared 58 days as on March 31, 2022.