­Experienced management and established track record of operations
ETPL has an established operational track record of over two decades. It is promoted by Mr. Anil V. Somalvar who possess ~40 years of experience in the field of closed die forging. He is supported by other directors, Mr. Shrikrishna K. Kalambkar, Mrs. Swati A. Somalwar & Mr. Anil G. Kharwadkar who possess over 40 years of experience in the same industry. The promoter & directors are being supported by its team of experienced professionals in managing day to day operations of ETPL. The extensive experience of the promoter and directors has enabled ETPL to establish a healthy relationship with its customers and suppliers. Acuité believes that ETPL will continue to benefit from its experienced management and established track record of operations.

Moderate Financial Risk Profile
ETPL's financial risk profile is moderate marked by a modest net worth, moderate gearing, and moderate debt protection metrics. The company's tangible net worth improved to Rs. 18.65 crore as of March 31, 2024, from Rs. 15.66 crore as of March 31, 2023, due to profit retention in reserves. This includes Rs. 1.41 crore of unsecured loans from directors, treated as quasi-equity since they are subordinated to bank borrowings, with an undertaking submitted by the management.

The gearing (debt-equity) ratio stood at a moderate 0.97 times as of March 31, 2024, compared to 0.94 times as of March 31, 2023, due to an increase in overall debt to Rs. 18.06 crore in FY2024 from Rs. 14.78 crore in FY2023. This increase is attributed to the ongoing CAPEX aimed at enhancing the production capacity of the machining process. The total debt of Rs. 18.06 crore as of March 31, 2024, includes long-term bank borrowings of Rs. 7.53 crore, short-term bank borrowings of Rs. 7.24 crore, and the current portion of long-term debt of Rs. 3.29 crore. The gearing is expected to improve further over the medium term. Although the interest coverage ratio and DSCR moderated, they remained comfortable at 5.96 times and 1.86 times for FY2024, respectively, compared to 7.16 times and 2.41 times for FY2023. The Net Cash Accruals to Total Debt ratio moderated to 0.35 times for FY2024. The Total Outside Liabilities to Tangible Net Worth ratio stood at 1.70 times for FY2024, and the Debt-EBITDA ratio was 1.99 times for FY2024, compared to 1.95 times for FY2023. Acuité believes that the financial risk profile of ETPL will remain moderate over the medium term due to its moderate gearing, modest tangible net worth and moderate debt protection metrics.

Moderations in operating performance along with decline in profitability margins
ETPL's revenue remained stable at Rs. 70.45 crore in FY2024, compared to Rs. 68.94 crore in FY2023. Despite stable revenue, ETPL's operating margin improved significantly, reaching 12.80 per cent in FY2024 from 10.78 per cent in FY2023. However, the net profit margin slightly declined to 4.25 per cent in FY2024 from 4.86 per cent in FY2023, due to increased interest costs and depreciation charges.

As of March 2025, ETPL reported a revenue of ~ Rs. 67.17 crore which is further moderating the operating performance. The profitability margins have seen a slight decline due to high employee turnover, leading to higher employee costs, interest, and depreciation. For FY25 the operating profit margin is expected to decline and stand at 9 per cent and the PAT margins is expected to decline significantly and will be in the range of 0.60 per cent to 1 per cent. Acuité believes that the ability of ETPL to improve its scale of operations and profitability margins will remain a key rating sensitivity factor.

Moderately working capital intensive operations
ETPL's working capital operations are moderately intensive, as indicated by its Gross Current Assets (GCA) of 142 days for FY2024, compared to 129 days in FY2023. This is due to its inventory and receivables cycle, which stood at 62 days and 81 days for FY2024, respectively, compared to 46 days and 83 days for FY2023. The company's creditors cycle also increased to 110 days for FY2024 from 91 days in FY2023. The average bank limit utilization for the six-month period ending February 2025 stood at 84.96 per cent. Acuité believes that the ability of ETPL to improve and maintain an efficient working capital cycle over the medium term will remain a key rating sensitivity factor.

Susceptibility to foreign exchange rate fluctuation
The company is exporting around 24 per cent majorly to Switzerland and further are going to start business in USA also. Further natural hedging is not availed as they are not into importing and they are not using any hedging mechanism to cover forex risk thus they are susceptible to fluctuation in the foreign currency.

­Presence in highly competitive and cyclical nature of the steel industry
ETPL’s performance remains vulnerable to cyclicality in the steel sector as steel being a key raw material in the manufacturing of gears, shafts & other products from closed die forging. Also, demand for steel & other nonferrous metals depends on the performance of the end user segments like automobile and construction. Indian steel sector is highly competitive due to the presence of large number of players.