| Experienced management with an established track record of operations
ACTPL has nearly two decades of operational experience in the chemical industry, supported by experienced promoters with industry expertise. Over the years, the company has strong, long-term relationships with both customers and suppliers, including major players across the refinery, pharmaceutical, fertilizer, and paint sectors. Acuité believes that the company will continue to benefit from its experienced management and able to sustain established relations with its customers and suppliers over the medium term.
Moderate Financial Risk Profile
The financial risk profile of the company is moderate marked by moderate net worth, below unity gearing and comfortable debt protection metrics. The company’s net worth stood at Rs. 55.77 Cr. as on March 31, 2024, from Rs. 55.34 Cr. as on March 31, 2023, due to accretion of profit to reserves. The total debt of the company stood at Rs. 22.56 Cr. as on March 31, 2024, as against Rs. 18.87 Cr. as on March 31, 2023. The debt profile of the company comprises of Rs. 2.21 Cr. of long-term debt and Rs. 20.35 Cr. of unsecured loans from related parties as on March 31, 2024. The gearing of the company’s stood at 0.40 times in FY24 as against 0.34 times in FY23. Going forward, gearing is expected to rise further due to higher working capital utilization; however, it is projected to remain below unity. The debt protection metrics declined however remained comfortable as reflected with an interest service coverage ratio of 1.63 times as on March 31, 2024, as against 2.18 times as on March 2023. Also, debt service coverage ratio stood at 1.35 times as on March 31, 2024, as against 1.93 times as on March 2023. Acuite believes that the financial risk profile of the company is likely to sustain in near to medium term on account of steady accruals and low gearing.
Moderately efficient working capital management
The working capital management is moderately efficient marked by GCA of 113 days in FY24 and 92 days during FY23. The debtor days of the company stood at 79 days for FY24 compared to 76 days for FY23 and the inventory days stood at 34 days for FY24 as against 16 days for FY23. The increase in inventory days was primarily due to the company’s strategic purchase of a large volume of chemicals at favourable low prices, capitalizing on an opportunity to optimize future cost efficiency. The creditor days stood at 72 days in FY24 as compared to 68 days in FY23. The average fund-based working capital utilization of the company is ~65 percent for 6 month ended as on May 2025. Acuite believes that working capital operations of the company will continue to remain in similar range over medium term considering the nature of business.
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| Subdued scale of operations and profitability margins
The company experienced a declining trend in operating performance over recent years. However, this appears to have stabilized at the bottom marked by revenue of ~Rs. 503 Cr. in FY25(Est.) as compared to Rs.492.07 Cr. in FY24 and Rs.667.42 Cr. in FY23. The decline was primarily driven by geopolitical factors, which caused significant market volatility, resulting in lower volumes and reduced realizations. Additionally, falling crude oil prices exerted considerable pressure on the petrochemicals segment. The operating profit margin stood ~1.36 percent in FY25(Est.) as compared to 1.25 percent in FY24 and 1.52 percent in FY23. Consequently, the PAT margin of the company subdued and stood at 0.09 percent in FY24 and 0.53 percent in FY23. Acuite believes that the sustainability in the revenue growth and profitability would be a key monitorable going forward.
Competitive nature of industry and vulnerability of margins to volatile Imported Inputs
The competitive landscape is intense due to low entry barriers and a fragmented industry structure, which results in significant pricing pressures from peers. This combination of volatile raw material costs and aggressive competition poses a continuous challenge to maintaining stable profit margins for companies engaged in trading. Profit margins are highly susceptible to fluctuations in raw material prices due heavy reliance on imports of the raw materials i.e. around 40 percent and forex risk.
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