­Experienced management
The promoters of AAEPL, Mr. Bajrang Lal Ladha, Mr. Ashok Kumar Ladha, Mrs. Abha Ladha and Mrs. Suman Ladha possess sound knowledge regarding the procurement, sorting, processing & distribution of agricultural commodities with an extensive experience of around two decades in this industry. Acuité believes that the experienced management and the long track record of the company of over two decades will continue to support the company in maintaining the long-standing relations with its customers and suppliers.

Healthy financial Risk Profile
The tangible net worth of the company stood at Rs.59.69 Cr. as on March 31, 2024 as compared to Rs.59.12 Cr. as on March 31, 2023 due to accretion to reserves. The gearing of the company stood modest at 0.09 times as on 31 March 31, 2024. The Total Outside Liabilities/Tangible Net Worth (TOL/TNW) stood at 0.11 times as on March 31, 2024 as compared to 0.83 times as on March 31, 2023. The debt protection metrices of the company remain comfortable marked by Interest coverage ratio (ICR) of 1.48 times and debt service coverage ratio (DSCR) of 1.08 times for FY2024. The net cash accruals to total debt (NCA/TD) stood healthy at 0.11 times in FY2024.

Working Capital Management
The working capital management of the company is moderate marked by Gross Current Assets (GCA) of 36 days for FY2024 as compared to 59 days for FY2023. The reduction in GCA days are due to reduction in Advance tax paid in FY2024. The inventory days of the company stood at 5 days in FY2024 as compared to 4 days in FY2023. The products have a shelf life of 1 year and the company tends to stock up products during peak season which are Q1 and Q3. The debtor days stood at 15 days in FY2024 against 23 days in FY2023. The terms with customers are between 15-30 days. Days payable outstanding stood at 1 days in FY2024 nil in FY2023 as supplies are on advance payment basis or immediately.

­Volatile scale of operations
The company was primarily engaged in exporting maize (about 75%) to Bangladesh and trading maize and wheat domestically until FY23. However, in FY24, the company’s total operating income decreased by 20%, dropping to Rs. 393.10 crore, due to import restrictions imposed by Bangladesh to preserve its foreign currency reserves. Previously, the company had benefited from better pricing in the Bangladesh market, which resulted in higher EBITDA margins of 7.16% in FY22 and 7.93% in FY23. Since the imposition of these import restrictions, the company has shifted its focus to the domestic market, where it supplies maize primarily to starch and ethanol manufacturers at lower realizations. In FY24, the company’s sales were driven mainly by domestic sales of maize and wheat, where it faced stiff competition from numerous players, leading to lower profitability margins. Additionally, the company’s EBITDA margin fell to 0.62% in FY24, primarily due to higher freight costs and reduced profitability in other traded products such as soybeans, soy DOC,and red lentils.

Profitability susceptible to intense competition in domestic market
AAEPL’s profitability is susceptible to sharp volatility in the prices of traded goods as agri-commodity prices are generally market driven thus limiting bargaining power with the customers & suppliers. The company used to command premium prices in the export market at Bangladesh as was observed with higher margins in FY23 however, with the restrictions imposed in FY24, AAEPL had to sell its products in the domestic market which faces intense competition from many organized & unorganized players resulting in dip in the profitability margins.