Long track record of operation and experienced management
CEC, a Kolkata based firm, was incorporated in 2000 by Mr. Bhagwan Das Agarwal. Currently the firm is managed by Mr. Bhagwan Das Agarwal, who possesses more than two decades of experience in iron casting business especially in manufacturing of manhole, pipe fittings, valve box among others. The other partners, Mrs. Priti Jhunjhunwala and Mrs. Jyoti Gupta also have more than a decade experience in aforementioned industry. The firm has a long presence in this sector and has established a healthy relationship with customers over the years.
Moderate financial risk profile
The firm’s financial risk profile is currently moderate, with a decline in net worth albeit low gearing, and no long-term debt. Net worth decreased to Rs. 28.65 Cr. in FY24 from Rs. 37.23 Cr. in FY23, mainly due to a Rs. 16.12 Cr. capital withdrawal by the partners. Gearing remained healthy at 0.61 times as of March 31, 2024, due to a debt-free structure. Interest coverage ratio (ICR) and debt service coverage ratio (DSCR) moderated to 13.06 times and 8.80 times in FY24, from 23.03 times and 15.12 times in FY23, while the net cash accruals to total debt (NCA/TD) ratio decreased to 0.41 times in FY24 from 0.92 times in FY23. Acuité expects the financial risk profile to improve in the absence of any major debt-funded capital expenditure over the medium term albeit risk of capital withdrawal.

Intensive working capital operations
The firm’s working capital management is intensive. GCA days increased to 196 days in FY24 from 125 days in FY23, with debtor days rising to 95 days in FY24 from 63 days in FY23 due to a longer payment cycle amid the US economic slowdown. Inventory days also rose sharply to 79 days in FY24 from 39 days in FY23 as the firm had to hold on to finished goods due to geopolitical reasons. The creditor cycle extended to 41 days in FY24 from 18 days in FY23. Acuité expects working capital cycles to remain in a similar range as the firm shifts focus from manufacturing to job work, leading to longer cycles.
Partnership nature of business
The firm is exposed to risk of capital withdrawal considering its partnership nature of constitution of the business. There have been instances in the past for capital withdrawal, but the promoters have maintained the funds required for operations of the business. There was a net withdrawal of capital from business amounting to Rs.16.12 Cr. in FY24 resulting its working capital cycle to elongate. The GCA increased to196 days in FY24 from 125 days in FY23. Acuite believes, the management will maintain the capital required for proper functioning of the business.
Customer concentration risk
The firm is also susceptible to customer concentration risk as on average~80-90% percent of the firm’s revenue is generated through sales to one US based customer. However, the firm is taking the initiative to diversify its customer base. Acuité believes that the ability of CEC to expand its customer base to mitigate the revenue concentration risk will remain a key rating sensitivity factor.