Experienced management and long operational track record.
CPSL has a long operational track record of more than three decades in this line of business. The promoters of the company, Mr Pawan Kumar Bansal and  Mr. Abhishek Bansal have an experience of more than three decade in this industry and are involved in the day-to-day operations. The experience of the promoters has helped the company to maintain a healthy relationship with its customers and suppliers of 7-15 years wherein few customers are associated with the company for even three decades. Acuité believes that CPSL will continue to benefit from its experienced management to strengthen its business risk profile over the medium term.

Improvement in revenue and profitability
CPSL’s revenue stood at Rs. 178.27 Cr. in FY24 vis-a-vis Rs. 150.89 Cr. in FY23.  In FY 2025, the revenue is estimated at ~Rs.213 Cr.  on account of sale of new smart meter products The company has unexecuted orders worth Rs. 508.11 Cr. which gives revenue visibility for the medium term. EBITDA Margin of the company improved and stood at 10.96 per cent in FY24 as against 9.98 per cent in FY23. The PAT margins have increased to 3.81 per cent in FY24 vis-à-vis 3.15 per cent in FY23. The improvement in margin is account of better absorption of fixed cost resulting into better margins. Further, the company has orders in hand which commands better margins as compared to previous years. Acuite believes, the operating performance of the company would improve steadily on account of expected capacity utilisation in the medium term.

Moderate Financial Risk Profile
Financial Risk profile of the company remained moderate marked by moderate net-worth, low gearing and moderate debt protection metric. Tangible Net worth of the company stood at Rs. 91.04 Cr. in FY 24 as against Rs. 61.53 Cr. in FY 23. Net worth of the company includes loan from promoters ~Rs.22.79 Cr. as quasi equity. Improvement in Net worth is due to accretion of profits in reserves. Total Debt of the company stood at Rs. 65.94 Cr in FY 24 as against Rs. 44.22 Cr. in FY 23, it comprises of Long-term loan of Rs. 19.44 Cr, CPLTD of Rs. 2.61 Cr. and Rs. 43.89 Cr. of Short-term loan as on FY 2024. Gearing of the company stood comfortable at 0.72 times in FY24 as against 0.72 times in FY23. However, the gearing is expected to increase on account of additional debt taken in FY25 for capex as it is increased from Rs.65 Cr. in FY24 to ~Rs. 83 Cr. in FY25 with gearing estimated to increase to 0.84 times in FY25 compared 0.72 times in FY24. TOL/TNW stood at 1.26 times in FY24 as against 1.18 times in FY 23. Debt protection metrics are moderate with interest coverage of 2.19 times in FY24 as against 2.06 times in FY23 and DSCR of 1.75 times in FY24 as against 1.68 times in FY23. The coverage indicators of the company are estimated to remain moderate with ICR at ~ 2.38 times and DSCR at ~1.71 times in FY25 on account of additional debt for capex vis a vis steady cash accrual.

Acuite believes that the financial risk profile of the company would remain moderate over the medium term on account of debt funded capex and lower capacity utilisations.

Working Capital Intensive Operations
CPSL’s operations remained working capital intensive marked by Gross Current Asset  (GCA) of 308 days in FY24 as against 265 days in FY23. The debtor days improved and stood at 100 days in FY24 as against 121 days in FY23 and 208 days in FY22.  Inventory holding period majorly increased to 183 days in FY24 from 104 days in FY23 as few of the orders were billed in next fiscal. Creditor days of the company remained stable at 126 days in FY24 as against 82 days in FY23. Acuité expects the working capital operations to remain intensive over the medium term on account of the high credit period extended to its customer majorly being state owned power utilities.

Tender based nature of operations and competitive industry

CPSL manufactures and supplies meters to various state owned power utilities. The revenue of the company is highly dependent on the number and value of tenders floated by such power utilities. Additionally, supply to such state owned power utilities exposes the company to the risk of elongated receivables. The company also faces intense competition from several players in the industry in procuring orders through bidding, immense competition for procuring tenders leads to very competitive pricing which in turn lead to stress on the operating margins. Moreover, susceptibility of raw material pricing again keeps margin vulnerable and is a key sensitivity factor.