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Established in 2003 by Mr. Chandra Mohan Reddy, who has more than two decades of experience in the electrical and related construction industry. CIEPL is engaged in executing turnkey electrical projects for various government departments of Andhra Pradesh (GoAP), Telangana (GoTS), and Karnataka. The promoter, with extensive industry experience and timely execution of projects, has been able to establish longstanding relationships with various government as well as private clients. The company is a registered class I contractor with different states and local governing bodies. Apart from working with Transmission Corporations of Telangana and Andhra Pradesh, various power distribution companies (Discoms) of GoAP, GoTS, Karnataka, and other states. The timely execution of the projects has helped the company in improve its market presence, besides continued business from its reputed clientele.
- Improvement in scale of operations and sizeable order book position
The operating income of the company has shown YOY growth of 31.88 percent in FY2024 as compared to the previous year. It stood at Rs 150.25 Cr. in FY2024 as against Rs 113.93 Cr. in FY2023. The improvement in the revenue is on account of the execution of more orders in Q4 of FY2024 and orders executed on time. Profitability margin, i.e., EBITDA margin, improved and stood at 7.14 percent in FY2024 as against 5.54 percent in FY2023. The reason behind the improvement in the margin is mainly due to a decrease in raw material costs during FY2024. The company has an unexecuted order book position of Rs. 267.47 Cr. as of July 31, 2024. The company is planning to execute around Rs.130-135 Cr. in the next 9 months (August 2024–March 2025); the outstanding order book is 1.78x of the FY2024 revenue. All the orders are related to the distribution and transmission of electrical works in Andhra Pradesh and Karnataka states. Acuité believes that CIEPL’s scale of operations will remain stable on account of its sizeable order book position and the ability of the company to win new orders.
- Comfortable financial risk profile albeit moderate net worth
The CIEPL's financial risk profile is comfortable, marked by comfortable debt protection metrics, low gearing, and moderate net worth. The tangible net worth stood at Rs. 31.41 Cr. as on March 31, 2024, as against Rs. 26.55 Cr. as on March 31, 2023. The improvement is on account of accretion of net profit in the reserves. The gearing of the company stood at 0.40 times as on March 31, 2024, against 0.37 times as on previous year. The total debt as on March 31, 2024, consists of working capital limits from banks of Rs. 7.91 Cr, term loans of Rs. 3.65 Cr, and USL of Rs. 1.05 Cr. Further, the interest coverage ratio stood at 4.31 times as on March 31, 2024, as against 6.34 times as on March 31, 2023. DSCR stood at 2.34 times as on March 31, 2024, as against 3,69 times as on March 31, 2023. The debt to EBITDA of the company stood at 1.17 times as on March 31, 2024, as against 1.41 times as on March 31, 2023. However, the TOL/TNW stood to 2.12 times as on March 31, 2024, as against 2.31 times as on March 31, 2023. Acuité believes that the financial risk profile of CIEPL will continue to remain comfortable over the medium term in the absence of any major debt-funded capital expenditure.
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- Working capital intensive operations with high bank limits utilization:
The operations of the company are working capital intensive, marked by Gross Current Asset (GCA) days of 208 days in FY2024 as against 252 days in FY2023. However, there is improvement in GCA days in FY2024 as compared to the previous year on account of improved debtor days and inventory days. The GCA days are mainly marked by debtor days. Inventory days stood at 22 days in FY2024, as against 50 days in FY2023. Debtor days stood at 115 days in FY2024 as against 147 days in FY2023. The improvement in debtor days is on account of payments being on time. Additionally, the company is managing its operations with a minimal working capital limit of Rs. 8.00 Cr, which was highly utilized at an average of 99 percent during the past 6 months ending September 2024. Subsequently, the payable period stood at 162 days in FY2024 as against 188 days in FY2023, respectively. Further, the average bank limit utilization in the last six months ended September 24 remained at ~99 percent for fund-based and 90 percent for non-fund-based.
- Fragmented nature of industry and high regulatory intervention limits pricing flexibility
Given the highly fragmented nature of the pharmaceutical distribution business, the company’s pricing flexibility is limited. Besides, CIEPL’s operations are also exposed to changes in regulatory policy pertaining to pharmaceutical industry.
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