| Experienced Management and Strong Product Portfolio
Deekay Electricals (DE), established in 1996, is a Chennai-based partnership firm led by partners, Mr. Arun Kumar and Mrs. Sunitha Arun with a collective experience of more than 2 decades in the industry. The group is a distributor of electrical products of Polycabs, Siemens India, EPCOS, Crompton greaves among others in Chennai, Hyderabad and Bangalore cities. The products sold by the firm includes electircal appliances like wires, cables, switch gears, building products, panels, capacitors, lightings, fans, lugs and terminals.
Deekay Group (DK Group) caters to dealers, OEMS (original equipment manufacturers), contractors, builders and retail customers. Group’s operating revenue increased to 290.96 Cr in FY2022 from 186.33 Cr in FY2021 due to increase in prices, expansion of dealership network and favourable market conditions. Operating profits of the group increased to 16.48 Cr in FY2022 from 10.13 Cr in FY2021 with stable operating margins of 5.67 percent in FY2022 and 5.44 percent in FY2021 .
Acuité believes that the group will continue to benefit from its experienced management and established relationships with both customers as well as suppliers in the medium term.
Moderate Financial Risk Profile
DK group’s financial risk profile is moderate marked by healthy capital structure and coverage indicators. Group’s net worth stood at 45.37 Cr as on March 2022 against 39.71 Cr as on March 2021, networth are expected to remain modest on account of limited accretion to reserve. Debt protection metrics of Interest coverage ratio stood at 3.58 times as on March 31st 2022 against 2.38 times as on March 31st 2021. The net cash accrual to debt stood at 0.2 times as on March 31st 2022 against 0.12 times as on March 31st 2021. The total outside liabilities to tangible net worth stood at 1.81 times as on March 31st 2022 against 1.85 times as on March 31st 2021.
Acuité believes that the financial risk profile of the firm is expected to remain moderate in the absence of any major debt funded capex in near to medium term.
|
| Moderately intensive working capital operation
The working capital operations of the group are moderately intensive with Gross current asset (GCA) days of 158 days in FY 2022 as against 215 days in FY 2021. The improvement in GCA days is majorly due to better inventory management with inventory days reduced to 47 days in FY 2022 as against 72 days in FY 2021. Further, the debtor days has reduced to 107 days in FY 2022 as against 136 days in FY 2021. However, the same is still higher as the credit period allowed to customer is around 90 days. Further, out of the total debtor outstanding as on March 2022 of Rs 85 Cr, Rs 10.70 Cr are outstanding for period of more than a year. Acuite’ believes that working capital operations of the group may continue to remain moderately intensive considering the nature of business.
Vulnerability of profitability owing to volatility in commodity prices
The profitability margins of the group are susceptible to volatility in commodity prices. Significant changes in commodity prices will impact the margins of the group. Acuité believes that profitability of the group will remain susceptible to volatility in commodity prices in the near to medium term.
Susceptibility to cyclicality nature of industry and competitive nature of industry
The firm engaged in trading business of electrical products to dealers, OEMS (original equipment manufacturers), contractors, builders and retail customers. Demand for electrical components is majorly dependent upon the economic activities taking place in and around the country. The end user industry being infrastructure, manufacturing, service and real state, any significant slowdown in these industries will impact the demand of electrical components and will impact the revenues of the firm. Further, the firm competes with various players in the organized and unorganized segments in the electrical component trading industry, thus limiting the pricing power.
|
