­Established track record of operations and experienced management
ERDI, which was established in 1984, has an established track record of operations of over three and a half decades in said line of business. The directors Mr. Sunil H. Agrawal, Mr. Deepak R. Dashrath and Mrs. Manali Agrawal possess experience of over a decade, which has helped the company to get a healthy order book. The company has an order book of Rs.112 crore as on April 1,2022 showcasing a good revenue visibility in medium term. The day to day operations of the company are managed by the promoter along with experienced senior management team who are ably supported by a strong line of mid-level managers. 

Moderate financial risk profile
The company has a moderate financial risk profile marked by the tangible net worth of Rs.15.25 crore (incl quasi equity of Rs.3.87 crore) as on 31 March 2022 as against Rs.14.25 crore as on 31 March 2021. The increase in the networth is due to the accretion of profits in reserves. The gearing level of the company remained moderate at 1.07 times as on 31 March 2022 as against 0.59 times as on 31st March 2021. The total debt of the company comprised of long term debt of Rs.3.80 crore and short term debt of Rs.11.46 crore as on 31 March 2022. The coverage ratios of the company remained moderate with interest coverage ratio of 2.38 times for FY2022 as against 3.35 times for FY2021. The DSCR stood at 1.54 times for FY2022 as against 1.72 times in FY2021. The total outside liabilities to tangible net worth (TOL/TNW) of the company stood at 1.48 times for FY2022 as against 1.16 times in FY2021. 

­Decline in the operating income and modest scale of operations
The revenue of the company stood at Rs.34.97 crore in FY2022 as against Rs.49.24 crore in FY2021. The operations of the company were impacted as the company had inadequate BG facility to undertake additional projects and the enhancement of working capital remained delayed. The company secured a Rs.22 crore BG facility from Indusind bank Limited as against Rs.11.50 crores previously in FY2022. The enhanced limit is expected to remain sufficient for growth over the near to medium term. The operating profit margin improved to 12.01 times in FY2022 as against 10.15 times in FY2021. This increase in the operating profit margin is due to the reduction in the raw material costs. The PAT margin stood at 5.44 percent in FY2022 as against 5.33 percent in FY2021.

Working capital intensive operations
The operations of the company are working capital intensive which is a characteristic trait for such contractors. The GCA days stood at 297 days as on 31 march 2022 as against 150 days as on 31 march 2021. The increase in the GCA days is majorly due to the increase in the debtors days and inventory days. The debtors days stood at 132 days in FY2022 as against 21 days in FY2021. The receivable position appears stretched as the company billed for Rs.13.45 crores only in the month of March 2022, which has lead to higher receivables of Rs.12.80 crores as on March 31, 2022. The inventory days stood at 162 days as on  March 31, 2022 as against 99 days as on March 31, 2021. The inventory consists of Work in progress inventory. The bills are shown as inventory till it is booked in the railway system. The creditors days stood at 27 days as on March 31, 2022 as against 33 days as on March 31, 2021. The fund based facilities are utilized around 76 percent for last 6 months ending November 2022 and the BG limits are utilized around 56 percent as on October 2022. 

High competition and tender based nature of business
The company deals with Indian Railways and quotes for the contracts on a tender basis. The company also faces stiff competition in this industry from many organized as well as unorganized players. The tender base nature of operations and competitive pricing along with successful bidding of contracts will certainly impact operations of the company. Going forward, the company’s ability to successfully bid for a greater number of large orders remains to be seen.