Established track record along with experienced management
Established in 2007, Expanded Polymer Systems Private Limited is into manufacturing of Polyols which is used as a feedstock to produce polymers (polyester and polyether). The company currently has two manufacturing facilities each in Navi Mumbai and Dahej, having a total installed capacity of 47000 MTPA. The company also manufactures blended polyols used in variety of industries. The company is currently managed by Mr. Mukesh Bhuta who is having an experience of more than 40 years in Polyurethanes industry. The experience of the management is also reflected in the moderate scale of operations as marked by the company. The company had marked a revenue of Rs.668.96 crores in FY24 as against Rs. 649.79 crores in FY23 and Rs.607.03 crores in FY22. The revenue growth over the last two years is muted primarily due to lower price realisation. Acuite believes with expected commencement of commercial operations of ongoing capex from next year onwards, scale of operations are expected to improve over the medium term.   

Healthy Financial Risk Profile
The financial risk profile of the company remained modeate marked by a moderate net worth, low gearing, and moderate debt protection metrics. The net worth of the company stood moderate at Rs. 80.79 Cr. as on March 31, 2024, as against Rs. 71.64 Cr. as on March 31, 2023. The increase in net worth is primarily due to the accretion of profits to  reserves. The gearing of the company stood at 0.9 times as on March 31, 2024, as against 0.86 times as on March 31, 2023. Further, the adjusted debt – equity stood at 0.67 times as on 31st March 2024. The TOL/TNW stood at 2.58 times as on March 31, 2024, as against 3.01 times as on March 31, 2023. The debt protection metrics stood moderate with DSCR and Interest coverage ratio at 1.76 times and 2.64 times respectively as on 31st March 2024.
The company is currently undertaking a capex plan to enhance its production capacity of moulded polyether and other products. The moulded polyether plant is constructed at a total cost of Rs. 16 Cr. which is funded by debt of Rs. 12 Cr. and balance by internal accruals. The construction of this plant is completed in H1FY2025 and has commenced commercial production.  The other ongoing capex to increase its production capacity of other existing products is estimated at a total cost of Rs. 13.50 Cr. which is to be funded by debt of Rs. 9.85 Cr. and balance by internal accruals. This project is estimated to commence commercial operations from next year onwards.
Acuite expects the financial risk profile of the company to remain moderate driven by expected improvement in cash accruals going ahead. 

Moderate Working capital operations 
The working capital operations of the company remains moderate marked by GCA days of 102 days in FY 2024 as against 108 days in FY 2023. The GCA days are majorly comprised of moderate inventory and debtor along with other current assets consisting of statutory deposit and advances received. The debtor days stood at 56 days in FY 2024 as against 52 days in FY 2023. The inventory for the company stood at 38 days in FY 2024 as against 50 days in FY 2023. However, the creditors days stood at 74 days in FY 2024 as against 85 days in FY 2023

Lower operating margins
The profitability margins of EPSPL are inherently thin due to competition risks. The EBITDA margins of the company stood at 4.48 percent in FY24 as against 4.19 percent compared to previous year. The PAT margins stood at 1.59 percent in FY24 as against 1.44 percent in FY23. The products manufactured by EPSPL are import substitutes, the company prices its finished products based on the respective landed costs of imports, which limits the control over end-product pricing for the company.

Industry dominated by cheaper imports
The polyol industry in India is highly dominated by import from China and other various countries. The current installed capacity is also on lower side for the industry requirement as compared to demand which leads to higher imports for the industry. Timely support from the Government in the form of anti dumping duty etc can help mitigate the risk to some extend for the company.