| Experienced management and established presence in the industry
The group is promoted by Mr. Mohmed Umar General and his three sons, Mr. Mohmed Amin General, Mr. Mohmed Juned General and Mr. Mohmed Zaid General. The group has a presence since 1995 and has more than two decades of established track record in the textile industry. The group has longstanding relationships with its customers and suppliers for over two decades. The established track record of operations and experience of the management has helped the group to develop healthy relationships with its customers. The estimated revenue for FY2024E stood at Rs. 199.53 crore as against Rs. 195.73 crore in FY2023 as against Rs.188.80 crore in FY2022. Also, the group has already achieved a turnover of Rs ~ 56.76 crore in Q1FY25 and is expected to achieve a turnover of Rs. ~80 crore in Q2FY25.
Acuité believes that the group will continue to benefit from its established presence in the industry over the medium term.
Diversified customer base, Proximity to raw material and geographically well diversified
The general group caters to around 200 clients in domestic market with top ten customers contributing to less than ~50.00 percent of the total revenue for last three years ending 2022. This also mitigates customer concentration risk to a certain extent. The manufacturing facilities of General group are located at Surat, a textile hub of India which ensures regular supply of raw materials and easy reach to customers. General Group has PAN India presence and caters to major regions such as Maharashtra, Gujarat, Delhi and Bengaluru with longstanding relationships with customers and suppliers. The group enjoys easy connectivity to road & rail, leading to better lead -time and facilitates delivery of finished products in a timely manner. Presence in the textile manufacturing region results in benefits derived from easy availability of raw material at a better price, weaving of grey fabrics at cheaper cost and lower logistic expenditure.
Moderate Financial risk profile
The group has a moderate financial risk profile with moderate net worth, gearing and comfortable debt protection metrics. The tangible networth of the company stood at Rs. 117.04 crore as on March 31, 2023 as against Rs. 87.54 crore in March 31, 2022. The improvement in the overall tangible networth is on account of accretion of profits into reserves and infusion of funds by the promoters/directors. The group currently follows a moderate leverage policy as the gearing of the group marginally declined and stood at 0.79 times as on March 31, 2023, as against to 0.83 times as on March 31, 2022. The TOL/TNW of the group stood at 0.97 times as of March 2023 as against 0.98 times as of March 2022. Also, the debt protection metrics of the company remained moderate with Debt Service Coverage ratio of the group improved and stood at 1.26 times in FY2023 as against 1.09 times in FY2022. Interest coverage ratio of the company stood at 4.54 times in FY2023 as against 4.66 times in FY2022.
Going ahead, Acuite expects deterioration in the financial risk profile of the group on account of the on-going debt funded capex. While a significant portion of capex is completed in FY2024, the new capex started in FY2024 is planned to be completed in FY2025. The group is. While a significant portion of capex is completed in FY2024, the new capex started in FY2024 is planned to be completed in FY2025. The group is setting up 4.9 MW of hybrid power plant which is expected to be operatonalised by December 2024. The total cost of project is Rs. 70.35 Cr. which is funded through unsecured loans from promoters/directors of Rs.13.02 crore, bank loans of Rs. 49 crore, and internal accruals of Rs. 8.33 crore. The promoters have infused incremental Rs10.21 cr. in FY 2025 during April and May 2024 by way of interest free unsecured loans. However, the overall gearing of the company is estimated to be remain above unity over the near to medium term.
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| Working capital intensive nature of operations
General Group has an intensive working capital cycle marked by GCA days of 178 days in FY2023 as against 155 days in FY2022. The improvement in GCA days is driven by the improvement in Inventory days to 72 days in FY2023 from 85 days in FY2022. The improvement in the inventory levels is on account of group's focus on made to order. The group’s debtor collection period stood at 92 days in FY2023 from 69 days in FY2022. Creditor days of the group stood at 48 days in FY2023 as against 25 days in FY2022. The current ratio stood at 1.75 times as on March 31, 2023. Slight improvement in the working capital cycle is expected.
Acuite expects that with an increase in the company’s capacity the working capital requirements are also expected to increase in the near to medium term.
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