Established track record of operations and experienced management

GCIL has an established track record of operations dating back almost four decades, along with experienced management. The company is promoted by Mr. Ashok Chhajer, Mr. Rishab  Chhajer and Mr. Kashyap Mehta. The promoters and management of the company have experience of over four decades in the industry which reflected in the growing scale of operations. The experience of the promoters have helped the company to maintain a longstanding relationship with its customers and suppliers. The company was able to achieve a revenue of Rs 175.56 Cr. in FY2024 against Rs.164.33 Cr. in FY2023 . Acuité believes that the long operational track record coupled with the experience of the management will continue to benefit GCIL going forward, resulting in steady growth in the scale of operations.

Healthy financial risk profile

The financial risk profile of GCIL is healthy, marked by moderate tangible net worth, low gearing level and comfortable debt protection metrics. The tangible net worth of the company stood at Rs. 60.07 Cr. as on March 31, 2024, as against Rs. 37.02 Cr. as on March 31, 2023. The net worth is adjusted for revaluation reserves and increase in net worth is due to accumulations of profits to reserves. The company follows a conservative financial risk policy reflected through its peak gearing of 1.30 times as on March 31, 2021. The gearing ratio of the company has improved and stood at 0.83 times as on March 31, 2024 as compared to 0.89 times as on March 31, 2023. The total outside liabilities to tangible net worth (TOL/TNW) stood at 1.31 times as of March 31, 2024 as compared to 1.46 times as on March 31, 2023. Further, debt protection metrics stood comfortable with debt service coverage ratio and interest coverage ratio of 1.81 times and 3.08 times respectively in FY2024. 

Working capital-Intensive nature

The working capital management of the company is intensive marked by GCA days of 165 days in FY24 as against 133 days in FY23. The company maintains inventory levels of around 99 days in FY24 as against 78 days for FY23. The Debtor days stood at 53 days in FY24 as against 48 days for FY23. Furthermore, the creditor days stood at 56 days in FY24 as against 31 days in FY23. The working capital gap is funded by working capital borrowings from Bank. GCIL has moderate reliance on the short-term bank financing, average utilization of Cash Credit is around 66 percent in last six months ended November 2023 for the working capital limit sanctioned for Rs. 25 Cr. of SBI Bank and Rs. 7 Cr. of HSBC Bank. Acuite believes that the working capital operations of GCIL may continue to remain intensive considering the nature of the business.

Susceptibility of margins to raw material price fluctuation and foreign exchange fluctuation risk

As GCIL is engaged in the manufacturing of FIBC bags, the major raw materials required to manufacture such products are polypropylene granules and low-density polyethylene, which are derivatives of crude oil, and the prices of crude oil are directly affected by various macroeconomic factors. Similarly, the prices of such raw materials are also volatile in nature, and such fluctuations in the major raw material prices may impact the operating profit margin of the company. Furthermore, the company also deals in exports to various countries across the globe, which contribute around 35-40 percent to the total revenues in FY2023 and FY2022. As a result, the company’s business is exposed to fluctuations in foreign exchange rates. However, such risks are mitigated to some extent due to the hedging policies adopted by the company.