| Long track record of operation and experienced management -
IMIPL’s, a Raipur based company was incorporated in 1997 and promoted by Mr. Sunil Agarwal, Mr. Vikas Prakash Chand Agarwal and Mr. Pankaj Agarwal, Director who possess more than two decades of experience in trading of coal. BEMPL was incorporated in 2009 and taken over by Indermani Group in March 2018. Currently, the company is managed by Mr. Sunil Agarwal, Mr. Vikas Prakash Chand Agarwal and Mr. Pankaj Agarwal, Director, who possess more than two decades of experience in coal industry. This long experience helps the group to create healthy relation with its customers as well as with the suppliers. As a group, this long experience of the promoters helps both the units to create healthy relation with its customers as well as with the suppliers and the same is reflected in healthy and improving business risk profile of the group.
Healthy scale of operation coupled with healthy profitability margin of the group-
The revenue of the group has improved to Rs.852.08 crore in FY2022 (Prov.) as against of Rs.653.26 crore in the previous year. This significant improvement in revenue is on account of increasing demand for coal in the domestic market during the period. Further, this improvement in revenue is also on account of increase in coal washery capacity to 500000 MTPA in FY2022 from 96000 MTPA in Bhatia Energy & Minerals Pvt Ltd. The group has booked Rs.670.47 crore till September 2022 (Prov.). Going forward, Acuité believes that the revenue of the group will improve on account of increasing demand of coal in the domestic market as well as in international market.
The operating profitability margin of the group has also improved and stood healthy at 18.16 per cent in FY2022 (Prov.) as compared to 11.36 per cent in the previous year. This improvement in operating profitability margin is on account of decrease in coal price during the period. Moreover, the operating profitability margin of the group is also at a healthy level of 15.27 per cent till 6MFY2023 (Prov). Going forward, Acuité believes that the operating profitability margin of group will sustain at a healthy level on account of efficient cost management by the group.
Strong financial risk profile-
The financial risk profile of the group is marked by healthy net worth, low gearing and strong debt protection metrics. The net worth of the group stood high at Rs.310.08 crore in FY2022 (Prov.) as compared to Rs 232.47 crore in FY2021. This improvement in networth is mainly due to the retention of profit during FY2022. Acuité has also considered unsecured loan of Rs. 28.37 crore as quasi equity as the same amount is subordinated with the bank debt. The gearing of the group stood at 0.73 times as on March 31, 2022 when compared to 1.07 times as on March 31, 2021. Interest coverage ratio (ICR) is strong and stood at 6.91 times in FY2022 (Prov.) as against 2.76 times in FY2021. The debt service coverage ratio (DSCR) of the group also stood comfortable at 2.20 times in FY2022 (Prov.) as compared to 1.23 times in the previous year. The net cash accruals to total debt (NCA/TD) stood comfortable at 0.47 times in FY2022 (Prov.) as compared to 0.16 times in the previous year. Going forward, Acuité believes the financial risk profile of the group will remain strong on account of steady net cash accruals and no major debt funded capex plan over the near term.
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| Working capital intensive nature of operation –
The working capital management of the group is marked by high gross current asset (GCA) days of 189 days in FY2022 (Prov.) as compared to 300 days in the previous year. This significant improvement in GCA days is on account of improvement in debtor days to 49 days in FY2022 (Prov.) as compared to 115 days in FY2021. Further, the collection period of the group had increased significantly on March 2021 to 300 days as compared to 176 days in FY2020, mainly due to the impact of covid-19 and nation-wide lock down during that time. The inventory holding period stood comfortable at 27 days in FY2022 (Prov.) as its improved from 79 days in the previous year. This high GCA days also emanates from the high other current assets which mainly consisting of advance to suppliers, GST credit receivables, short term loans and advances to related parties among others.
End user sector challenges and high entry barriers
Coal washed, transported and traded by Indermani group find their end use by companies involved in power generation, cement manufacturing and steel and metal plants. The consumers that Indermani group caters to are also under high regulation from the government. Increasing cost of supply as against environmentally friendly and economically attractive options of solar and wind power has led to significant reduction in energy consumption from power plants, putting the power plants under financial distress. Loss of supply linkages between the cement industry and coal availability has been a developing challenge in India over lack of infrastructure. Further, capital intensive steel and metal plants have been under low potential utilization and have been experiencing reduced productivity amidst a global competition and slowdown in domestic economic conditions. Any policy changes affecting the highly regulated coal industry or its end users will impact the financial risk profile of Indermani group. The ability of Indermani group to grow in such conditions and maintain its profitability will be key monitorable in the future.
The coal beneficiation business in India is highly regulated and falls under the purview of Ministry of Coal, Government of India as well as Ministry of Environment, Forest and Climate Change, Government of India. Such high level of regulation from multiple government authorities creates entry barriers for new players. This provides an advantage to the existing players by keeping the competition low. With limited number of companies present in the coal washeries business, Acuité believes the existing players in the market will benefit from its established presence.
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