| Established track record of operations and experienced management
JGI group has a strong track record of operations and experienced management. The company's promoters have been engaged in the steel trading business since 1997, which has helped establish strong relationships with both suppliers and customers. This has led to stability in the inflow of orders and the supply of raw materials. The extensive experience of the promoters and the company's established presence have enabled JGI group to secure distributorship of JSW Steel Limited in Goa. Additionally, the group has acquired distributorship rights for the Coastal Maharashtra region, including the districts of Sindhudurg, Ratnagiri, Raigad, and Kolhapur. Acuité believes that the group will benefit from its experienced management, which helps maintain long-standing relationships with customers and suppliers.
Moderation in operating performance
The group has shown stagnancy in revenue wherein it has reported revenue of Rs. 491.44 Cr. in FY24 as against Rs. 503.05 Cr. in FY23. The group has reported sales of ~Rs.521 Cr. for 10MFY2025 and expected to register revenue in the range of Rs.605-650 Cr. in FY2025. The EBITDA margin remained stable at 4.67 percent in FY24 as against 4.62 percent in FY23. EBITDA margin is expected to be in the range of 4 to 5 per cent in FY25. PAT margin of the group has declined during FY24 to 2.43 percent against to 4.14 percent in FY23 on account of high finance cost. Acuite believes, the operating performance of the group would improve steadily over the medium term.
Healthy financial risk profile
JGI group’s financial profile remained healthy marked by moderate net worth, moderate gearing and comfortable coverage indicators. The group’s net worth stood healthy at Rs 90.85 Cr. as on March 31, 2024 as against Rs 77.89 Cr. as on March 31, 2023, backed by steady accretion to reserves. The capital structure remained moderate with average gearing of ~1.05 times and Total Outside Liabilities to Tangible Net Worth (TOL/ TNW) at ~1.51 times for past three years ending March 31, 2024 due to limited capex requirements and resulting in low external borrowings.
The group's coverage indicators are comfortable with interest coverage ratio (ICR) 4.50 times and Net Cash Accruals (NCA)/Total Debt (TD) stood at 0.15 times for FY24 as against 11.21 times and Net Cash Accruals (NCA)/Total Debt (TD) stood at 0.45 times for FY23 respectively. Debt service coverage ratio stood at 2.50 times during FY24 against 5.37 times during FY23. Acuité believes that financial risk profile of the group will remain healthy over the medium term, supported by no significant debt-funded capital expenditure plans in near to medium term.
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| Moderately intensive working capital management
The group's working capital is moderately intensive in nature as reflected in its Gross Current Asset (GCA) days of around 115 days during last 3 years ended March 31, 2024. JGI group offers credit period of around 45 -60 days to its customers and makes upfront payment to its suppliers. Its inventory days stood at 20-45 days during last 3 years ended March 31, 2024. All its purchases are against payment only leading to moderate utilisation of its working capital limits at an average of 65 per cent for last 6 months ending January 2025. Acuité believes that with competitive and trading nature of operations, the company needs to maintain inventory while offering credit keeps the operations working capital intensive in nature.
Cyclical and competitive nature of steel industry
The steel long products industry is intensely competitive, with many organized and unorganized players. Its performance is linked to the cyclical nature of the steel industry and end-user industries such as real estate, infrastructure, and construction. However, this risk is mitigated by the booming infrastructure industry and the high demand, supported by government initiatives in the current fiscal year.
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