| Established track record in the farm equipment sector
Incorporated in 2005, KKL has an established track record of more than a decade supported by experienced management team. The product portfolio of the company includes more than 300 different models to serve the farmers’ needs in 14+ product segments like soil preparation, plantation, crop management, irrigation and harvesting, etc. Further, the wide product portfolio is aided by a well-entrenched pan India dealer network, encompassing ~2800 dealers and 15 regional offices across the country. The company also participates in state government subsidy schemes which accounts for ~10% of the revenues.
Therefore, the company’s long-standing presence, diversified product profile and deep penetration into the markets across the geographies has strengthened the business profile of the company.
Improving operating performance
The company recorded an operating revenue of Rs. 261.55 Cr. in FY2025 (Prov.), registering ~19 percent growth from Rs. 218.91 Cr. in FY2024 on account of improved agricultural demand. The EBITDA margins also improved to 11.45 percent in FY2025 (Prov.) as against 10.90 percent in FY2024 owing to reduced input costs and efficiency of operations. Further, the company imports majority of its traded goods from China and Vietnam to maintain the quality and affordability.
Going forward, Acuite expects the continued demand of efficient, innovative and affordable agricultural equipment to drive the growth in operating performance of the company.
Healthy Financial Risk Profile
The financial risk profile of is healthy, supported by healthy networth, low gearing and comfortable debt protection indicators. The networth improved to Rs. 121.78 Cr. on March 31, 2025 (Prov.) as against Rs. 105.77 Cr. on March 31, 2024. Post the scheduled long term debt repayment in FY24, the company's debt profile includes working capital borrowings only, hence, the gearing has improved from 0.19 times in FY2024 to 0.04 times in FY2025 (Prov.). The TOL/TNW levels also stood comfortable at 0.53 times on March 31, 2025 (Prov.) (0.63 times on March 31, 2024). Further, the coverage indicators of the company stood adequate, with interest coverage ratio at 11.24 times (7.77 times in FY2024) and debt service coverage ratio at 9.34 times (1.58 times in FY2024) in FY2025 (Prov.)
The financial risk profile of the company is expected to remain healthy, in the absence of any debt funded capex plans.
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| Intensive working capital operations
The operations of the company are working capital intensive as evident from the high gross current assets (GCA) days of 173 days as on March 31, 2025 (Prov.) (177 days on March 31, 2024). These are mainly driven by high inventory holding of 136 days in FY2025 (138 days in FY2024) as trading nature requires to maintain adequate stock. Majority of the sales through dealers is on advance basis, except for government subsidy sales which keeps the debtors’ days moderate in the range of ~30 days. Moreover, for sale to government departments, the company takes security deposits from the dealers and holds commissions payments which is released on receipt of the entire proceeds.
Susceptibility to cyclicality in agricultural demand and raw material fluctuations
The agricultural machinery business is highly sensitive to cyclical factors like monsoon quality, crop prices, and government subsidies. In years of poor harvests or weak farmer incomes, demand for machinery sharply declines impacting the revenue and profitability. Further, the prices of major raw materials like steel and plastic are also vulnerable to various domestic and global phenomena’s and inability of the company to completely pass on the uptrends in these affects the profitability, as affected in FY2023 when margins reduced to ~6.85 percent.
Forex exposure risk
The company imports almost all of its raw materials and finished goods and has no hedging policy in place. Therefore, any unforeseen fluctuations in forex can impact the profitability of the company. To mitigate this risk, the company has also started in-house manufacturing, however, the contribution from the same is only ~10-20 percent. As a result, it's still largely exposed to external risks like currency fluctuation and supply issues.
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