­Acuite has considered the consolidated business and financial risk profile of Lamina Foundries Limited (LFL), Lamina Suspension Products Limited (LSPL) and Lamina International (LI) together referred as ‘Lamina Group’(LG). The consolidation is mainly on account of operational linkages and common management.

­Extensive experience of management and established track record of operations
LG commenced operations from 1976. The group is promoted by its directors, Mr. Nitte Vinaya Hegde, Mr. Guruprasad Adyanthaya and Mr. Tonse Ramesh Shenoy who possess experience of more than four decades in casting industry. The extensive experience has enabled the company forge healthy relationships with customers and suppliers and has helped in getting recurring orders from its customers. The same can be reflected in its customer profile which includes names like Tata Motors, Ashok Leyland, Mahindra & Mahindra etc. which has helped them in developing the presence in domestic as well as international markets. Acuité believes that the extensive experience and association with reputed clientele will benefit the group to establish a strong market position.

Moderate financial risk profile
Lamina Group has a moderate financial risk profile marked by the tangible net worth of the group stood at Rs. 47.57 crore as on March 31, 2022(incl quasi equity of Rs.35.91 crore), as against Rs. 46.10 crore as on March 31, 2021(incl quasi equity of Rs. 36.98 crore). The group’s gearing stood at 1.26 times as on March 31, 2022, as against 1.28 times in the March 31, 2021. The total debt of Rs.59.91 crore as on March 31, 2022, consists of long-term borrowings of Rs.6.49 crore and short-term debt obligations of Rs.28.18 crore. The Group has undertaken a capital expenditure of Rs.14.50 crore in FY23 in Lamina Foundries Limited, for which a term loan of Rs.9 crore is availed, and the rest will be funded through internal accruals. The capex is expected to be completed by June 2023. The interest coverage ratio stood at 1.63 times in FY2022 as against 1.68 times in the previous year 2021. The DSCR stood at 1.16 times in FY2022 as against 1.20 times in FY2021. Acuité believes that the financial risk profile of the Group is likely to remain moderate in the medium term.

­Intensive nature of working capital operations
The operations of Lamina Group are working capital intensive reflected by Gross Current Assets (GCA) of 219 days as on March 31, 2022, as against 300 days as on March 31, 2021. The inventory holding days stood at 134 days as on March 31, 2022, as against 176 days as on March 31, 2021. The average inventory holding period of the group is around 120-140 days. The inventory majorly consists of raw materials and work in progress. The debtor days stood at 80 days as on March 31, 2022, as against 104 days as on March 31, 2021. Average credit period allowed to the customers are around 90 days. The creditors days stood at 102 days as on March 31, 2022, as against 149 days as on March 31, 2021. Average creditor period received from the suppliers is around 90 days. Working capital requirement is funded through bank lines, the average utilisation of bank facilities is 68.95 percent for last 6 months ended as on March 2023. Acuité expects any further elongation in the group's working capital cycle will be a key rating sensitivity factor.

Cyclical nature of the industry
The Group performance remains vulnerable to cyclicality in the steel sector as steel being a key raw material in the manufacturing of auto brake drum. Also, demand for steel & other nonferrous metals depends on the performance of the end user segments like automobile, construction and real estate. Indian steel sector is highly competitive due to the presence of a large number of players. The operating margin of the group is exposed to fluctuations in the prices of raw materials (coal and iron ore) as well as realization from finished goods.