| Extensive experience in management and an established track record of operations
LG commenced operations in 1976. The group is promoted by its directors, Mr. Nitte Vinaya Hegde, Mr. Guruprasad Adyanthaya, and Mr. Tonse Ramesh Shenoy, who possess experience spanning more than four decades in the casting industry. The extensive experience has enabled the company to forge healthy relationships with customers and suppliers and has helped it get recurring orders from its customers. The same can be seen in its customer profile, which includes names like Tata Motors, Ashok Leyland, Mahindra & Mahindra, etc., which has helped them develop their presence in domestic as well as international markets. Acuité believes that its extensive experience and association with reputed clients will help the group establish a strong market position.
Moderate financial risk profile
Lamina Group has a moderate financial risk profile, marked by the fact that the tangible net worth of the group stood at Rs. 47.57 crores as of March 31, 2022 (incl. quasi equity of Rs. 35.91 crore), as against Rs. 46.10 crores as of March 31, 2021 (incl. quasi equity of Rs. 36.98 crore). The group’s gearing stood at 1.26 times as of March 31, 2022, as against 1.28 times on March 31, 2021. The total debt of Rs. 59.91 crore as of 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 is undertaking a capital expenditure of Rs. 14.50 crore in FY23 at 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 FY 2022 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.
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| Intensive nature of working capital operations
The operations of Lamina Group are working capital intensive, as reflected by gross current assets (GCA) of 219 days as of March 31, 2022, as against 300 days as of March 31, 2021. The inventory holding days stood at 134 days as of March 31, 2022, as against 176 days as of March 31, 2021. The average inventory holding period for the group is around 120–140 days. The inventory mainly consists of raw materials and work in progress. The debtor days stood at 80 days as of March 31, 2022, as against 104 days as of March 31, 2021. The average credit period allowed to customers is around 90 days. The creditors days stood at 102 days as of March 31, 2022, as against 149 days as of March 31, 2021. The average credit period received from the suppliers is around 90 days. Working capital requirements are funded through bank lines; the average utilisation of bank facilities is 68.95 percent for the last 6 months ended as of March 2023. Acuité expects any further elongation in the group's working capital cycle to be a key rating sensitivity factor.
Cyclical nature of the industry
The group's performance remains vulnerable to cyclicality in the steel sector as steel is a key raw material in the manufacturing of auto brake drums. Also, demand for steel and other nonferrous metals depends on the performance of end-user segments like automobiles, construction, and real estate. The 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 realisation from finished goods.
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