Established track record in the machine tools industry and its long-term association with the clientele
The company’s long-standing presence, spanning nearly four decades, in the machine tools segment, has helped it develop strong expertise in design and manufacturing capabilities, enabling it to provide customized machines to customers. Further, the four-decade-long experience of the promoters in the Machines Tools industry has helped build healthy relationships with customers (automotive original equipment manufacturers) and suppliers, and a diversified distribution network which helps them with getting repeat orders to an extent. The company ranks in the top 5 CNC Machine Manufacturers in India. Acuité believes that the promoter’s experience, understanding of the market dynamics and established relationships with suppliers and customers will continue to support the business profile over the medium term.

Healthy financial risk profile
The company’s financial risk profile is healthy, marked by healthy net worth, low gearing and moderate debt protection metrics. The net worth of the company stood at Rs.195.44 Cr. and Rs.158.67 Cr. as on March 31, 2024, and 2023 respectively. The improvement in net worth is due to the accretion of reserves and equity infusion. Gearing of the company stood at 0.60 times as on March 31, 2024, against 0.56 times as on March 31, 2023. Debt protection metrics – Interest coverage ratio and debt service coverage ratio stood at 3.66 times and 1.86 times as on March 31, 2024, respectively, as against 3.20 times and 1.70 times as on March 31, 2023, respectively.  TOL/TNW (Total outside liabilities/Total net worth) stood at 1.00 times and 1.06 times as on March 31, 2024, and 2023 respectively. The debt to EBITDA of the company stood at 2.81 times as on March 31, 2024, as against 2.57 times as on March 31, 2023. Acuité believes that the financial risk profile will remain healthy in the absence of any major debt-funded capital expenditure plan in the near term.

­Working capital intensive operations
LML’s working capital operations are intensive, marked by high gross current Asset (GCA) at 223 days in FY2024, although improved from 254 days in FY2023. The GCA days are impacted mainly on account of high inventory days. The inventory levels of the company have been historically high owing to the lengthy order execution cycle. As these are capital goods, a large part of the inventory remains in the work-in- progress stage. Inventory days stood at 170 days in FY2024 as against 194 days in FY2023. Debtor days stood moderate at 51 days in FY2024 as against 53 days in FY2023. Subsequently, the payable period stood at 83 days in FY 2024 as against 83 days in FY2023. Further, the reliance on bank limits utilization stood at ~89 percent for the fund-based limits and 49 percent for the non-fund-based limits for the past seven months ending in January 2025. Acuité believes that the working capital operations of the company will remain intensive, as evident from its high inventory levels.

Improvement in operating performance in FY2024, albeilt moderation in 9MFY2025
The company witnessed an improvement in its operating revenue marked by y-o-y growth of 22.15 percent in FY 2024, which stood at Rs. 293.54 Cr. in FY 2024 as against Rs. 240.30 Cr. in FY 2023. The improvement in revenues is on account of the increase in utilization levels due to higher order flow and demand revival in the end-user sectors (primarily auto), procurement of CNC machines by customers for productivity and technology improvement initiatives, and favorable industry outlook. The company has an unexecuted order book position of Rs.80.25 Cr. as on January 2025. However, in 9M FY2025, the company’s operating revenue moderated to Rs. 189.63 Cr. as against Rs. 213.20 Cr. in 9M FY2024. The moderation is due to its inclusion on the OFAC sanctions list of the United States Department of Treasury. Further, Acuite learns from the management that it has taken steps to resolve the issue, and expects a favorable outcome in the near term. Going ahead, Acuite will continue to monitor the impact of the sanction on the overall financial and business risk profile of the company.

Intense competition in industry
LML continues to face stiff competition from domestic players in the standardized machinery segment and from imports in the case of high value-added specialized and customized products, which limits its pricing flexibility and margins to an extent. Further, the company’s margins remain susceptible to fluctuations in raw material prices as its orders are of a fixed price in nature. Its major raw materials include steel and steel components. Furthermore, the revenue profile is also concentrated on the auto segment; the auto industry has been facing headwinds in the recent fiscal and, thereby impacting demand for LML’s products and its profitability. However, going forward, consolidation in the industry and LML’s efforts to diversify its sectoral space are likely to support its revenues.