Experience management and established track record of operations
The company started its operations in the year 2007 and has a long track record of operations. Over the years, it has been able to successfully establish itself as a leading woven bag and fabric manufacturer with the help of experienced management. Further, the company benefits from the long-term experience of the promoters in this industry including key promoters who are Mr. Deenanath Khandelwal and Mr. Kuldeep Khandelwal and have more than three decades of experience in this field and oversee the overall operations of the company. They are supported by Mr Shreekant Khandelwal, President and a team of professionals having average experience of more than 2 decades. Acuite believes that the long track record of business has enabled in developing established customer and supplier network.
Improvement in the scale of operations
The company witnessed a revenue of Rs.382.03 Crore in FY24 against Rs.309.44 Crore in FY23. The improvement has been shown in FY24 against FY23 due to shift in focus from government orders to private orders, which are recurring in nature. In addition, the company has made losses in FY23 on an account of state government department cancelling the order and the company had to dispose these at very low prices. Further, the EBITDA margins of the company stood at 2.89% in FY24 against (0.72%) in FY23 and the PAT margins of the company stood at 0.37% in FY24 against (3.08%) in FY23. In addition, the company has an order book of Rs.292 Crore which are expected to be executed by the end of the current financial year. Going forward, the company is expected to showcase an increase in the scale of operations along with stable margins.
Moderate financial Risk Profile
The financial risk profile of the company is moderate marked by net-worth of Rs.62.09 Crore as on 31st March 2024 against Rs.60.79 Crore as on 31st March 2023. The increase in the net-worth has shown on an account of accumulation of profits into reserves. Further, the total debt of the company stood at Rs.62.79 Crore as on 31st March 2024 against Rs.61.04 Crore as on 31st March 2023 and the capital structure marked by moderate gearing which stood at 1.01 times as on 31st March 2024 against 1.00 times as on 31st March 2023. The coverage indicators of the company are average reflected by interest coverage ratio and debt service coverage ratio which stood at 2.09 times and 0.85 times respectively as on 31st March 2024 against (0.31)times and 0.21 times respectively as on 31st March 2023. Despite lower DSCR in the current financial year, the company was able to make pre-payments in last two years, backed by the capital subsidy received of Rs.4.86 Crore and positive cash flow from operations of Rs.31.00 Crore approximately in FY23. The TOL/TNW ratio of the company stood at 1.43 times as on 31st March 2024 against 1.12 times as on 31st March 2023. Going forward, Acuite believes that the financial risk profile of the company is likely to improve near to medium term in the absence of debt funded capex in near to medium term.
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Working Capital Intensive Operations
The working capital operations of the company is intensive marked by GCA days which stood at 111 days as on 31st March 2024 against 103 days as on 31st March 2023. The GCA days are higher on an account of debtor days which stood at 57 days as on 31st March 2024 against 53 days as on 31st March 2023. Further, the inventory days of the company stood at 38 days as on 31st March 2024 against 44 days as on 31st March 2023. On the other hand, the creditor days of the company stood at 27 days as on 31st March 2024 against 11 days as on 31st March 2023. Going forward, the working capital operations of the company is expected to improve in near to medium term.
Exposed to Volatility in the raw material prices fluctuations and foreign exchange fluctuations
The company faces several Weaknesses in the manufacturing of PP/HDPE woven sack fabric, bags, FMB, polymer compounds, colour masterbatch, and yarn, including a heavy dependency on fluctuating raw material prices, intense competition that pressures profit margins, and the need for constant technological upgrades to stay relevant. Additionally, stricter environmental regulations could increase operational costs, while supply chain vulnerabilities and labour shortages may disrupt production. Further, it is exposed to adverse fluctuations in foreign currency exchange rates. However, MPPL generally enters into forward contracts, which partially mitigate the forex risk.
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