| Established t rack record of operations and experienced management
Mittal group was incorporated in the year 1907. The group has an established track record of operation of more than 10 decades in the Indian Market. The group is promoted by Mittal family led by Mr. Dinesh Chand Mittal. The promoters have an experience of more than four decades in the Copper and Copper Alloy Product Industry. The extensive experience of the promoters and established track record of operation has helped the group to maintain healthy relationship with its customers and suppliers. Revenue of the group has increased significantly in FY22 to Rs.994.27Cr from Rs.864 Cr in FY21. This is due to healthy orders from Indian government mint who is the major customer of the group. The Government releases tenders as per the requirement of coins. As this industry has limited players, probability of tender allotment is very high. Apart from these orders, the group received major portion of revenue through exports to china. The EBITDA margin and PAT margin improved slightly to 3.4 percent and 1.97 percent in FY22 from 2.52 percent and 1.48 percent in FY21. The margins are at lower side, however the group enjoys the benefit of limited number of players in the industry.
Moderate financial risk profile
The financial risk profile is healthy marked by strong net worth, low gearing and moderate debt protection metrics. The net worth stood at Rs.160.64Cr as on March 31, 2022 as against Rs.128.84Cr as on March 31, 2021. The group has followed conservative leverage policy. Gearing stood at 1.63 times as on March 31, 2022 as against 1.67 times as on March 31, 2021. The interest coverage ratio has improved to 4.12 times in FY22 from 3.60 times in FY21.However, NCA/TD has declined to 0.09 times in FY22 from 0.15 times in FY21. DSCR stood improved at 2.21 times in FY22. TOL/TNW stood at 1.72 times in FY22. Debt-EBITDA is high at 6.67times as on March 31, 2022.Acuite believes that financial risk profile of the group will improve in the medium term.
Reputed Clienteles:
The products of the group are extensively used for the coinage purpose. The group supplies the coin blanks majorly to the Indian and other Government Mint (export) for minting of currency coins. Besides this, the group also supplies the medals, copper billets and strips to other private entities. The other reputed clientele of the group includes name like the Indian Ordnance Factory, Royal Canadian Mint, Banco Central De Reserva Del Peru, Thai Treasury, Tata Steel and Bank of Baroda to name a few. The group has also successfully executed orders and supplied coin blanks to the government mints of countries like Argentina, Canada, France, etc. The group has moderately high customer concentration risk, As Ningo Rising Guangua import and export co. Ltd constitutes more than 50 percent of the revenue for FY22. Acuite believes that the group will benefit from the established client presence and presence of healthy order book of Rs.200Cr to be executed in FY23.
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| Declining Profitability Margins:
The profitability margins of the group have reduced when compared to pre covid levels. In FY20 the group has reported operational margin of 3.72 percent which was declined to 2.82 percent in FY22. This is mainly due to increased raw material prices. Return on capital employed has declined from 14.82 percent in FY20 to 9.12 percent in FY22. Debt - EBITDA is high at 6.63 times for FY22 compared to the pre covid level of 3,52 times during FY20. Acuite believes that the margins will remain at similar levels in the medium term on account of increased debt in FY22.
Working capital operation is intensive in nature
The working capital operation is intensive in nature marked by GCA days of 148 in FY22 as against 132 days. The inventory holding period has rose to 50 days as on March 31, 2022 from 48 days as on March 31, 2021. The debtor collection period stood at 56 days as on March 31, 2022 as against 43 days as on March 31, 2021. The group largely depends upon the working capital facilities for the operations. However, the utilization of working capital facilities stood at an average of 68 percent in the past 12 months ending September 2022. Acuité expects the working capital management to remain intensive over the medium term on account of high debtor collection and inventory period which is inherent in the aforementioned industry.
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