| >Experienced management and established track record of operations with reputed clientele
The Mumbai-based Oceanic Group incorporated by Mr. Manoj Khetan and family. The promoters possess over three decades of experience in the trading business. The extensive experience of the promoters has helped the group to established strong ties with its suppliers and customers. The group caters to renowned cement manufacturing companies, including Ultratech Cement Ltd., Dalmia Cement Ltd., JK Cement Ltd., Ramco Cement Ltd., amongst others. The extensive experience of promoters is reflected through the improvement is the revenue of the group at Rs.1017.85 crore in FY2023 as against Rs. 982.48 crore in FY2022. The group in H1FY2024 has already recorded sale of Rs.537 Cr and is estimated to close the year in the range of Rs. 1100-1200 Cr while maintaining its profitability margins. The operating profitability improved and stood at 3.14 percent in FY2023 as against 2.96 percent in FY2022. The PAT margins registered a slight decline as it stood at 1.73 percent in FY2023 as against 1.86 percent in FY2022 primarily driven by increase in interest costs.
Acuité believes that the group will continue to benefit from its experienced management and established relationships with both customers as well as suppliers in the medium term.
> Moderate financial risk profile
The financial risk profile of the group is moderate marked by modest net-worth, moderate gearing and comfortable debt protection metrics. The net-worth of the group stood at Rs.56.97 Cr as on March 31, 2023 as against Rs.46.01 Cr as on March 31, 2022. The overall gearing rose to 1.70 times as on March 31, 2023 from 0.78 times as on March 31, 2022. The surge in gearing levels is primarily on account of higher utilisation of working capital limits as on year end. The company primarily avails only working capital limits. The total debt stood at Rs. 96.95 Cr as on March 31, 2023 out of which Rs.0.07 Cr was unsecured loan from promoters and related parties and balance Rs. 96.95 Cr constituted short term borrowings from banks. The debt protection metrics marked by interest coverage ratio and debt service coverage ratio though declined, stood comfortable at 5.95 times and 4.37 times respectively in Fy2023 as against 15.47 times and 10.93 times respectively in last year. The TOL/TNW stood at 2.66 times as on March 31, 2023 as against 2.80 times as on March 31, 2022. The Debt to EBITDA surged to 3.02 times in FY2023 as against 1.23 times in last year.
Acuite believes the group's financial risk profile will continue to remain moderate in absence of any major debt-funded capex plan over the near to medium term.
> Efficient working capital management
The working capital cycle of the group is efficient marked by gross current asset days of 68 days in Fy2023 as against 61 days last year. The GCA days are primarily driven by debtor and inventory days which stood at 33 days and 24 days respectively as against 24 days each last year. The company generally receives 90% of its payment within 7 days of loading material on transport and balance 10 percent of the order value is received with 30 days of the dispatch. The company largely makes advance payments to its suppliers to get better prices on its purchases, however, due to long standing relationships with some of its suppliers, the company can avail a week long credit period with a select few incase required. The average utilisation of the fund based facilities of the group for the six months ended December, 2023 was ~49%.
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| >Vulnerability of profitability owing to volatility in cement prices
The profitability margins of the group are susceptible to volatility in gypsum and clinker prices in the international market as the group imports 100 percent of its traded goods from Middle Eastern countries. Significant changes in prices of gypsum and clinkers impact the margins of the group.
Acuité believes that profitability of the group will remain susceptible to volatility in gypsum and clinker prices in the near to medium term.
>Susceptibility to cyclicality nature of industry and competitive nature of industry
The group engaged in trading business of gypsum, clinker and laterite to the top cement manufacturers of the country. The cement consumption is majorly dependent upon the economic activities taking place in and around the country. The end user industry being infrastructure and real state, any significant slowdown in these industries will impact the demand of cement and will impact the revenues of the group. Further, the firm competes with various players in the organized and unorganized segments in the gypsum trading industry, thus limiting the pricing power.
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