­Experienced management with an established track record of operations and a reputed clientele
PMIPL has an operational track record spanning more than four decades. The company was initially established as a proprietorship concern in 1978 by Dr. Champalal Desarda, who holds a doctorate in metallurgy. Further, the company was reconstituted as a private limited company in 1991 and is currently managed by his son, Mr. Shekhar Desarda (Chairman and MD), who possesses more than two decades of experience in the manufacturing of capital equipment, consumables, and spares for the pulp and paper industry. He is ably supported by a qualified team of senior management in managing the day-to-day operations of PMIPL. The extensive experience of the management has enabled PMIPL to establish a healthy relationship with its reputed clientele, like ITC Limited, JOEFL Paper Mills, West Coast Paper Mills, Astron Paper and Board Mill, JK Paper Limited, Tamil Nadu Newsprint and Papers Limited, and Century Paper & Board Mills Limited, amongst others. Acuité believes that PMIPL will continue to benefit from its experienced management, an established track record of operations and a reputed clientele.

Stable growth in operations:
PMIPL’s has registered revenue of Rs.311.52 Cr. in FY2024 (Prov.) posting a growth rate of ~6 percent against Rs.294.62 Cr. in FY2023 and Rs.258.82 Cr. in FY2022. The growth in the company’s revenue over the years is primarily driven by the company’s established presence of more than four decades in serving the entire pulp and paper industry across both domestic and exports market towards manufacturing wide range of machineries used for producing Kraft, Tissue & Writing paper. It also deals in manufacturing wide range of consumables & spares such as rotors, gear boxes, shaft sleeves amongst others. The company has established relationship with its reputed clienteles in the paper industry such as ITC limited, JOEFL Paper Mills, West Coast Paper Mills, Astron Paper and Board Mill, JK Paper Limited, Tamil Nadu Newsprint and Papers Limited, Emami, Century Paper & Board Mills Limited amongst others from whom they receive repetitive orders.

The operating profit margins also improved to 16.87 percent in FY2024 (Prov.) against 14.77 percent in FY2023 and 12.17 percent in FY2022 on account of reduced steel prices and focusing on operational efficiency. Net profit margin is also shown stable improvement with 11.30 percent in FY2024 (Prov.) against 9.65 percent in FY2023 and 9.42 percent in FY2022. Acuite expects, the operations of PMIPL will show stable improvement over the medium term on account of stable flow of orders. 

Healthy financial risk profile:
PMIPL’s financial risk profile is healthy marked by healthy networth, low gearing and healthy debt protection metrics. The networth of the company stood at Rs.196.25 Cr. as on March 31, 2024 (Prov.) compared to Rs.161.05 Cr. The improvement in networth is due to accretion of profits to the reserves. Despite the marginal increase in overall debt levels to Rs.34.06 Cr. as on March 31, 2024 (Prov.) from Rs.29.61 Cr. as on March 31, 2023, the gearing levels remained low at 0.17 times. Further, the total outside liabilities to tangible networth (TOL/TNW) also remained low at 0.90 times as on March 31, 2024 (Prov.) against 0.62 times as on March 31, 2023. The gearing of the company is expected to improve further and remain low over the medium term on account of absence of any debt funded capex plans. The debt protection metrics stood healthy with DSCR and ICR of 11.67 times and 21.43 times respectively as on March 31, 2024 (Prov.) Debt to EBITDA also remained healthy at 0.77 times as on March 31, 2024 (Prov.) against 0.60 times as on March 31, 2023. Acuite believes that the financial risk profile of the company will remain healthy over the medium term due to its conservative leverage policy.

Working capital intensive nature of operations:
PIMPL’s operations are working capital intensive in nature as reflected by the gross current assets (GCA) days of 240 days in FY2024 (Prov.) against 138 days in FY2023. The elongated GCA days is on account presence of large amount of advances to suppliers. The inventory and receivables cycle remained elongated at 62 days and 88 days respectively in FY2024 (Prov.) against 52 days and 68 days respectively in FY2023. However, the payable period has been stretched during the FY2024 (Prov.) to 161 days, resulting in minimal dependency on the fund based working capital limits. Acuite expects the operations of the company to remain working capital intensive on account of the presence of large amount of advances to suppliers and stretched receivable period.

Margins are susceptible to raw material prices and foreign exchange fluctuation risk.
Steel, being the major raw material utilised by PMIPL, forms a major component of the overall cost structure of the company. With steel prices being volatile in nature, the company faces cost escalation risk in the absence of adequate hedging mechanisms and a price escalation clause in its contracts. Further, exports contribute 35 percent of the revenue for PMIPL; this poses a foreign exchange fluctuation risk to PMIPL in the absence of adequate hedging mechanisms, making the operating income and profitability margins volatile.