| Moderate scale of operations
The revenue of the company has increased to Rs. 93.01 Cr. as on March 31, 2025, as compared to Rs. Rs. 84.84 Cr. as on March 31, 2024. The company has already achieved Rs 214.04 Cr. in 9MFY26 out of which Rs.152.67 Cr. was contributed by trading of Non-Torrefied Biomass pellets and pulverized cereal straw operations. Further, the profitability margin improved moderately to 11.74% in FY2025 from 6.56% in FY2024, primarily driven by lower raw material costs. Additionally, the PAT margin stood at 11.22% in FY2025 compared to 9.67% in FY2024. Acuité believes that the company’s profitability margins may moderate following the inclusion of the new trading segment; however, they are expected to remain healthy over the medium term.
Healthy financial risk profile
The company’s financial risk profile is marked by increasing net worth, comfortable gearing and healthy debt protection metrics. The tangible net worth of the company stood at Rs.76.80 Cr. as on March 31, 2025 from Rs. 66.36 Cr. as on March 31, 2024 due to accretion of reserves. Acuité notes that the unsecured loans (USL) of Rs.19.63 crore outstanding as on March 31, 2025 are no longer treated as quasi-equity, as the tenure of the bank loans has been completed and the same are not subordinated to bank borrowings anymore. The gearing of the company stood below unity at 0.43 times as on March 31, 2025. The Total Outside Liabilities/Tangible Net Worth (TOL/TNW) stood at 0.64 times as on March 31, 2025. The debt protection metrics of the company is marked by Interest Coverage Ratio at 15.24 times as on March 31, 2025 and Debt Service Coverage Ratio at 5.92 times as on March 31, 2025. The Net Cash Accruals/Total Debt (NCA/TD) stood at 0.37 times as on March 31, 2025. Acuité believes that the company’s financial risk profile will remain healthy over the medium term, supported by steady net worth, a comfortable capital structure, and the absence of any major debt-funded capex plans.
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| Working capital intensive nature of operation
The working capital management of the company is intensive marked by high Gross Current Assets (GCA) of 289 days in 31st March 2025 as compared to 281 days in 31st March 2024. The GCA days is high primarily on account of high receivables and emanates from the other current assets including loans given to body corporates. The debtors stood at 113 days in FY2025 compared to 141 days in FY2024. However, debtor levels are expected to remain elevated going forward due to delays in receipt of payments from customers. While the contractual payment terms stipulate a credit period of 90 days, management clarified that this is a standard clause, and in practice, payments are often delayed as the supplied products are subject to multiple quality checks prior to clearance and release of funds and as a result the same will be monitorable. The inventory holding stood at 25 days as on 31st March 2025 as compared to 28 days in 31st March 2024. Creditors stood at 16 days as on March 31, 2025. Acuité believes that the working capital operations of the company will remain at similar levels over the medium term on account of nature of business and high receivable days.
Exposure to Trading-Led Business Model Risks and customer concentration risk
RREL is entering into a trading-driven business model, which entails thin operating margins, commodity price volatility, competition from organized and unorganized players, and exposure to supply-side risks related to raw material availability and pricing, thereby making profitability and scalability sensitive to market fluctuations. The customer concentration risk also poses a significant risk to revenue and continuance of the business, as the company has minimal bargaining power against Adani Power Ltd and its subsidiary and any change in buying pattern or elongated receivables from its key customer may lead to disruption in operating performance.
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