­Experienced management and established market position
The promoters of SGPL, Mr. Kailash Chandra Anand, Mr. Triloknath Anand, Mr. Puneet Anand and Mr. Paras Juny Anand are seasoned players in the said industry and with an operational track record of more than four decades, company has been able to maintain strong relations with its customers and suppliers. The company also manufactures leather balls, bats, protective equipment, cricket accessories, shoes and apparels under its own "SG" brand, thereby maintaining a diversified product portfolio. Acuité believes that the promoters' extensive experience and healthy relations with its customers and suppliers will continue to benefit SGPL over the medium term.

Steady scale of operations and strong relationship with customers
In FY24 revenues stood at Rs.312.18 Cr. as compared to Rs.270.99 Cr. in FY23, the sales are estimated to have further increased in FY25 to ~Rs.342 Cr. Though EBITDA margin improved in FY24 to 10.30% it has reduced in FY25(estimated) to 9.51% due to higher employee cost and SG&A(selling,general and administrative) expenses. Major expenses were for marketing and branding as the company had roped in prominent cricketers of the Indian team as brand ambassadors (expense ~Rs.30-32 Cr. in FY25). PAT margins had fallen in FY24 owing to higher tax outflow arising from additional taxes paid for buyback of shares . SGPL has forayed into retail business  through its second arm - SG Retail Private Limited.
SGPL has a strong customer base which includes Kookaburra Sports, JRT Crampton, Board of Control for Cricket India (BCCI) and Unicorn Products Limited, to name a few. It has established relationships with these customers since four decades, which helps it to benefit from repeat orders. Acuité believes that SGPL will sustain the business risk profile on account of its established market presence in the industry.

Healthy Financial Risk Profile
The tangible net worth of the company stood at Rs.85.38 Cr. as on March 31, 2024, as compared to Rs.91.29 Cr. as on March 31, 2023, due to moderate accretion to reserves , with payment of dividends and equity buyback (shares worth ~Rs.3.37crs). The buyback was executed through an equitable combination of investment liquidation and accruals. Acuite has treated unsecured loans from promoters amounting to Rs.8.44 Cr. as on 31st March,2024 (Rs.6.15 Cr. in FY23), as a part of tangible net worth as they are subordinated to bank loans. Further, the gearing of the company stood modest at 0.51 times as on 31 March, 2024. The Total Outside Liabilities/Tangible Net Worth (TOL/TNW) stood at 1.31times as on March 31, 2024 as compared to 1.06 times as on March 31, 2023. The debt protection metrices of the company although declined, remain comfortable marked by Interest coverage ratio (ICR) of 8.45 times and debt service coverage ratio (DSCR) of 4.80 times for FY2024. The net cash accruals to total debt (NCA/TD) stood healthy at 0.40 times in FY2024. Acuite believes that going forward, the financial risk profile of the company will remain healthy backed by steady accruals and absence of debt funded capex plans.

­Moderate working capital cycle
SGPL has a moderate working capital cycle marked by Gross Current Assets (GCA) of 145 days in FY24 as compared to 139 days in FY23. Further, SGPL’s working capital cycle is estimated to have stretched at the back of inventory and debtor buildup in FY25. The inventory days are estimated to be 76 days in FY25 as compared to 58 days in FY24(mostly finished goods), as compared to 69 days in FY23 owing to expectations of higher sales . While debtor days are estimated to be at 93 days in FY25 as compared to 70 days in FY24 and 61 days in FY23,due to higher year end sales. The creditor days stood at around 50 days in FY24 which is estimated to have increased to 75 days in FY25. Going forward, Acuite believes that the working capital cycle is likely to stretch due to higher inventory build-up to meet increased demand, in the medium term.

Highly competitive and fragmented industry
The sports goods industry is highly competitive and fragmented. Acuité believes that despite a highly competitive market, SGPL will be able to maintain its presence in the domestic market, mainly on account of its long presence in cricket gear manufacturing and recognition by the technical committee of Board of Control for Cricket India (BCCI).