| Experienced management and long-track record of operations
Indo Group has been present in this industry for over 15 years and is supported by well experienced and qualified management personnel. Mr. Rajan Jadhav, promoter and CEO of the group, has a business experience of more than 3 decades. Long experience of the promoter has helped the group to have supportive strategies in place, which enabled the group to expand its product offering. Just from being a trader to the various departments of Maharashtra State Government, Indo Group also started supplying manufactured food items such as ready to cook food over the years. The group has been able to get new tenders, thus expanding its customer base for the partnership firms - Saroj Enterprise and Shiva Enterprise.
Acuité believes that experienced management would continue to help the group to generate healthy revenues while maintaining its profitability margins.
Improving operations backed by healthy orders.
The group’s revenue has grown at a compounded annual growth rate of ~23 percent over the past three years on account of healthy orders from Maharashtra government under various welfare schemes. (The group has to offer bank guarantee/deposits equivalent to 3per cent of orders. Typical tenure of bank guarantee/s is 1.5-2 years and are renewed if required). The group has reported revenue of Rs.1293.78 Cr. in FY23 registering a growth rate of 38 percent over FY22 revenue of Rs.968.32 Cr. and further registered revenue of Rs.2062.55 Cr. till December 31, 2023. Increase in revenue is majorly on account of healthy orders. However, EBITDA margin has marginally declined yet healthy at 20.38 percent in FY23 against 22.83 percent of FY22. Acuite believes that operations of the group will improve over the medium term on account of healthy order book.
Healthy financial risk profile:
Financial risk profile of the group is healthy marked by comfortable net worth, capital structure and debt protection metrics. Group’s net worth improve to Rs. 552.08 Cr. as on March 31, 2023 from Rs. 445.20 Cr. as on March 31, 2022 despite the withdrawal of capital worth Rs.113 Cr. owing to the healthy profits registered by the group in FY23. Indo allied group’s capital structure is comfortable marked with healthy gearing and total outside liabilities to total net worth (TOL/TNW) of 0.22 times and 0.69 times respectively as on March 31, 2023 as against 0.17 times and 0.51 times as on March 31, 2022. The coverage indicators were healthy with DSCR of 36.91 times as on March 31st 2023 as against 57.61 times as on March 31st 2022. Interest coverage stood at 48.08 times as on March 31st 2023 as against 71.56 times as on March 31st 2022. Debt to EBITDA is continued to remain healthy at 0.44 times during FY23 from 0.31 times during previous year. Acuite believes that the financial risk profile of the company will remain comfortable for FY24 as well on account of healthy net worth position.
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| Moderate intensive working capital operations:
Woking capital operations of the group are moderately intensive marked by GCA days of 196 days for FY23 as against 209 days in FY22. The high GCA days are majorly on account of elongated debtor days in FY23. The group undertakes government welfare order where the payment is usually delayed resulting in elongated debtor days at 138 days for FY23. The creditor days of the group stood at 75 days for FY23 for FY23. The average utilization of the working capital limits of the group remained on the lower side of ~13 percent for past 12 months ending November 2023. Acuité believes the group's ability of maintaining its working capital management will remain key credit monitor able.
Susceptibility to fluctuation in food inflation and high client concentration
The group’s outstanding order book also includes large amount of orders for supply of food items which exposes the profitability of the group to fluctuation in food inflation. Any sharp rise in the overall food inflation would hurt the company's profitability and in turn, hurt overall operating performance of Indo Group. Being a tender-based business, there is no scope to pass on any sudden rise in food inflation. Further, the group has high client concentration as its entire business is directly or indirectly relied on the state government of Maharashtra. Thus, any adverse change in policy decision by the state government would have negative implications on Indo Group's entire business.
Tender-based business operations and risk of capital withdrawal from partnership firms
Business of IAPFPL is based on tender orders floated by departments of the State of Maharashtra. Therefore, the group's revenue is directly linked to the successful bidding of orders amidst high competitive intensity. High competitive intensity also impacts the pricing power of players. Further, Saroj Enterprise and Shiva Enterprise being partnership firms, there is a risk of capital withdrawal.
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