| 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.
Healthy financial risk profile
Indo Group has moderate financial risk profile marked by strong net worth, healthy gearing and debt protection matrix. The tangible net worth of the group stood at Rs.509.77 crore as on 31 March, 2022 (provisional) as against Rs.275.35 crore as on 31 March, 2021. The gearing level of the group remained low at 0.18 times as on 31 March, 2022 (provisional) as against 0.24 times as on 31 March, 2021. The total debt outstanding of Rs.89.30 crore consists of working capital borrowings of Rs.86.92 crore, unsecured loan from promoters of Rs.1.05 crore and term loan of Rs.1.33 crore as on 31 March, 2022 (provisional). The coverage ratios of the group remained healthy with Interest Coverage Ratio (ICR) of 57.90 times for FY2022(provisional) against 22.46 times for FY2021. Also, the Debt Service Coverage Ratio (DSCR) stood at 51.82 times for FY2022(provisional) against 18.68 times for FY2021. The total outside liabilities to tangible net worth (TOL/TNW) of the group stood low at 0.38 times as on March 31, 2022 (provisional) against 0.88 times as on March 31, 2021. Further, Net Cash Accruals to Total Debt (NCA/TD) stood at 2.42 times for FY2022(provisional) as against 1.58 times for FY2021.
Acuité believes the financial risk profile of the group will remain healthy on account of healthy net cash accruals.
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| Working Capital Intensive Nature of operations
The operations of the group are working capital intensive nature of operations marked by high GCA days of 229 days for FY2022 (provisional) as against 275 days in FY2021. The high GCA days are majorly on account of high debtor days of 175 days for FY2022(provisional) compared against 199 days for FY2021. The average receivable time is 110 days due to lengthy approval process from government for realisation of bills. The inventory days are moderate at 34 days for FY2022(provisional) against 57 days for FY2021. The creditor days of the company stood at 48 days for FY2022 (provisional) as against 84 days for FY2021. The average utilization of the working capital limits of the group remained on the lower side of ~45.29 percent for FY2022.
Acuité believes the group's ability of maintaining its working capital management will remain key credit monitorable.
Susceptibility to fluctuation in food inflation and high client concentration
IAPFPL's profitability is susceptible 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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