­­Experienced Management
SBAPL is promoted and managed by Mr. Sunil Aggarwal, who has around two decades of experience in the aluminium industry and has been associated with the company since its inception. This has helped the company establish a strong market position and maintain long-standing relationships with its customers. Acuité believes that the company will continue to derive benefit from its experienced management and established market position over the medium term.

Augmentation in the business risk profile
SBAPL’s operations improved, which is apparent from the growth in revenue from operations by 19% in FY2023 (prov.) to 741.43 crore as against Rs. 625.53 crore for FY2022. (improved by 67 percent over the last three years, from FY 21 to FY 23). Revenue increased due to the quantity sold, which is evident from the table given below. The operating profit margin of the company remains stable (minuscule moderation of 4 bps in FY 23). The operating profit margin of the company stood at 4.03% in FY2023 (prov.) as against 4.07% in FY2022. Furthermore, the net profit margin of the company improved by 33 bps and stood at 1.11 percent in FY2023 (prov.) as against 0.78 percent in FY202. The ROCE of the group stood at 14.53 times in FY2023 (Prov.).

Financial Risk Profile: Moderate
SBPAL has a moderate financial risk profile, marked by moderate net worth and moderate debt protection metrics. SBAPL’s net worth stood at Rs. 73.16 Cr (Prov.) as on 31st March 2023 as against Rs. 64.77 Cr as on 31st March 2022. The company follows a moderate leverage policy. Gearing levels (debt-to-equity) moderated by 13 bps and stood at 1.88 times as of March 31, 2023 (prov.) as against 1.75 times in FY 2022. The moderation in the gearing ratio in FY 23 is on account of additional GECL loans taken during FY 23 despite profit accretions and repayment of debt. The total debt outstanding of the company is Rs. 137.61 crore as of March 31, 2023 (prov.), which consists of long-term bank borrowings of Rs. 35.88 crore, a short-term working capital limit of Rs. 99.66 crore, and current maturities of long-term debt of Rs. 2.08 crore.

Further, the interest coverage ratio stood at 1.74 times for FY2023 (prov.) as against 1.49 times in FY2022. The debt service coverage ratio improved by 25 basis points and stood moderately at 1.52 times for FY2023 (prov.) as against 1.27 times in FY2022. Improvement in gearing due to an increase in profits. Total outside liabilities to total net worth (TOL/TNW) stood at 2.04 times as of FY2023 (prov.) compared to 1.95 times as of FY2022. However, debt-EBITA stood at 4.49 times as of March 31st, 2023 (prov.) as against 4.31 times as of March 31st, 2022. The net cash accruals to total debt stood at 0.08 times as of FY2023 (prov.) and 0.06 times for FY2022. The financial risk profile of the company is expected to remain comfortable in the near term as the company does not have any new capex plans in the short term.

Locational Advantage: Integrated Manufacturing Unit with Reputable Customers
For a supplier of metal in liquid form, proximity to the customer's manufacturing unit is one of the keys to success. Cost reduction is one of the major focus areas for any type of organisation. Automobile component manufacturers prefer to buy metal in liquid form rather than solid form to save on re-melting, burning losses, and inventory carrying costs. Therefore, these manufacturers give first preference to aluminium alloy manufacturers with manufacturing facilities nearest to their production plants. SBAPL has started manufacturing at its Dharuhera (Haryana) plant, which was built for producing aluminium alloy in molten form. Thereafter, SBAPL set up other plants to remain the first choice of the customer. Rockman Industries Limited, Rico Auto Industries Limited, Maruti Udyog Limited, Minda Industries Ltd., Sundaram-Clayton Limited, and Alicon Castalloys Limited are the major customers getting supplies from SBAPL. Proximity to customers and approval from big automobile players provide a shield to SBAPL while ensuring future business and also pose an entry barrier for new entrants as customers avail cost benefits due to SBAPL's strategically located plant.

Working capital operations
The group has moderate working capital requirements, as evident from gross current assets (GCA) of 91 days in FY2023 (prov.) as compared to 92 days in FY2021. Debtor days improved by 5 days and stood at 36 days in FY2023 (41 days in FY2022). Inventory days stood at 50 days in FY2023 (prov.) as against 45 days in FY2022. The working capital limits were utilised at 85 percent during the last twelve months ended March 23. The current ratio of the group stood at 1.79 times as of March 31, 2023 (prov.).