Acuité has considered the consolidated business and financial risk profiles of SAPL and Som Autocast Private Limited, together known as Som Group (SG). The consolidation is owing to the common management and financial linkages between the entities.

Established clientele and track record along with experienced management
SAPL primarily caters to leading automotive original equipment manufacturers (OEMs) such as Bajaj Auto Limited, Honda 2W, Varroc Engineering, Greaves Cotton and Dell ‘Orto India, etc and has healthy relationships with customers and suppliers which will continue to support the business. The group receives steady flow of repeat orders from the established clients and are diversifying their customer base even further. With pricing quotation updates on every quarter, the company is able to pass on any fluctuation in raw material costs to its customers. The operations of the group are led by Mr. Anil Ramgopal Mali & Mr. Vishwanath Gopal Jalnapukar who possess more than three decades of experience in this industry.
Acuité believes that the group will benefit from the experience of the management in developing healthy relationships with its customers and suppliers.

Growing operations post capex
The group has successfully completed the capex plan in September 2023 for the addition of new suspension facility in Dahegoan, Aurangabad and has also enhanced the existing production capacity of die casting components. The company incurred capex of Rs 58 Cr. of which Rs 17 Cr. was towards expansion of existing capacity and Rs 41 Cr. towards development of new segment. This capex is expected to boost the revenue and profitability for the company in the near to medium term as evident from revenue of Rs. 189.71 Cr. till October’ 2024 as against FY2024 revenue of Rs 268.4 Cr. The company also marked significant improvement in margins from FY2024 wherein the operating margin stood at 10.23% and the PAT margin stood at 4.38% in H1FY2025. Also, SAPL is eligible to receive subsidy under the Package Scheme of Incentives (PSI) Subsidy, 2013 where they will be receiving 80% of the capex cost incurred over a span of 10 years from the Government of Maharashtra (GoM). Of this, the company has already received Rs 8.08 Cr. of subsidy in FY2024.

Moderate Working Capital Cycle
The working capital operations are moderate as reflected by Gross Current Assets (GCA) of 90 days as on March 31, 2024 as against 68 days as on March 31, 2023. The GCA days are driven by increase in inventory and debtor levels. The inventory holding days stood at 41 days for FY2024 as against 28 days for FY2023. The average inventory holding period of the group is around 30-45 days. Further, the group receives the production plan from the OEMs at the start of the year and hence can plan the production and supply of the auto parts accordingly. The debtor days stood at 31 days as on March 31, 2024, as against 29 days as on March 31, 2023. The average credit period allowed to the customers are around 30 days. The creditors days stood at 44 days as on March 31, 2024, as against 35 days as on March 31, 2023. The average creditor period received from the suppliers is around 30-45 days. The working capital requirement is funded through bank lines, the average utilisation of bank facilities remains high at ~93 percent for six months ended as of October’2024.
Acuité believes that the working capital operations of the group will be key monitorable in medium term.

Moderate Financial Risk Profile
The group’s financial risk profile is moderate marked by its moderate net worth, moderate gearing and debt protection measures. The tangible net worth of the group stood at Rs. 44.07 Cr. as on March 31, 2024, as against Rs. 42.29 Cr. as on March 31, 2023. The net worth includes industrial promotion subsidy of Rs.17.95 Cr. Owing to the capex incurred, the group’s gearing increased and stood at 2.07 times as on March 31, 2024, as against 1.67 times in the March 31, 2023. The total debt of Rs. 91.05 Cr. as on March 31, 2024, consists of long-term borrowings of Rs.39.27 Cr, unsecured loans of Rs. 2.17 Cr. and short-term debt obligations of Rs. 41.74 Cr. The group has done a capex of Rs.58 Cr. in FY23 and FY24 which was funded through the term loan of Rs.30 Cr. and the balance was funded through the net cash accruals. The interest coverage ratio stood at 1.99 times in FY2024 as against 3.95 times in FY2023. The DSCR stood at 1.06 times in FY2024 as against 1.09 times in FY2023.

Exposure to customer concentration risk
The company is exposed to client concentration risk, with the top three customers contributing to around 87% of total revenue in FY2024. Though the company has strong relationship with customers, as reflected in repeat orders, high customer concentration risk makes SAPL vulnerable to downturns in the business of large customers or any change in the clients' business plans. However, management is working towards reducing the customer concentration risk with steady addition of new customers as witnessed from reduction in contribution from the top client by around 5-10% in FY2024.