| Extensive experience of management and established track record of operations
SPPL is based out of Maharashtra and was incorporated in 1998 reflecting its long track record of operations in the sector. The promoters of the company, are Mr. Shyamashish Subal Ghoshal, Mr. Bandana Ghoshal and Mr. Suryadipta Shyamashish Ghoshal have been working in the aforementioned industry for over more than two decades. The operations of the company are managed by its promoters who are ably supported by a qualified and well experienced senior management team. The experience of the promoters and long track record of operations in the sector has helped the company to maintain healthy and long term relationships with both its customers and suppliers. The key customers of the company include names such as Indian Navy, Bharat Heavy Electricals Limited etc. Acuité believes SPPL will continue to benefit over the medium term from its longstanding association with its key customers as well as suppliers.
Improvement in scale of operations
The company clocked an operating income of Rs.34.72 Crore in FY2024 as against Rs.28.40 Crore in FY2023. The EBITDA margins of the company increased and stood at 8.28% in FY2024 against 5.21% in FY2023. Likewise, the PAT margins of the company stood at 4.55% in FY2024 against 2.33% in FY2023. The increase in the revenue and margins is on an account of increase in the orders executed by the company. Further, the company has also enhanced its total production capacity in FY2024 to 900 ton and 1600 ton from 750 ton and 1500 ton for Heavy engineering and Shipbuilding respectively. This includes production by SPPL as well as through sub-contract basis. In addition, the stability in revenue is backed by an unexecuted healthy order book position to the tune of Rs.96.70 crores as on 31st December, 2024. The orders are primarily for manufacture of ship vessels and process equipment for diversified industries from reputed clientele including Indian Navy, Bharat Heavy Electricals Limited etc. Further, the company have achieved a revenue of approximately Rs.17.50 Crore as on 31st December, 2024 and is expecting to clock around Rs.40.00 Cr. along with better margins in FY2025 on an account of execution of the order book. Acuité believes that the company will continue to sustain its order book position and maintain its business risk profile over the medium term.
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| Average Financial risk profile
The financial risk profile of the company is average marked by net-worth of Rs.6.23 Crore as on 31st March 2024 against Rs.4.65 Crore as on 31st March 2023. The increase in the net-worth is on an account of accretion of profits into reserves. Further, the total debt of the company stood at Rs.6.79 Crore as on 31st March 2024 as against Rs.5.75 Crore as on 31st March 2023. The capital structure of the company is marked by gearing ratio of the company which stood at 1.09 times as on 31st March 2024 as against 1.24 times as on 31st March 2023. Further, the coverage indicators of the company improved reflected by interest coverage ratio and debt service coverage ratio of the company which stood at 3.79 times and 2.19 times respectively as on 31st March 2024 as against 2.19 times and 1.26 times respectively as on 31st March 2023. The TOL/TNW ratio of the company stood at 3.29 times as on 31st March 2024 as against 5.85 times as on 31st March 2023 and DEBT-EBITDA of the company stood at 2.23 times as on 31st March 2024 as against 3.39 times as on 31st March 2023. Acuité believes that going forward the financial risk profile of the company may moderate in near to medium term on an account of debt-funded capex plan for development of shipyard with an estimated project cost of Rs.8.00 Cr., despite same it is expected to remain in comfortable range.
Intensive Working capital operations
The working capital operations of the company are improved yet intensive marked by GCA days which stood at 231 days as on 31st March 2024 against 348 days as on 31st March 2023. The inventory and debtor days of the company stood at 164 days and 21 days respectively as on 31st March 2024 as against 266 days and 56 days respectively as on 31st March 2023. The company is following payment realization method wherein they have stopped extending credit period to customers, which majorly lead to improvement in the debtor collection efficiency as compared to previous year. On the other hand, the creditor days of the company stood at 54 days as on 31st March 2024 as against 64 days as on 31st March 2023. In addition, the average fund based bank limit utilization of the company stood at 75.49% approximately in last six months ended December 2024. Acuite believes that working capital operations of the company are expected to remain in similar range due to nature of operations.
Exposure to risks related to cyclicality of the industry and customer concentration
The ship repairs and ship building orders depend on the demand sentiments in the economy. Further, the operations of the company are tender based in nature and highly dependent on the tenders floated by the government shipping companies. Hence, the operating performance of the company is susceptible to successful award of tenders and the cyclicality in industry due to weak economic sentiments. Additionally, SPPL also faces a customer concentration risk as around 60 percent of the revenue of the company has been contributed by single customer profile in FY2024.
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