• Organizational stability and promoter’s extensive experience: The extensive industry experience of the promoter and healthy track record and long-standing customer relationships have helped the firm gain repeat orders and also improve customer concentration risk and service diversity.

  • · Established relationships with customers and suppliers: Over the years, the promoter has established strong relationships with both customers and suppliers, resulting in regular orders and hassle-free supply of consumables.

  • · High focus on quality: The firm has an in-house quality team, which undertakes quality testing to enhance the product quality, leading to a competitive advantage.

  • · Automation: The firm’s fully automated production process improves cycle

  • time and minimises wastage.

  • · Exposure to intense competition: The industry has many small and medium- scale enterprises (due to low entry barriers), with limited product differentiation; many players operate in the unorganized segment, and the industry also faces competition from the external industry, which has a larger global footprint.

  • · Weak organisation structure: The business is highly dependent on the promoter and is yet to develop a competent second-tier management with decision-making powers.

  • · Inadequate Insurance coverage: The firm’s assets are not adequately insured, leaving it vulnerable to event risks.

  • · Low capacity utilisation: The firm is utilising only 40.00% of its installed

  • capacity, which may constrain cash flows to absorb depreciation and fixed costs. This may pressure margins in the future.

Financial

  • · Adequate return on capital employed (RoCE): RoCE was managed adequately at 20.45% during fiscal 2017. This implies that the firm has adequate resources for meeting its business obligations.

  • · Adequate working capital management: Working capital has been managed efficiently as the firm’s gross current assets remained adequate at 21 days for fiscal 2017. The days reflect low inventory at 5 days and receivables at 7 days for fiscal 2017.

  • · Adequate profitability: The firm’s operating profit before depreciation, interest,

  • and tax (OPBDIT) margin was adequate at 2.95% and profit after tax (PAT) margin at 2.31% in fiscal 2017.

  • · Moderate financial flexibility: Although the firm had a low debt base over the past 4 fiscal years, proposed enhancement of cash credit facility would increase

    thegearingtoaround2times.Itwouldleavethefirmvulnerabletoexternal shocks.

Key observations