Agarwal Toughened Glass India IPO

1. About the company...

• Agarwal Toughened Glass is a manufacturer of toughened glass. Toughened glass is made by processing different types of glass materials. The company offers various thickness and size option for its glass products. The company produces toughened glass, which forms the basis for various other types of glasses, such as laminated, frosted, tinted, reflective, clear, and double-glazed toughened glass, by processing float glass. The company's toughened glass is used for several purposes. These include making shower doors, refrigerator doors, mobile screen protectors, Bulletproof glass, and heat resistant plates and cookware. Additionally toughened glass is widely used in architectural projects, such as glass doors, tables and partitions. It also serves as a popular choice for dividers in residential and commercial buildings, hospitals, airports, shopping malls, staircases, balustrades and other structural and decorative elements.

2. Strengths

1. Agarwal Toughened Glass produces a variety of toughened glass products that comply with the quality set by the Bureau of Indian Standards(BIS) and are certified for use with the ISI labels.

2. The company's production facilities are ISO 9001:2015 certified for quality management systems.

3. The company claims that it conducts a range of rigorous tests on the products, including assessment for human impact, ball drop tests, design and visual inspections, annealing (residual stress) evaluations, and measurement of thickness and weight.

4. The company has seen a consistent increase in profit after tax(PAT) over the past few years. PAT increased from Rs. 0.50 Crores in FY22 to Rs. 0.97 Crores in FY23 to Rs. 8.68 Crore in FY24.

3. Risks

1. The company relies on a limited number of customers for a significant portion of it's revenue. The top 10 customers contributed Rs. 9.02 crore(40.46%) for the period ending September 30,2024, Rs. 13.15 crore(34.31%), Rs. 14.72 crore(36.84%) and Rs. 13.51 crore (40.43%) to the total revenue from operations in FY24,FY23, and FY22, respectively. The company also caters to its customers on a purchase order basis and does not have long-term agreement with them. Therefor any loss of any of these customers or a decrease in business from any of them can adversely affect the company's operations and finance.

2. The company depends on a few suppliers for its material needs and lacks formal agreement or fixed trade terms with most of them. Any difficulty in maintaining these supplier relationship or finding alternative supplier could disrupt operations and adversely affect the business.

3. The company's manufacturing facilities and operations are concentrated in Rajasthan. Any adverse developments in region's business environment could lead to the shutting down of the facilities, which could negatively impact its business operations.

4. The company, its promoters, its directors and some member of the promoter groups are involved in certain legal proceedings. Any adverse judgement in any of these cases could be detrimental to the company's business prospectus.

5. As September 30,2024, the company had outstanding secured loans amounting to Rs 27.33 crore. Any inability to replay or service these loans can adversely affect the company's financial position.

4. Financial position of company as on September 30, 2024.

1. Net Profit - Net profit of company showing increasing trend which is showing the company is giving a good performance since last 3 FY. Company profit in March 2022 is Rs. 0.5 crores and in March 2023 is Rs. 0.97 crore and in March 2024 is Rs.8.69 crore.

2. Equity Capital - Equity capital of the company is increased from Rs. 4.75 Crore in FY March 2022 to 11.88 Crore in FY Sep 2024.

3. Reserves - Reserves of the company increasing every year which shows that company is keeping emergency reserve for the company operational and financial purpose. Reserves value Rs. 2.87 crore in FY 2023, Rs. 4.43 crore in March 2024 and Rs. 8.97 crores in Sep 2024.

4. Borrowings - Borrowing of the company is continuously increasing due to which interest cost of the company will increase and will make impact on profit of the company. Company may be taken this borrowing for the expansion till date and may be after taking the investor fund this borrowing may be reduced. Borrowings of the company is increased from Rs 28.77 crore in March 2023 to Rs. 30.56 crore in Sep 2024.

5. Fixed Assets - Fixed Assets increased from Rs.14.37 crore in March 2024 to Rs. 21.36 crore in Sep 2024.

6. Inventories - Inventory of the company increased from Rs. 9.73 crore in March 2023 to Rs.14.93 crore and Rs. 14.55 crore in Sep 2024.

7. Trade receivables - Trade receivables of the company is showing increasing value which may affect financial position of the company i.e risk of non payment or delayed payment. Trade receivable of the company in March 2022 is Rs. 7.5 crore and in March 2023 is Rs. 8.97 crore and in March 2024 is Rs. 10.73 crore and in Sep 2024 is Rs. 12.72 crore.

   - This could affect the company's ability to meet short-term obligations, such as paying suppliers or covering operating expenses.

   - A growing amount of trade receivables suggests that the company might be struggling with efficient collection processes.

5. Ratios

1. Debtor Days - As we seen that Trade receivable values increased every year which is a result of debtor days increased from 81.94 days to 102.18 days between the period of March 2022 to March 2024.

2. Days Payable(Creditors) - Creditors increased from 20.21 Days to 35.97 Days between the period March 2023 to March 2024.

3. Cash Conversion cycle - The Cash Conversion Cycle (CCC) is a key financial metric that measures the time it takes for a company to convert its investments in inventory and other resource inputs into cash flows from sales. Essentially, it shows how efficiently a company manages its working capital. Company Cash Conversion Cycle is increased from 197 days to 369 days.

   - An increasing CCC is a signal that the company is becoming less efficient in managing its working capital, which can lead to liquidity problems and higher financial costs.

   If the trend continues over time, it could harm the company's profitability, growth prospects, and overall financial stability.

4. Working capital days - Working capital days are increased from 171 days to 212 days between the period March 2022 to March 2024. If working capital days are increasing, it indicates that the company is taking longer to convert its working capital into revenue or cash. This can be a red flag and poses several risks to the business.

5. ROCE - Return on Capital employed is increased from 10.54% to 34.98% between the period March 2023 to March 2024. It generally signals improvement in a company’s financial health and efficiency. Positive implication of increasing ROCE is Improved Profitability, Efficient Use of Capital, Better Operational Performance, Enhanced Asset Utilization, Positive Investor Perception, Sustainability of Growth.