- Omkar had borrowings of Rs 223 crore as at 31/03/2015 on consolidated basis. Finance cost on gross basis was Rs 22.65 crore for FY2015. After capitalising Rs 8.17 crore of interest, net charge towards finance cost Rs 14.48 crore.
- Net fixed assets deployed/under deployment of 271 crore include CWIP of Rs 121 crore as the company is expanding its capacity in Chiplun and Lasa unit. However, their present level of revenues at Rs 263 crore in relation to that is small; Not sure what level of revenues is targeted by the company when commercial production is achieved.
- Iodine derivative segment, which is among major portfolio of the Company, the prices of iodine based raw material continued to fall & consequently the Company suffered on topline growth as per own admission of the management. Even though the production volumes of iodine derivatives grew by 16-17%, it didn’t result in topline growth.
- Company is working on Working capital cycle that has improved to 143 days compared to 203 in FY 2014 but remains to be seen if they can bring greater efficiency. Shorter debtor cycle in export segment might be of help.
- Though they are capitalizing interest and maintaining operating margins of 19% or so, I don’t see the ROCE meaningfully expanding from here.
I don’t closely track Omkar but as it appears from its financials & trend, a setback on business front or inability of the company to commensurately increase the revenues due to internal or external factors can adversely affect it’s operational performance, given the finance cost and other fixed costs.
In present environment when iodine prices are soft and commodities highly uncertain to call, any setback can severely test company’s resilience to financially withstand a downturn. Investors need to be cautious.
Discl – Not invested.
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