Dhiraj
Much appreciate these detailed notes – the one concern I had speaking to their customers is that CP holds the consumables inventory at the customer’s premises at their cost which results in WC getting locked up and hence to low OCF – OCF is consistently not even 10-30% of EBITDA which is really low.
I spent a lot of time on what generates cash in a business – out of OCF of Rs. 27 Cr. more than Rs. 19 cr. went back again as inventories and receivables – that’s not a sign of a moat. If they have one inventory write-off because of technology obsolescence etc,it will hit the business badly.
Like charlie munger would say, its a tread mill business where more and more of the profits have to be invested into the business to keep running. Given that, the sales growth means not much until they can shrink the WC.
Would you have a view on when the company can improve upon this ?
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