Observation from balance sheet & cash flow statements
Trade payables increased from 9.25 crores in FY 21-22 to 15.13 crores in FY 22-23. Which increases the working capital from 16 crores to 22 crores for the same period. However the growth in top line as well as bottomline exceeds the increase in working capital, because of which the cash flow from operations has doubled from 10 crores to 20 crores. And almost all of it is being distributed as dividend (there is no requirement of keeping higher cash on the balance sheet despite the company is in high growth phase)
This way the book value of the company will not rise commensurate to the profit growth which will lead to even further rise in ROCE (which is already above 100)
Though the company is still very small and it’s too early to form an opinion but the company appears to be in an different orbit. Many successful companies have grown fast on internal accruals without taking debt by having higher ROIC. But what is happening in Ksolves currently is beyond epic, as the company is growing fast without debt and even after distributing all the profits as dividends.
The risk involved here is “Till when this can continue” before company achieves a particular size and start facing competition from bigger companies. But even if the answer is few years, it can turn out to be a very rewarding investing experience.
Disclosure: invested from much lower levels and my opinions are likely to be biased.
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