I highly recommend you to listen (rather than read) the Q4FY23 concall of the co. The global requirement for this product by 2030 would be 70-80 lines. So demand would be there. Supply takes time to come up (you may know that it takes 2-4 years to start productoin after placing orders for the machines).
Moreover, currently there’s only 1 line in India and with upcomng 2 more lines from Xpro and 1 line from SRF, the total would be 4 lines by 2026/27 and would be just enough for Indian market requirement. So Supply Demand mismatch is not a issue at the moment.
From the available information, the base machines cost would be 500 cr for the 2 machines and customization, building , installation would take it to 600-700 cr.
The co has raised 150 cr via Warrant issue and they generated 80cr cash through internal accruals and may 160cr more in Fy24 and Fy25 combined and so the total cash equivalents would be 390 cr. And remaining 210-310 cr could come from Supplier credit (can avail upto 85% of the based machine cost).
Considering the co has working capital days of 30-40 days, the Working capital requriement would be less than 100-140 cr even considering incremental revenue of 1500 cr. But working capital loan could be availed easily from Banks as the co has good credit rating (not the best).
So, I believe and wish the new capex would be for capacity expansion. It’s prudent to wait for confirmation from the co and to find out more details like the Enquiries from the customers, New applications/segments, etc. The ramp up in capacities in FY25 and FY26 would tell more about the managment, execution and competitive intensity.
It’s time to wait and see while keep tracking the new developments in the industry and co
Praveen
Disc: Holding and biased. Please do your own due diligence. The above data/points provided may be inaccurate
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