Actually competetion is very low in this business because of govt. policy. Thanks to the post above on GeM Class-I Local Supplier lead, I was able to hunt down a bit more.
Govt. has been pushing govt. funded institutions to procude through the GeM portal and also insisting preference be given to MSE/MII (Medium/Small Enterprises / Make In India certified)
MII (Make in India) certificate can be procured only if you have > 50% localisation (Class-I) or 20-50% localisation (Class-II). Some tenders even seem to reduce margin of L1 if you are a MSE/MII (like within 15% of L1) or outright reject ones without MII cert. This is what seems to be giving Holmarc the advantage
As for reason for margins being down – its because hiring when capacity wasn’t ready. Last year the company went from 215 employees to 265 employees even as they were funds to come in to put up capex. This year again this 265 number has gone up to 335 and as I had highlighted, these people are currently being trained and yet to be productive since machinery is still being installed.
Margins won’t improve in H1 either though topline should go up. Hiring has continued and from 335 its now close to 350 (though pace has slowed while waiting for commissioning of equipment)
From H2 onward we should see sequential margin improvement as part of capex will be done for H2 and from H1, FY26 productivity should go up considerably when compared to FY25/FY24. As for sales, I am certain demand is robust going by tenders and exports.
These sort of businesses require patience and cannot be played from quarter to quarter as there’s no liquidity and spreads are huge. Over time though with policy tailwind, strong exports, it will do alright.
Disc: Invested
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