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Kolkata-based plywood and veneer maker Greenply Indutries is looking to pay off its long-term debts over the next three or four years. Till September 2019, the company had debt of ₹171 crore on its books. Of this, ₹43 crore was long-term while ₹128 crore was its working capital requirement.
Its debt-to-equity ratio stands at 0.47.
According to Sanidhya Mittal, Joint Managing Director, Greenply, long-term debt servicing and repayments have already begun. The debts were taken primarily for ramping up the decorative business (plywood) in 2018.
The company, during a recent analyst concall, had said that its standalone debt level had increased in H1 FY20, against the ₹156 crore in H1 FY19. But, on a quarter-on-quarter basis, there was a marginal reduction in debtor days, mainly on account of improved cash flow and overall market scenario.
‘Debtor days’ refers to the number of days that a company takes to collect cash from its credit sales, which is indicative of the company’s liquidity position and its collections department’s efficiency. It is also known as days sales outstanding (DSO), or receivable days.
“Long-term debts are expected to be paid over the next 36-to-48-month period. We are also working on various parameters to tighten the debtor cycles and have more control over the working capital cycle,” Mittal told BusinessLine in an interview.
Greenply’s standalone working capital turnover days stood at 68 as of September 2019, against 51 in the year-ago period. The working capital turnover ratio measures how efficiently a company is using its working capital to support sales. The work capital turnover also shows the relationship between funds used to finance a company’s operations and the revenues it generates.
Greenply’s debtor days stood at 95 and 93 respectively in Q1 and Q2, FY20. In the year-ago period, it had been 81-85 days.
A general slowdown in consumption and weak sentiments saw suppliers not stocking enough. There was also a delay in realising payments.
“Considering the economic slowdown and poor sentiments we had to increase the credit cycle. So, obviously, the debtor days went up. Our target now is to bring it back to March (2019) levels of 81 days. But by the end of this fiscal the debtor days should be between 81 and 85 days,” Mittal said.
The company had reported a standalone turnover of ₹648 crore for H1 FY20, with an EBITDA of ₹73 crore. Net profit stood at ₹39 crore, up 39 per cent YoY.
With different measures like improvement in debtor days and focus on an asset-light model (where it enters into equity participation with regional players for the supply of finished products), there will be a marked improvement in margins, too, said Mittal.
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