How has been the historical performance of Kanishk Steel?

Revenue and Operating Performance

In the fiscal year ending March 2016, Kanishk Steel reported net sales of ₹272.61 crores, down from ₹303.80 crores in the previous year. This decline in sales was accompanied by a reduction in total operating income, which mirrored the sales trend as there was no other operating income recorded in either year. The company’s raw material costs increased to ₹120.48 crores from ₹102.04 crores, while purchases of finished goods decreased significantly from ₹152.90 crores to ₹110.44 crores. Manufacturing expenses also saw a reduction, falling from ₹42.62 crores to ₹37.48 crores, reflecting some cost control efforts.

Despite these adjustments, the total expenditure excluding depreciation remained high at ₹271.90 crores in 2016, only marginally lower than ₹297.27 crores in 2015. Operating profit before other income (PBDIT) declined sharply to ₹0.71 crores from ₹6.53 crores, indicating pressure on core operations. However, other income surged to ₹10.52 crores from ₹1.36 crores, boosting the overall operating profit to ₹11.23 crores, an improvement over the previous year's ₹7.89 crores.

Profitability and Margins

Kanishk Steel’s profit before tax rose significantly to ₹6.12 crores in 2016 from ₹1.41 crores in 2015, supported by lower depreciation charges of ₹1.88 crores compared to ₹3.59 crores the previous year. Interest expenses increased slightly to ₹3.23 crores from ₹2.89 crores. The company reported a profit after tax of ₹4.73 crores, a marked turnaround from a loss of ₹0.26 crores in 2015. Consolidated net profit followed a similar trend, improving to ₹5.01 crores from a loss of ₹0.66 crores.

Margins reflected this recovery, with the gross profit margin rising to 2.94% from 1.65%, while the operating profit margin excluding other income contracted sharply to 0.26% from 2.15%. The profit after tax margin improved to 1.74% from a negative 0.08%, signalling a return to profitability despite operational challenges.

Balance Sheet and Financial Position

The company’s shareholder funds increased to ₹47.10 crores in 2016 from ₹42.01 crores in 2015, driven by a rise in reserves to ₹18.63 crores from ₹13.54 crores. Total liabilities grew moderately to ₹157.86 crores from ₹142.78 crores, with a notable increase in short-term borrowings to ₹21.44 crores from ₹5.29 crores, indicating higher reliance on working capital financing. Trade payables decreased to ₹53.54 crores from ₹62.17 crores, while current liabilities rose to ₹106.37 crores from ₹96.37 crores.

On the asset side, total assets expanded to ₹157.86 crores from ₹142.78 crores. Inventories declined to ₹40.17 crores from ₹46.89 crores, while sundry debtors increased significantly to ₹70.17 crores from ₹43.34 crores, reflecting a higher receivables position. Cash and bank balances improved to ₹6.37 crores from ₹4.76 crores. The book value per share rose to ₹14.11 from ₹12.14, underscoring enhanced net worth per equity share.

Cash Flow and Working Capital

Cash flow from operating activities turned negative at ₹-11.67 crores in 2016, a reversal from a positive ₹12.86 crores in 2015. This was largely due to adverse changes in working capital, which consumed ₹18.91 crores compared to a release of ₹7.41 crores the previous year. Cash flow from investing activities remained marginally positive, while financing activities generated ₹12.97 crores, a significant improvement from an outflow of ₹14.66 crores in 2015. Overall, the company recorded a net cash inflow of ₹1.61 crores, reversing the prior year’s outflow.

Summary of Historical Performance

Overall, Kanishk Steel’s historical performance over the two-year period shows a decline in top-line revenue but a commendable recovery in profitability and net worth. The company managed to reverse losses and improve earnings per share from negative to positive territory. However, operating margins remain under pressure, and the increased working capital requirements have impacted cash flows adversely. The rise in borrowings, particularly short-term debt, suggests a need for careful liquidity management going forward. Investors should weigh these factors alongside sector dynamics and peer performance when considering Kanishk Steel’s prospects.

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