How has been the historical performance of United Credit?

Revenue and Operating Income Trends

For the fiscal year ending March 2009, United Credit reported total operating income of ₹1.21 crore, comprising net sales of ₹0.89 crore and other operating income of ₹0.32 crore. This modest revenue base was insufficient to cover the company's operating expenses, which included employee costs of ₹0.52 crore and manufacturing expenses of ₹1.32 crore. Notably, the company did not incur raw material or power costs during this period, but other expenses amounted to ₹0.81 crore. The increase in stocks contributed ₹0.15 crore to the expenditure profile.

The total expenditure excluding depreciation stood at ₹2.80 crore, more than double the operating income, leading to an operating loss before other income of ₹1.59 crore. After accounting for other income of ₹0.17 crore, the operating loss (PBDIT) was ₹1.42 crore, indicating significant operational inefficiencies.

Profitability and Margins

United Credit's profitability metrics for March 2009 were deeply negative. The company recorded a gross profit before depreciation and tax (PBDT) loss of ₹1.51 crore after interest expenses of ₹0.09 crore and depreciation of ₹0.15 crore. This translated into a profit before tax (PBT) loss of ₹1.66 crore. After accounting for a small tax benefit of ₹0.03 crore and minority interest adjustments, the consolidated net loss was ₹1.61 crore.

The earnings per share (EPS) reflected this loss, with a reported figure of negative ₹2.93 per share and a diluted EPS of negative ₹2.78. Operating profit margin excluding other income was a steep negative 131.07%, while the gross profit margin was negative 124.79%. The net profit after tax margin was also deeply negative at 134.96%, underscoring the company's inability to generate profits from its operations during this period.

Cash Flow and Liquidity Position

Examining cash flow trends over three fiscal years ending March 2007, 2008, and 2009 reveals a deteriorating liquidity position. In March 2007, United Credit generated positive cash flow from operating activities of ₹1.97 crore and a net cash inflow of ₹3.68 crore. However, by March 2008, operating cash flow turned negative at ₹1.46 crore, with a net cash outflow of ₹2.11 crore. This negative trend continued into March 2009, with operating cash flow at negative ₹1.37 crore and a net cash outflow of ₹2.36 crore.

Investing activities consistently consumed cash, with ₹1.29 crore outflow in March 2009, while financing activities provided a modest inflow of ₹0.31 crore. The company's cash and cash equivalents declined sharply from ₹5.43 crore in March 2007 to ₹0.89 crore in March 2009, signalling tightening liquidity and potential challenges in meeting short-term obligations.

Equity and Shareholding Structure

As of March 2009, United Credit's equity capital stood at ₹5.49 crore with a face value of ₹10 per share. The company maintained reserves of ₹14.14 crore, which may provide some buffer against losses. Public shareholding accounted for 28.19%, while promoter holdings were not pledged, indicating no immediate encumbrances on promoter shares.

Despite these equity reserves, the persistent losses and negative cash flows highlight the need for strategic operational improvements and financial restructuring to restore profitability and investor confidence.

Outlook and Considerations for Investors

United Credit's historical financial data up to March 2009 depicts a company facing significant operational and financial challenges. The negative margins and declining cash reserves suggest that the company was under pressure to improve its cost structure and revenue generation capabilities. Investors should carefully analyse subsequent performance data and strategic initiatives before considering exposure to this stock, given the risks evident in the historical results.

Get 2 full years of MojoOne Premium for only Rs. 12,999. Subscribe for 1 year and we'll add another year FREE. Offer valid for a limited time. Start Saving Now →