Classic Electrodes claims to hold a prominent position in the welding electrodes and MIG wires market.
It claims to possess a highly skilled and experienced team with strong engineering expertise, allowing them to conceptualise and deliver innovative fixture solutions tailored to clients' needs.
According to the RHP, the company is equipped with hi-tech, advanced machinery that enhances its production capabilities and ensures precision in manufacturing.
It has a pan-India presence.
It is ISO – 9001:2008 certified for its quality management systems by Moody International Certification Limited.
The company has seen a consistent increase in revenue from operations and profit after tax (PAT). Revenue from operations increased from Rs 133.84 crore in FY22 to Rs 150.87 crore in FY23 and Rs 193.82 crore in FY24. PAT increased from Rs 1.45 crore in FY22 to Rs 2.08 crore in FY24 and Rs 12.28 crore in FY24.
The company is heavily dependent on the domestic market for sales. However, some of its products are sold in Bangladesh and Nepal, too. Domestic sales accounted for Rs 130.73 crore (97.68 percent) of its total sales in FY22, Rs 150.11 crore in FY23, and Rs 191.74 crore in FY24. For a more balanced geographical spread, the company needs to increase its exports.
There are outstanding legal proceedings involving the company, its promoters, and its directors. These proceedings are pending at different levels of adjudication before various courts. Any adverse judgments in any of these cases could hurt the company’s business.
The cost of raw materials and components consumed as a percentage of the company’s total revenue is significant. These accounted for Rs 86.57 crore (44.67 percent) in FY24, Rs 76.35 crore (50.61 percent) in FY23, and Rs 62.98 crore (47.06 percent) in FY22. Any rise in these costs could negatively affect the bottomline and profitability of the company.
The company had trade receivables of Rs 34.21 crore in FY24, Rs 32.87 crore in FY23, and Rs 27.42 crore in FY22. Trade receivables need to be kept under control. Any sharp rise in trade receivables can strain cash flows, forcing the company to look for debt funding, which in turn will entail financing costs.
The company sources its raw material from among a select group of suppliers, with the top 10 suppliers accounting for a significant portion of the total raw material purchases. They accounted for Rs 139.58 crore (89.71 percent) of its total raw material sourced in FY24, Rs 126.00 crore (96.91 percent) in FY23, and Rs 112.66 crore (96.06 percent) in FY22. Any disruption in supplies from this core group of suppliers could hurt the company’s overall performance.
The company is dependent on a few customers for a significant portion of its revenues. The top 10 customers accounted for Rs 109.54 crore (56.52 percent) of the company’s revenues in FY24, Rs 92.03 crore (61 percent), and Rs 76.59 crore (57.23 percent) in FY22. The company does not enter into long-term arrangements with its customers, and so, loss of any of these key customers or reduction in business from them could adversely affect the business and results of operations.
The company’s capacity utilisation in FY24 was as follows: electrodes (73.74 percent), MIG wire (53.72 percent), both at the West Bengal unit, and MIG wire (55.86 percent) at the Jajjar, Haryana unit. Underutilisation of its manufacturing capacities and the inability to effectively utilise the expanded manufacturing capacities could adversely affect its business and financial performance.
The company has witnessed negative cash flows in the past three years. In its investing activities, it faced Rs 0.97 crore negative cash flow in FY24, Rs 1.92 crore in FY23, and Rs 4.04 crore in FY22, while in financing activities, it faced Rs 1.97 crore negative cash flow in FY24. Positive cash flows are vital for the smooth running of a company’s operations. Any continued negative cash flows in the future can hurt the company’s business and profitability.