Investors are always looking for growth in small-cap stocks like Kesar Terminals & Infrastructure Limited (NSE:KTIL), with a market cap of ₹1.00b. However, an important fact which most ignore is: how financially healthy is the business? Companies operating in the Oil and Gas industry, in particular ones that run negative earnings, tend to be high risk. So, understanding the company’s financial health becomes crucial. I believe these basic checks tell most of the story you need to know. However, this commentary is still very high-level, so I’d encourage you to dig deeper yourself into KTIL here.
Does KTIL produce enough cash relative to debt?
KTIL has shrunken its total debt levels in the last twelve months, from ₹1.13b to ₹78.41m , which comprises of short- and long-term debt. With this reduction in debt, KTIL’s cash and short-term investments stands at ₹28.72m , ready to deploy into the business. Moving onto cash from operations, its operating cash flow is not yet significant enough to calculate a meaningful cash-to-debt ratio, indicating that operational efficiency is something we’d need to take a look at. For this article’s sake, I won’t be looking at this today, but you can examine some of KTIL’s operating efficiency ratios such as ROA here.
Can KTIL meet its short-term obligations with the cash in hand?
Looking at KTIL’s most recent ₹1.25b liabilities, the company has not maintained a sufficient level of current assets to meet its obligations, with the current ratio last standing at 0.067x, which is below the prudent industry ratio of 3x.
Does KTIL face the risk of succumbing to its debt-load?With a debt-to-equity ratio of 13.81%, KTIL’s debt level may be seen as prudent. This range is considered safe as KTIL is not taking on too much debt obligation, which may be constraining for future growth. Investors’ risk associated with debt is very low with KTIL, and the company has plenty of headroom and ability to raise debt should it need to in the future.
KTIL’s low debt is also met with low coverage. This indicates room for improvement as its cash flow covers less than a quarter of its borrowings, which means its operating efficiency could be better. In addition to this, its lack of liquidity raises questions over current asset management practices for the small-cap. Keep in mind I haven’t considered other factors such as how KTIL has been performing in the past. I suggest you continue to research Kesar Terminals & Infrastructure to get a better picture of the stock by looking at:
- Historical Performance: What has KTIL’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
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