Trailing twelve-month data shows us that JITF Infralogistics Limited’s (NSEI:JITFINFRA) earnings loss has accumulated to -₹1.10B. Although some investors expected this, their belief in the path to profitability for JITF Infralogistics may be wavering. Savvy investors should always reassess the situation of loss-making companies frequently, and keep informed about whether or not these businesses are in a strong cash position. Additional cash raising may dilute the value of your shares, and since JITF Infralogistics is currently burning more cash than it is making, it’s likely the business will need funding for future growth. Looking at JITF Infralogistics’s latest financial data, I will gauge when the company may run out of cash and need to raise more money. See our latest analysis for JITF Infralogistics
What is cash burn?
JITF Infralogistics’s expenses are currently higher than the money it makes from its day-to-day operations, which means it is funding its overhead with equity capital a.k.a. its cash. With a negative operating cash flow of -₹1.60B, JITF Infralogistics is chipping away at its ₹140.07M cash reserves in order to run its business. The measure of how fast JITF Infralogistics goes through its cash reserves over time is called the cash burn rate. The most significant threat facing investor is the company going out of business when it runs out of money and cannot raise any more capital. JITF Infralogistics operates in the marine ports and services industry, which delivered positive earnings in the past year. This means, on average, its industry peers operating are profitable. JITF Infralogistics runs the risk of running down its cash supply too fast, or falling behind its profitable peers by investing too little.
When will JITF Infralogistics need to raise more cash?
JITF Infralogistics has to pay its employees and other necessities such as rent and admin costs in order to keep its business running. These costs are called operational expenses, which is sometimes shortened to opex. In this calculation I’ve only included recurring sales, general and admin (SG&A) expenses, and R&D expenses occured within they year. In the past year, opex (excluding one-offs) rose by 25.00%, which is considerably high. But according to my analysis, given the current level of cash reserves, JITF Infralogistics can continue to spend at the current rate and should not need to raise further capital for a few years. Even though this is analysis is fairly basic, and JITF Infralogistics still can cut its overhead in the near future, or raise debt capital instead of coming to equity markets, the analysis still gives us an idea of the company’s timeline and when things will have to start changing, since its current operation is unsustainable.
Next Steps:It seems like JITF Infralogistics will not need to raise capital anytime soon, even if its strong operational expense continues to grow over the next couple of years. Shareholders may be pleased to know this as it signals that the company still has a strong cash reserve, as well as less likelihood of share dilution from new capital raising. Keep in mind that opex is only one side of the coin. I recommend also looking at JITF Infralogistics’s revenues in order to forecast when the company will become breakeven and start producing profits for shareholders. I admit this is a fairly basic analysis for JITFINFRA’s financial health. Other important fundamentals need to be considered alongside. You should continue to research JITF Infralogistics to get a better picture of the company by looking at:
- Historical Performance: What has JITFINFRA’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.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on JITF Infralogistics’s board and the CEO’s back ground.
- Other High-Performing Stocks: If you believe you should cushion your portfolio with something less risky, scroll through our free list of these great stocks here.