How Long Will Loss-Making JITF Infralogistics Limited (NSE:JITFINFRA) Survive?

JITF Infralogistics Limited (NSEI:JITFINFRA) continues its loss-making streak, announcing negative earnings for its latest financial year ending. The single most important question to ask when you’re investing in a loss-making company is – will they need to raise cash again, and if so, when? Cash is crucial to run a business, and if a company burns through its reserves fast, it will need to come back to market for additional capital raising. This may not always be on their own terms, which could hurt current shareholders if the new deal lowers the value of their shares. 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 currently has ₹140.07M in the bank, with negative cash flows from operations of -₹1.60KM. Since it is spending more money than it makes, the business is “burning” through its cash to run its day-to-day operations. How fast JITF Infralogistics runs down its cash supply over time is known as the cash burn rate. The riskiest factor facing investors of the company is the potential for the company to run out of cash without the ability to raise more money, i.e. the company goes out of business. JITF Infralogistics operates in the marine ports and services industry, which delivered a positive EPS of ₹7.74 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.

NSEI:JITFINFRA Income Statement Jan 11th 18
NSEI:JITFINFRA Income Statement Jan 11th 18

When will JITF Infralogistics need to raise more cash?

Opex, or operational expenses, are the necessary costs JITF Infralogistics must pay to keep the business running every day. For the purpose of this calculation I’ve only accounted for sales, general and admin (SG&A) expenses, and R&D expenses incurred within this year. In the past year, opex (excluding one-offs) rose by 37.68%, which is considerably high. Though, my cash burn analysis suggests that JITF Infralogistics has a cash runway of over three years, with its current level of cash holdings. This means the company’s expenditure can continue to grow at the same rate without having to come to market anytime soon. Although this is a relatively simplistic calculation, and JITF Infralogistics may reduce its costs or open a new line of credit instead of issuing new equity shares, the outcome of this analysis still helps us understand how sustainable the JITF Infralogistics’s operation is, and when things may have to change.

What this means for you:

Even if JITF Infralogistics continues to ramp up opex at its current high rate over the next few years, my analysis shows us it will still not need to come to market any time soon. This should be good news for current shareholders as there is less of a chance that their current shares will be diluted, and it also indicates the company doesn’t have an immediate cash problem on its hand. However, this analysis still doesn’t tell us when JITF Infralogistics will become breakeven. I suggest you take a look at their expected revenue growth to determine the timing of future profitability as well. This is only a rough assessment of financial health, and I’m sure JITFINFRA has company-specific issues impacting its cash management decisions. You should continue to research JITF Infralogistics to get a more holistic view of the company by looking at:

1. 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.

2. 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.

3. 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.

NB: Figures in this article are calculated using data from the trailing twelve months from 31 March 2017. This may not be consistent with full year annual report figures. Operating expenses include only SG&A and one-year R&D.