Take a look at the below numbers. Good, Bad or ugly seeing years 1-3 ? On face of it, will fall in last two categories on first glance.
There were lot of factors playing at same time in it-
- Extraordinary income and expenses.
- Fluctuating sales.
- High borrowing vs sales.
But also what this company continued doing was investing in
- Fixed Assets
- People ( Look at employee cost even though sales had fallen).
Here it was important to understand the non-financial metrices which were in favour of company-
- World class manufacturing facility.
- Product required multiple approvals from regulatory bodies as well as business associates.
- Business associates (customers) were leading industry players and had offtake contracts and long term past association.
- Problems which led to the bleeding in P & L were clearly identifiable and corrective processes were in place.
- Ability of the promoters to pump in money if required although was yet to be demonstrated.
- Happy, dedicated and long vintage employees.
Below is what happened YOY subsequently in short –
| Year 10 | Year 9 | Year 8 | Year 7 | Year 6 | Year 5 | |
| Short Term | A1 | A2+ | A2 | A2 | A3 | A3 |
| Long Term | A | A- | BBB+ | BBB | BBB- | BBB- |
So even though the operating numbers didn’t look good, it was a good credit if you give benefit of above factors the foundation was strong to come out of challenge which it was facing.
Note: These are personal views and in no way represent the organization(s) I am (was) part of.
