Lanco Industries is in the business of manufacturing Ductile Iron (DI) pipes used for water transportation. It supplies primarily to government, state and municipal boards. The company has reported consistent growth in revenues and operating profits over the last five years – generating over 85cr in operating profits on revenues of about 725cr in the last financial year while employing a high net debt load of over 340cr. The company is highly leveraged and has significant resources tied up in working capital, thereby impacting its operating cash flows. The business is dependent on iron ore and coking coal supplies and prices. It is also exposed to high competition and capacity additions. Moreover, it runs the specific risk of delayed payments by government boards, who seem to have a reputation for it.
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