Debt has been a concern for many.Interest coverage has been the lowest in the past 10 years.Debt has been rising due to the rising working capital needs. They are not Capital intensive, but a working capital intensive company. Also, to build a brand from scratch ( commencing consumer durables division from 2011), their working capital needs to support their expansion plans. Inventories needs to be high to ensure availability of stocks at the outlets. The creditor payments to be delayed and relaxed to form a better trust with the dealers.
Cash flows are negative owing to increases in the working capital. Since this is a company in the growth phase, these things are bound to come. What i sense is, once they have established the rapport with the consumers and dealers on their own, the necessity of working capital will come down. That would free up some cash flows for the company and reduce the debt in the future.
Also, i have been doing some interesting analysis for this company and industry, and my conclusion is both the company and industry looks promising. They currently hold 5.6% market share in A/C, and it has been growing eventhough there is a price increase. That gives us insights on the power the brand is becoming in A/C market. It has garnered 2.3% in the LED Tv market during FY 2014. Remember, it all started from nothing during 2011, when it commenced the operations into consumer durables segment. Their communication to the consumers are working fine. Even if i assume they continue to hold on to this market share for the upcoming years, the industry growth alone could be suffice to fetch better valuations for the company.