Akar Auto Industries Faces Financial Scrutiny Amid Rising Debt and Interest Expenses
Akar Auto Industries has recently undergone an adjustment in evaluation, reflecting the company's current market dynamics and financial metrics. The engineering sector microcap has been navigating a challenging landscape, characterized by high debt levels and concerns regarding its long-term viability.In terms of growth, Akar Auto Industries has reported a net sales increase at an annual rate of 10.01% over the past five years, while operating profit has shown a rise of 14.34%. However, the company's ability to manage its debt obligations is under scrutiny, highlighted by a low EBIT to interest ratio of 1.35, which raises questions about its financial stability.
Additionally, the nine months ending September 2024 saw a significant rise in interest expenses, which increased by 32.40% to Rs 9.89 crore. The debtors turnover ratio has also reached a low of 5.77 times, indicating potential liquidity issues. Over the past year, Akar Auto Industries has underperformed relative to the broader market, with negative returns of -10.12% compared to the BSE 500's 8.71% return.
While some technical indicators may suggest a mildly bullish trend, the overall outlook for Akar Auto Industries remains cautious as the company addresses its financial challenges and market position.
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