Samvardhana Motherson Irevna (SML) is an Indian multinational conglomerate with a significant presence in the automotive and technology industries. The company’s financials have raised concerns about its high leverage, with a net debt-to-equity ratio of 1.36, which is higher than the industry average. This high debt level may put the company’s financial stability at risk and limit its ability to respond to unexpected expenses or downturns in the market.
The company’s high debt-to-equity ratio is due to its aggressive expansion strategy, which has led to significant capital expenditures. Moreover, SML’s interest expenses have been increasing significantly, which has put additional pressure on its profit margins. The company’s interest coverage ratio, which measures its ability to pay interest expenses, has also been declining, indicating potential concerns about its ability to service its debt.
However, it’s worth noting that SML’s revenue has been growing at a CAGR of 12.5% over the past five years, indicating its ability to generate significant cash flows to service its debt. Nevertheless, given its high debt levels, investors may be concerned about the company’s financial health and its ability to maintain its growth momentum in the long term.