I was talking to my cousin, a wholesaler of garments who gave a very stark view of the textile market. While he has sold goods worth more than ~INR 50 crs on credit during the year (growth of 200% since last year), however, some of the retailers have not paid him till date; few of them have not paid since 2019. This is obviously a scary situation, especially if you are an entrepreneur who keeps selling goods/services on credit and you don’t get paid on time or not at all in a few situations.
While the sales for most listed firms have shown a phenomenal increase YoY (obviously, due to low base effect), it is important to understand whether the increase in sales is on account of increase in credit.
I have prepared a .xls sheet which would provide you with Debtors / Net Sales (Sale on Credit leads to formation of Debtors) of more than 4,000 companies industry-wise for the most recent year and average of 3, 5 and 10 years. Trend of Debtors / Net Sales over various periods of time would give you a sense of the credit risk of the company/industry to some extent.
Would be happy if you could share some of your thoughts !!
Click below to download the file:
Disclaimer: Please note that these are my personal views. While I am NOT a registered Research Analyst as per SEBI (Research Analyst) Regulations, 2014, all investors are advised to conduct their own independent research into individual stocks or industries before making any decision. There could be some inadvertent errors in taking the data or calculation for which I should not be held responsible. In addition, investors are advised that past stock performance is not indicative of future price action.