Elgi Rubber Company Limited — financial distress indicators

Interest coverage (EBIT / interest) is -1.94×.

When EBIT < interest, debt service is funded from cash reserves or new borrowing — the classic precursor to payment default and covenant breach.

Debt is 72% of assets while EBITDA is not positive.

With no operating earnings, repayment depends entirely on asset sales or fresh capital.

Operating cash flow negative in 2 of the last 3 years.

A business that cannot fund itself from operations depends on external capital to survive.

O-score 5.17 → model probability 99%.

Ohlson (1980) logit model of 1-year corporate failure; O > 0 (p > 50%) is the original failure cut-off.

Current ratio is 0.86.

Short-term obligations exceed short-term resources — the company relies on rolling over credit.

Cash covers ~18 months of free-cash-flow burn.

Funding needs within two years make the company dependent on capital-market access.

Recurring net losses.

Repeated losses are a core input in both Ohlson and Altman failure models.

Merton distance-to-default 1.12 σ → PD 13.2%.

Investment-grade issuers typically have 1-year PD well below 1%.

Short-term debt is 8.0× cash on hand.

Maturity wall: debt due within a year must be refinanced, which is the most common proximate cause of filings.

Operating margin fell from 2% to -17% in two years.

Sharp margin compression signals loss of pricing power or cost control.

Revenue declined every year for three years.

Structural, not cyclical, decline.