Mangalam Drugs & Organics Limited — financial distress indicators

Interest coverage (EBIT / interest) is -2.04×.

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

Merton distance-to-default -0.62 σ → PD 73%.

Structural (Merton/KMV) model: equity is a call option on assets; low distance-to-default means assets are close to the default point.

Debt is 33% of assets while EBITDA is not positive.

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

O-score 3.11 → model probability 96%.

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

Current ratio is 0.79.

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

Recurring net losses.

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

Revenue changed -27% year over year.

Falling sales reduce cash available for debt service.

Short-term debt is 130.4× 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 0% to -14% 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.