Shah Alloys Limited — financial distress indicators

Interest coverage (EBIT / interest) is 0.16×.

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

Current ratio is 0.49 (current assets cover 49% of near-term obligations).

Cash-flow insolvency test: inability to pay debts as they fall due is the trigger for both U.S. involuntary petitions and Indian IBC default.

Revenue changed -86% year over year.

A >30% sales drop typically breaches leverage covenants and starves fixed-cost coverage.

O-score 0.97 → model probability 73%.

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

Recurring net losses.

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

Short-term debt is 54.4× cash on hand.

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

Operating cash flow negative in 2 of the last 3 years. The company is profitable, so this likely reflects working-capital or loan-book growth.

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

Revenue declined every year for three years.

Structural, not cyclical, decline.

0 severe and 2 moderate distress-related headlines in the last 6 months.

Headlines are corroborating evidence only; they are weighted lightly and never drive a flag alone.