PT Ricky Putra Globalindo Tbk. (RICY) is a textile and garment company known to many men through its GT Man brand underwear. However, the textile industry in general is experiencing difficult times during the COVID-19 pandemic. Even so, RICY was able to survive thanks to the additional debt it did. The problem that RICY is facing is how the company will continue to increase financing in the future as the debt level rises. The textile industry requires good cash flow management because the business has thin margins and often experiences delays in receiving receivables.

During the pandemic, the demand for textile and garment products decreased because many people were more at home and did not shop for clothes. This has led to a decline in RICY's performance in the last three years, with declining revenues in the range of IDR 1.2-1.4 trillion.

The decline in RICY's net profit was due to a combination of reduced demand and increased cotton prices. This resulted in net profit that accumulated during 2011-2022 or retained earnings to be negative by IDR 92 billion.

The company recorded a positive net profit in the first quarter of 2023 thanks to a profit from an exchange difference of IDR 21 billion. However, this profit cannot be considered as the company's operational performance and RICY has the potential to return to losses in the following quarters if there is no significant improvement in performance.

If these losses continue, then the company's equity is at risk of becoming negative.

RICY's debt has continued to increase over the last 11 years, while its capital has decreased. This causes the company's debt to equity ratio (DER) to reach 5.7, which indicates that the company's debt is greater than its capital by 5.7 times. This high debt limits RICY's ability to develop its business using its own capital.

RICY's cash flow condition is inconsistent because it does not take into account the financial burden of ever-increasing debt. Over the past 11 years, RICY's accumulated Free Cash Flow (FCF) has reached a negative value of IDR 76 billion, while operational cash flow has reached IDR 470 billion. This means that most of the cash obtained from operations must be used to pay debts and develop the business.

RICY's trade receivables continued to grow to reach IDR 426 billion or the equivalent of 29% of total assets. The high trade receivables increase the company's liquidity risk because it is difficult to collect payments from customers, especially when demand decreases.

With difficult financial conditions, the question is whether investing in RICY is still worth it. Company performance that has not shown post-pandemic improvement and significant losses in the last three years is a risk for potential investors.

Apart from RICY, many other textile companies, such as Sritex and Duniatex, are also experiencing difficulties and are on the verge of going bankrupt. Pan Brothers is one of the surviving textile companies by increasing capital.

Overall, the textile industry has been under pressure due to the Covid-19 pandemic, and RICY must find ways to overcome the financial challenges it faces if it is to survive and thrive in the future.