| GHCL Limited | ||
| Rating outlook revised to 'Stable'; Rating Reaffirmed and Withdrawn | ||
| Rating Action | ||
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| & Proposed | ||
| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||
| 1 crore = 10 million | ||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has revised its outlook on the non-convertible debentures (NCDs) of GHCL Ltd (GHCL) to ‘Stable’ from ‘Positive’ while reaffirming the rating at ‘CRISIL AA-‘ . CRISIL Ratings has subsequently withdrawn the rating at the company’s request and upon receipt of requisite documents. The withdrawal is in line with the CRISIL Ratings policy of withdrawal of ratings.
The revision in outlook reflects the expectation of sustained pressure on soda ash realisations going forward, which could adversely impact the profitability and cash accruals of the company, as was also witnessed in fiscal 2024. Further, the company remains exposed to project risk associated with the large greenfield expansion planned to increase soda ash capacity by 5 lakh tonne to 17 lakh tonne. CRISIL Ratings notes that there have been delays in getting requisite regulatory approvals for the project, pushing back the growth plans of the company.
The rating continues to factor in the healthy business risk profile of the company backed by its established market position in the domestic soda ash industry and strong operating efficiency, as reflected in healthy profit margin. The rating also factors in the strong financial risk profile, as indicated by healthy capital structure and debt protection metrics, aided by successful demerger of the textile business. These strengths are partially offset by vulnerability to price fluctuation of soda ash and volatility in key raw material prices. |
Analytical Approach CRISIL Ratings has considered the consolidated business and financial risk profiles of GHCL.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths:
To maintain market share in the domestic soda ash industry, GHCL is undertaking a large greenfield project to add 5 lakh tonne of soda ash capacity at a new location in Kutch, Gujarat, with estimated outlay of nearly Rs 4,500 crore. The company is in the process of obtaining regulatory approvals. As per the management, the entire process of pre-clearance is expected to be completed in fiscal 2025 (vs expectation of completion in fiscal 2024 earlier). Further, the management has articulated that the debt to equity ratio would not exceed 1 time at the company level during the project implementation phase. Higher-than-expected increase in project cost or leverage will be a key rating sensitivity factor.
Weakness:
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Liquidity: Strong Liquidity is supported by cash and equivalent of over Rs 880 crore as on June 30, 2024. Cash accrual is projected at Rs 500 crore in fiscal 2025 against yearly debt obligation of Rs 81 crore. Fund-based working capital limit of Rs 450 crore was sparsely utilised for the 12 months through June 2024. Excess accrual, cash and equivalent and undrawn bank limit will comfortably cover the working capital requirement and capital expenditure (capex) over the next two fiscals.
ESG profile Chemical manufacturers can have a significant impact on the environment owing to high water consumption, waste generation and greenhouse gas emissions. The social impact of the sector is characterised by health hazards, leading to higher focus on employee safety and wellbeing and the impact on local community, given the nature of its operations. GHCL has consistently focused on mitigating its environmental and social risks.
Key ESG highlights:
There is growing importance of ESG among investors and lenders. The commitment of GHCL to ESG will play a key role in enhancing stakeholder confidence, given high access to domestic capital markets. |
Outlook: Stable CRISIL Ratings believes the credit risk profile of GHCL will sustain over the medium term driven by healthy market position and strong financial risk profile. |
Rating sensitivity factors Upward factors:
Downward factors:
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About the Company Incorporated in October 1983, GHCL is a diversified player with presence in chemicals, textile and consumer products segments. The company manufactures soda ash (anhydrous sodium carbonate) and sodium bicarbonate (baking soda). Its unit in Sutrapada, Gujarat, had installed capacity of 12 lakh tonne per annum as on June 30, 2024.
In the consumer products division, GHCL manufactures and sells edible salt and industrial grade salt under the brand name i-FLO and Sapan. The company has its salt manufacturing facility in Nagapattinam, Tamil Nadu, and a refinery in Chennai for producing edible salt. The textile business of GHCL was successfully demerged to GHCL Textile Ltd in April 2023. |
Key financial indicators (CRISIL Ratings-adjusted)
*Includes profit from discontinued operations |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
#Yet to be issued |
Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
Criteria Details
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