| NGL Fine Chem Limited | ||||||
| Rated amount enhanced | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
CRISIL Ratings has reaffirmed its ‘CRISIL BBB+/Positive/CRISIL A2’ ratings on the bank loan facilitied of NGL Fine Chem Limited (NGL).
The ratings continue to reflect extensive experience of the promoters in animal health API industry, established and diversified customer base and NGL's healthy financial risk profile. These strengths are partially offset by vulnerability of profitability to volatility in raw material prices, high product concentration risk with major presence in animal health API and large working capital requirement.
CRISIL Ratings had on February 28th, 2022, revised its outlook on the long-term bank facilities of NGL Fine Chem Limited (NGL) to ‘Positive’ from ‘Stable’; while reaffirming its rating at ‘CRISIL BBB+’. Short term rating was reaffirmed at ‘CRISIL A2’.
The change in outlook reflected CRISIL Ratings belief that NGL’s business risk profile is expected to improve driven by sustained increase in scale of operations and stable healthy operating margin. Revenue growth has been supported by the capacity expansion and healthy demand for veterinary active pharmaceutical ingredients (APIs). Operating performance has been much better than CRISIL Ratings’ expectation in fiscal 2021; with the same continuing during the first nine months in the current fiscal as well. Company has clocked a revenue of Rs 235 crore with an operating margin of 23% for a period between April 2021 and December 2021. Operating margins were somewhat impacted in the current fiscal when compared with the earlier year due to sharp increase in raw material, power, and fuel prices, but remained above CRISIL Ratings’ expectations.
Sustained improvement in operating performance would lead to enhanced financial risk profile, despite the partially debt funded capex of around Rs 100 crores, as the net worth would augment to over Rs. 260-320 crores over the medium term. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has combined the financial and business risk profiles of NGL Fine Chem Limited and its wholly owned subsidiary, Macrotech Polychem Pvt Ltd (MPPL). That is because both these companies, together referred to herein as NGL, have a common management and strong operational and financial links.
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:
Weaknesses:
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Liquidity: Adequate Liquidity should continue to remain adequate, supported by the surplus cash accrual and cushion in bank lines. Net cash accrual is expected to be at Rs 64-79 crore per annum over medium term, sufficient to meet the yearly debt obligation of Rs 10-15 crore. Bank limit utilisation has been moderate and averaged 31% during the last 12 months despite the large working capital requirement. The company is planning to undertake capex of Rs 100 crore; the funding pattern is not yet finalized for same; but is expected to partially be funded by debt and remaining through internal accruals. NGL has sufficient headroom for availing debt for this capex. Net cash accrual, unutilised bank limit, and cash and cash equivalent will be sufficient to cover incremental working capital requirement, debt obligation and capex over the medium term. |
Outlook: Positive NGL is expected to exhibit improved operating performance supported by healthy demand and established customer relationships. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Group NGL, incorporated in 1981, manufactures human and veterinary bulk drugs, intermediates, and formulations. It primarily deals in animal healthcare products such as antiprotozoal, anthelmintics, and growth promoters. The administrative office is in Mumbai and manufacturing facilities are in Tarapur and Navi Mumbai in Maharashtra. Mr Rahul Nachane and Mr Rajesh Lawande manage the business. In May 2019, NGL Fine Chem Limited acquired 100% equity shareholding in MPPL, which manufactures pharmaceutical intermediates. |
Key Financial Indicators
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
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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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||
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This Annexure has been updated on 28-Mar-2022 in line with the lender-wise facility details as on 02-Aug-2021 received from the rated entity.
Criteria Details
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