| Resonance Specialties Limited | ||||||
| Ratings upgraded to 'CRISIL BBB- / Stable / CRISIL A3 ' | ||||||
| Rating Action | ||||||
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| 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 upgraded its rating on the bank loan facilities of Resonance Specialties Ltd (RSL) to ‘CRISIL BBB-/Stable/CRISIL A3’ from ‘CRISIL BB+/Stable/CRISIL A4+’
The rating upgrade reflect an improved business risk profile on the back of improved revenue, profitability and benefits it derives as part of a larger group. Revenue and operating margins grew by 23.9% and 540 basis points to Rs 71.9 crores and 22% respectively in fiscal 2021. Revenue growth is likely to be sustained over the medium term with healthy profitability. The current promoter’s group is also the promoters of IPCA Laboratories Limited (CRISIL A1+); RSL is expected to benefit from the technical, marketing and operational expertise of the promoters; further strengthening its business risk profile over the medium term
The ratings continues to reflect the established presence of RSL in the specialty chemicals industry and above average financial risk profile. These strengths are partially offset by a modest scale of operations and large working capital requirement. |
Analytical Approach: For arriving at the rating; CRISIL Rating has considered standalone financial of RSL and factored in operational benefits it derives from its association with larger promoter group |
Key Rating Drivers & Detailed Description Strengths
The promoters has over 40 years of experience in the chemical and pharma industry with established relationship with customers and suppliers across the globe. The group also has track record of promoting and scaling up operations; the flagship company of the group (IPCA Laboratories Ltd) is one among the leading player in the industry with turnover of Rs 5483 crores in fiscal 2021. RSL is expected to receive extensive support from the group to enhance its technical, operational and marketing capabilities; strengthening business risk profile over the medium term
Weaknesses:
Scale of operations continues to remain moderate at Rs 71.9 crore in fiscal 2021; the moderate scale constrains RSL’s ability to get favourable terms from its customers and suppliers. However, association with the current promoter group partially mitigate this risk. Input prices are volatile and any material movement in prices may impact profitability. However, the company is able to pass on the price hike to its customers with a lag, partially mitigating the risk. |
Liquidity: Adequate Net cash accrual was Rs 11.5 crore in fiscal 2021 and should be around Rs 11-13 crore over the medium term against nil debt obligation. Fund-based limits remained largely unutilised during the past 6 months through September 30, 2021.There are no large capex plans over the medium term. Current ratio was comfortable at 3.16 times and the company also had adequate cash balance of Rs 5.19 crore as on March 31, 2021. |
Outlook: Stable CRISIL Ratings believes RSL will continue to benefit from the extensive experience of its promoters and its focus on exports. |
Rating sensitivity factors Upward factors
Downward factors
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About the company RSL was set up in 1989. The company manufactures specialty chemicals such as lutidine, picoline, and their derivatives. These chemicals are used in diverse industries, including pharmaceuticals, agro chemicals, dyes and paints, food, and animal feeds. Makers Laboratories Ltd and Kaygee Investments Pvt Ltd acquired 54.24% stake in RSL in December 2021. The company is listed in Bombay Stock Exchange |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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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 | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Bank Guarantee | 2 | YES Bank Limited | CRISIL A3 |
| Cash Credit | 5 | YES Bank Limited | CRISIL BBB-/Stable |
| Inland/Import Letter of Credit | 3 | YES Bank Limited | CRISIL A3 |
| Proposed Long Term Bank Loan Facility | 2 | Not Applicable | CRISIL BBB-/Stable |
This Annexure has been updated on 23-Feb-23 in line with the lender-wise facility details as on 10-Feb-23 received from the rated entity.
Criteria Details
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