| Sunshield Chemicals Limited | ||||
| Rating reaffirmed at 'CCR BBB/ Stable'; 'CRISIL BBB/Stable' assigned to Bank Debt | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has assigned its ratings of ‘CRISIL BBB/Stable’ on the long term bank facilities to Sunshield Chemicals Limited (SCL) while has reaffirmed its corporate credit rating of ‘CCR BBB/Stable’
The rating reflects the Established market position in chemical industry, strong and diversified customer base, efficient working capital cycle, and comfortable financial risk profile. These strengths are partially offset by moderate scale of operations amid intense competition, susceptibility to fluctuations in raw material prices |
Key Rating Drivers & Detailed Description Strengths:
The company is currently promoted by Mr. Jeet Malhotra and Mr. Virendrasingh Baidwal. The promoter has been in the chemical industry for over 10 years. This has given them strong understanding of market dynamics. Further, the company through its 3 decades long presence in the industry has developed a strong market position. They have established healthy relations with customers and suppliers. Further the company has a wide range of product offerings like Ethylene oxide (EO) based specialty surfactants, anti-oxidants, THEIC based products which are used in various industries including homecare, petrochemicals, automobile, rubber etc. This has led to steadily increasing revenue in the past fiscals through 2021, to Rs 198 crore in fiscal 2021 from Rs. 181 crore in fiscal 2020and expected to be Rs 230-240 crore in fiscal 2022.
SCL’s clientele includes large players such as Asian Paints, Lubrizol, MRF, Pidilite, among others. SCL also caters to the overseas market (mainly Europe and the USA), from which it derives 35-40% of total revenue. The top 10 customers contributed to 61% revenues in fiscal 2022. This helps in sustaining the revenues and not impacted with demand fluctuations from a single customer.
Gross current assets (GCAs) are in range of 120-140 days, because of receivables of 50-60 days and inventory of 50-60 days. The company extends moderate credit period to its customers and does not hold large inventory as the lead time to procure raw materials is low. Further the working capital cycle is expected to remain stable with expected GCA of around 130 days for fiscal 2022 and in the similar range over the medium term.
Networth is expected to be comfortable at Rs. 54-55 crores, with total outside liabilities to adjusted networth (TOLANW) ratio estimated at 0.5 time, as on March 31, 2022. It is expected to remain stable over the medium term with steady accretion to reserves. Debt protection metrics were comfortable due to high operating profit, with interest coverage and net cash accrual to adjusted debt ratios of estimated 5-5.5 times and 0.5-1 time, respectively, for fiscal 2022.
Weakness:
Turnover was moderate at Rs 198 crore in fiscal 2021 and is expected to be Rs 230-240 crore in fiscal 2022, given the large size of the industry SCL operates in. This restricts bargaining power with customers and suppliers given intense competition in the industry, with high fragmentation following low entry barrier, resulting in low pricing power.
The raw materials (which account for about 65% of operating income) are downstream petrochemical products (key input, ethylene oxide) and are therefore vulnerable to volatility in crude oil prices. |
Liquidity: Adequate Cash accrual is expected to be Rs 20-21 crore each in fiscals 2023 and 2024 against term debt obligation of Rs 4 crore in fiscal 2024 (for debt expected to be availed for capex); the remaining accrual will cushion liquidity. Current ratio was moderate at 1.08 times as on March 31, 2021, while cash and bank balance stood at Rs 3.6 crore. The company has recently been sanctioned working capital limit of Rs 40 crore will also support liquidity |
Outlook: Stable The company will continue to benefit from its healthy market position and established customer base. |
Rating Sensitivity factors Upward Factors:
Downward Factors:
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About the Company SCL was incorporated in 1986 as a private limited company. It was reconstituted as a public limited company and listed on the Bombay Stock Exchange in 1995.
SCL manufactures organic and other speciality chemicals such as surfactants, ethoxylation and antioxidants at its plant in Raigad (Maharashtra); these chemicals are used in the home and personal care, industrial formulations, paints and coatings, and agrochemicals segments.
In 2013, 62.36 % stake in SCL was acquired by Solvay SA (Solvay), Belgium, through its stepdown subsidiary, Rhodia Amines. In November 2021, the entire stake of Rhodia Amines was taken over by Indus Petrochem Ltd. Currently the company is managed by Mr. Jeet Malhotra and Mr. Virendrasingh Baidwal. |
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 - 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 30-Apr-2022 in line with the lender-wise facility details as on 30-Apr-2022 received from the rated entity.
Criteria Details
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