| Tatva Chintan Pharma Chem Limited | ||||||
| Rating outlook revised to 'Negative'; Ratings Reaffirmed | ||||||
| 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 revised its outlook on the long term bank loan facilities of Tatva Chintan Pharma Chem Limited (TCPCL) to ‘Negative’ from ‘Stable’ while reaffirming the rating at ‘CRISIL A-‘. The short term rating has been reaffirmed at ‘CRISIL A2+’.
Revision in outlook reflects moderation in the business risk profile of the company. The company’s operating performance has been impacted in fiscal 2025 majorly on account of weaker global demand and increased competition impacting the end user base of company’s products. For H1FY25, the company has achieved a scale of Rs 174 crores with operating margin of 7%. Consequently, cash accruals are expected to be lower in fiscal 2025. Improvement in operating margin, during H2 of fiscal 2025 will remain key monitorable.
While the business risk profile has moderated, the financial risk profile has remained strong with lower reliance on external debt. The group has capex plans which will be funded through internal accruals and available liquidity. The financial risk profile is expected to remain strong over the medium term and will remain monitorable.
The ratings continue to reflect the company’s established market presence, supported by the extensive experience of its promoters, diversified product base and healthy financial risk profile. These strengths are partially offset by TCPCL's large working-capital requirements, and susceptibility to volatility in raw material prices. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of TCPCL and its wholly owned subsidiaries, which are its marketing arms, Tatva Chintan (USA) Inc and Tatva Chintan Europe B.V., herein after together referred to as TCPCL group, as there are operational and financial linkages between these entities.
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: Established market presence backed by the experience of the promoters: The company is the largest manufacturer of Structure Directing Agents (SDA) for Zeolites in India and leading manufacturer of some of the other products it has in its portfolio. Company will continue to benefit from its established position in the niche segment. Further, promoters’ experience of over 25 years, their understanding of industry dynamics and healthy relations with customers and suppliers should continue to support the business.
Healthy financial risk profile: Capital structure was strong, as reflected in networth and total outside liabilities to tangible networth ratio of Rs 733 crore and 0.09 times, respectively, as on March 31, 2024. Debt protection metrics were comfortable, as indicated by interest coverage and net cash accrual to adjusted debt ratios of 10.8 times and 3.35 times, respectively, in fiscal 2024. The financial risk profile is expected to remain strong over the medium term.
Weakness: Large working capital requirement: Operations have been working capital intensive, with gross current assets (GCAs) in range of 220-250 days over past 4 years through March 31, 2024. GCA were at 254 days as on March 31, 2024, driven by inventory, and receivable at around 176, and 65 days, respectively. High cash and cash equivalents have also resulted in high GCA.
Susceptibility to volatility in raw material prices: The raw materials consumed are primarily crude oil derivatives. Operating margin remains susceptible to volatility in raw material prices. This can be seen from operating margins in the range of 14-26% for the last 4 years ending fiscal 2024. While margins have moderated in H1FY25. Further the decline in margins has been on account of lower sales from the SDA segment where margins are higher. While operating margins are expected to improve, sustenance of the improved operating margins to be seen. |
Liquidity: Strong Liquidity is marked by net cash accruals expected to be over Rs 40 crores against minimal repayment obligations. Bank Limit Utilization is 24.85% utilized for the last 15 months ending June 2024. The company has cash and cash equivalent of Rs 14.76 crores as on September 30,2024. The group has capex plans which will be funded through internal accruals and available liquidity. |
Outlook: Negative CRISIL Ratings believes that TCPCL’s credit profile will remain under pressure on account of moderation in operating margin however will benefit from its strong and diverse product profile, established relations with customers and enhanced manufacturing capacities. |
Rating Sensitivity Factors Upward Factors:
Downward Factors:
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About the Group Incorporated in 1996, TCPCL is promoted by Mr Chintan Shah, Mr Ajay Patel, and Mr Shekhar Somani. The company manufactures Structure Directing Agents, Phase Transfer Catalysts, Electrolyte Salts for Super Capacitor Batteries and Pharma & Agro Intermediates and Specialty Chemicals. Its units in Ankleshwar and Dahej (both in Gujarat) together have 500 KL Reactor Capacity and 39 Assembly Lines.
TCPCL has set up two marketing arms Tatva Chintan (USA) Inc and Tatva Chintan Europe B.V. (in Netherlands) with warehouse facilities. |
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 - 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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Criteria Details
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