| The Dharamsi Morarji Chemical Company Limited | ||||
| Rating reaffirmed at 'CRISIL BBB+/Stable' | ||||
| 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 reaffirmed its 'CRISIL BBB+/Stable' rating on the bank loan facilities and fixed deposit programme of The Dharamsi Morarji Chemical Company Limited (TDMCC).
The ratings continues' to reflect TDMCC's established market position in the chemical industry and an above-average financial risk profile. These strengths are partially offset by exposure to volatile end products and raw material prices and regulatory risks. |
Key Rating Drivers & Detailed Description Strengths: Established market position in the chemicals industry: Company's established market position in the chemical business is backed by a diversified product portfolio, strong clientele, and experienced management. TDMCC, a pioneer in manufacturing sulphuric acid and Sulphur chemistry products with diversified product portfolio which includes specialty and commodity chemicals, primarily based on sulphuric acid, ethanol, and boric acid chemistries. DMCC has presence in domestic and overseas market and has forged strong relations with reputed clients across geographies. Furthermore, the products find applications in many end-user industries, thus allaying any sectoral concentration risk. TDMCC's business risk profile is also bolstered by the promoters' extensive experience and longstanding presence in the chemical industry. Enhanced capacities expected commence operations over the medium term should support business risk profile
Above-average financial risk profile: TDMCC's financial risk profile is reflected in healthy networth sand strong capital structure, with total outside liabilities to adjusted net worth ratio of 0.97 time as on March 31, 2022. Debt protection metrics are strong, as reflected in interest coverage of 11.84 times and net cash accrual to adjusted debt ratio of 0.3 times in fiscal 2022. Major Part of the Planned Capital expenditure is over and minor is in final stages of completion. There is no further capex expected until the existing expansion is completed, and the operations are stabilised. The financial risk profile is expected to remain healthy, supported by healthy accruals and absence of any further large capex over the medium term., the financial risk profile is expected to remain healthy, supported by healthy accruals and staggered nature of capex. Nevertheless, ramp-up of enhanced capacities will remain rating sensitivity factors.
Weaknesses: Susceptibility to fluctuations in commodity chemicals and raw material prices: Profitability is susceptible to price fluctuations in raw material as well as end products. Major raw materials are Sulphur, benzene, ethanol, and boron, etc. and raw material cost account for about 55-60% of total sales. Any adverse fluctuation in raw material prices can impact profitability. Furthermore, commodity chemicals account for about 40% of sales, where competition is high and the ability to pass on price fluctuations is limited. This is reflected in volatile operating margin of 12-18% (12.4% in fiscal 2021) over the three years through fiscal 2022. While operating margin was impacted due to sharp fall in raw material prices and forex movement in Q2 of fiscal 2023, company's operating margin is expected to improve over medium term.
Exposure to regulatory risks: Company is into manufacturing of chemicals from sulphur and ethanol chemistry; due to its hazardous nature, it is exposed to regulatory risks. |
Liquidity: Adequate Net cash accrual, expected at Rs 35-50 crore per fiscal over the medium term, should sufficiently cover yearly debt obligation of around Rs 15 crore per annum. Company has no major debt funded capex plans over the medium term. Bank limit utilisation was low, averaged at 78% over the 13 months through October 2022. Low gearing and moderate net worth also support financial flexibility |
Outlook: Stable CRISIL Ratings believes that TDMCC will continue to benefit from its established market position, enhanced capacities and comfortable financial risk profile |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company Incorporated in 1919, TDMCC primarily manufactures commodity and specialty chemicals, with plants in Roha (Maharashtra) and Dahej (Gujarat). Borax Morarji Ltd, a group company, was amalgamated with DMCC with effect from April 01, 2016. TDMCC is listed on the Bombay Stock Exchange.
TDMCC was earlier engaged into manufacturing of phosphate fertilisers, such as single super phosphate, under its well-known 'Ship' brand. The company has discontinued fertiliser manufacturing since 2007 |
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 | ||||||||||||||||||||||||
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This Annexure has been updated on 07-Dec-2022 in line with the lender-wise facility details as on 07-Dec-2021 received from the rated entity.
Criteria Details
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