| Transpek Industry Limited | ||||||
| Rating outlook revised to 'Positive'; Ratings reaffirmed; rated amount enhanced for Bank Debt | ||||||
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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 facilities and fixed deposit programme of Transpek Industry Limited (TIL) to ‘Positive’ from ‘Stable’ while reaffirming the ratings at ‘CRISIL A/CRISIL A1’.
The outlook revision reflects CRISIL rating's belief that the business risk profile likely to improve while maintenance of robust financial risk profile over the medium term. The company achieved revenue of Rs 609 crore in FY22 and achieved Rs 436 crore during H1FY23 (against Rs 290 crore during H1FY22) driven by established market position in chlorinated chemicals like thionyl chloride and various acid and alkyl chlorides which finds application in various key end user applications. With rise in capacity from August 2022 onwards and improved order flow, the revenue expected to grow at double digit over the medium term. Simultaneously, operating margin were volatile in range of 15-21% during past 5 years ended FY22 and 16.9% during H1FY23 and it should remain comfortable level over the medium term. The working capital of company was steady with GCA of 146 days in FY22 (against 161 days in FY21) backed by improvement in debtor days which led to lower reliance on external bank borrowings thereby strengthening its financial risk profile. The gearing was in range of 0.3-0.5 times for the past three fiscal ended March 31, 2022. In absence of large debt funded capex, and unrelated diversification plan, financial risk profile is expected to strengthen over the medium term.
The ratings reflect TIL’s diversified revenue in terms of end-user industries, and geographic presence and the healthy financial risk profile. These strengths are partially offset by working capital intensive operations, high product and customer concentration risk, and exposure to risks inherent in the chemical industry. |
Key Rating Drivers & Detailed Description Strengths:
The company caters to various industries, such as polymers, agrochemicals, plastics, performance materials, coatings, pharmaceuticals, personal care, and flavours and fragrances. Furthermore, overseas markets, including the US, South Korea, and Europe, contribute over 75% to the revenue. The company has shown healthy recovery in performance with revenue of Rs 609 crore in FY22 and Rs 436 crore in H1FY23. Company is also expecting to derive benefit from recently enhanced capacity in August 2022 and revenue should grow at healthy pace over the medium term.
Financial risk profile is strong, driven by healthy networth of over Rs 309 crore and gearing of 0.42 time as on March 31, 2022. Debt protection measures were robust, as reflected in interest coverage and net cash accrual to total debt ratios of 10.5 times and 70%, respectively, in fiscal 2022.
Weaknesses:
Operations are working capital intensive with expected gross current assets (GCA) of around 4-5 months driven by receivables and inventory of 61 and 48 days in FY22. As on September 30, 2022, these had moderated to 51 days and 37 days respectively. However, operations are better managed than the previous fiscal on account of better revenue contribution from various products.
With a key product contributing significantly to topline through sales to a single customer, TIL faces pronounced product and customer concentration risks. This is mitigated by a long-term ‘take-or-pay’ supply agreement with the customer.
Revenue and profitability are exposed to government policies related to pollution control, product toxicity, or import and export of raw materials. |
Liquidity: Strong The company is expected to generate annual cash accruals of over Rs 95 against its repayment of less than Rs 15 crore. Bank limit utilisation averaged below 34% over the 12 months through October 2022. Company has freely available cash bank balance of over Rs 35 crore currently. The steady working capital cycle and absence of any large capex coupled with healthy accruals shall ensure that healthy liquidity for company. |
Outlook: Positive CRISIL Ratings believes TIL likely to benefit from established market position in chlorinated chemicals, established relationships with reputed customers and robust financial risk profile. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company Incorporated in 1965, Vadodara (Gujarat)-based TIL manufactures and exports chemicals, mainly acid and alkyl chlorides. Export contributes to over three quarters of the revenue, with the domestic market accounting for the remaining. The company is listed on the Bombay Stock Exchange. TIL is promoted by Shroff family. |
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 20-Jan-23 in line with the lender-wise facility details as on 20-Jan-23 received from the rated entity.
Criteria Details
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