CRISIL has revised its rating outlook on the long-term bank facilities of Micas Organics Ltd (MOL) to ‘Stable’ from ‘Negative’, while reaffirming the rating at ‘BBB-’; the rating on the company’s short-term facilities has also been reaffirmed at P3. The outlook revision reflects CRISIL’s belief that MOL’s increasing revenue diversity will support its operating margin, and help sustain the improvement in its capital structure; the gearing has improved to 1.6 times as on March 31, 2010, from 3.05 times a year earlier. Furthermore, MOL’s liquidity is also expected to improve following the enhancement of its bank limits by Rs.30 million.

The ratings continue to reflect MOL’s diversified customer base and moderate operating efficiency. These rating strengths are partially offset by MOL’s below-average capital structure marked by high, though improving, gearing and low net worth, and its exposure to intense competition because of the fragmented nature of the pigment industry.

Outlook: Stable
CRISIL believes that MOL would continue to benefit from its established relationships with its end-user industries. The outlook may be revised to ‘Positive’ in case the company is able to sustain the improvement in its operating performance and improve its working capital management, thereby leading to further improvement in its capital structure. Conversely, any deterioration in the company’s gearing and debt servicing ability may result in a revision of the outlook to ‘Negative’.

About the Company
MOL, incorporated in 1988 as Dhiraj Intermediates Pvt Ltd (DIPL), was originally promoted by Mr. Dhiraj Tandel. Subsequently, the company was acquired by the late Mr. Dinkar Patel. In 2006, Mr. Patel had divested 49 per cent stake in the company to Mr. Rajul Shah and Mr. Bharat Shah. Currently, Mr. Rajul Shah looks after the day-to-day functioning of the company. In 2008-09 (refers to financial year, April 1 to March 31), the company received board approval for amalgamation of its other group entities–Blaze Pigments, Sunbright Pigments, Brighton Pigments, and Brighton Inorganics–with itself; it received court approval for this in 2009-10. The books of accounts have been consolidated for 2009-10. DIPL’s name was changed to MOL as of March 19, 2010.

MOL produces a range of chrome pigments with scarlet, yellow, and blue bases. It has a total capacity of about 600 tonnes per month, making it a leading player in this product segment. The company also manufactures 3,3 dichloro benzene. It exports its products to Turkey, Australia, Kenya, the United Arab Emirates, Iran, Thailand, the Philippines, Tanzania, Italy, and Spain. It has received an ISO 9001:2000 certification.

MOL reported a provisional profit after tax (PAT) of Rs.43 million on net sales of Rs.879 million for 2009-10, against a PAT of Rs.1 million on net sales of Rs.686 million for 2008-09.