Detailed Rationale

Crisil Ratings has revised its outlook on the long-term bank facilities of Archean Chemical Industries Ltd (ACIL) to ‘Negative’ from ‘Stable’ while reaffirming the rating at ‘Crisil A’.

 

The revision in outlook factors Crisil Ratings’ belief that ACIL’s business levels and operating profits will be lower than earlier anticipated for the second consecutive fiscal due to lower bromine and industrial salt realisations and volumes, impacting cash generation. Besides, slow ramp up in utilization levels at its bromine derivative subsidiary, Acume Chemicals Pvt Ltd (ACPL, rated ‘Crisil A-/Negative’) in fiscal 2026. Also, delay in re-commencement of operations at other subsidiary, Idealis Mudchemie Pvt Ltd (IMPL), which was acquired from National company Law Tribunal (NCLT) in 2024. The company has commenced setting up a semi-conductor fab unit, SicSem Private Ltd (SPL) in Orissa, at a cost of Rs.2066 crore, which will be majorly funded by grants from the Government of India and Government of Orissa. However, the large size of the project exposes the company to project related risks.

 

Overall, the company’s debt levels have risen to fund capex at ACPL and additional investments in subsidiaries & in new technologies such bromine-based batteries. Minimal contribution from subsidiaries, moderation in own performance and ongoing investments along with slightly higher debt levels, have impacted the company’s return on capital employed (RoCE), which is estimated at ~10% in fiscal 2026, compared with ~25% in fiscal 2024.

 

That said, despite moderation in cash generation, the financial risk profile still remains adequate, and debt metrics are at healthy levels.

 

ACIL’s revenues declined by ~28% to Rs.1042 crore in fiscal 2025, from Rs.1339 crore in fiscal 2024, due to lower realisations and declined volumes of bromine and industrial salt, as well as lower contribution from ACPL. Bromine segment revenues fell by ~17% on primarily account of steep decline in realizations impacted by excess supply globally and contraction in demand in the end consumer segments. Industrial salt volumes were affected on account of cyclonic storm Asna hitting the Kutch region hard (where ACILs salt pans are located) with the region receiving very heavy rainfall. This led to loss of industrial salt stock amounting to Rs.40.2 crore (4.72 Lakhs MT) limiting the growth in sales for the segment. Besides, ACIL also faced supply chain issues in the middle of fiscal 2025 due to unavailability of trucks for transporting its end products to ports. Sale volumes of both bromine and industrial salt are expected to witness modest pick up in fiscal 2026 and along with similar realisations as well as slow ramp up in ACPL’s operations, ensure improvement in revenues to ~Rs.1250-1300 crore in fiscal 2026, still lower than expected. Revenue growth is expected at 8-10% over the medium term. ACIL’s operating profitability moderated to 28.4% in fiscal 2025 from 36.2% in fiscal 2024, impacted due to weak bromine and industrial salt realizations, loss of sales due to cyclones, higher freight costs, increase in power costs and other expenses and initial losses at subsidiaries. Over the medium term, operating margins are expected to settle at 25-26% on account of initial gestational losses and low margins at newly commenced businesses, as well with only marginal improvement in key product realizations.

 

Debt levels on a consolidated basis, which rose to Rs.178 crore at March 31, 2025, from Rs. 60 crore a year earlier, are expected to peak at ~Rs.550-600 crore by fiscal 2028, due to part funding of capex, mainly the semi-conductor fab project. Company has capex plans of Rs.100-125 crore annually in the current and next fiscal excluding the project at SPL.

 

However, despite the large capex plans at consolidated level, any material debt addition is unlikely, as ~75% of SPL’s project related capex will be funded by state govt of Odissa and GoI on pari passu basis. The remaining 25% will be funded by ACIL with a mix of debt and equity. Supported by strong net worth of Rs.1859 crore as of March 31 2025, expected debt addition for capex is expected to be gradual, will ensure healthy debt metrics; gearing is still expected at below 0.5 times, and interest cover at 13-15 times over the medium term. Annual cash generation of over Rs.230-290 crore will adequately fund the working capital requirements and will aid in retaining healthy cash surplus of over Rs.200-300 crore annually. ACIL also has additional liquidity in the form of sanctioned limits of Rs.165 crore which remain unutilized for the 10 months ended July 2025.

 

Crisil Ratings has taken note of the recent search operation conducted by the Income Tax Department at the offices, plants of ACIL and its subsidiaries which concluded on September 9, 2025. As per the management, ACIL has not yet received any demand or violation notices in terms of the Income Tax Act 1961. Hence, the financial impact arising on account of search operations is currently unknown. The business operations of ACIL remained unaffected and continued as usual. Crisil Ratings believes that the said event did not have any material bearing on the operating performance and financial profile of the company. However, any adverse development with respect to this investigation as well as any material liability arising from the search operation would be a key monitorable.

 

ACIL had set up a bromine derivatives plant under wholly owned subsidiary, ACPL, at a total planned project cost of Rs 251 crore with capacity of 28,000 metric tonne per annum (TPA). Phase 1 of the project included capacity of 18,000 MTPA to manufacture clear brine fluids (CBF), and catalyst for Poly terephthalic acid (PTA) synthesis (HBr). As of now phase 1 has commenced operations in fourth quarter of fiscal 2025 and contributed revenues of Rs.27 crore with operating loss of 2.6% during the last fiscal. Company has also received new orders for this segment and for full fiscal revenue contribution is expected to be around Rs.90-100 crore.

 

Phase 2, which involves flame retardants, was earlier expected to be completed in fiscal 2024. However, due to muted demand scenario and increased pricing pressure and competition, the project is delayed and could come onstream from fiscal 2026. It may be noted that for the ACPL project, ACIL had increased bromine capacity to 42,500 MTPA in January 2023 from 28,500 MTPA for its captive consumption. Due to integrated nature of operations and with expected ramp-up in  capacity utilisations from the end of this fiscal, ACPL is expected to make operating profits from next fiscal onwards.

 

ACIL won the bid to acquire IMPL and also received in final approval from National Company Law Tribunal (NCLT), which was under liquidation, in January 2024 through its wholly owned subsidiary, Ideallis, for a consideration of Rs 77 crore. The product profile of IMPL includes mud chemicals that find application in oil drilling. This will complement the CBF, which will be produced in ACPL and is used in oil drilling. IMPL has 6 facilities viz, 2 in Tamil Nadu, 3 in Andhra Pradesh and 1 in Gujarat. The acquisition is expected to enable ACIL to offer an expanded basket of products and also expand its customer base. IMPL’s plants have not been operational for the past 4-5 years, and refurbishment and other necessary approvals are under progress. During fiscal 2025, company spent around Rs.12 crore toward refurbishment of its Gujarat facility and ~Rs.20-30 crore is expected to be spent in the current fiscal. Post receipt of necessary approvals, IMPL is targeting to commence operations initially at its Gujarat plant by second half of current fiscal. While the peak revenue of IMPL was ~Rs 400-450 crore and operating profitability 10-12% in fiscals 2016 and 2017, the company is expected to incur operational losses in the current fiscal due to minimal scale of operations. However, from next fiscal onwards with addition of material revenues, operating profitability is expected to improve gradually.

 

During October 2024, ACIL announced its plans to foray into manufacturing of silicon carbide-based semiconductors. ACIL incorporated SPL for setting up an integrated facility to manufacture silicon carbide (SiC) based MOSFETs/ semiconductors with an annual capacity of 60,000 wafers and packaging capacity of 96 million units as part of the Indian Semiconductor mission. The proposed products will have applications in missiles, defence equipment, electric vehicles (EVs), railway, fast chargers, data centre racks, consumer appliances, and solar power inverters. The initial phase 1 project cost for this is estimated ~Rs.2066 crore, which will be funded 25% by ACIL and remaining 75% in the form of grants from Govt of Odissa and Government of India  on pari passu basis.

 

To this effect, ACIL has also entered into an agreement with a UK based technology partner, Clas-SiC wafer Fab Ltd (CWFL) specializing in silicon carbide (SiC) MOSFETs/device manufacturing (Semiconductor Industry). As part of the agreement, ACIL invested GBP 12.5 mn (~Rs.135 crore) in CWFL during third quarter of fiscal 2025. In addition, GBP 2.5 mn was loaned to CWFL. These funds will be utilized towards developing a blueprint for setting up its project in SPL. The project is still under financial closure stage while the construction is expected to take around 2-2.5 years. Hence, material revenue addition from SPL is likely to commence only from fiscal 2029 onwards.

 

Besides the above, ACIL also intimated the exchanges about its interest towards bromine-based batteries. The company entered into share subscription agreement with Offgrid Energy Labs. UK (Offgrid) during January 2025. ACIL invested USD 12 mn for stake to 21% in Offgrid in the ongoing quarter of fiscal 2026. This investment aligns with ACIL’s broader strategy to enter the energy storage sector, particularly focusing on applications in renewable energy, industrial storage etc. Established in 2018, Offgrid is an IP-led company specializing in zinc-bromide battery technology and is spearheaded by alumni of IIT Kharagpur in UK. Offgrid has developed patented battery technology based on Zinc Bromide chemistry with significant cost and performance advantages. The funds raised will be utilized to increase research and development on technology, commercialize its zincgel batteries. ACIL is supporting the establishment of a pilot manufacturing facility in the UK in next fiscal, with an intention to establish a giga-factory in India in near future to scale Zinc Bromide based battery production.

 

The ratings reflect the sustained healthy business risk profile supported by market leadership in the export of liquid bromine, diversified product portfolio, longstanding relationships with customers and healthy operating efficiency due to lower cost of production. The rating also considers the high entry barrier due to the quantum of investment required and long gestation period (4-5 years) for brine field development, limited availability of natural resource, and hence moderate competitive intensity. However, these strengths are offset by inherent volatility in realisations of products, customer concentration, vulnerability of output to heavy rains, exposure to risks associated with single location plants and project risk arising from the recently announced project to set up SiC based compound semiconductor fab in Odissa.

Analytical Approach

To arrive at the ratings of ACIL, Crisil Ratings has consolidated ACIL with its wholly-owned subsidiaries, (ACPL, Idealis Chemicals Pvt Ltd and Neun Infra Pvt Ltd) as well as stepdown subsidiaries (Idealis and SPL) since all the entities have financial linkages and common management.

 

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:

Healthy market presence and diversified product offerings

ACIL is one of the leading players in the bromine segment with the largest capacity in India. The company holds 60-70% market share in bromine exports. It is also one of the largest producers of industrial salt in India with capacity of over 4.8 million MTPA, which was enhanced to 6 MT in fiscal 2025. The industrial salt produced is primarily exported to Japan, South Korea, and China. Sojitz Corporation (Sojitz, rated ‘BBB/Stable’ by S&P Global Ratings as of August 2025) is the company’s largest customer for industrial salt with committed offtake of ~2.2 million MTPA annually, which it subsequently distributes across South Korea, Japan and China. Also, ACIL is the only player in Asia to produce sulfate of potash (SOP) from natural resources, which is used as fertilisers for chlorine sensitive crops. However, revenue contribution from SOP has been almost nil in fiscal 2025 as production is impacted by the high level of sodium chloride in raw material, thereby impacting yield. ACIL has been working with a Germany based technology partner to work on a process to overcome the above challenge and restart production of SOP. In fiscal 2023, bromine and industrial salt contributed 50% each to the total revenue. However, due to moderation in bromine prices from fiscal 2024 onwards and better performance of industrial salt, product mix changed with bromine contribution declining to 34% and industrial salt contribution increasing to 64% as of fiscal 2025.

 

The business profile of ACIL is supported by a diversified product basket largely comprising of bromine and industrial salt. Besides this company is also in the process of ramping up its other products such as clear brine fluids (CBF), and catalyst for Poly terephthalic acid (PTA) synthesis (HBr) and mud chemicals. The company enters into 3 to 9-month fixed price contracts for bromine and 12 to 24-month fixed price and volume contracts for industrial salt, which provide adequate revenue visibility to an extent. The contribution from Bromine is expected to decline further in fiscal 2026 with stable prices, as and when the contribution from CBF, HBr and OHPL commences. 

 

Healthy operating efficiency

Operating profitability ranged between 35-40% from fiscals 2021 and 2024 due to steep increase in bromine prices, favourable product mix and low cost of production because of fully integrated facility and quality of sea brine available in the Rann of Kutch. The steaming out process used to extract bromine is more cost effective than the blowing out process used in China and Japan. Hence, the company’s operations are power-intensive. Industrial salt and SOP are also produced through relatively cost-effective processes, resulting in overall production cost being lower than domestic and global peers. In fiscal 2025, operating profitability fell to 28.4% which is expected to further moderate due to product mix and initial gestational losses in ACPL and Ideallis, however it is still expected to remain healthy at 25-26% in the near to medium term.

 

Adequate financial risk profile

Networth was substantial at Rs 1859 crore as on March 31, 2025, supported by IPO proceeds of Rs 805 crore in November 2022 and healthy networth accretion in recent years. Sizeable capex addition in the recent past has led to sufficient capacity for key products. Pre-IPO, debt was elevated due to high-cost Non-Convertible Debentures (NCDs) and a volatile operating profitability, which led to aggressive debt metrics. Debt moderated after NCDs were retired, thereby strengthening debt protection metrics. Company is expected to avail debt of Rs.60-70 crore in this fiscal for its capex purposes. From next fiscal onwards, debt addition is likely around Rs.150-200 crore for funding the SPL project. Despite debt addition, consolidated financial risk profile is expected to remain healthy due to steady cash generation and continuing healthy liquid surplus. Net Debt to Ebitda expected to increase to 0.4-0.6 times in fiscal 2026 and 0.8-1.4 times due to project-related debt in fiscal 2027, while interest coverage ratio is expected to remain healthy at over 15 times. Any large debt addition or material depletion of cash surpluses will be monitorable.

 

Weaknesses:

Volatility in realisations of products and high customer concentration, albeit reducing

Realisations of bromine and industrial salt increased 2 times and 1.8 times, respectively, during fiscals 2018-2023 coupled with increase in capacity led to revenue increase of 3.3 times. Healthy demand for bromine and industrial salt, supply chain disruptions and reduced Chinese production due to resource depletion have firmed up realisations. After the highs seen in fiscal 2023, bromine prices declined 35% in fiscal 2024 and remained at almost similar levels in fiscal 2025. While better performance of the industrial salt segment mitigated steep fall in revenue to an extent, the company remains exposed to volatility in realisations, despite fixed-price contracts of 1-2 years. ACIL also enters into simple forward contracts, which will help mitigate the volatility.

 

Revenue contribution from industrial salt, bromine and bromine derivative stood at 64%, 34% and 2% respectively, in fiscal 2025. However, this is partially offset by some degree of diversity through end markets and diverse end use applications for the product. Geographically, ACIL derives 75-80% from the export markets while the remaining contribution from the domestic demand. This is largely offset through long-term contracts with its key customers in the export market.

 

ACIL derives ~25% of revenue from its top customer, Sojitz, and ~70% from its top 10 customers. The concentration risk is a little higher but improving in industrial salt wherein it has 8-10 customers, and Sojitz accounts for 50-55% (down from 60-65% previously) of the revenue. However, Sojitz is more a distribution company, supplying to multiple customers across Japan and South Korea and has long term contracts with the company. Also, end-user base is diverse in the bromine segment with about 43 customers in both the domestic and export markets. Ramp-up in production of SOP and timely ramp up of operations in the bromine derivative plant will help diversify product portfolio.

 

Vulnerability to climatic conditions and natural phenomena

Manufacturing facility is in Hajipir, Gujarat. Such locational concentration exposes the company to adverse weather and natural occurrences, as well as to regulatory, economic, demographic and other changes. The company’s operations can be significantly impacted by higher-than-expected rains in plant’s area. Generally, the performance is relatively muted in the first two quarters of the fiscal due to monsoon, which dilutes sea brine, thereby reducing yield. Also, Jakhau jetty, which is used to transport a portion of the industrial salt, is closed sometimes during monsoon and hence also impacts logistics. ACIL has taken steps to mitigate this impact to an extent by constructing ponds to store high-density brines and feed enrichment section.

 

For instance, during fiscal 2025, sales of industrial salt affected on account of cyclonic storm Asna hitting the Kutch region hard (where ACI’s salt pans are located) with the region receiving rainfall of over 180% of long-term average during the storm. This affected ACI’s salt volumes during second quarter of fiscal 2025 and partly of first quarter leading to loss of Industrial salt stock amounting to Rs.40.2 crore (4.72 Lakhs MT).

 

The company’s facility and brine reserves are on land that is held on lease. It entered into a memorandum of understanding (MOU) with the Government of Gujarat during the Vibrant Gujarat Summit dated January 13, 2005, and subsequently entered into a land lease agreement with the state government on July 14, 2008. It also executed a supplementary agreement on August 10, 2010. Subsequent to the expiry on July 31, 2018, a renewal application was filed on December 28, 2017, as per the guidelines laid down by the state government. As per the MOU and lease agreement, the lease term can be extended for a duration and conditions as mutually agreed. ACIL has been receiving demand notes annually for the revised lease rents as per the state government circular, and the management has been making these payments regularly. If the land lease is not renewed or terminated by the Gujarat government, the company may be required to relocate its operations or shut down its facility.

 

Exposure to project risk

Earlier, ACIL had been setting up Inorganic Bromide project (CBF and PTA catalyst) project, however it commenced operations from fourth quarter of fiscal 2025 and has been ramping up operations gradually. ACIL had announced its foray into manufacturing of SiC based Compound semiconductors. The facility will have annual capacity of 60,000 wafers and packaging capacity of 96 million units. The phase I of the project is expected to be set up at a cost of ~Rs.2066 crore which will be a significant investment. However, ACIL is required to fund only 25% of the project cost for which funding modalities are being finalized.. Remaining 75% fund requirements will be met by GoI and Govt. of Odissa. The funds from state government and GoI will be released on pari passu basis during the project execution. Although, stake of GoI and Govt of Odissa in completing the project exists, timely release of funds and timely completion of the project will be crucial to avoid any potential cost or time overrun. The project is also subject to global competition and supply chain vulnerabilities, including reliance on imported, specialized materials and equipment, which can be affected by geopolitical tensions and trade disruptions. Furthermore, as a high-technology and rapidly changing sector, there are risks associated with securing and retaining highly skilled professionals, alongside technological obsolescence. Any delays or failures in project execution, technology integration, or securing of government approvals and financial incentives could negatively impact the company's financial performance and returns on capital from the project.

Liquidity: Strong

Liquidity is driven by healthy cash generation expected over Rs 230-290 crore annually over the medium term which will be adequate to meet the capital expenditure requirements excluding the company’s ongoing semiconductor project. For the semiconductor project of ~Rs.2066 crore expected to be executed over a period of next 2-3 fiscals, ACIL is expected to fund 25% with mix of debt and internal accruals, while the 50% of capital requirements shall be funded by Govt of India as part of Indian Semiconductor mission project and remaining 25% by State Govt of Odisha. Regular capex at ACIL is expected around Rs.90-125 crore which will be met through internal accruals. Debt obligation of Rs 27 crore per annum from fiscal 2026 onwards will be serviced through internal accrual. Cash surplus were at Rs.268 crore as of March 31, 2025 and besides, this company has access to fund-based working capital limits of Rs 165 crore which has been sparsely utilized, adequately aiding to meet working capital requirements of the company.

Outlook: Negative

Crisil Ratings believes that business risk profile of ACIL is expected to remain steady over the medium term, supported by established market position in bromine and industrial salt, healthy customer relationships, competitive cost of production, high operating efficiency and forward integration into bromine derivatives. ACIL is also expected to sustain its adequate financial risk profile despite its large-scale capex plans ahead supported by steady cash generation and only moderate debt addition. However, project related risks remain elevated, and will bear watching.

Rating Sensitivity Factors

Upward factors

• Steady revenue growth with improvement in product diversity, and ramp up of operations at ACIL, and operating margin of over 30% leading to better-than-anticipated cash generation
• Sustenance of adequate financial risk profile and healthy liquidity

 

Downward factors

• Continued moderation in sale volumes and realisations impacting revenues, delay in ramping up of operations at subsidiaries, and decline in operating profitability (below 15-16%) impacting cash generation
• Further large debt funded capex/acquisitions/new product diversification enhancing project risk, any undue stretch in working capital cycle or adverse tax ruling, weakening debt metrics
• Support extended to group companies or sizeable cash used for inorganic growth depleting cash surplus
• Material impact on operations due to non-renewal of leasehold land containing brine reserves.

About the Company

Incorporated in 2009, ACIL is a leading speciality chemical manufacturing company with wide presence in the global markets which produces bromine, industrial salt and SOP. The company serves its products to 39 global customers across 13 countries, and to 30 domestic clients. ACIL has its manufacturing plant in Hajipir, Gujarat. It is first of its kind integrated unit in India to produce industrial salt, bromine and SOP. ACIL has an integrated facility in Rann of Kutch, which has abundant raw material, brine, is found in the brine reserves in this region.  ACIL is also the largest exporter of bromine and industrial salt from India, and also among one of the lowest cost producers of bromine and industrial salt globally.

 

As on June 30, 2025, the promoter group, led by Mr Ranjit Pendurthi, held 53.44% stake in ACIL, mutual fund comprised of 16.73%, insurance companies 3.42%, foreign portfolio investors & alternative investment funds of 15.56%, and the balance is held by the public and others.

 

On a consolidated basis, ACIL reported operating income of Rs 292 crore in the first three months of fiscal 2026 and operating margin of 26.7%, against Rs 213 crore and 33.5%, respectively, in the corresponding period of the previous fiscal.

Key Financial Indicators*

As on/for the period ended March 31		2025	2024
Revenue	Rs.Crore	1042	1339
Profit after tax (PAT)	Rs.Crore	162	317
PAT margin	%	15.6	23.7
Adjusted debt/adjusted networth	Times	0.10	0.04
Interest coverage	Times	41.38	59.07

Note: Crisil Ratings Adjusted numbers

Any other information: Not Applicable