Detailed Rationale

Crisil Ratings has revised its outlook on the long-term bank facilities of Chemplast Sanmar Ltd (CSL) to ‘Negative’ from ‘Stable’ while reaffirming the rating at ‘Crisil A+’. The short-term rating has been downgraded to ‘Crisil A1’ from ‘Crisil A1+’.

 

The rating action follows Crisil Ratings’ expectations that CSL’s performance would continue to remain under pressure in the near term, due to weak realizations of suspension polyvinyl chloride (S-PVC, 60% of CSL’s revenues) and paste PVC, leading to lower than anticipated operating profits. While the final anti-dumping duty (ADD) was announced on paste PVC for five years in March 2025 (provisional ADD imposed between July-December 2024), cheaper imports from Europe and Japan, which were excluded in the countries where ADD was applied, continued and impacted domestic realizations. Further, final findings on ADD on suspension PVC (S-PVC) has been announced and is awaiting implementation, resulting in continuing cheaper imports, impacting realizations, at subsidiary, Chemplast Cuddalore Vinyls Ltd (CCVL, rated ‘Crisil A+/Negative/Crisil A1’).  In addition, CSL has invested over Rs 1000 crores over the past 3-4 fiscals in expanding its capacity in custom manufactured chemicals division(‘CMCD’) which is yet to significantly contribute to operating profits.

 

Crisil Ratings expects CSL’s revenue growth in fiscal 2026 will be driven by higher offtake at its CMCD, and full benefit of enhanced paste PVC capacity; however will be offset by continued modest realizations of S-PVC and paste PVC. Even as operating profits are expected to be significantly lower than expected in fiscal 2026, debt levels are expected at Rs.1800-1900 crore by end of fiscal 2026 due to capacity expansion at the CMCD, including for new products, preventing envisaged protection in key debt metrics. Meaningful recovery in operating profits will depend on timely implementation of ADD on S-PVC and ADD on paste PVC including Europe and Japan. The final findings on the investigation of dumping of S-PVC have been notified by Directorate General of Trade Remedies (DGTR) on August 14 ,2025. The final implementation will be done by Finance Ministry. The ratio of net debt to earnings before interest, tax, depreciation and amortization (net debt/EBITDA) is expected to remain moderate at 4-4.5 times in fiscal 2026 compared to 5.11 times in fiscal 2025. Also, interest cover is expected to remain modest at 1.1-1.2 times in fiscal 2026. While CSL’s financial risk profile is moderate, unencumbered steady state liquid surpluses of Rs.550-600 crore provide comfort, especially when operating cash flows are volatile.

 

Even though demand for both paste and suspension PVC continues to be strong, and operating profits are expected to materially improve from fiscal 2027, with full benefit of ADD expected to be available, debt protection metrics will witness only a gradual recovery over the medium term. Also, any delay in implementation of ADD resulting in continued modest realizations and low operating profits will remain a monitorable.

 

Earlier, in the first quarter of fiscal 2026, CSL’s revenues declined by 4% driven by moderation in realizations of S-PVC due to continuing cheap imports from China and. Operating profitability declined to 1.6% in the first quarter of fiscal 2026 compared to 10.8% in the corresponding period last fiscal. The moderation was majorly driven by operating losses in CCVL as high cost finished goods stock were diluted in first quarter.

 

The ratings continue to factor CSL’s established market presence in the PVC segment (both paste, and S-PVC through CCVL), diversified revenue stream catering to multiple end user industries, long standing relationship with customers and healthy demand prospects for its products. The rating also factors in the long vintage and experience of the promoters in the PVC and chemicals sector and integrated nature of operations. However, these strengths are partially offset by commoditized nature of products (S-PVC) which lends variability to operating margins, and the company’s moderate financial risk profile. Besides there is also high import dependence of key raw material for S-PVC business (Vinyl Chloride Monomer {VCM}), which exposes the company to risk in foreign exchange fluctuations. The same is nevertheless being managed through effective hedges.

Analytical Approach

For arriving at the ratings, Crisil Ratings has consolidated the business and financial profiles of CSL and its 100% subsidiary, CCVL. This is due to the strong business and financial linkages between the companies. Both companies (CSL and CCVL) adopted fair value method of accounting in fiscal 2019, in line with Ind AS accounting standards, and accordingly revalued their assets, and created a combined revaluation reserve of ~Rs.1500 crore. The same has been knocked off against the consolidated net worth. Depreciation has also been considered without the impact of revaluation of assets, and accordingly profit after tax has been adjusted from fiscal 2019 onwards.

 

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:

Diverse revenue streams and healthy demand prospects: CSL’s business risk profile benefits from its established market position in India in the PVC (paste and suspension) segment and in the chlor alkali business in South India. The company is the largest player in the domestic specialty paste PVC business (~80% market share basis production capacity and ~45% considering imports) and second largest player in the S-PVC business (~20% market share basis production capacity and ~10% considering imports). The company has also undertaken complex custom manufacturing chemicals of starting materials and intermediates for consumption by life sciences and fine chemical sectors, adding to its business diversity. In addition, CSL also manufactures caustic soda, chloro-methanes, refrigerant gases and hydrogen peroxide.

 

Out of country’s 4 million tonne of annual S-PVC demand, 2.5 million tonne is imported. Reliance Industries Ltd (RIL, rated ‘Crisil AAA/Stable/Crisil A1+’) is planning to set up PVC and chlorinated PVC manufacturing facilities at its existing locations in Dahej and Nagothane with a cumulative production capacity of 1.5 million tonnes per annum (MTPA). These integrated facilities are expected to commence commercial production in fiscal 2027. Besides, the Adani Group is proposing a 1 million MTPA PVC plant in Mundra, Gujarat, through its step-down subsidiary Mundra Petrochem Limited. The plant, expected to be commissioned in fiscal 2028, will produce various PVC grades, including suspension, chlorinated-PVC, mass, and emulsion PVC, as well as other components like VCM and ethylene. Despite these capacities coming up, India will remain dependent on imports for over 40% of requirement, even post these new capacities coming on stream. Revenue visibility for CSL over the medium term will be driven by steady demand for both suspension and specialty paste PVC resin and offtake in CMCD businesses, while contribution from the chlor alkali segment is expected to remain stable. PVC realizations dipped in fiscal 2023 and fiscal 2024 post highs witnessed in fiscals 2021 and 2022 but largely stabilised in fiscal 2025. Also, capex in the CMCD business will ensure further diversification in revenue streams as well as strengthen the overall business risk profile. The CMCD division is aiming to triple revenues in the next 3 years. This will lend further diversity to CSL’s revenue streams and lower concentration on the PVC businesses.

 

Integrated nature of operations: CSL’s plant at Mettur for manufacturing of specialty paste PVC resin and chlor alkalis is highly integrated with captive salt mines (on lease) and captive power plant to meet requirements for its chlor alkali business. Chlorine derived from caustic soda manufacturing is then combined with ethylene to produce ethylene dichloride which is converted to specialty paste PVC resin. Imported methanol and chlorine are used to manufacture chloro-methanes, while hydrogen produced through the salt electrolysis route is used to produce hydrogen peroxide. CSL and CCVL have their own marine terminals at Karaikal and Cuddalore for importing ethylene and VCM (key raw material for suspension PVC) respectively. The company has also entered into a captive power arrangement with a third-party power producer which is expected to reduce power costs by ~ Rs. 50–60 crores annually from fiscal 2027.

 

Experience of Sanmar Group in the chemicals and PVC business: The Sanmar group has been engaged in the manufacturing of chemicals and PVC sectors for over five decades. The group also has presence in shipping and engineering sectors through other entities. The promoters have scaled up the domestic PVC/chemicals business to over USD 500 million and is an established player in the domestic markets for its products. The Sanmar group also ventured in the international markets through an acquisition in Egypt (TCI Sanmar Chemicals S.A.E (TCI Sanmar), rated ‘Crisil BB+/Stable/Crisil A4+) in 2007 and has expanded the entity to being a major PVC and chlor alkali player in the MENA region. The group’s PVC/chemicals business has consolidated revenues of over USD 1.2 billion, making the group a major player in this space. This has also enabled the Group to attract investments from marquee investors like Fairfax Group and also raise funds via an initial public offering at CSL, wherein it raised Rs 3850 crore in August 2021.

 

Weaknesses:

Vulnerability to fluctuations in PVC prices and regulatory risk: Profitability of PVC manufacturing companies depends on the prevailing PVC and VCM prices. Cyclical downturns have resulted in variations in operating profitability for these players including CSL. Import of PVC currently attracts an import duty of 7.5% (earlier at 10%) while duties on import of key raw materials is negligible. PVC prices are also significantly affected due to fluctuations in supply of PVC from China, which is the largest consumer and producer of PVC. The slowdown in their domestic economy has led to huge quantities being dumped in the global markets, especially India, resulting in considerable correction in PVC prices since fiscal 2023. 

 

Operating margin which was below 1% in fiscal 2024 due to lower PVC realizations improved to 5% in fiscal 2025 on account of better product prices in the first quarter of fiscal 2025 and increased contribution from CMCD. Further, improvement in operating margin is contingent upon timely implementation of ADD. CSL is rationalizing other fixed costs and expanding its custom chemicals manufacturing business which will partially insulate the margins from fluctuating PVC prices. The PVC segment, supported by better product prices, will continue to contribute significant portion of the operating profits, with ADD being imposed on paste PVC (excluding Europe and Japan), and with ADD expected on suspension PVC.

 

High dependence on imported raw materials exposes company to risk of forex fluctuations: CSL on a consolidated basis has high import requirements for procuring ethylene, methanol and VCM for paste PVC, chloro-methane and suspension PVC respectively. CSL imports close to 90% of its raw material requirements, which exposes its profitability to forex fluctuations. To mitigate the forex risk, CSL uses plain vanilla forwards to hedge 100% of its imports. Further, pricing of PVC products (paste and suspension resin) are generally dollar linked on import parity basis which provides additional natural hedge.

 

Moderate financial risk profile: Financial risk profile of the company is moderate, and is expected to witness gradual improvement, with better profitability, which will aid cash generation in fiscal 2027. Unencumbered cash surplus of over Rs. 500-550 crores also supports the financial risk profile. Due to expanded paste PVC capacity and continuing investment in expansion of CMCD capacity, total debt has increased to Rs 1841 crores by end of fiscal 2025 from below Rs.1000 crore in fiscal 2022.

 

Phase-1 & 2 of the CMCD has been already completed. Due to better order visibility, CSL has decided to expand the custom manufacturing capacity further with phase 3 and phase 4. Phase 3 will be completed and commence operations by fiscal 2026. Civil and infrastructure for phase 4 will also be ready by fiscal 2026. These projects will be funded by mix of debt and accruals/liquid surpluses. Further, CSL has obtained environmental clearance for setting up facility to manufacture refrigerant gases (R-32). The final project sizing will depend on the quota allocation by the government. Given the debt addition for the capex including the R-32 project, the debt levels will continue at around Rs 1800-1900 crores by end of fiscal 2026 resulting in continued modest debt metrics. Net debt/EBITDA and interest cover is expected at ~4-4.5 times and 1.1-1.2 times in fiscal 2026 compared to 5.11 times and 1.12 times respectively in fiscal 2025. Further gradual improvement in these metrics is expected over the medium term, with better contribution from CMCD, savings in power costs and improved PVC realisations, subject to implementation of ADD.

Liquidity: Strong

Liquidity is expected to remain strong supported by unencumbered cash and cash equivalents estimated at Rs 550-600 crores as on June 30,2025, which Crisil Ratings expects will be sustained over the medium term. Cash accruals are expected to remain moderate at ~Rs 80-100 crores in fiscal 2026 (Rs 87 crores in fiscal 2025) and improve to above Rs 250 crore over the medium term. The company has annual debt repayment of Rs 186 crores in fiscal 2026 and Rs 220-230 crores in fiscal 2027 which will be funded by internal accruals and cash surpluses, if required. CSL has access to bank lines of Rs 725 crore which have some cushion, further supporting liquidity.

Outlook: Negative

Crisil Ratings expects that over the medium term the revenue growth will be driven by increased contribution from CMCD and optimal utilisation of enhanced paste PVC capacity however ,meaningful recovery will be augmented by timely implementation of ADDs on S-PVC and paste PVC. On account of continued capex plans and lower than expected recovery in operating profitability, debt metrics are expected to remain modest, with improvement in financial risk profile dependent on the recovery in profitability. No support is expected to be rendered to associate entities or to the holding company over the medium term.

Rating sensitivity factors

Upward Factors:

• Recovery in revenue growth, supported by better PVC product realisations, revenue diversity including contribution from CMCD, also improving operating margins to over 8%
• Sustained improvement in financial risk profile supported by better cash generation, prudent capex spending, and better working capital management reflecting in healthy debt metrics; for instance net debt/EBITDA sustaining below 2.5 times

 

Downward Factors:

• Significant moderation in business performance with operating margins sustaining below 4-5%, also impacting cash generation
• Significant increase in debt levels due to capex, acquisitions, or elongation of working capital cycle impacting key debt metrics; for instance, net debt/EBIDTA in excess of 5 times
• Material support, direct or indirect, to promoter holding company or associate companies, especially TCIS
• Moderation in liquidity position including cash surpluses, compared with expectation.

About the Company

CSL, part of the South India based Sanmar Group, is among the leading PVC and chemicals player in India. CSL completed its IPO on August 24, 2021 and post IPO promoter shareholding is ~55% and balance 45% is with the public.

 

CSL started operations in 1967 with manufacturing of PVC. CSL, on a standalone basis, has installed capacities for manufacturing 107,000 tonne per annum (tpa) of paste PVC resin, 119,000 tpa of caustic soda, 35,000 tpa of chloromethanes and 34,000 tpa of hydrogen peroxide and 4,500 tpa of custom manufactured chemicals across 3 locations in Tamil Nadu. Additionally, CCVL has manufacturing capacity of 331,000 tpa of S-PVC at Cuddalore.

 

CSL (standalone) reported a net loss of Rs.28.4 crores on net sales of Rs. 495.3 crores in the first quarter of fiscal 2026, compared with net loss of Rs. 2.7 crores on net sales of Rs. 559.8 crores during corresponding period of previous fiscal.

 

CSL (consolidated) reported a net loss of Rs.64.3 crores on net sales of Rs. 1099.9 crores in the first quarter of fiscal 2026, compared with profit after tax of Rs. 23.9 crores on net sales of Rs. 1144.9 crores during corresponding period of previous fiscal.

Key Financial Indicators (Consolidated)*

Particulars	Unit	2025	2024
Revenue	Rs. Crore	4346	3924
Profit After Tax (PAT)	Rs. Crore	(45)	(115)
PAT Margin	%	(1.0)	(2.9)
Adjusted Debt/Adjusted net worth	Times	13.3	22.71
Interest Coverage	Times	1.11	0.57

*Crisil Ratings Adjusted

Any other information: Not Applicable