Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil A/Stable/Crisil A1’ ratings on the bank facilities and short-term debt of DIC India Ltd (DIC India).

 

The rating reaffirmation continues to reflect the company’s stable performance with revenue growing 6% to Rs 887 crore in 2024 (Rs 833 crore in 2023), driven by improvement in demand from the packaging segment, export revival and increased contribution from the toluene-free ink segment, which started operations in 2023. However, realisations declined by 2% on account of softening of raw material prices. Operating margin improved to 4.8% in 2024 from 1.7% in 2023 owing to increased contribution from toluene-free ink, a higher margin product, and improvement in other expenses post closure of the loss-making Kolkata plant. This, along with the company’s cost cutting measures, such as undertaking Kaizen mechanism for improved operating efficiency and controlling fixed cost have also led to improvement in margins. In the first six months of 2025 company has reported revenue of Rs 437 crore compared to Rs 441 crore in corresponding period in 2024, a decline of 1% largely due to a bulk one time sale to one customer in same period last year. Operating profitability moderated to 3.7% in the first six month of 2025 from 4.5% in the same period last year, primarily due to one-time expense of Rs 2 crore owing to forex loss. Gross margins however remained stable and over the medium term margins are expected to remain at 4-5%.

 

The financial risk profile was healthy with adequate networth of Rs 418 crore as on June 30, 2025, and nil debt on the books. Debt protection metrics will likely remain strong with the company not expected to tie up additional debt. Liquidity was strong with cash surplus of Rs 42 crore as on June 30, 2025. Also, bank lines of Rs 151 crore remain fully unutilised. Expected annual cash accrual of Rs 40-45 crore will sufficiently cover capital expenditure (capex) and working capital requirement.

 

The ratings also factor in the stable operational performance of the parent, DIC Corporation, Japan, in 2024, with revenue improving by 3% to 1071.2 billion yen from 1038.7 billion yen and operating margin improving to 9.1% in 2024, from 7% in 2023. In the first six months of 2025 company has earned revenue of 523.3 billion yen compared to 538.8 billion yen in 2024 with operating margin improving to 9.3%, from 8% over the six months through 2025. With no increase in debt and improvement in profitability, the parent’s interest coverage ratio has improved to ~11.6 times in 2024 from ~6.3 times in 2023. Gearing improved to 1.27 times as on December 31,2024, from 1.47 times as on December 31, 2023. These ratios are expected to improve further on account of improving revenue and profitability. The operating performance of DIC India will remain monitorable.

 

The ratings continue to reflect the strong position of DIC India in the domestic printing inks market, its healthy financial risk profile and the strong technological and managerial support received from the ultimate parent, DIC Japan, a global leader in printing inks. These strengths are partially offset by susceptibility to risks inherent in the printing ink industry and modest operating profitability.

Analytical Approach

Crisil Ratings has factored in the business and need-based financial support available to DIC India from DIC Japan.

Key Rating Drivers - Strengths 

Established position in the printing inks industry: DIC India is one of the largest player in the domestic printing inks industry (DIC Corp is largest global player in Inks) with presence in newsprint, publication and packaging industries. The company introduced flexi-packaging toluene-free ink in 2023. It is increasingly focusing on the packaging ink segment to meet demand from end-user industries. Revenue share from the packaging segment has been picking up over the past 4-5 years and is expected to go up further. Strong presence in the packaging segment may also result in higher profitability.

 

Strong technological, managerial and need-based financial support from DIC Japan: DIC India receives strong support from its parent in terms of technology transfer, process improvement and understanding of the global printing inks business. Moreover, DIC Japan is actively involved in DIC India's operations and product development initiatives. As per policy, the parent will also meet the financial needs of DIC India in case of distress.

 

For DIC Japan, gearing and interest coverage ratio improved to 1.27 times and 11.60 times, respectively, in 2024 from 1.47 times and 6.30 times, respectively, in 2023. In 2024, DIC Japan achieved revenue of JPY 1,071.2 billion (JPY 1,038 billion in 2023) with operating margin of 9.1%.

 

Healthy financial risk profile: At standalone level, gearing was nil as on June 30, 2025, on account of absence of debt and nil bank limit utilisation over the 12 months through July 2025. Debt protection metrics of DIC India were healthy, as reflected in interest coverage ratio of over 25 times in the first six months of 2025. Capex is expected at Rs 10-15 crore, mainly for maintenance purposes, and will likely be funded entirely through internal accrual and cash surplus (Rs 42 crore as on June 30, 2024).

Key Rating Drivers - Weaknesses 

Modest operating efficiency: For the first half of 2025, the company reported operating margin of ~3.7% (4.5% in the first half of 2024). The operating margin has improved significantly in 2024 on account of stabilization and increasing utilization of the new facility of toluene-free ink, leading to improvement in the product mix and decline in other expenses and employee costs because of the Kolkata plant closure, and improving efficiency measures, such as undertaking the Kaizen mechanism. Operating margin improved to 4.8% in 2024 from 1.7% in 2023. Over the medium term, the operating margin will likely improve with increasing share of revenue from the toluene-free ink segment. RoCE has ranged between negative 0.04% and 6% in the last five years on account of fluctuations in profitability. The company’s ability to improve its operating margin (by passing on any price hike) remains a key monitorable.

 

Susceptibility to risks inherent in the printing ink industry: The printing ink business is inherently working capital-intensive. Substantial decline in newspaper ink demand (from 33% in 2017 to 23% in 2024) was mainly owing to migration of users to online news, which got a boost during the Covid-19 pandemic. Revenue remained range-bound on account of sluggish demand from the newsprint ink segment. The operating margin remains susceptible to volatility in prices of petroleum-based raw materials and foreign exchange rates. Moreover, intense competition restricts pricing flexibility, resulting in modest profitability and low return on capital employed.

Liquidity Strong

Liquidity will remain healthy, with cash accrual expected to be Rs 40-45 crore per annum against nil debt obligation and yearly capex of Rs 10-15 crore over the medium term. Liquidity is supported by cash surplus of Rs 42 crore as on June 30, 2025, and nil utilised fund-based bank limit of Rs 151 crore as on July 31, 2025.

Outlook Stable

DIC India will continue to benefit from its healthy financial risk profile and support from the parent. However, the business risk profile will remain susceptible to fluctuations in raw material prices.

Rating sensitivity factors

Upward factors

• Increase in revenue driven by higher market share in the domestic ink segment through better product mix and segment diversity
• Sustained improvement in operating margin to over 5% 
• Improvement in the credit risk profile of the parent or enhanced support from the parent

 

Downward factors

• Sustained weak operating performance with operating margin below 2% leading to lower cash accrual
• Large, debt-funded acquisition or capex or stretched working capital cycle weakening the capital structure or debt protection metrics
• Reduced support from the parent or weakening in the credit risk profile of the parent

About the Company

DIC India (formerly, Coates of India Ltd) manufactures printing inks, including newsprint inks, offset inks, liquid inks, flexographic inks and lamination adhesives used in the newspaper, publishing and packaging industries. The company’s facilities are in Ahmedabad, Saykha, Noida and Bengaluru. The company has the one of the largest ink manufacturing capacity in India at ~53,000 TPA. Singapore-based DIC Asia Pacific Pte Ltd, a wholly owned subsidiary of DIC Japan, holds 71.75% equity stake in DIC India.

 

As on June 30, 2025, the company reported revenue of Rs 437 crore (Rs 441 crore in the same period a year earlier), and earnings before interest, tax, depreciation and amortisation of Rs 16 crore (Rs 20 crore in the same period a year earlier).

Any other information: Not Applicable