Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AA+/Stable/Crisil A1+’ ratings on the bank facilities of Gujarat Fluorochemicals Ltd (GFL).

 

Crisil Ratings has withdrawn its rating on GFL’s non-convertible debentures aggregating Rs 50 crore on their redemption and on receipt of independent confirmation that these instruments are fully redeemed. This is in line with the Crisil Ratings policy on withdrawal of rating. (Refer to 'Annexure - Details of Rating Withdrawn').

 

The rating reaffirmation factors in GFL’s sustained healthy operating performance, as reflected in revenue of Rs 3,628 crore for the first nine months of fiscal 2026, compared with Rs 3,512 crore for the corresponding period of the previous fiscal. This was supported by strong growth in the first half of 2026 in the fluoropolymers (FP) segment while other segments showed subdued performance.

 

The operating margin also showed recovery, increasing to 27% in the first nine months of fiscal 2026 from 23% in the corresponding period of fiscal 2025 (24% in fiscal 2025). The margin has improved intermittently— it reached 30% in the second quarter of fiscal 2026 but was subdued in the third quarter due to weak demand due to elevated US tariffs and holiday season in the US and Europe. The operating performance in the third quarter was also impacted by production quota restrictions in the fluorochemicals business, which constrained R-22 production volume.

 

GFL’s operating performance is expected to recover over the next few quarters, which will remain key monitorable. This will be driven by the FP segment, with bottoming out of the destocking phenomenon and tariff rationalisation in the US leading to recovery in demand and improved realisations. Exit of a few legacy players and commercialisation of some new FPs, which are in advanced stages and should start contributing significantly from the first half of fiscal 2027, will also aid the operating performance.

 

The company’s battery chemical business saw investment of ~Rs 1,700 crore as of January 2026, out of planned capital expenditure (capex) of Rs 6,000 crore in the next 2-3 fiscals. However there was no significant revenue and profitability from the segment in the first nine months of fiscal 2026, constraining the overall return on capital employed (RoCE; 9.0% in fiscal 2025). The new FP segment comprises products such as salts (Lipf6), binders (polyvinylidene fluoride or PVDF) and electrolytes (LFP), which are used in high-growth sectors such as electric vehicle (EV) batteries, hydrogen fuel cells and semiconductors. GFL is well-positioned to cater to these segments given its expertise in fluorine chemistry, significant investments and the China-plus-one sourcing strategy of end-users. This segment will drive revenue growth over the medium term. Hence, improvement in the product mix is likely to help reduce volatility and aid sustenance of strong operating margin. This ramp-up of the new FPs leading to improvement in RoCE will remain monitorable.

 

The financial risk profile remains healthy, backed by robust debt protection metrics with debt of ~Rs 1,532 crore as on December 31, 2025. The interest coverage is expected to sustain over 8 times over the medium term. GFL plans significant capex (~Rs 1,700 crore per annum for the next few fiscals), given the growth opportunity in the new FP segment, including battery chemicals. Crisil Ratings notes the recent equity raise of ~Rs 430 crore in GFCL EV, a majority owned subsidiary, for funding the capex. Majority of the capex for the chemicals segment is likely to be funded through internal accrual and for the EV segment through support from promoters and fund raising, and the rest through debt.

 

Significant reduction in debt of group companies and increase in cash accrual from the wind business have lowered their dependence on GFL. The ratio of adjusted net debt to earnings before interest, tax, depreciation and amortisation (Ebitda), including guaranteed debt of Inox Renewable Solutions Ltd (‘Crisil A/Positive/Crisil AA+ (CE) /Stable/Crisil A1’) is expected to improve to below 1.3 times as on March 31, 2026, from over 1.5 times a year earlier and ~3.1 times as on March 31, 2024. The strong debt protection metrics will sustain with recovery in the operating margin, unwinding of guaranteed debt in Inox Renewable Solutions Ltd, no significant debt-funded capex plans and equity infusion in the EV business. The net debt to Ebitda ratio should sustain below 1.6 times over the medium term, which will remain a key rating sensitivity factor.

 

The ratings continue to reflect GFL’s established market position in the chemicals business, healthy operating efficiency driven by integrated operations, and strong financial risk profile. These strengths are partially offset by the sizeable financial support extended to group companies and inherent volatility in the chemicals business.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of GFL and its subsidiaries, as these entities (collectively referred to as GFL) operate in similar businesses and have common management.

 

Also, Crisil Ratings has included the debt of inox Renewable Solutions Ltd, which has been guaranteed by GFL, to arrive at the adjusted debt.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers - Strengths 

Established market position in the chemicals business

GFL is the largest polytetrafluoroethylene (PTFE) manufacturer in India and among the top players globally. The company has a diversified product portfolio, comprising PTFE, new FPs, specialty chemicals, caustic soda, chloromethane and refrigerant gases. The FP segment accounted for nearly 60% of revenue in fiscal 2025, and is likely to be a key growth driver over the medium term. The company’s market position will likely improve driven by growing demand in end-user industries, such as EVs and semiconductors, and the China-plus-one sourcing strategy of end users. Ability of GFL to scale up operations will be monitorable.

 

Integrated operations driving operating efficiency

The chemicals business has been integrated forward into manufacturing PTFE and backward into hydrochlorofluorocarbons (HCFC), anhydrous hydrogen fluoride, chloroform and chlorine. New FP products such as PVDF, fluorocarbons (FKM) and phosphoric acid fit seamlessly in the production cycle as they are manufactured from the same raw materials, such as fluorspar and R-142b. This reduces dependence on external sources and ensures healthy operating margin and capacity utilisation. The Ebitda margin improved to 27% in the first nine months of fiscal 2026 from 24% in fiscal 2025 and is expected at 25-27% over the medium term driven by improved product mix.

 

Strong financial risk profile

The financial risk profile is backed by strong networth, comfortable gearing and robust debt protection metrics. The debt protection metrics will remain comfortable, with interest coverage expected over 8 times and reduction in debt guaranteed by GFL. Adjusted gearing is expected below 0.6 time over the medium term.

 

GFL plans capex of around Rs 1,700 crore per annum over the next few fiscals towards the new FP segment, particularly EV chemicals, and will fund the capex through internal accrual. The promoters have adequate financial flexibility to raise equity to fund the capex. Any larger-than-expected debt-funded capex will be monitorable.

Key Rating Drivers - Weaknesses 

Support to group companies, albeit expected to reduce materially

Over the years, GFL has supported group entities by extending loans, advances, corporate guarantees and lien marking its own liquidity for their loans, leading to increase in its own debt.

 

With focus on deleveraging and improvement in operating performance, the support from GFL has reduced significantly and is likely to be negligible over the medium term, which remains monitorable.

 

Inherent volatility in the chemicals business

The chemicals business is export-driven and vulnerable to volatility in international markets. Sizeable capacity addition in the overseas markets may constrain performance. While GFL’s large scale and integrated operations drive operating efficiency, the business remains susceptible to fluctuations in global supply and prices, especially in bulk chemicals and refrigerant gases. For instance, the operating margin was impacted in fiscal 2025 owing to destocking in Europe following an economic slowdown. However, the higher mix of new FP products, along with increase in demand and operating margin, should help reduce volatility in earnings over the medium term.

 

The fluorochemicals business was impacted in the third quarter of fiscal 2026 by production quota restrictions, which constrained R-22 production. To mitigate the risk, GFL is moving towards R-32 production. Nonetheless, it will remain exposed to both volume and pricing risks with China being one of the key players in the international market. Also, despite prudent management of foreign exchange (forex) risk, GFL remains vulnerable to any sharp fluctuation in currency exchange rates.

Liquidity Strong

Expected annual cash accrual of Rs 1,200–1400 crore will sufficiently cover yearly term debt obligation of Rs 8–35 crore over the medium term. GFL had unencumbered cash equivalent/liquid surplus of ~Rs 176 crore as on December 31, 2025. Annual capex of ~Rs 1,700 crore over the next few fiscals will be financed through equity and internal accrual. Fund-based limit of Rs 3,375 crore was utilised 33% on average in the 12 months through December 2025.

Outlook Stable

Crisil Ratings believes the business and financial risk profiles of GFL will remain healthy over the medium term supported by strong demand for its products.

Rating sensitivity factors

Upward factors

• Significant revenue growth from new products resulting in leading market position in those segments, along with operating margin of above 30%
• Material reduction in debt and support to group entities, strengthening the capital structure

 

Downward factors

• Slower-than-expected ramp-up in new segments or products, leading to subdued operating profitability and RoCE
• Significant, debt-funded capex or acquisitions, or increase in support to group entities, weakening the financial risk profile with adjusted net debt to Ebitda sustaining above 1.75 times

About the Company

GFL houses the chemicals business of the INOXGFL group. The company has a diverse product portfolio, which includes caustic soda, chloromethane, PTFE, HCFC and value-added products. It is one of the largest chemical players in India with combined installed capacity of 72,000 tonne per annum (TPA) of HCFC, 19,750 TPA of PTFE, 138,450 TPA of caustic soda and 109,620 TPA of chloromethane.

Any other information: Not applicable