| Gulbrandsen Chemicals Private Limited | ||||||
| Rated amount enhanced | ||||||
| Rating Action | ||||||
| ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its 'CRISIL A-/Stable/CRISIL A2+' ratings on the bank facilities of Gulbrandsen Chemicals Private Limited (GCPL; part of Gulbrandsen Group, India [GGI]).
The ratings continue to reflect GGI's extensive experience in the global specialty chemical industry and the financial and marketing support it receives from the Gulbrandsen group, USA, healthy financial risk profile and strong liquidity position. These rating strengths are partially offset by susceptibility to volatile raw material prices, working capital intensity in operations, and customer concentration risk. |
Analytical Approach: For arriving at the ratings, CRISIL rating has consolidated the business and financial risk profiles of GCPL, Gulbrandsen Technologies India Pvt Ltd (GTIPL) and Gulbrandsen Catalysts Pvt Ltd (Catalyst). This is because the three companies, collectively referred to as GGI, are part of the Gulbrandsen group and are promoted by Mr Donald Gulbrandsen. Also, decisions related to capital expenditure, funding sources, material procurement, product mix, and market entry are made in the US, despite GGI having a professional management team.
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:
Benefits from the extensive experience of promoter, Mr Donald Gulbrandsen in the global specialty chemical industry, and the financial and global marketing support of the Gulbrandsen group, USA, should continue to support GGI’s business and financial risk profiles over the medium term. The operations of group is not affected by spread of COVID-19 and estimated revenue of over Rs 1064 crore in FY21. While group has maintain healthy operating margin in range of 21-23% in past five fiscals through 2021, ability of group to maintain its revenue growth backed by addition of product line in GTIPL while maintaining healthy profitability will remain key monitorable.
Group has healthy operating efficiency as reflected in return on capital employed (ROCE) of over 27% in FY21 and expected to remain above 25% over the medium term driven by high economies of scale and experienced management team. The operating margin estimated at around 22% in FY21 and expected to remain in range of 21-23% over the medium term. The operating efficiency is likely to remain healthy over the medium term as well.
Networth and gearing estimated over Rs 545 crore and 0.51 time, as of March 2021. Debt protection metrics estimated robust as reflected in interest coverage and net cash accrual to total debt ratios were 21.15 times and 63%, respectively, in FY21. In absence of large debt funded capex, the financial risk profile of group expected to remain comfortable over the medium term. Liquidity remains strong marked by growing cash accrual, healthy free cash balances and deposits, and moderate bank limit utilization.
Weaknesses:
Raw material costs account for over 60% of GGI’s total operating expenses. Volatility in the prices of major raw materials, tin and aluminium ingots, and chemicals such as chlorides and butyls may lead to fluctuation in margins, and will, therefore, be closely monitored.
Operations are expected to remain working capital-intensive as reflected in gross current assets (GCA) days of 223 days in FY21. The working capital largely dominated by receivables and inventory of 115 and 73 days, respectively, in FY21. The GCA days are expected to remain in range of 180-240 days over the medium term.
Customer concentration risk persists, with sales to group companies contributing more than half of GGI’s revenue. Gulbrandsen Chemical Inc (GCI) and Gulbrandsen Technologies Inc (GTI) are established suppliers of tin and aluminium based chemicals. GGI’s sales overseas is, therefore, majorly routed through these group companies. Hence revenue profile of company expected to remain highly concentrated towards few customers. |
Liquidity: Strong GGI has strong liquidity with supported by sufficient accruals against repayment obligation of external commercial borrowing (ECB) and funding support from group. The net cash accruals are expected over Rs 110 crore over the medium term against term debt repayment of Rs 14-20 crore, the surplus cash should be used to meet the working capital requirement. The bank lines are moderately utilised at 84% for last 12 months ended May 2021. The current ratio were at 2.89 times as on March 31, 2021 and estimated to improve over 3 times over the medium term. |
Outlook: Stable CRISIL rating believes GGI will continue to benefit from its experience of promoter group and robust financial risk profile. |
Rating Sensitivity factors Upward factors
Downward factors
|
About the Group GCPL incorporated in 1998 and manufactures tin and aluminium-based specialty chemicals, such as mono-n-butyltin trichloride, stannic chloride, tetra butyl tin, dibutyl tin oxide, and tri-ethyl aluminium. Its manufacturing facility is in Vadodara, Gujarat.
GTIPL was incorporated in 2003 to provide back-end services, such as accounting, finance, logistics, information technology, and human resources, to group companies. In 2006, GTIPL entered the specialty chemicals business, by producing aluminium chlorohydrate solution (ACH), which is an antiperspirant active used in fragrances. Over the years, the company has added other antiperspirant actives such as aluminum ziroconium octa-chlorohydrex glycine solution and aluminium sesquichlorohydrate powder, etc. Its manufacturing facility is in Vadodara, Gujarat.
Catalyst (formerly, ARCIL Catalyst Pvt Ltd and Arkema Pvt Ltd) was acquired by the Gulbrandsen group in 2009. Catalyst manufactures aluminium chloride anhydrous ANH (Alcl3), in line with the existing products of the Gulbrandsen group. The company was acquired aiming at operational synergy for the anhydrous market. The manufacturing facilities are in Nagada (Madhya Pradesh). |
Key Financial Indicators (consolidated)
^Provisional |
Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
& Includes sub-limit of Rs.2 crore for export packing credit/packing credit foreign currency/foreign bill discounting /post shipment foreign currency limit ^ Includes sub-limit of Rs 84 crore for buyers' credit and Rs 3 crore for bank guarantee |
Annexure – List of entities consolidated
|
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||
| Facility | Amount (Rs.Crore) | Rating |
| Cash Credit& | 2 | CRISIL A-/Stable |
| Letter of Credit^ | 63 | CRISIL A2+ |
| Letter of Credit^ | 21 | CRISIL A2+ |
| Proposed Fund-Based Bank Limits | 1 | CRISIL A-/Stable |
Criteria Details
|