Key Rating Drivers & Detailed Description

Strengths:

Established market position: MOPL has been manufacturing specialty chemicals for the past four decades and has established itself as a reliable supplier to a diversified clientele of around 60 customers. Most of them have been dealing with the company for over 10 years. Around 85-90% of the revenue is derived from sales of two products (beta naphthol and alpha naphthol). The product concentration risk is, however, mitigated by MOPL’s presence in diversified end-user industries, including pharmaceuticals, agrochemical, and dies and intermediaries. The company is also expected to enhance its capacities over the medium term. CRISIL Ratings believes the company’s established track record of over 40 years as a reliable supplier, coupled with diversified customer base in multiple end-user industries will help MOPL in improving its business profile over the medium term.

Extensive experience of the promoters: MOPL was founded by the late Mr Baburao V Birewar, who had more than 40 years of experience. Operations are currently managed by Mr Ajit Naik and Mr Abhijeet Birewar. Mr Ajit Naik has over 20 years of experience and holds a bachelor’s degree in technology from Indian Institute of Technology, Delhi, and post graduate diploma in management from Indian Institute of Management, Kolkata. Mr Abhijeet Birewar has over 10 years of experience in multi-organics and holds a bachelor's degree in engineering from the University of Bombay and masters in science and business administration degrees from Iowa State University in Ames, Iowa. The promoters’ experience and expertise and healthy relationships with different stakeholders should continue to support the business risk profile.

Robust financial risk profile: Networth and total outside liabilities to adjusted networth (TOLANW) stood at  Rs 178.01 crore and 0.27 times, respectively, as on March 31, 2022. Capital structure is expected to remain healthy over the medium term. Debt protection metrics were healthy as reflected in interest coverage and net cash accruals to adjusted debt of 31.89 times and 0.00 times for Fiscal 2022. In spite of the debt funded capex to the tune of Rs 60 crores over the medium term, financial risk profile is expected to remain healthy backed by healthy accretion to reserves.

Weaknesses:

Moderate scale of operations: In spite of being in business from last 40 years, MOPL has moderate scale of operations as reflected in net sales of Rs 201 crores in Fiscal 2022. Moderate scale restricts bargaining power with suppliers, and limits MOPL’s ability to remain critical to its customers. Given the capex in pipeline, revenue is expected to grow over the medium to long term.

Exposure to product concentration risk: Sales of beta naphthol and alpha naphthol contributes 85-90% to total revenue. High product concentration makes the company susceptible to adverse movements in the industry, which could impact revenue and profitability. However, the risk is partially mitigated as these products are used as intermediates in several industries, including pharmaceuticals, agrochemicals, and dyes and pigments. Furthermore, MOPL has been manufacturing the products for more than two decades and has healthy relationships with its customers.

Key Financial Indicators

Annexure - Details of Instrument(s)

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