| NOCIL Limited | ||||||
| Ratings reaffirmed at 'CRISIL AA/Stable/CRISIL A1+'; Rated amount enhanced for Bank Debt | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL AA/Stable/CRISIL A1+’ ratings on the bank loan facilities of NOCIL Limited (NOCIL).
The ratings continue to reflect NOCIL's healthy business risk profile marked by its leading market position in the rubber chemicals industry in India and established clientele as well as robust financial risk profile marked by minimal debt. The strengths are partially offset by high revenue dependence on the tyre industry, exposure to competition from imports and risks associated with the ramp up of expanded capacities.
Robust revenue growth of 70% in FY22 over a low base largely aided by price growth as volume growth was ~16%. The company achieved its highest ever quarterly revenues of Rs. 463 crores in Q4 of this fiscal. The demand from replacement tyre segment has been buoyant as OEM demand was impacted by semiconductor issues. Ramp up of newly added capacities, consistent price hikes taken while retaining competitive edge, focus on increasing share from export markets and benefits accruing from continued diversification of vendor base by global customers by following China+1 strategy will also drive the revenue growth over the medium term.
Operating margins increased to 18.2% in fiscal 2022 as compared to 14.1% in fiscal 2021 with price hikes taken, better absorption of overheads with increased scale of operations and increase in proportionate sales of higher valued products. Operating profitability is expected to stabilise with recent correction in inflationary trend in raw material prices and will also be supported by improving capacity utilisation of its new capacities.
Financial risk profile remains strong in the absence of any long-term debt obligation. The company is expected to generate healthy cash surpluses over the medium term, which will further help in the sustenance of strong credit metrics. Bank lines remain moderately unutilised, and net cash accruals should support any capital expenditure (capex) requirements. The company has enhanced its bank loan facilities to support the increasing working capital requirements. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of NOCIL and its wholly owned subsidiary, PIL Chemicals Ltd.
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:
Commercialisation of the new capacities, at a time when global customers are diversifying their vendor base away from Chinese specialty chemical manufacturers, will benefit NOCIL to ramp up its new capacities faster and gain market share in global supply chain of rubber chemicals in the medium term. Substantial increase in market share in rubber chemicals in the medium term will be a key rating driver.
Weaknesses:
Considering the long-term demand potential from the domestic and global tyre industry, the company carried out capacity expansions in Navi Mumbai and Dahej recently. Timeliness in receipt and supply of orders to new customers and geographies is crucial for NOCIL to further increase its brand presence. |
Liquidity: Strong Liquidity is healthy with 62% of bank limit utilization currently and cash surplus of 34 crore as on 31st March’2022 which is expected to improve in the medium term. The company has also enhanced its bank loan facilities to support the increasing working capital requirements. |
Outlook: Stable CRISIL Ratings believes NOCIL will maintain its robust financial risk profile with a largely debt-free balance sheet over the medium term. Furthermore, continued strong market position should help ramp up the enhanced capacities. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company NOCIL, part of the Arvind Mafatlal group, is India’s largest rubber chemicals manufacturer. The promoters held 34% stake in the company as of June 30, 2022, and the remaining stake was held by public and others, including mutual funds and insurance companies.
The company follows an integrated approach wherein it manufactures intermediates as well as a wide range of final products across two manufacturing facilities in Navi Mumbai and Dahej. NOCIL manufactures four categories of products:
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Key Financial Indicators
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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)
* fully interchangeable with non-fund based working capital limits ** fully interchangeable with fund based working capital limits @ Interchangeable with Rs. 30 crore fund based limits |
Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||
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Criteria Details
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