| NOCIL Limited | ||||||
| Rating outlook revised to 'Negative'; Ratings Reaffirmed | ||||||
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| Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale Crisil Ratings has revised its outlook on the long-term bank facilities of NOCIL Limited (NOCIL) to ‘Negative’ from ‘Stable’ while reaffirmed the rating at ‘Crisil AA’; The short-term rating has been reaffirmed at ‘Crisil A1+’.
The revision in outlook follows the Crisil Ratings’ expectations that NOCIL’s performance would continue to remain subdued in the near term on account of continuing pressure on realizations arising from dumping by players from China, Korea, Thailand and European Union leading to lower than anticipated operating profits. However, the company will continue to maintain its strong financial risk profile, supported by nil external debt on its balance sheet.
In the first quarter of fiscal 2026, NOCIL’s operating income declined by 10% to Rs.336 crore from Rs.372 crore in corresponding period of previous fiscal and operating margins contracted to 9.1% from 11% during the corresponding period. For the full year fiscal 2026, revenues are expected to remain flattish led by volume growth, even as realizations remain weak. Operating margins are expected to sustain at similar levels. NOCIL has filed application for Anti-dumping duty (ADD) with Directorate General of Trade Remedies (DGTR) on four key products which contribute to around 40% portion of its overall revenue. While the company envisages favorable announcement for this investigation, however timely implementation of the same will remain crucial for any sizeable recovery in profitability.
In fiscal 2025 also, revenues witnessed a degrowth of ~4% on-year to Rs.1392 crore owing to fall in realisations by 8.5% pressurized by continuing cheap imports, and not withstanding volume growth of ~5%. The price erosion also impacted on the operating margins which contracted by 360 bps to 9.8% from 13.4% in fiscal 2024. While key raw materials prices declined from the second quarter of fiscal 2025 onwards, the latter half of fiscal saw sharp correction resulting in carryforward of higher-cost inventory thereby impacting profitability. Ebidta (earnings before interest, taxes, depreciation, and amortisation) per kg was down by about 30% in fiscal 2025 in comparison to fiscal 2024.
Going ahead from fiscal 2027 onwards, Crisil Ratings expects revenue to grow by more than 10% per annum driven by increase in share of business from existing clients and recovery in exports, amidst diversification of vendor base by global customers by following China+1 strategy. Impact of US tariff on the company’s exports is expected to be minimal owing to limited exposure to the region. With operating leverage gains coupled with various cost rationalization measures adopted by the company, operating margins are expected to improve but remain lower than historic peak level of 25-28%. The implementation of antidumping duty will have an additional positive impact on profitability.
Capital structure continues to remain healthy as on March 31, 2025 supported by nil external debt and networth of Rs.1759 crore as the company continues with conservative leverage philosophy. NOCIL’s management has planned capex of Rs.250 crore for expansion of capacities of one of its antioxidants (Trimethyl Dihydroquinoline; TDQ) by setting up a new unit in Dahej which is expected to commence trial production/operations in first half of fiscal 2027. The project will be funded through a mix of internal accruals and long-term debt (not exceeding Rs.100 crore). A sizeable capex (inclusive of this TDQ project) has been envisaged from fiscal 2026 to fiscal 2028 towards capacity addition for existing as well as new products and maintenance capex. The financial risk profile will continue to remain healthy, with gearing and ratio of total outside liabilities / tangible net worth (TOL/TNW) will remain below 0.07 times and 0.24 times in the medium term. Other debt protection metrics too will remain comfortable with interest cover remaining healthy. With sizeable capex planned, return on capital employed (ROCE) is likely to moderate in the near to medium term, depending on the timing of these investments.
Liquidity remains strong supported by cash surplus of Rs.279 crore as on March 31, 2025. Expected annual cash accruals in medium term coupled with cash surplus will be sufficient to fund any incremental working capital requirement as well as major portion of the capex. The Company is exploring ways to reduce its net working capital employed. Fund based working capital limits remain unutilized for the past 12 months ended July 2025.
The ratings continue to reflect NOCIL's healthy business risk profile marked by its dominant market position in the rubber chemical industry in India and established clientele, as well as robust financial risk profile marked by minimal gearing. The strengths are partially offset by high revenue dependence on the tyre industry and vulnerability to competition from imports and volatility in raw material prices which are largely crude linked. |
Analytical Approach Crisil Ratings has combined the business and financial risk profiles of NOCIL and its wholly owned subsidiary, PIL Chemicals Ltd. |
Key Rating Drivers - Strengths Long track record and strong market position supports business risk profile NOCIL’s business risk profile is marked by its leading market position in the rubber chemical industry in India (with ~40% market share) and its established clientele. The company is also among the few players globally with a wide product basket of 25+ rubber chemicals. The company’s experience of manufacturing these chemicals span over past five decades. Furthermore, it has been able to maintain healthy relationships with major domestic and global tyre manufacturers for over 40 years, backed by its ability to meet their stringent quality requirements. NOCIL, therefore, has a good international presence. During fiscal 2025, exports contributed 35% of the total revenue. Increasing share of business from overseas customers and change in global sourcing scenario to include China+1 strategy is resulting in increase of share of exports, which improved from 26% in fiscal 2018 and is expected to further improve over the medium term.
Healthy financial risk profile The capital structure remained strong with low debt, networth of Rs.1759 crore, resulting in comfortable TOL/TNW of 0.17 times. Interest cover is also healthy at over 18 times. With only moderate capex plans and moderate accruals, TOL/TNW and interest cover is likely to remain at healthy levels over the medium term. The management has indicated a conservative stance towards leveraging and Crisil Ratings believes that going ahead, any large expansion in the future will be funded prudently, resulting in the sustenance of a strong financial risk profile. |
Key Rating Drivers - Weaknesses High revenue dependence on tyre industry NOCIL derives almost two-thirds of its revenue from the tyre industry. The commercial vehicle (CV) industry, which contributes a sizeable proportion to tyre demand in value terms, is the most cyclical, and there were instances of large-scale imports of tyres from China and Southeast Asia in the past. ADD was levied on imported tyres in fiscal 2017 which expired in December 2022. To counter that in September 2020, tyres were removed from the Duty-Free Import Authorisation (DFIA) list thereby benefitting the domestic tyre industry. Domestically, restrictions on tyre imports continue. As of September 2025, countervailing duty are applicable on certain type of tyre imports. This time to time imposition of duties has led to pick up in demand for the domestic tyre manufacturers and augurs well for input suppliers such as NOCIL. That said, the company’s performance partly remains exposed to the demand pattern of the automotive sector.
Competition from imports and susceptibility to volatility in raw material prices The domestic rubber chemicals sector faces steep competition from imports primarily from China, Korea, Thailand and European Union. These players have an advantage of large capacities and government support. In view of underutilization at the foreign competitors end, nearby markets including India remain vulnerable to aggressive dumping which is being witnessed since second half of fiscal 2023. Though the Company has filed for antidumping petition for products that together contribute sizeable part of its impacted revenues. The outcome of the petition and its corresponding impact on aggressive pricing will remain monitorable in the future.
High proportion of raw materials such as aniline, benzene and other chemicals of NOCIL are linked to crude prices and thus the profitability of the company remains susceptible to the volatility of the same. Over the past two fiscals, the input prices have been softening; though the fall in the input prices is relatively lower than the fall in realization of finished goods. Historically, the company has been able to pass on raw material price increases, albeit with a lag to contract customers. |
Liquidity Strong Liquidity was healthy with nil utilization of fund based working capital line for past 12 months ended July 31, 2025 and cash surplus of Rs.279 crore as on Mach 31, 2025. Around half of the cash surplus includes investment in high-rated non-convertible debentures. The company’s liquidity is also supported by nil debt repayment obligations in medium term. Capex plans are likely to be partly debt funded. |
Outlook Negative Crisil Ratings believes NOCIL’s business risk profile will benefit from its established position in the rubber chemicals sector, and plans to diversify its exports. Albeit, operating profitability will continue to remain modest in fiscal 2026 due to pricing pressure from cheap imports, and witness a gradual improvement from fiscal 2027, but still remain lower than average levels of the past, limiting material improvement in annual cash generation. Financial risk profile will remain healthy with only modest debt being availed for capex over the medium term. |
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 chemical manufacturer. 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:
The company recorded Rs 336 crore of operating income during first quarter of fiscal 2026 with an operating margin of 9.1%. |
Key Financial Indicators
*Debt includes lease liabilities |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Fully interchangeable with non-fund based working capital limits |
Annexure - List of Entities Consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||
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**Fully interchangeable with fund based working capital limits
@Interchangeable with Rs.30 crore fund based limits
Criteria Details
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