| Nikhil Adhesives Limited | ||||||
| Rating outlook revised to 'Positive'; Ratings Reaffirmed | ||||||
| Rating Action | ||||||
| ||||||
| ||||||
| 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 and fixed deposits of Nikhil Adhesives Limited (NAL) to ‘Positive’ from ‘Stable’, while reaffirming the rating at ‘Crisil BBB’. The rating on the short-term bank facilities is reaffirmed at ‘Crisil A3+’.
The revision in outlook reflects expectations of sustained improvement in the business risk profile, backed by steady volume growth and improved profitability. While overall revenues have been range bound and expected to remain at similar levels primarily due to reduced focus on trading business, the manufacturing business has seen consistent growth and expected to continue to grow at around 12-15%. This is backed by increased focus on new product additions and value-added products. This is leading to improved profitability reflected in operating margin of 6.4% in fiscal 2025, up from 5.5% in fiscal 2024. It has further improved to 6.78% in Q1 of fiscal 2026 and sustenance of same with revenue increase from manufacturing business remains monitorable. Financial profile and liquidity continues to remains strong over medium term.
The ratings reflect established relations with the customers and suppliers supported by extensive experience of the promoters, and well-known brand, diverse customer and product portfolio, along with comfortable financial risk profile and efficient working capital cycle. These rating strengths are partially offset by profitability vulnerable to volatility in raw material prices and intense competition in the industry and low value addition. |
Analytical Approach Crisil Ratings has evaluated the standalone business and financial risk profiles of NAL. |
Key Rating Drivers - Strengths Extensive experience of the promoters and well-known brand: NAL has a strong business profile, backed by its promoters’ extensive experience of over three decades in the emulsions and adhesive manufacturing industry. Their extensive experience in the industry has helped the company establish its brand like Emdilith, Emditex, Mahacol RDP, Mahafix, Emdicryl and thus association with large and reputed clientele and diversified product profile.
Diverse customers and product profile: NAL has a wide customer base with top 5 customers contributing 44% of revenues. Its customers include large players like Akzo Nobel India Ltd, Dow Chemicals, Indigo Paints Ltd, Asian Paints Ltd and JSW Paints Private Limited for paint emulsions. The company is engaged in multiple segments like paint emulsions, textile adhesives, consumer adhesives, industrial adhesives and construction chemicals, hence this mitigates the risk from concentration in any one segment. Further the diversification into manufacturing of Re-dispersible polymer (RD Powder) and addition of new products in construction chemicals will drive the revenues further over medium term.
Comfortable financial risk profile: Financial risk profile is comfortable with networth of Rs 129.1 crore as on March 31, 2025. With moderate reliance on external debt, capital structure will be moderate with gearing and total outside liabilities to adjusted networth ratios of 0.44 and 1.40 time, respectively, as on March 31, 2025. It is expected to remain at similar levels over the medium term backed by healthy accretion to reserve and no major debt funded capital expenditure (capex).Debt protection metrics is comfortable with interest coverage and net cash accrual to adjusted debt ratios of 4.63 and 0.41 times, respectively, for fiscal 2025. Financial risk profile is expected to remain strong with healthy accretion to reserve and moderate reliance on external debt.
Efficient working capital requirements: NAL has efficient working capital cycle, with Gross Current Asset (GCA) days ranging between 100-135 days over last four fiscals ending 2025 driven by debtors and inventory of 72 days and 59 days. Despite increase in number of products Inventory holding is expected to remain in a similar range going forward due to expansion and diversification into different product segment |
Key Rating Drivers Weaknesses Profitability vulnerable to volatility in raw material prices: Raw material accounted for around 80% of total sales in fiscal 2025. However, volatility in key input prices like butyl acrylate has marginally constrained the operating profitability in the past. Moreover, as some of the key raw materials are imported, profitability is also susceptible to fluctuations in foreign exchange (forex) rates.
Intense competition in the industry and low value addition: The presence of numerous players in specialty chemical industry results in intense competition, hence limiting bargaining power of the players. Also, with minimal value addition involved opening door for more players to enter into industry Improvement in scale of operations with operating margins will remain key monitorable. |
Liquidity: Adequate Bank limit utilization is low at around 25 percent for the past twelve months ended June 2025. Annual net cash accruals are expected to be over Rs 25-28 crore which are sufficient against term debt obligation of Rs 4-8 crore over the medium term. Current ratios are healthy at 1.43 times on March 31, 2025. Unencumbered cash and bank balance of around Rs 5.5 crores and unsecured loans of around Rs 13 crores as of March 31, 2025. The promoters are likely to extend support in the form of equity and unsecured loans to meet its working capital requirements and repayment obligations. |
Outlook: Positive Crisil Ratings believes that NAL will benefit from sustained business risk profile backed by the extensive experience of its promoters and comfortable financial risk profile. |
Rating sensitivity factors Upward Factors
Downward Factors
|
About the Company Incorporated in 1982 and based in Mumbai, NAL is promoted by Mr. Umesh Sanghavi, Mr. Rajesh Sanghavi, Mr. Tarak Sanghavi and Mr. Ashok Sanghavi. The company manufactures speciality adhesives and emulsion through its manufacturing facilities in Dahanu (Maharashtra), Silvassa (Dadra Nagar Haveli), Dahej (Gujarat), and Bangalore (Karnataka) while its registered office is based in Mumbai. The company also trades in chemicals used in emulsions and adhesives industry. The company is listed on Bombay Stock Exchange. |
Key Financial Indicators
|
Status of non cooperation with previous CRA: NAL had not cooperated with Infomerics Ratings, which marked it non-cooperative via rating rationale dated February 01, 2021. The reason provided by Infomerics Ratings was non-furnishing of information by NAL. |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
|
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||
|
Criteria Details
|