Detailed Rationale

Crisil Ratings has revised its outlook on the long-term bank facilities and non-convertible debentures of PCBL Chemical Ltd (PCBL) to ‘Negative’ from ‘Stable’ while reaffirming the rating at ‘Crisil AA’.  The rating on the commercial paper of the company has been reaffirmed at ‘Crisil A1+’.

 

The revision in outlook reflects moderation in operational performance of the company impacting debt protection metrics. Performance of the carbon black division (~80% of consolidated revenue) was impacted in the first half of fiscal 2026 on account of subdued realisation despite healthy volume. The dip in realisation was majorly on account of subdued spot prices in the domestic market owing to softening crude prices, dumping by Russia and moderation in global demand owing to US tariff related uncertainties. Consequently, the revenue of this segment fell ~1% on-year in the first half of fiscal 2026 despite 4% rise in volume. In the Aquapharm (phosphonates) segment (~18% of consolidated revenue), revenue has grown by ~8% on-year to Rs 777 crore in the first half of fiscal 2026, supported by growth in homecare and water solutions segment. The oil and gas segment, however, was impacted owing to decline in crude prices. On a consolidated basis, the company has achieved revenue of Rs 4,278 crore in the first half of fiscal 2026, as against Rs 4,307 crore in the corresponding period of fiscal 2025.

 

Subdued realizations impacted the operating margins which moderated to ~13.7% in the first half of fiscal 2026 from 16.8% in the first half of fiscal 2025. As sales to the US contribute ~5% of revenue, increase in tariff is expected to result in an impact of 0.5-1.0% on the operating margin. Although tariff has increased to 50%, effective tariff borne by the company will be lesser as the company imports a major portion of its raw material from the US and tariff is applicable only on the sales amount net-off raw material imports from the US. Earnings before interest, tax, depreciation and amortisation (Ebitda) per tonne in the carbon black segment fell to ~Rs 15,500 per tonne in the first half of fiscal 2026 from ~Rs 19,350 per tonne in the corresponding period of the previous fiscal. Going forward, with crude prices stabilising, helping recovery in spot domestic prices, improvement in global demand and continued increase in the share of specialty black volume, the Ebitda per tonne will likely improve.

 

The operating margin of the Aquapharm segment moderated to ~12.3% in the first half of fiscal 2026 from 13.2% in the first half of fiscal 2025 owing to subdued performance in the oil and gas segment. Revenue and profitability will likely improve with improving demand, introduction of new products and execution of large tenders received from Saudi Arabia, leading to better plant capacity utilisation.

 

Furthermore, the pilot plant for Nanovace Technologies Ltd has been commissioned and has been granted process patent by the US. Commercialisation of the plant is expected in the second half of fiscal 2027. This segment is expected to generate high operating margin (over 30%), which will support improvement in the Ebitda margin.

 

The financial risk profile has been temporarily impacted owing to moderation in cash accrual following decline in the operating margin. Debt to Ebitda ratio is expected to be high ~4 times in fiscal 2026, and is expected to correct to 3.0-3.3 times in fiscal 2027. Capital structure will remain adequate with networth expected at Rs 2,800-3,000 crore and gearing of ~1.5 times as on March 31, 2026. Also, the financial risk profile benefits from being part of the RP Sanjiv Goenka group, which has strong financial flexibility. The promoters have infused Rs 448 crore over the last 18 months through warrants, with Rs 336 crore received in November 2025.

 

Liquidity was healthy with cash and equivalent of Rs 299 crore as on September 30, 2025. Additionally, the company has fund-based credit line of Rs 1,500 crore, which was utilised less than 50% over the 12 months through September 2025.

 

The ratings continue to reflect the company’s market leadership in the domestic carbon black industry along with strong global presence, strategic plant locations, healthy operating efficiency and financial risk profile. The business risk profile is supported by diversification into specialty chemicals segment. These strengths are partially offset by susceptibility of operating profitability to fluctuations in crude oil prices and foreign exchange (forex) rates, and exposure to competition from imports, risk of large-sized ongoing capital expenditure (capex) and cyclicality in the automobile industry. However, the forex risk is reduced as the company hedges most of its net forex exposure. A significant portion of the sales come from the tyre segment, which operates as per pricing formula linked with crude oil prices, thereby protecting operating profits, if volumes are maintained.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of PCBL and its subsidiaries to the extent of its shareholding, as they have significant business and financial linkages and common management.
 

Also, Crisil Ratings has amortised goodwill and other intangible assets of ~Rs 3,340 crore arising from acquisitions in January 2024 over a period of five years starting fiscal 2024. The company has impaired the goodwill by ~Rs 555 crore in fiscal 2025.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers - Strengths

Market leadership in the domestic carbon black industry

PCBL is the largest player in the domestic carbon black industry with market share of around 40%, in terms of capacity, and the sixth largest manufacturer of carbon black globally. The company has production capacity of 790,000 tonne per annum (TPA) and expected to increase capacity by 90-120 kilotonne per annum (KTPA) by March 2026.

 

PCBL manufactures over 110 grades of rubber carbon black and specialty black and is focussed on high-performance and high-margin products. It mainly caters to large tyre manufacturers and has established relationships with them. The tyre segment contributed 48% of revenue in fiscal 2025. Large scale of operations, along with timely and high-quality service, supports the company in maintaining healthy relationships with key customers.

 

Strong global presence and diversification into the specialty chemicals business

The company is the largest exporter of carbon black in India and has operations in more than 50 countries. Exports contributed ~40% of revenue in the first half of fiscal 2026, up from around 30% in fiscal 2023.

 

Aquapharm enjoys strong market position in the specialty water treatment solutions business. It manufactures phosphonates, chemicals used in oil and gas sector, and polymers for reputed global customers across diverse industries. It is the largest manufacturer of phosphonates in India and the third-largest in the world. Acquisition of Aquapharm business led to diversification of PCBL’s product portfolio into high-margin specialty chemicals business with wider geographical reach.

 

Favourable plant location and healthy operating efficiency

PCBL benefits from the advantageous location of its manufacturing facilities. Its five facilities are near ports and have easy access to raw materials, lowering logistical costs. PCBL imports ~60% of its raw material and exports 35-40% of its products. The company also has power plants at all its facilities, which use tail gas generated in thermal decomposition for making carbon black. The company sells 50-60% of the power generated.

 

While subdued realisation impacted the operating margin in the first half of fiscal 2026, stabilisation of crude prices, improvement in global demand and increase in the share of specialty black volume, will likely aid margin improvement in the carbon black division over the medium term. In the Aquapharm division, profitability is expected to improve supported by introduction of new products and execution of large tenders received from Saudi Arabia, leading to better capacity utilisation.

Key Rating Drivers - Weaknesses

Susceptibility to volatility in crude oil prices and forex rates

Carbon black feedstock (CBFS), derived from crude oil, is a major raw material for carbon black production. Any fluctuation in crude oil prices may impact CBFS prices and thus affect the operating margin. The company has a pricing formula linked to crude oil prices for the tyre segment, which accounts for a significant proportion of sales, thus providing partial relief. It imports ~60% of raw material and hence is vulnerable to volatility in forex rates. This risk is mitigated by a natural hedge because of exports and a stringent hedging policy. Furthermore, increasing share of specialty black sales and improving yield and input-output ratio have helped reduce volatility in the operating profitability.

 

Exposure to risks associated with large size ongoing capex

The company has large capex plans for the medium to long term. It is expected to undertake capex of Rs 600-700 crore per annum over the medium term for expansion of capacities in carbon black and specialty chemicals business (Aquapharm). It plans to increase brownfield capacity of carbon black in Chennai by 90 KTPA and 20 KTPA of specialty black in this fiscal. The company has capex planned of Rs 100-150 crore for enhancing capacities of specialty chemicals (Aquapharm) in the medium term. It has infused ~Rs 200 crore in Nanovace Technologies Ltd and is expected to infuse Rs 200-250 crore in phases over the next 1-2 years for setting up manufacturing facilities for developing nano-silicon products to be used in the anodes of Lithium-ion batteries. The pilot plant has been completed in November 2025 and received process patent for nano-silicon in the US. In addition, PCBL has added a 1-KTPA line dedicated to superconductive specialty carbon black grades at Palej in November 2025, and a 4-KTPA acetylene black facility is planned at Mundra by fiscal 2027. Furthermore, it has plans to set up greenfield carbon black manufacturing plants in phases in Andhra Pradesh. The capex will be funded through debt and internal accrual. The company is exposed to implementation risks and timely progress of capex; any cost and time overruns and optimal capacity utilisation will remain monitorables.

 

Susceptibility to cyclicality in the automobile industry

Demand for domestic carbon black depends on growth of the tyre industry, as 60-65% of the carbon black produced in India is consumed by tyre manufacturers. PCBL generated around 48% of its revenue from the tyre industry in fiscal 2025. Hence, carbon black revenue can be impacted by sluggish demand from tyre manufacturers, owing to slowdown in demand from automobile original equipment manufacturers (OEMs), or shutdown of tyre dealerships or automobile service stations, as seen during the Covid-19 pandemic, which affected aftermarket sales for tyres. That said, 60-65% of the tyre demand comes from the aftermarket, which is generally more resilient than OEM demand.

Liquidity Strong

The company had cash and equivalent of Rs 299 crore as on September 30, 2025, and is expected to maintain cash and equivalent of Rs 150-200 crore over the medium term. Additionally, the company has fund-based credit line of Rs 1,500 crore. Average bank limit utilisation was below 50% of the drawing power for the 12 months through September 2025.

ESG Profile

The ESG profile of PCBL supports its already strong credit risk profile. The sector has moderate environmental and social impact, primarily driven by high water consumption, waste-intensive processes and direct impact on the health and well-being of customers.

 

• Key ESG highlights:
• The company plans to minimise its environmental impact by reducing resource consumption, mitigating greenhouse gas emissions, conserving water, managing waste responsibly and adopting sustainable practices. It targets to achieve net zero by 2050 and has planted over 23,000 saplings in fiscal 2025.
• The plants are zero liquid discharge (ZLD) compliant and equipped with effluent treatment plant (ETP) facilities. The wastewater generated during the manufacturing processes is treated and reused, promoting water conservation.
• The LTIFR (lost-time injuries frequency rate) was 0.7 in fiscal 2025. The company has addressed 100% of customer grievances.
• The governance structure is characterised by effectiveness in board functioning, with 60% of members being independent directors, presence of investor grievance redressal mechanism and extensive disclosures.
   

ESG is gaining importance among investors and lenders. PCBL’s commitment to ESG principles will play a key role in enhancing stakeholder confidence, given shareholding by foreign portfolio investors and access to both domestic and foreign capital markets.

Outlook Negative

Crisil Ratings believes subdued market conditions may impact the operational performance of PCBL, leading to lower-than-expected cash generation. However, it will continue to benefit from its established market position in the domestic CB industry, increasing global footprints, and strong financial flexibility.

Rating sensitivity factors

Upward factors:

• Higher than expected operating profits or pre-payment of debt resulting in improvement in debt to operating Ebitda ratio below 1.5 times on a sustained basis
• Significant increase in revenue and diversification through seamless integration of acquired business

 

Downward factors:

• Considerable weakening of operating performance owing to intense competition and/or sluggish demand impacting operating profitability and cash accrual
• Higher than expected debt-funded capex or acquisitions leading to debt to operating Ebitda ratio remaining above 3-3.25 times on a sustained basis

About the Company

Incorporated in 1960, PCBL manufactures carbon black. The company has five plants―one each in Durgapur, West Bengal; Mundra and Palej, Gujarat; Kochi, Kerala; and Chennai, Tamil Nadu, with aggregate capacity of 790,000 TPA. The company also operates 122-megawatt cogeneration power plants based on gas generated in the carbon black manufacturing process. PCBL is a part of the Kolkata-based RP-Sanjiv Goenka group.

 

The company acquired Aquapharm Chemicals Pvt Ltd in January 2024. It is the largest producer of phosphonates in India and third-largest in world with capacity of 142 KTPA.

 

The company has formed joint venture with Kindia to develop nano-silicon products for lithium-ion batteries, Nanovace Technologies Ltd. PCBL holds 51% and Kindia holds 49% in the joint venture.

Key Financial Indicators 

As on / for the period ended March 31		2025	2024
Operating income	Rs crore	8411	6424
Reported profit after tax (PAT)	Rs crore	435	491
Adjusted PAT*	Rs crore	-31	395
Reported PAT margin	%	5.2	7.6
Adjusted debt / adjusted networth	Times	1.8	1.5
Adjusted interest coverage	Times	3.0	5.8

*adjusted for amortisation of goodwill and intangibles created due to acquisition of Aquapharm Chemical in fiscal 2024

Any other information: Not applicable