| Sunshield Chemicals Limited | ||||
| Rating reaffirmed at 'Crisil BBB+/Stable' | ||||
| Rating Action | ||||
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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 reaffirmed its rating on the long-term bank facilities of Sunshield Chemicals Limited (SCL) at ‘Crisil BBB+/Stable’.
The rating reflects the established market position in chemical industry, strong and diversified customer base, moderate working capital cycle, and comfortable financial risk profile. These strengths are partially offset by moderate scale of operations amid intense competition, susceptibility to fluctuations in raw material prices. |
Analytical Approach Unsecure loans extended by parent of Rs 35 crores as on March 31, 2025 are treated as debt as they are expected to be repaid. |
Key Rating Drivers & Detailed Description Strengths: Established market presence in chemical industry: The company is currently promoted by Indus Petrochem Limited (62.36% holding) who has been in the chemical industry for about 25 years. This has given them a strong understanding of market dynamic and established strong relations with customers and suppliers. Further, the company, through its 3 decades long presence in industry, has developed a healthy market presence. This has led to steadily increasing revenue with the company achieving revenues of around Rs 365-370 crore for fiscal 2025 as compared to Rs 283 crore in fiscal 2024.
Diversified customer base and end markets: SCL clientele includes large players such as Asian Paints, Lubrizol, MRF, Pidilite, among others. SCL also caters to the overseas market (mainly Europe and the USA), from which it derives 35-40% of total revenue. The top 5 customers contributed around 40-45% revenues in fiscal 2025. Further the company has a wide range of product offerings like Ethylene oxide (EO) based specialty surfactants, antioxidants, THEIC based products which are used in various industries including homecare, petrochemicals, paints, automobiles, rubber etc. This helps the company to sustain its scale and is not impacted by demand fluctuations from a single customer or industry.
Moderate working capital cycle: The working capital operations of the company remains moderately working capital intensive as reflected in the gross current assets of around 135 days as on March 31, 2025 (134 days as on March 31, 2024). The same arises mainly as the company offers a moderate credit period of around 60 to 90 days to its customers with an inventory of around 60-70 days to be kept as per the business requirements and vide range of products. It is partially supported by the credit period received from the suppliers of around 60 days along with the bank lines. Overall working capital cycle is expected to be in the range of 130 to 140 days of gross current assets.
Comfortable financial risk profile: Net worth of the company has improved to Rs 95-98 crores as on March 31, 2025 and is further expected to improve with steady accretion to the reserves. The capital structure remains comfortable as reflected in the gearing and total outside liability to adjusted net worth ratio of around 1-1.1 times and 1.8-1.85 times as on March 31, 2025. It is further expected to improve driven by expected equity infusion in fiscal 2026. The debt protection metrics also remains robust mainly due to limited dependence one external borrowings and healthy profitability leading to the interest cover of around 4-4.2 times for fiscal 2025 and is expected to improve with improvement in the margins over the medium term. Overall financial risk profile of the company is expected to improve over the medium term backed by the healthy accretion to the reserves and growing scale of operations.
Weaknesses: Moderate scale of operations amid intense competition: While improving, the scale of operations continues to remain moderate at Rs 365-370 crore in fiscal 2025, given the large size of the industry SCL operates in. This restricts bargaining power with customers and suppliers given intense competition in the industry, with high fragmentation following low entry barrier, resulting in low pricing power.
Susceptibility to fluctuations in raw material prices: The raw materials (which account for about 65% to 75% of operating income) are downstream petrochemical products (key input, ethylene oxide, lauryl alcohol etc) and are therefore vulnerable to volatility in crude oil prices. The same can be reflected in the decline in the operating margins in fiscal 2025 to around 10-10.2% from 14.7% in fiscal 2024. Though it is expected to improve over the medium term with price revisions with the customers, the same would continue to remain a key monitorable over the medium term. |
Liquidity: Adequate Cash accrual is expected to be Rs 35-40 crore each in fiscals 2026 and 2027 against term debt obligation of Rs 8-10 crore, the remaining accrual will cushion liquidity. Bank lines were utilized around 75% on an average for the last 12 months ending March 2025. Cash and bank balance stood at Rs 3.7 crore as on March 31, 2025. Crisil expects internal accruals, cash & cash equivalents and unutilized bank lines to be sufficient to meet its repayment obligations as well as incremental working capital requirements. |
Outlook: Stable Crisil Ratings believes the company will continue to benefit from its healthy market position and established customers. |
Rating sensitivity factors Upward factors
Downward factors
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About the Company SCL was incorporated in 1986 as a private limited company. It was reconstituted as a public limited company and listed on the Bombay Stock Exchange in 1995.
SCL manufactures organic and other speciality chemicals such as surfactants, ethoxylation and antioxidants at its plant in Raigad (Maharashtra); these chemicals are used in the home and personal care, industrial formulations, paints and coatings, and agrochemicals segments.
In December 2012, 62.36 % stake in SCL was acquired by Solvay SA (Solvay), Belgium, through its stepdown subsidiary, Rhodia Amines Chemicals Pte Ltd. In November 2021, the entire stake of Rhodia Amines Chemicals Pte Ltd was taken over by Indus Petrochem Ltd. Currently the company is working under the leadership of Mr Jeet Malhotra (MD & CEO). |
Key Financial Indicators
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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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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Criteria Details
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