| Tata Chemicals Limited | ||||
| Ratings reaffirmed | ||||
| 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 ‘Crisil AA+/Stable/Crisil A1+’ ratings on the non convertible debentures (NCDs) and commercial paper programme of Tata Chemicals Ltd (TCL).
The ratings reaffirmation factors the strong business risk profile of TCL, driven by its established market presence in diversified markets, and comfortable financial risk profile on the back of healthy liquidity and strong financial flexibility emanating from being part of the Tata group. These strengths are partially offset by susceptibility to price volatility in the soda ash business.
During the first nine months of fiscal 2025, TCL’s consolidated revenue moderated by 5% on-year mainly on account of industry wide dip in realisations for soda ash, a key product for TCL. This resulted in earnings before interest, tax, depreciation, and amortisation (EBITDA) margin moderating to 14.3% during the same period as against 20.1% during first nine months of fiscal 2024. With soda ash realisations showing signs of stabilization in the past few months, the operating margin could remain range-bound going forward.
Among international businesses, operations in the US and Kenya have the advantage of natural soda ash production process supporting the operating margins. On the other hand, the company’s UK operations witnessed a sharp decline in operating performance over the past 4-6 quarters and reported operating losses, owing to unfavourable cost structure. In the fourth quarter of fiscal 2025, the company has discontinued its loss-making soda ash manufacturing in the UK, which is expected to result in improvement of overall operating performance going forward.
In the standalone business, during fiscal 2025, TCL raised fresh non-convertible devbentures (NCDs) mainly to repay equivalent debt in its overseas subsidiaries. At a consolidated level, gross debt increased to Rs 6,722 crore as on December 31, 2024 (against Rs 5,912 crore a year earlier) as a result of high capital expenditure (capex) outgo towards new soda ash and sodium bi-carbonate capacities as well as higher short-term debt due to high inventory build-up, which is expected to have corrected since then. |
Analytical Approach Crisil Ratings has combined the business and financial risk profiles of TCL, Tata Chemicals Europe, Tata Chemicals North America, Tata Chemicals Magadi, and Rallis India Ltd (Rallis; ‘Crisil AA+/Stable/Crisil A1+’). For calculation of financial ratios, Crisil Ratings has amortized goodwill (both arising from acquisitions as well as self-generated) over 20 years starting fiscal 2009. A significant portion of this goodwill relates to the acquisition of General Chemical Industrial Products (GCIP), which gave TCL access to long-term trona reserves for manufacturing natural soda ash.
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:
Business remains diversified, with operations spread across basic chemistry products, including soda ash, sodium bi-carb and salt manufacturing (together contributing around 80% of revenue in the first nine months of fiscal 2025) and specialty products, including agricultural solutions (around 20%).
The inorganic chemicals business is geographically diversified across North America, Europe, Africa and India. TCL is among the largest producers of soda ash in the world, with capacity of around 4 million tonne per annum (mtpa) and natural soda ash forming nearly 70% of its capacity. Its subsidiary, Rallis, too has a strong market position in the agricultural products industry.
Operating efficiency is expected to remain healthy, backed by availability of low-cost natural soda ash from North America and Kenya, and improving capacity utilisation catering to strong demand across all applications. The company has shut down its synthetic soda ash unit in Lostock, UK, which was loss making. This will benefit the overall operating margins of the company. Further, the company’s soda ash plant in Mithapur, Gujarat, is one of the lowest-cost producers of synthetic soda ash, aided by proximity to saltworks and limestone quarries and economies of scale. It also has an integrated cement plant, which utilises by-products from soda ash manufacturing.
Liquidity remains strong, aided by unencumbered cash and cash equivalent of Rs. 1,375 crore, as on December 31, 2024. The company also had quoted equity investment in other Tata group companies valued at around Rs. 6225 crores as on April 4, 2025. Strong financial flexibility being part of the Tata group, and low utilisation of working capital lines, also support liquidity. Capital structure remains healthy with gearing expected at 0.4 times as on March 31, 2025 and is expected to remain well below 1 time going forward as well.
The company is expected to incur capex of ~Rs 3,500 crore over fiscals 2026-2028 towards routine maintenance capex requirements and brownfield expansion ofits soda ash capacity in Kenya. While part of this capex could be debt-funded, Crisil Ratings expects net debt to ebitda ratio to remain comfortable at less than 2 times. Further, the company is evaluating additional capex towards units in the US and India in a calibrated manner. This capex is subject to improvement in soda-ash demand and realisations.
Weakness:
The domestic soda ash business remains susceptible to volatility in international prices, driven by capacity addition, currency fluctuations and competition from imports. While improved operating efficiency from large scale of operations and increased integration across geographies partially offsets impact of any price fluctuation on TCL, its soda ash business will remain exposed to price volatility. |
Liquidity: Strong Liquidity is supported by unencumbered cash and cash equivalent of Rs 1,375 crore as on December 31, 2024. Easy access to low-cost financing from banks and financial markets, being part of the Tata group, and minimal utilisation of working capital lines also support liquidity. Surplus liquidity and expected annual cash accruals of over Rs 1,350-1,450 crore over fiscals 2026 to 2027 would be adequate to cover the planned capital expenditure over the medium term. During fiscal 2025, the company has repaid debt in some of its foreign subsidiaries, from proceeds realised from raising NCDs in India, which have bullet payment in three years, thus easing any near-term repayment pressures.
ESG profile
Key ESG highlights:
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Outlook: Stable Crisil Ratings believes TCL will continue to benefit from its established market presence in the domestic as well as international markets and healthy financial risk profile driven by strong liquidity and financial flexibility. |
Rating sensitivity factors Upward factors
Downward factors
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About the Company Incorporated in 1939, TCL manufactures soda ash and related chemicals, including sodium bicarbonate, caustic soda and bromides. The company commenced operations in 1944 with a 30,000 tonne per annum (TPA) plant in Mithapur. Over the years, it has expanded its soda ash installed capacity to 10,91,000 TPA. It entered the iodised vacuum salt business in 1986. TCL also has a 440,000-TPA cement plant in Mithapur, which was set up to effectively utilise the solid waste generated during soda ash production.
Its subsidiary, Rallis, is one of the leading players in the domestic crop protection sector, and manufactures pesticides, herbicides and fungicides at its factories in four locations. In March 2006, TCL completed acquisition of the Brunner Mond group for GBP 104 million, gaining access to the soda ash business in Europe and Kenya. It acquired GCIP in North America for USD 1.01 billion in March 2008. In December 2010, it acquired British Salt Ltd, the leading manufacturer of pure-dried vacuum salt products with around 50% market share in the UK, for GBP 93 million. The company also has brine wells with a long tenure of residual life. TCL was also in the urea and phosphatic fertiliser and trading businesses, which it sold in 2018 as part of its strategy to exit highly regulated businesses. In fiscal 2020, TCL demerged its consumer product business to another Tata group entity, and also acquired the remaining 25% stake in Tata Chemicals (Soda Ash) Partners (TCSAP) for USD 195 million, thereby increasing its stake to 100%. |
Key Financial Indicators#
#Crisil Ratings-adjusted numbers |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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