Rating Rationale
July 13, 2022 | Mumbai
Tatva Chintan Pharma Chem Limited
Rated amount enhanced
 
Rating Action
Total Bank Loan Facilities RatedRs.215 Crore (Enhanced from Rs.137.43 Crore)
Long Term RatingCRISIL A-/Stable (Reaffirmed)
Short Term RatingCRISIL A2+ (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL A-/Stable/CRISIL A2+’ ratings on the bank loan facilities of Tatva Chintan Pharma Chem Limited (TCPCL).

 

The ratings continue to reflect the company’s established market presence supported by the extensive experience of its promoters, sound operating efficiencies and healthy financial risk profile. These strengths are partially offset by TCPCL's large working-capital requirements, and susceptibility to volatility in raw material prices.

Analytical Approach

CRISIL Ratings has combined the business and financial risk profiles of TCPCL and its wholly-owned subsidiaries, which are its marketing arms, Tatva Chintan (USA) Inc and Tatva Chintan Europe B.V., herein after together referred to as TCPCL group, as there are operational and financial linkages between these entities.

 

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:

Established market presence backed by the experience of the promoters: The company is the largest manufacturer of Structure Directing Agents (SDA) for Zeolites in India and leading manufacturer of some of the other products it has in its portfolio. Company will continue to benefit from its established position in the niche segment. Further, promoters’ experience of over 25 years, their understanding of industry dynamics and healthy relations with customers and suppliers should continue to support the business.

 

Sound operating efficiencies: Operating efficiencies are sound as reflected in operating margin of around 25% in fiscal 2022. Further, return on capital employed has remained over 25% over past 3years through fiscal 2022. Healthy operating margin is driven by niche products having higher margin; integrated operations and experienced management.

 

Healthy financial risk profile: Company’s low total outside liabilities to adjusted networth (TOLANW) estimated below unity on a healthy networth base of around Rs 164 crore represents healthy capital structure. Healthy operating margin has also resulted in comfortable debt protection metrics. Interest coverage and net cash accrual to adjusted debt ratios were healthy at over 20 times and 0.8 time, respectively, in fiscal 2022. Company has also raised equity through initial public offering which has also supported the liquidity and financial risk profile.

 

Weakness:

Large working capital requirement: Operations have been working capital intensive, with gross current assets (GCAs) in range of 180-220 days over past 2 years through March 31, 2022. GCA were estimated at around 365 days as on March 31, 2022, driven by inventory, and receivables at around 190, and 48 days, respectively. High cash equivalents has also resulted in high GCA.

 

Susceptibility to volatility in raw material prices: The raw materials consumed are primarily crude oil derivatives. With few of the company’s contracts being yearly and at fixed prices, operating margin remains susceptible to volatility in raw material prices.

Liquidity: Strong

Cash accrual, expected at over Rs 105 crore per annum should comfortably cover repayment obligation of Rs 10-12 crore per fiscal over medium term. Bank limit (fund based) of Rs 105 crore was utilised 56% on average over the 12 months through March 2022; however the limits has been enhanced by Rs 75 crore which will further support liquidity. CRISIL Ratings expects internal accruals and unutilized existing bank lines to be sufficient to meet its incremental working capital, other operational and financial requirements

Outlook: Stable

CRISIL Ratings believes that TCPCL will continue to benefit from its strong and diverse product profile, established relations with customers and enhanced manufacturing capacities.

Rating Sensitivity Factors

Upward Factors:

  • Sustained improvement in scale of operations by over 10% & sustenance of operating margin in range of 23-24% resulting in higher accruals
  • Timely completion of ongoing capex and successful commissioning of the enhanced plant capacity
  • Sustenance of financial risk profile

 

Downward Factors:

  • Significant decline in the scale of operations or weaker operating profitability below 20%, resulting in lower net cash accruals
  • Increase in working capital requirement, larger-than-expected debt-funded capex or acquisition, or more-than-expected dividend pay-out, weakening the financial risk profile

About the Company

Incorporated in 1996, TCPCL is promoted by Mr Chintan Shah, Mr Ajay Patel, and Mr Shekhar Somani. The company manufactures Structure Directing Agents, Phase Transfer Catalysts, Electrolyte Salts for Super Capacitor Batteries and Pharma & Agro Intermediates and Specialty Chemicals. Its units in Ankleshwar and Dahej (both in Gujarat) together have 280 KL Reactor Capacity and 17 Assembly Lines.

 

TCPCL has set up two marketing arms Tatva Chintan (USA) Inc and Tatva Chintan Europe B.V. (in Netherlands) with warehouse facilities.

Key Financial Indicators

Particulars

Unit

2022

2021

Reported revenue

Rs.Crore

443

306

Reported profit after tax (PAT)

Rs.Crore

95.8

52.3

PAT Margin

%

22.1

17.1

Adjusted debt/adjusted networth

Times

0.3

0.5

Interest coverage

Times

22

17

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN

Name of instrument

Date of allotment

Coupon
rate (%)

Maturity date

Issue size 
(Rs.Crore)

Complexity

level

Rating assigned

with outlook

NA

Bank Guarantee

NA

NA

NA

1

NA

CRISIL A2+

NA

Cash Credit

NA

NA

NA

115

NA

CRISIL A-/Stable

NA

Letter of Credit

NA

NA

NA

4.5

NA

CRISIL A2+

NA

Term Loan

NA

NA

Jun-23

25

NA

CRISIL A-/Stable

NA

Working Capital Facility

NA

NA

NA

65

NA

CRISIL A-/Stable

NA

Proposed Working Capital Facility

NA

NA

NA

4.5

NA

CRISIL A-/Stable

Annexure - List of Entities Consolidated

Names of Entities Consolidated

Extent of Consolidation

Rationale for Consolidation

Tatva Chintan Pharma Chem Limited

Full

Parent company; strong operational synergies

Tatva Chintan Europe BV

Full

Marketing arm of TCPCL; strong operational synergies and wholly-owned subsidiary

Tatva Chintan USA Inc

Full

Marketing arm of TCPCL; strong operational synergies and wholly-owned subsidiary

Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 209.5 CRISIL A-/Stable 07-06-22 CRISIL A2+ / CRISIL A-/Stable 29-06-21 CRISIL A2+ / CRISIL A-/Stable 23-12-20 CRISIL BBB+/Stable 26-12-19 CRISIL BBB+/Stable CRISIL BBB/Positive
Non-Fund Based Facilities ST 5.5 CRISIL A2+ 07-06-22 CRISIL A2+ 29-06-21 CRISIL A2+ 23-12-20 CRISIL A2 26-12-19 CRISIL A2 CRISIL A3+
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 1 ICICI Bank Limited CRISIL A2+
Cash Credit 35 DBS Bank Limited CRISIL A-/Stable
Cash Credit 40 State Bank of India CRISIL A-/Stable
Cash Credit 40 ICICI Bank Limited CRISIL A-/Stable
Letter of Credit 4.5 ICICI Bank Limited CRISIL A2+
Proposed Working Capital Facility 1.93 Not Applicable CRISIL A-/Stable
Proposed Working Capital Facility 2.57 Not Applicable CRISIL A-/Stable
Term Loan 2.5 Axis Bank Limited CRISIL A-/Stable
Term Loan 2.75 ICICI Bank Limited CRISIL A-/Stable
Term Loan 19.75 Citibank N. A. CRISIL A-/Stable
Working Capital Facility 65 Citibank N. A. CRISIL A-/Stable

This Annexure has been updated on 13-Jul-2022 in line with the lender-wise facility details as on 2-Aug-2021 received from the rated entity 

Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Criteria for rating short term debt
CRISILs Criteria for Consolidation

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