| Tatva Chintan Pharma Chem Limited | ||||||
| Ratings downgraded to 'Crisil BBB+/Stable/Crisil A2' | ||||||
| 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 downgraded its ratings on bank loan facilities of Tatva Chintan Pharma Chem Limited (TCPCL; part of TCPCL group) to ‘Crisil BBB+/Stable/Crisil A2’ from ‘Crisil A-/Negative/Crisil A2+’.
The rating action reflects moderation of business risk profile of the group. During FY 25, revenue of the group has declined to around Rs. 385 crore from Rs 393 crore in FY24 (Rs.423 Crores in FY 23). During FY 25, group also registered operating profitability of 9.49% which declined from 18.43% of FY 24. Consequently, accruals have reduced.
Moderation in operating profitability was attributed to higher pricing pressure, lower cost absorption, issues related to scaling up (discontinuation of flame retardants) and lack of contribution from high margin new products.
During FY 25, one of the major products of the company SDA (Structure Directing Agents) saw moderation in offtake from major export destination which is China. Due to higher adoption of LNG Powered trucks by Chinese companies, company saw substantial decline in SDA demand from Chinese consumers.
Further, the Group will be entering into the commercial phase of new products in FY 26 and offtake of new products will be crucial for improvement of business risk profile.
The ratings continue to reflect the company’s established market presence, supported by the extensive experience of its promoters and healthy financial risk profile. These rating strengths are partially offset by susceptibility of profitability to fluctuations in raw material prices and higher working capital requirements. |
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. The group 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.
Healthy financial risk profile: Capital structure was strong, as reflected in networth and total outside liabilities to tangible networth ratio of Rs 733 crore and 0.11 times, respectively, as on March 31, 2025. Debt protection metrics were comfortable, as indicated by interest coverage and net cash accrual to adjusted debt ratios of 28.3 times and 0.90 times, respectively, in fiscal 2025. The financial risk profile is expected to remain strong over the medium term.
Weaknesses: Susceptibility of profitability to fluctuations in raw material prices: The raw materials consumed are primarily crude oil derivatives. Operating margin remains susceptible to volatility in raw material prices. This can be seen from operating margins in the range of 9.49-26% for the last 5 years ending fiscal 2025. Operating profitability was moderated in FY 25 . Further the decline in margins has been on account of lower sales from the SDA segment where margins are higher. While operating margins are expected to improve, sustenance of the improved operating margins is to be seen.
Large working capital requirement: Operations are working capital intensive, with gross current assets (GCAs) in range of 220-250 days over past 5 years through March 31, 2025. GCA were estimated at around 250 days as on March 31, 2025, driven by inventory and receivable at around 140, and 79 days, respectively. High cash and cash equivalents have also resulted in high GCA. |
Liquidity: Adequate Bank limit utilization is low at around 5.33 percent for the past twelve months ended March 2025. Cash accruals are expected to be over Rs 35 crore which are sufficient against nil obligation over the medium term. In addition, it will act as a cushion to the liquidity of the company. |
Outlook: Stable Crisil Ratings believes that TCPCL’s credit profile will remain under pressure on account of moderation in operating margin however it will benefit from its strong and diverse product profile, established relations with customers and enhanced manufacturing capacities. |
Rating sensitivity factors Upward Factors:
Downward Factors:
|
About the Group 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 500 KL Reactor Capacity and 39 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
|
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
|
Annexure – List of entities consolidated
|
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||
|
Criteria Details
|