Established track record of operations with experienced promoters
Being in the industry for more than three decades, NLPL has established a significant track of operations in the domestic and international markets. The company exports its products to various geographical locations like China, Austria, Spain, Japan, Singapore, etc which contributed to ~15 percent to the total sales in FY25. Further, one of the shareholder of NLPL i.e. NACL Industries Limited holding 26 percent stake in the company has been majorly acquired by Coromandel International Ltd i.e a leading agrochemical company. This change shall provide better market opportunities to the company and enhance its scale of operations. Further, the director of the company, Mr. Goutham Gottumukkala RK Raju has an experience of over 15 years in the chemical and bulk drug industry, along with Mr. YP Rao, a technical advisor of the company, who is a renowned specialist in process design and optimization with more than 35 years of experience in the bulk drugs industry. Therefore, the extensive experience of the management has helped the company to establish healthy relationships with their suppliers and customers.
Acuité believes that the diversified product portfolio and long-standing experience of the management shall continue to benefit the company going forward, resulting in steady growth in the scale of operations.

Improvement in operating performance post reinstatement of the production capacity
The operating revenue of the company stood at Rs. 135.05 Cr. in FY25 (Prov.) as compared to Rs. 115.64 Cr. in FY24, owing to increase in the production volume post reinstatement of manufacturing capacity supported by diversified product portfolio and subsequent change in production model from single-batch chemical manufacturing to campaign-based model. Further, the company has also established itself as a contract development and manufacturing organisation (CDMO), which is generating better profitability margins and improving its scale of operations. While the operating margins of the company stood at 11.16 percent in FY25 (Prov.) as compared to 10.49 percent in FY24, the net profitability margins of the company increased substantially to 9.17 percent in FY25 (Prov.) as compared to 2.30 percent in FY24, owing to recording of an exceptional income of Rs 9.21 Cr. pertaining to insurance claim received in FY25. Further, for the fire accident, against the total insurance claim of  Rs. 44.76 Cr. the company has received Rs. 30.38 Cr. till March 2025 and balance is expected in FY26.

Moderate financial risk profile
The company’s financial risk profile is moderate marked by tangible net worth of Rs. 84.17 Cr. as on March 31, 2025 (Prov.) as against Rs. 71.78 Cr. as on March 31, 2024, owing to the accretion of profits to reserves and partial receipt of insurance claim in FY25. The company reinstated their production plant in FY24 for Rs. 24.10 Cr. for which they availed term loan of ~Rs. 15.75 Cr. and remaining was funded through the internal cash accruals. Therefore, the debt levels elevated in FY24. Moreover, the improved net worth (including exceptional income) moderated the gearing (debt-equity) in FY25 (Prov) to 0.64 times to 0.78 times in FY24. Further, the debt protection metrics also improved with interest coverage ratio of 3.44 times in FY25 (Prov.) (1.85 times in FY24) and debt service coverage ratio at 2.35 times in FY25 (Prov.) (1.38 times in FY24). Going forward, the company plans to add another equipment of Rs. 7.00 Cr. in the fiscal 2026 which shall be funded through internal cash accruals. 
Acuité believes that the financial risk profile is expected to improve going forward on the back of steady cash accruals and absence of any significant debt funded capex.

Intensive working capital operations owing to requirement of higher inventory levels
The working capital operations of the company are intensive as reflected by high gross current assets (GCA) of 256 days as on March 31, 2025 (Prov.) (254 days as on March 31, 2024) which are mainly driven by high inventory levels which stood at 200 days in FY25 (Prov.) (214 days in FY24). This is due to company's diversified product portfolio and the fact that production involves multiple stages which needs to be followed accurately within limited resources. Further, the company provides an average credit period of 60-90 days to its customers which marked debtor days of 54 days in FY25 (Prov.) (40 days in FY24) and the average creditor days stood at 135 days in FY25 (Prov.) (150 days in FY24).
Acuité believes that any further stretch in the working capital operations shall be a key rating monitorable.

Susceptibility to volatility in raw material prices and cyclicality in the chemical industry
The company procures raw materials domestically (~85 percent) and from the global markets as well. The operating profitability remains partially susceptible to volatility in the prices of key raw materials, such as sodium metal, pyridine, etc. Further, the chemical industry is intensely competitive and dominated by large global players. The bulk drug and specialty chemical industry is also susceptible to regulatory changes and cyclicality in the industry. The revenue also constitutes export income which incurs foreign exchange currency risks; however, it gets naturally hedged against the imports and for the net forex exposure the company books the forward contracts.
Any significant reduction in the demand and prices adversely impacting the operating margins and cash accruals of the company will remain a key monitorable.