Note:- For activities or ratings of instruments falling under the purview of Financial Sector Regulators other than SEBI, the grievance / dispute redressal mechanisms and investor protection mechanisms provided by SEBI shall not be available.
Rating Rationale
Acuité has reaffirmed the long-term rating of ‘ACUITE BBB-’ (read as ACUITE triple B minus) and the short-term rating of ‘ACUITE A3’ (read as ACUITE A three) on the Rs. 35.00 crore bank facilities of Chemtrade Overseas Private Limited (COPL). The outlook is 'Stable'.
Further, Acuité has assigned a long-term rating of ‘ACUITE BBB-’ (read as ACUITE triple B minus) on the Rs. 5.00 crore enhanced bank facilities of Chemtrade Overseas Private Limited (COPL). The outlook is 'Stable'.
Rationale for rating reaffirmation
The rating reaffirmation considers the sustained improvement in the profitability margins albeit the decline in revenues. Further, the rating reaffirmation also factors in the moderate financial risk profile of the company which is marked by moderate net worth, low gearing and moderate debt protection metrics. The rating also considers the adequate liquidity position of the company on account of the net cash accruals generated against no maturing debt repayment obligations as COPL doesn’t avail any long-term bank borrowings. However, the rating is constrained by the moderately intensive working capital operations as well as the highly fragmented nature of the chemical industry. Further, the operating and profitability margins are expected to remain susceptible to fluctuations in the raw material prices of traded chemicals.
About the Company
Chemtrade Overseas Private Limited (COPL) initially established as a proprietorship firm in 1992 and later the constitution was changed to private limited company in November 2007. The company is located at Mumbai and is engaged in trading of wide range of chemicals and solvents used in several industries like pharmaceuticals, petrochemicals, paints amongst others. The company is promoted by its directors, Mr. Jatin B. Shah and Mr. Niraj B. Shah, Mr. Ashish Kirtikumar Shah and Mr. Viral Kirtikumar Shah.
Unsupported Rating
Not Applicable
Analytical Approach
Acuité has considered the standalone business and financial risk profiles of COPL to arrive at the rating.
Key Rating Drivers
Strengths
Experienced management and established track record of operations
COPL has an established operating presence of over three decades in the chemical industry. The company is promoted by its directors, Mr. Jatin B. Shah and Mr. Niraj B. Shah, who are second-generation entrepreneurs with nearly three decades of experience in the chemical and solvent trading business. The promoters are supported by a team of experienced professionals who manage the day-to-day operations of the company. The promoters’ extensive experience has enabled COPL to establish and maintain strong relationships with both customers and suppliers.
Sustained improvement in overall profitability margins albeit decline in revenues
The overall profitability margins of the company have been sustained albeit decline in the turnover during the year. COPL's revenue moderated to Rs. 317.58 crore for FY2025 against Rs. 435.63 crore in FY2024. The turnover for FY2025 declined primarily as the company has shifted its focus to low volume-high margin products. The operating margins of the company improved marginally albeit decline in the turnover recorded in FY25. The operating margins stood at 1.76 percent in FY2025, up from 1.34 percent in FY2024, due to slight moderation in raw material prices along with decrease in selling and administration expenses incurred during the year. The PAT margins also improved marginally to 0.81 percent in FY2025 compared to 0.69 percent in FY2024. Further, the company reported an estimated revenue of Rs. 318.93 crore for FY2026. The revenue and profitability margins for FY2026 have remained rangebound due to stabilization in overall demand and prices for specialized chemicals and solvents.
Going forward the growth in operating and profitability margins are expected to sustain over the medium term, supported by stabilization in price and demand in the industry.
Moderate financial risk profile
The financial risk profile of COPL is moderate, characterized by moderate net worth, low gearing, and moderate debt protection metrics. The company's tangible net worth improved to Rs. 61.87 crore as of March 31, 2025, from Rs. 59.29 crore as of March 31, 2024, due to the accumulation of profits into reserves. Further, this tangible net worth also includes unsecured loans from directors amounting to Rs. 10.68 crore, which have been treated as quasi equity since they are subordinated to bank debts. The gearing (debt-equity ratio) stood negligible at 0.07 times as of March 31, 2025, as the company does not have any long-term bank borrowings. The total debt of Rs. 4.12 crore as on March 31, 2025, comprises of short-term fund-based working capital limits of Rs. 3.32 crore and USL from promoters of Rs. 0.80 crore. The interest coverage ratio and DSCR (Debt Service Coverage Ratio) moderated marginally to 2.14 times and 1.89 times in FY2025, compared to 2.53 times and 2.20 times for FY2024. The Net Cash Accruals to Total Debt stood at 0.66 times for FY2025. The Total Outside Liabilities to Tangible Net Worth marginally increased to 1.39 times for FY2025, from 1.21 times for FY2024.
Acuite believes that the financial risk profile of the company is expected to remain moderate on the back of low gearing due to the absence of long-term debt availed by the company.
Weaknesses
Moderately intensive working capital operations
The working capital operations of COPL are moderately intensive, marked by gross current assets (GCA) of 154 days in FY2025 as against 98 days in FY2024. The GCA days increased in FY2025 on account of higher inventory levels and elongation in the receivables cycle. The inventory days of COPL stood at 37 days in FY2025 as against 13 days in FY2024. The average inventory holding period for the company is around 30- 45 days; however, the company had stocked up inventory during FY2025, contributing to the increase in inventory days. The debtor days of the company also increased to 111 days in FY2025 as against 80 days in FY2024. The average credit period allowed to its customers is around 75 to 90 days. The creditor days of the company also stood at 97 days for FY2025 as against 61 days for FY2024.
Acuite believes that the working capital operations of the company will remain moderately intensive on account of higher inventory holding and elongated receivable cycle.
Highly competitive industry and susceptibility of margins to volatility in raw material prices
The chemical trading industry is a highly fragmented industry and presence of large number of organised and unorganised players has created high competition in the industry. COPL faces competition from large players as well as numerous players in the unorganised segment. Also, on account of its trading nature of business, the entry barriers are low thereby leading to stiff competition for players like COPL. Further, operating and profitability margins are expected to remain susceptible to fluctuations in the raw material prices of traded chemicals. The company is exposed to forex risk, as it does not hedge its foreign currency exposure; however, imports offer limited natural hedging.
Rating Sensitivities
Potential triggers (individual or collective) for an upward rating action:
Sustained improvement in operating margins above 2.5 per cent on a consistent basis
Improvement in working capital cycle
Potential triggers (individual or collective) for a downward rating action:
Decline in net profitability margins affecting cash accruals and debt coverage metrics
Further elongation in working capital cycle with GCA above 200 days
Deterioration in Financial risk profile
Liquidity Position
Adequate
The liquidity position of the company is adequate, marked by its net cash accruals (NCA) of Rs. 2.71 crore against no maturing debt repayment obligations as the company doesn’t avail any long-term debt as on 31st March 2025. The company generated cash accruals in the range of Rs. 2-3 crore during FY2023 to FY2025 against no maturing debt repayment obligations during the same period. In addition, it is expected to generate cash accruals in the range of Rs. 2.7- 3.0 crores against no maturing repayment obligations over the medium to long term. The current ratio stands at 1.58 times as on 31 March 2025. The company has maintained cash & bank balance of Rs. 0.54 crore in FY2025. The average bank limit utilisation for the six-month period ended February 2026 stood at ~81.14 per cent for the fund-based limits and ~97.66 per cent for the non-fund-based limits.
Outlook: Stable
Other Factors affecting Rating
None
Particulars
Unit
FY 25 (Actual)
FY 24 (Actual)
Operating Income
Rs. Cr.
317.58
435.63
PAT
Rs. Cr.
2.59
2.99
PAT Margin
(%)
0.81
0.69
Total Debt/Tangible Net Worth
Times
0.05
0.02
PBDIT/Interest
Times
2.14
2.53
Status of non-cooperation with previous CRA (if applicable)
Note:- For activities or ratings of instruments falling under the purview of Financial Sector Regulators other than SEBI, the grievance / dispute redressal mechanisms and investor protection mechanisms provided by SEBI shall not be available.
Contacts
List of instruments and names of regulators of the instruments
