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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 17.56 | ACUITE A- | Stable | Assigned | - |
| Bank Loan Ratings | 55.21 | ACUITE A- | Stable | Reaffirmed | - |
| Bank Loan Ratings | 77.00 | - | ACUITE A2+ | Reaffirmed |
| Total Outstanding | 149.77 | - | - |
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Rating Rationale |
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Acuité has reaffirmed the long-term rating of ‘ACUITE A-’ (read as ACUITE A minus) and the short-term rating of ‘ACUITE A2+’ (read as ACUITE A two plus) on the Rs.132.21 Cr. bank facilities of Gujarat Polysol Chemicals Limited (GPCL). The outlook remains ‘Stable’.
Acuité has assigned the long-term rating of ‘ACUITE A-’ (read as ACUITE A minus) on the Rs.17.56 Cr. bank facilities of Gujarat Polysol Chemicals Limited (GPCL). The outlook remains ‘Stable’. Rationale for reaffirmation The rating reaffirmation considers the stable business risk profile of the company, established market position of the company in the chemical industry with experienced promoters. The rating also factors in the healthy financial risk profile and adequate liquidity position of the company. However, the rating is constrained by the working capital-intensive nature of operations and susceptibility of operating performance to input price volatility and foreign fluctuation risk. |
| About the Company |
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Gujarat Polysol Chemicals Limited (Erstwhile Gujarat Polysol Chemicals Private Limited) is a Vapi, Gujarat based company incorporated in 1989. It is engaged in manufacturing of chemicals where the end use is in various sectors like Infrastructure, textile, agriculture and leather. The company’s finished products are the intermediates which are used as raw material for further admixture industries to make their final products. The company has 4 manufacturing facilities, 2 units in Vapi, 1 unit Sarigam (Gujarat) and the last one at Dadra & Nagra Haveli at a capacity of 184,400 Metric Tonnes Per Annum (MTPA). The promoters of the Company are Mr. Shaileshkumar Balvantrai Desai, Mr. Umang Shaileshbhai Desai and Ms. Bhavisha Shaileshbhai Desai.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
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Acuité has considered the standalone business and financial risk profile of GPCL while arriving at the rating.
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| Key Rating Drivers |
| Strengths |
| Established track record of operations and experienced management
GPCL is being promoted by Mr. Shailesh Desai and family members. The promoters have an experience of more than three decades in the chemical industry. The extensive experience of the promoters and established track record of operation has helped the company to maintain healthy relationship with its customers and suppliers. The chemicals manufactured by the company find it use in industries like Infrastructure, Agro/ Pesticide, Leather and Textile industries wherein the chemicals are used as an admixture to make the final product. The company generates around 64.5 percent of revenue from Infratech chemicals followed by 11.00 percent from textile and 19.00 and 5.50 percent respectively from agrochemicals and leather chemicals. Through continuous innovations and R & D the company keeps adding products to its portfolio which can be used in various industries. Acuité believes that the company will benefit from its experienced management, long track of operation and diversified product portfolio. Stable operating performance GPCL has witnessed growth in operating performance with a 3.18% growth in the absolute terms of its revenues. Revenue of the company stood at Rs.504.99 Cr. in FY2024(Prov) as against Rs.489.41Cr. in FY2023. However there had been growth by ~22% in terms of volume of the products. But in absolute term it is showing at a lower percentage due to decline in the price realisation. The growth seen in the revenue is driven by the increased demand on account of resumption of infrastructural and manufacturing activities in the industry. The operating margins of the company improved to 18.39% in FY2024(Prov) vis-à-vis 15.93% in FY2023. The same has been a result of better absorption of costs and reduction in price of raw materials. With constant modifications and innovations, new products are being added in product portfolio which fetch higher margins. Also, the company’s PAT margins have also improved to 12.34 % in FY2024(Prov) from 10.13 % in FY2023 mainly on account of improvement in operating margins. Acuite believes that the business risk profile of the company will continue to improve with the diversified product portfolio and healthy demand expected in the chemical industry. Further, with the acquisition of sister concern’s manufacturing facility, the company’s scale of operations is expected to improve over the medium term. Healthy financial risk profile GPCL’s financial risk profile is healthy marked by strong net worth, low gearing coupled with comfortable debt protection metrics and coverage indicators. The company’s net worth stood at Rs.295.51 Cr. as on 31st March 2024(Prov) as against Rs.231.92 Cr. as on 31st March 2023. Increase in tangible net worth is on account of healthy accretion of profits to reserves over the period. Gearing of the company remains at the same level 0.24 times as on 31st March 2024(Prov)and as on 31st March 2023. Total debt of the company stood at Rs. 70.43 crore in FY2024(Prov) as against Rs.56.29 crore in FY2023. Total debt of the company includes long term debt of Rs.46.79 Cr. and short term debt of Rs. 23.63 Cr. TOL/TNW of the company improved and stood at 0.53 times as on 31st March 2024(Prov) as against 0.55 times as on 31st March 2023. NCA/TD stood at similar level i.e 0.98 times as on 31st March 2024(Prov) as against 0.97 times as on 31st March 2023. Debt protection metrics of the company are comfortable with DSCR at 4.62 times in FY2024(Prov) as against 3.36 times in FY2023. Interest coverage ratio (ICR) improved and stood at 19.42 times in FY2024(Prov) as against 11.12 times in FY2023. Acuite believes that the financial risk profile of the company will continue to remain healthy on account of its healthy revenue growth, healthy cash accruals and no major debt funded capex in near to medium term. |
| Weaknesses |
| Working capital intensive nature of operations
Working capital operations of the GPCL are intensive with GCA days at 226 days in FY2024(Prov) as against 187 days in FY2023. Elongated GCA days are driven by high debtor collection period and significant loans and advances to related parties. The extent of exposure of funds to related parties would remain a key monitorable. Debtor days stood at 113 days in FY2024(Prov) as against 111 days in FY2023 in line with credit policy of the Company. The inventory holding period improved and stood at 37 days in FY2024(Prov) as against 41 days in FY2023. The creditor days stood at 81 days in FY2024(Prov) as against 63 days in FY2023. The average bank limit utilization stood low at around 20.66 percent for six months ended June, 2024. Acuite expects the working capital operations to remain intensive over the medium term on account of higher debtor collection period offered to its customers for the payment realization. Susceptibility of operating performance to input price volatility and foreign fluctuation risk The raw materials are procured both from the domestic market as well as through the imports. Around 50 percent of the products are procured through imports from countries like South Korea, Spain Singapore and China to name a few. The prices of the raw material are highly volatile in nature and any adverse movement in the price of raw material may impact the profitability of the Company. Due to significant exposure to imports, there is a foreign fluctuation risk associated to it. However, the company mitigates this risk as it carries forward the price fluctuation risk on its customer. There is a price escalation clause in every contract wherein a specific timeline is mentioned for supplying the product and also any fluctuation in the price of the raw material is carried forward on the customers. Engaging itself into forward contracts, placing back-to-back orders and procuring the raw material at bulk quantity helps the company to mitigate price volatility risk to a larger extent. Despite this, the operating margin of the company has fluctuated between 15.93% and 14.88% in last 2 years with an operating margin of 18.39% as on March 31, 2024(Prov). Acuite believes that the operating margins of the company will continue to remain volatile and susceptible to raw material price changes and foreign exchange fluctuations over the medium term. |
| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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Liquidity of GPCL is adequate with sufficient net cash accruals as against its debt repayment obligation. Net cash accruals of the company stood at Rs.68.67 Cr. in FY2024(Prov) as against debt repayment obligation of Rs. 11.03 Cr. Net cash accruals are expected to remain sufficient in the range of Rs 73 Cr. to Rs. 83 Cr. as against debt repayment obligation of Rs. 7 Cr. to Rs. 11 Cr. Bank limit utilisation remained low with average utilisation of 20.66% for 6 months ended June 2024. GPCL has maintained unencumbered cash balance of Rs 1.47 crore as on 31st March 2024(Prov) as against Rs.0.95 crore as on 31st March 2023. The current ratio of the company stood at 2.29 times as on March 31, 2024(Prov). However, the company has extended unsecured loans to its wholly owned subsidiary for setting up a chemical plant in Alwar, Rajasthan and is expected to support the group company over the medium term to set up the plant . GPCL has also acquired another unit Phthalo colours and chemicals (India) Limited. The capital outlay till year ended FY24 is of Rs. 57.37 Cr. Out of Rs 57.37 Cr. Rs 45.31 Cr. were funded to Phthalo colours and chemicals (India) Limited and the same would be recovered in the coming 4 months i.e upto Dec-24. No further funding would be done for this unit.The company has also provided corporate guarantees to the bank debts of Phthalo colours and chemicals (India) Limited.
Acuite believes that the liquidity of GPCL will remain adequate on the back of increasing accruals, absence of major debt funded capex plans, healthy current ratio low bank limit utilisation over the medium term. |
| Outlook: Stable |
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Acuité believes that the company will maintain a stable outlook over the medium term backed by its experienced management, established track record of operation in the chemical industry and healthy financial risk profile. The outlook may be revised to ‘Positive’ if the company registers higher than expected growth in its revenue while maintaining its operating margins at its current levels along with efficient working capital management. Conversely, the outlook may be revised to “Negative”, if the company registers lower than expected growth in revenues , decline in profitability or in case of further exposure to group entities or elongation in the working cycle.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 24 (Provisional) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 504.99 | 489.41 |
| PAT | Rs. Cr. | 62.33 | 49.57 |
| PAT Margin | (%) | 12.34 | 10.13 |
| Total Debt/Tangible Net Worth | Times | 0.24 | 0.24 |
| PBDIT/Interest | Times | 19.42 | 11.12 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any other information |
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None
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| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Manufacturing Entities: https://www.acuite.in/view-rating-criteria-59.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm |
| Note on complexity levels of the rated instrument |
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In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in
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