| Extensive experience of the promoters in the chemical industry and established track record of operations of the company
VCL was established in 1996, thus having an operational track record of over two decades in the chemical industry. The company is promoted by Mr. B. Vivek Shetty and Mr. Vinesh Shetty who have more than two decades of experience in the industry. The operations of the group are managed by its promoters and a qualified and experienced senior management team who are ably supported by a strong line of mid-level managers. The extensive experience of the promoters and management has helped the group to establish long and healthy relationships with reputed customers and suppliers over the years. The promoters' industry experience and established brand presence has helped the company to establish longstanding relationships with reputed clientele.
Acuité believes the company will continue to benefit from its established presence in the industry, and the promoter’s demonstrated ability to sustain a healthy level of operations across various cycles.
Improvement in revenues; however profitability is impacted due to increase in raw material prices
Viswaat Chemicals Limited has recorded a 11.21% YoY growth in the operating performance of the company to Rs. 739.84 Cr in FY23 as against Rs. 665.25 Cr in FY22. However, despite improvement in revenues, the company’s profitability declined in FY23 as reflected in the EBITDA margins which stood at 7.12% in FY23 as against 9.88% in FY22. The PAT margins of the company also declined in FY23 to 3.07% as against 5.44% in FY22. The margins of the company were impacted due to increase in raw material prices. However, till October 2024, the company witnessed an improvement as reflected in the EBITDA margins which stood at 7.98% and net sales at Rs. 442.47Cr.
The company earns revenue from 4 segments namely speciality chemicals, surfactants, leather and others. The company earns 91.93% from sale of surfactants, 4.24% from sale of textile chemicals, 3.47% from sale of speciality chemicals and 0.36% from sale of scrap materials. The company earlier had a leather chemicals portfolio which it sold to Stahl International, Netherlands in FY16. After the sale of the leather chemical portfolio, the company continued manufactuing for them until FY22. The company also earns through exports which contribute to around 23% of the total sales amounting to Rs. 173.71 Cr in FY23. Some of the key export markets of the company include – Bangladesh, Central America, China, Colombia, Egypt, Ethopia, Finland, Indonesia, Italy, Germany, Kenya, Korea, Middle East, Sri Lanka, Switzerland, Nepal, Netherlands, Nigeria, Pakistan, Singapore, Spain, Taiwan, Thailand, Turkey and USA. 60% of the exports are in Euro and 40% in USD. The company also imports 10% of the raw materials from Malaysia and Thailand which are in USD and hence there exists partial natural hedging. The company also enters into forward contracts for hedging the forex risk.
Acuité believes that the business risk profile of the company is likely to continue to improve on the back of reputed clientele and healthy demand expected over the near to medium term.
Increased Capacity Utilisation
The company has 2 surfactant manufacturing plants at Ambernath and Dahej. The company has an installed capacity of 55,000 MT at the Dahej plant in FY23 as against 39,500 MT in FY22 and 22,900 MT in FY23 as against 39,500 MT capacity at the Ambernath plant. The installed capacity for Ambernath plant declined in FY23 on account of sale of leather chemical portfolio sold to Stoller International, Netherlands. Despite the declined installed capacity, the company’s capacity utilisation increased for both the plants and stood at 84.78% in FY23 as against 58.7% at the Ambernath plant and 71.53% in FY23 as against 55.70% in FY22 at the Dahej plant.
The company is undergoing an expansion at the Dahej plant which started in April 2023 and is expected to complete by September 2024. The expansion will double the capacity at the Dahej plant. The company will incur Rs. 103 Cr of capex towards capacity expansion. This expansion is funded through internal accruals of Rs. 28.50 Cr and term loan of Rs. 75 Cr from banks. Out of the internal accruals of Rs. 28.50 Cr to be utilized towards capex activities, around Rs. 16 Cr has already been incurred towards capex in FY23. The term loans of Rs. 75 Cr has been sanctioned from Axis Bank and HDFC Bank but has not yet been disbursed.
Acuité believes that the increased capacity at the Dahej plant is likely to help in boosting the operations of the company.
Healthy Financial Risk Profile
The financial risk profile of the company is healthy marked by moderate networth, low gearing and comfortable debt protection metrics. The tangible networth of the company stood Rs. 144.66 Cr in FY23 as against Rs. 122.68 Cr in FY22 on account of accretion of profits. The debt outstanding of the company in FY23 comprises of long-term debt of Rs. 50.73 Cr and Rs. 59.35 Cr of short-term debt. The gearing of the company remained below unity and stood at Rs. 0.76 times in FY23 as against 0.89 times in FY22. However, the gearing of the company is expected to increase on account of a major debt funded capex for capacity expansion at Dahej plant. The TOL/TNW stood at Rs. 1.37 times in FY23 as against 1.52 times in FY22. The debt protection metrics remained comfortable with debt service coverage ratio of Rs. 2.02 times and interest service coverage ratio stood at Rs. 4.80 times in FY23.
Acuite believes that the financial risk profile is likely to remain healthy with no major capex plans in the near to medium term.
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