The key rating drivers were improved operational and financial performance in FY23 and H1FY24 and wide geographical reach in the global market amongst others
Vishnu Chemicals Limited, one of India’s leading speciality chemicals manufacturers and a leader in barium and chromium chemicals has announced that CARE Rating has revised its outlook to ‘CARE A-; Stable’ for the company’s long term bank facilities and 'CARE A2+' to the short term bank facilities.
As per the rating agency the key rating drivers were:
Improved operational and financial performance in FY23 and H1FY24: On Consolidated level, VCL has witnessed revenue growth by about 30.61% i.e., to Rs. 1400.74 crore in FY23 compared to Rs. 1072.48 crores in FY22 at the back of increased selling prices of both chromium and barium products by 31.22%. Despite slowdown in demand from export market due to recession in major global economies, VCL was able to maintain the sales volume similar to that of FY22. In line with increase in TOI, PBILDT and PAT levels of the company increased by 50% and 68% i.e., to Rs. 241.67 crores (PY: 161.06 crores) and Rs. 136.5 crores respectively in FY23 led by improved sales realizations. Companies’ ability to pass on rise in raw material costs to customers, flexible product mix coupled with cost reduction measures undertaken i.e., Co2 recovery plant for acidification process which acted as a backward integration helped company in fetching better profitability. With higher sales realization, PBILDT margin of the company improved by 223 bps i.e., to 17.25% in FY23 (FY22: 15.02%). Also, PAT margin of the company improved by 216 bps i.e., to 9.75% in FY23.
During H1FY24, TOI of VCL (On consolidated basis) reported was Rs. 613.84 crores which is marginally lower by 2.88% compared to corresponding H1 of previous year on account of correction in selling prices in tandem with decline in raw material prices. However, VCL was able to increase the sales volumes which enabled the company to maintain the revenue and profitability. It can be witnessed that, Q-o-Q, VCL’s sales volume increased by 10% at the back of improved sales from enhanced capacity and acceptance of VCLs products in the market. Despite reduction in selling prices, VCL was able to maintain the margins at similar levels with PBILDT and PAT margins stood at 16.66% and 8.57% respectively.
Equity infusion in the form of Qualified Institutional Placement: In July 2023, VCL raised funds in the form Qualified Institutional Placement (QIP) amounting to Rs. 200 crores (net proceeds of Rs. 196.73 crores) which were utilised to repay loans and reduction in utilisation of working capital limits both in VCL and its subsidiary VBPL. As on September 30, 2023, VCL has paid term loans and unsecured loans and reduced utilisation of working capital for amount Rs. 173.44 crores and balance funds parked in fixed deposit as on September 30, 2023.
Comfortable financial risk profile: As on March 31, 2023, debt profile of VCL consists of term loans availed for capex, ECLGS loan, unsecured loans from promoters and working capital borrowings. Capital structure of the company marked by overall gearing ratio improved and stood comfortable at 0.74x as on March 31, 2023 (PYE: 1.01x) led by healthy profitability levels accredited to net worth coupled with gradual repayment of term loans and reduction in average utilisation working capital limits. Net worth of the company improved from Rs. 276.86 crores as of March 31, 2022 to Rs. 414.36 crores as of March 31, 2023. Other debt coverage indicators, Interest coverage ratio and TD GCA improved to 6.98x and 1.81x in FY23 against 5.75x and 3.23x respectively in FY22. Considering the QIP funds raised in H1FY24, capital structure further improved and remained at 0.27x as on September 30, 2023.
Comfortable operating cycle: Company procures major raw material Chrome Ore from other countries like South Africa which contributes about 40 to 45% of total purchases and other products procured in indigenous market. VCL either makes payments to creditors through LC with cover period of 90 days or make payment in advance. VCL provides credit period of 60 to 90 days to its repetitive customers and received advance payment of 100% at the time of shipment/dispatch of products to its customers. Since the company is into manufacturing, it maintains adequate inventory of essential raw materials to alleviate financial risk and hold inventory for a period 60 days. Operating cycle of the company improved and stood comfortable at 60 days in FY23 from 72 days in FY22 on account of reduction in inventory days and improved collection period. With efficient working capital cycle, reliance on working capital borrowings reduced to 76% over last 12 months ended August 2023.
Established position with experienced promoters and management team: Ch. Krishna Murthy, one of the key architects in envisioning the growth and expansion of Vishnu Chemicals Limited (VCL) have an experience of over 3 decades in the business of manufacturing, marketing and exporting of chromium chemicals worldwide. Apart from Mr. Ch Krishna Murthy, Ms. Ch. Manjula (Wife of Mr. Ch Krishna Murthy) and Mr. Ch. Siddhartha (Son of Mr. Ch Krishna Murthy) are also the co-promoters of the company. Mr. Ch. Siddartha is a Joint Managing Director of Vishnu Chemicals Limited and Managing Director of Vishnu Barium Private Limited. He holds a master’s degree in biotechnology from Northumbria University, UK and a MBA from Saginaw Valley State University, USA. He has shouldered multiple responsibilities and his experience in international marketing, sourcing and building highly effective teams to serve customers in chemical industry has helped the company achieve scale and leadership position in global markets. VCL is serving more than 15 industries across 50+ countries globally.
Wide geographical reach in global market and long-term association with reputed clientele: VCL has established presence in both domestic as well as international market. VCL has presence in 50+ countries and sell majorly in the markets like Brazil, USA, Mexico, South Korea, Italy, Germany, Australia, Bangladesh, Argentina and Egypt etc., During FY23, Exports constituted about 48.26% of total TOI on consolidated level against 50.45% in FY22. In terms of value, exports increased by almost 24.8% to Rs. 679.15 crores from Rs. 545.08 crore in FY23. Apart from export market, the company is also gaining increased share in domestic market as can be witnessed from higher sales reported in FY23. The contribution to overall sales from domestic market increased to about 52% and when compared to previous year, TOI from domestic sales increased by about 36% to Rs.728.02 crore. Further, VCL accepts the orders from export or domestic market based on demand and associated probability.
Repeated orders backed by long standing association with reputed clientele: As on August 31, 2023, VCL (on standalone) has order book of Rs. 162.29 crores to be executed within 3 months. Company receives repeated orders from longstanding and reputed clientele like Solara Active Pharma Sciences Ltd, IOL Chemicals and Pharmaceuticals Ltd., Montana Quimica Ltd etc. Contribution from top 10 customers for FY23 stood at 42.66%.
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