CRISIL has reaffirmed its ‘CRISIL BBB/Stable/CRISIL A3+’ ratings on the bank facilities of Savla Chemicals Ltd (SCL).  The ratings continue to reflect the company’s established presence in the chemicals industry supported by the promoter’s industry experience and relationships with suppliers and customers, and its above-average financial risk profile. These strengths are partially offset by susceptibility of profit margins to volatility in raw material prices and moderate scale of operations.

According to CRISIL, the networth and total outside liabilities to adjusted networth (TOLANW) of the firm was moderate at Rs 15.37 crore and 1.12 times respectively as on March 31, 2020. Limited reliance on external debt results in low interest outlay. Accordingly interest coverage ratio was healthy at 9.17 times in fiscal 2020. Financial risk is expected to remain moderate in absence of debt funded capex over the medium term.

The firm is exposed to geographic risks, as the Kerala region accounts for 60-70% of the total revenue. Further, Bharat Chem has high dependence on the domestic oil marketing companies which are its principal oil suppliers. However, the risk is partly mitigated by presence of international oil suppliers and proprietor’s prior experience in procuring from them.

CRISIL believes SCL will continue to benefit from its established presence in the chemicals industry supported by its promoter's extensive industry experience and its strong relationships with suppliers and customers.