CRISIL’s ratings on the bank facilities of Elkay Chemicals Pvt Ltd (Elkay; part of the Elkay group) continue to reflect the Elkay group’s small scale of operations in an industry dominated by few large multinational corporations (MNCs), and weakened financial risk profile because of sizeable debt-funded capital expenditure (capex). These rating weaknesses are partially offset by the group’s promoters’ extensive experience in the specialty chemical industry and the group’s improving operating efficiencies.

For arriving at its ratings, CRISIL has combined the business and financial risk profiles of Elkay and Silicone International Products (SIP). The two entities are together referred to as the Elkay group. This is because the entities have common promoters and management, and are in similar lines of business, with strong operational and financial linkages with each other. Elkay owns 98 per cent of SIP’s equity shares.

Outlook: Stable CRISIL believes that the Elkay group’s financial risk profile will remain constrained over the medium term because of its ongoing, sizeable, debt-funded capex programme. The outlook may be revised to ‘Positive’ in case the group infuses larger-than-expected quantum of equity capital to support its capital structure or if there is a substantial increase in its cash accruals. Conversely, the outlook may be revised to ‘Negative’ in case the group faces delays in commissioning of the enhanced capacities or the capacity utilisation at the enhanced capacities is sub-optimal, or if the group’s liquidity weakens because of any unprecedented stretch in its working capital cycle.