CRISIL Ratings has reaffirmed its ‘CRISIL AA/Stable/CRISIL A1+’ ratings on the bank loan facilities of NOCIL Limited (NOCIL).

The ratings continue to reflect NOCIL's healthy business risk profile marked by its leading market position in the rubber chemicals industry in India and established clientele as well as robust financial risk profile marked by nil debt. The strengths are partially offset by high revenue dependence on the tyre industry, exposure to competition from imports and risks associated with the ramp up of expanded capacities.

Revenue is expected grow by 35-40% in fiscal 2022 aided by a low base of fiscal 2021 along with revival in the demand from auto industry, which contributes to around 70% of the NOCIL’s revenue. Ramp up of newly added capacities, consistent price hikes taken while retaining competitive edge, focus on increasing share from export markets and benefits accruing from continued diversification of vendor base by global customers by following China+1 strategy will also drive the revenue growth over the medium term.

Operating profitability is expected to stabilise with correction in inflationary trend in raw material prices and will also be supported by improving capacity utilisation of its new capacities. Efficient cost control measures in the form of price hikes in light of current inflationary pressure from raw material prices as well as strong operating efficiencies will also benefit in safeguarding their margins over the medium term.

Financial risk profile remains strong in the absence of any debt obligation. The company is expected to generate healthy cash surpluses over the medium term, which will further help in the sustenance of strong credit metrics.  Bank lines remain largely unutilised, and net cash accrual should be sufficient to meet capital expenditure (capex) requirements and support working capital.