CRISIL’s ratings on the bank facilities of Alps Chemicals Pvt Ltd (Alps) continue to reflect Alps’s healthy market position in the dye industry, and established customer base. The ratings also reflect the company’s above-average financial risk profile, marked by comfortable gearing and debt protection metrics. These rating strengths are partially offset by Alps’s small net worth and modest scale of operations, high working-capital intensity, exposure to intense competition in the highly fragmented dye industry, and susceptibility to volatility in the prices of raw materials and in the value of the Indian rupee.

Outlook: Stable CRISIL believes that Alps will continue to benefit over the medium term from its healthy market position in the dye industry, and that it will maintain its above-average financial risk profile on the back of adequate accruals. The outlook may be revised to ‘Positive’ if Alps significantly increases its scale of operations, while sustaining its profitability and capital structure. Conversely, the outlook may be revised to ‘Negative’ in case of decline in the company’s profitability or pressure on its liquidity due to unprecedented stretch in its working capital cycle, or if Alps undertakes a large, debt-funded capital expenditure programme, leading to pressure on its financial risk profile.

About the Company Set up in 1985 as an export-oriented unit, by the Bhuta and Mehta families of Gujarat, Alps manufactures dyes, including direct, acid, and liquid dyes. Its manufacturing unit at Vatva (Gujarat) has capacity to manufacture 2500 tonnes per annum (tpa) of direct and acid dyes, 4500 tpa of liquid dyes, and 500 tpa of solvent dyes. About 90 per cent of its products are exported to Germany, Netherlands, Hong Kong, and other countries.

For 2010-11 (refers to financial year, April 1 to March 31), Alps reported a profit after tax (PAT) of Rs.20.5 million on net sales of Rs.443.0 million, against a PAT of Rs.21.6 million on net sales of Rs.354.2 million for 2009-10.