CRISIL has revised its outlook on the long term bank facilities of Deccan Fine Chemicals India Private Limited to 'Positive' from 'Stable' while reaffirming the rating at 'CRISIL A+'. The short term rating has been reaffirmed at 'CRISIL A1'.

The outlook revision reflects CRISIL's belief that Deccan group's financial risk profile will improve over the medium term supported by healthy operating performance and absence of any immediate debt-funded capex plans. The group is expected to clock about 10 to 15 percent annual revenue growth over the medium term, backed by steady revenues from existing molecules and commercialization of new molecules. The group has increased its custom synthesis and contract manufacturing (CSM) offering to all its customers through long-term manufacturing agreements. Improving scale and strong portfolio of molecules will help sustain the operating profitability at above 25 percent levels.

Improvement in operating performance will lead to improvement in group's  financial risk profile with improvement in Total Outside Liabilities to Tangible Net worth (TOL/TNW) to around 1.40 times as on March 31, 2022 from 1.96 times as on March 31, 2020. Deccan group is in the process of completing its sizeable capital expenditure in FY21 including at its Tuni SEZ. With moderation in capex, no plans for any immediate debt funded acquisitions and strong accretion to reserves, overall indebtedness levels is expected to improve considerably. That said, any material and very large debt funded acquisition will remain monitorable.

The outlook revision also factors in the strengthening of group's liquidity profile. Utilization of working limits has reduced from 84% in May 2020 to 55% in November due to healthy cash flows and sanction of additional working capital limits.  The group continues to maintain healthy cash and bank balance.

Deccan Group today has long-term contracts for key agrochemical active ingredients and intermediates for both the newly launched and to be launched products across the globe. The group has a track record of development of more than 30 new molecules in the last five years.

CRISIL expects Deccan Group's business risk profile to strengthen further, driven by an expanding product portfolio, and healthy revenue visibility and steady margin, leading to adequate cash accrual.