CRISIL Ratings has upgraded its ratings on bank loan facilities of Chemspec Chemicals Private Limited (CCPL) to 'CRISIL BBB+/Positive/CRISIL A2' from 'CRISIL BBB/Stable/CRISIL A3+'

The rating action factors in the overall improvement in CCPL's credit risk profile backed by the healthy operating profitability, steady demand and revenue along with a controlled working capital cycle. The healthy offtake of various products and favourable raw material prices have driven the growth in revenue and operating margin.

CCPL 's operating income has witnessed a healthy y-o-y growth of 71.6% in FY2020 to record Rs 597.12 crore with a healthy operating margin of 18.1%. Revenue moderated to Rs. 506.83 crore in FY 2021 however the same was on account of disruption in operations due to Covid-19 pandemic. Despite this, the operating margin improved to 24.2% in FY 2021 on account of lower reliance on imports and healthy realizations. In the current fiscal, company has generated revenue of Rs 280.47 crore with an operating margin of 20% during H1 FY22. Gross current assets days further improved to 97 days (net of cash) as on March 31, 2021 from 114 days (net of cash) in previous fiscal.

The sustained healthy business risk profile, particularly controlled working capital cycle and healthy profitability, has led to healthy accretion to reserves thus ultimately resulting in further improvement in the financial risk profile metrics. Networth improved to Rs. 183.29 crore as on March 31, 2021 from Rs 102.25 crore in previous fiscal. Also, tight control over receivables and moderate inventory holding has improved the working capital cycle and thus led to lower reliance on external debt to fund working capital requirements.

The ratings reflect CCPL's established market position in the chemicals industry, its robust financial risk profile, and strong liquidity. These rating strengths are partially offset by vulnerability to volatility in raw material prices and foreign exchange (forex) rates, and moderately high working capital requirements.