CRISIL has upgraded its ratings on the bank facilities of Industrial Solvents and Chemicals Pvt Ltd (ISCPL) to ?BBB+/Stable/P2? from ?BBB/Stable/P3+?. The upgrade was driven by improvement in ISCPL?s financial risk profile because of healthy profitability over the past two years.

* includes Packing Credit Sub Limit upto a maximum limit of Rs.120.0 Million and EBN sub limit upto maximum of Rs.130.0 Million

Consequently, the gearing is expected to moderate to 1.3 times as on March 31, 2011 from historical levels of more than 2 times. The company is expected to improve its financial risk profile over the medium term, supported by moderate capital expenditure (capex) plans, which are likely to be largely funded by internal accruals. The upgrade also reflects CRISIL?s belief that ISCPL?s business risk profile will improve over the medium term because of the increasing scale of its operations and the resultant growth in cash accruals.

The ratings continue to reflect ISCPL?s established market position, leading to strong revenue growth, moderate financial risk profile, and healthy operating efficiency. These rating strengths are partially offset by its large working capital requirements and its susceptibility to fluctuations in raw material prices and cyclicality in the chemical industry.

Outlook: Stable

CRISIL believes that ISCPL will maintain its business risk profile over the medium term, backed by expected healthy growth in revenues and profitability, supported by strong market position. The outlook may be revised to ?Positive? if ISCPL?s sustains its improved capital structure over the medium term or if its revenues and cash accruals improve significantly. Conversely, the outlook may be revised to ?Negative? in case the company?s financial risk profile deteriorates, most likely because of an additional large, debt-funded capex, or decline in the operating margin.