By: ICN Bureau
Last updated : December 28, 2020 10:32 am
SSPL's scale of operations remains modest in the intensely competitive chemicals industry, as reflected in revenue of Rs 53.8 crore in fiscal 2020.
CRISIL has upgraded its ratings on the bank facilities of Spak Surfactants Private Limited (SSPL) to 'CRISIL BBB-/Stable/CRISIL A3' from 'CRISIL BB+/Stable/CRISIL A4+'.
The upgrade reflects improvement in SSPL's business and financial risk profiles. The business risk profile is supported by a diversified product profile and extensive experience of the promoters in the speciality chemicals industry. This has helped SSPL's revenue remain stable despite decline in inter-company sales to its group company Spak Orgochem (India). Operating margin improved to 13.99% in fiscal 2020 from 11.07% in fiscal 2019 on account of increase in clientele and higher production efficiency as a result of capital expenditure undertaken in the previous years. The financial risk profile has improved too, along with strengthening of liquidity.
The ratings reflect the extensive experience of the promoters, SSPL's healthy financial risk profile and sound operating efficiency. These strengths are partially offset by susceptibility to technological obsolescence/changes, unexpected currency rate movements and modest scale of operations.
The company’s capital structure is comfortable, indicated by gearing of 0.84 time as on March 31, 2020, with limited reliance on external borrowings. Debt protection metrics were moderate, as reflected in interest coverage and net cash accrual to adjusted debt ratios of 6.11 times and 0.64 time, respectively, as on March 31, 2020. However, networth was modest at Rs 10.26 crore as on March 31, 2020.
The sound operating efficiency is reflected in healthy return on capital employed of 32.10% and efficient working capital management. Gross current assets were 103 days as on March 31, 2020, driven by receivables and inventory of 69 and 73 days, respectively.
SSPL's scale of operations remains modest in the intensely competitive chemicals industry, as reflected in revenue of Rs 53.8 crore in fiscal 2020. The company's ability to increase its scale will remain a key monitorable.
CRISIL believes SSPL will continue to benefit from the promoters' extensive experience.