ICRA has assigned [ICRA]BB rating to the Rs. 11.10 crore fund based limits of Srichaitanya Chlorides Private Limited (SCPL). ICRA has also assigned [ICRA]A4 rating  to the Rs. 1.90 crore non-fund based limits of SCPL. The outlook on the long term rating is Stable.

The assigned ratings positively factor in the long experience of the promoters in the business of Active Pharmaceutical Ingredient (API) manufacture and satisfactory demand outlook for several of intermediates manufactured by the company. ICRA also derives comfort from the position of SCPL as a leading manufacturer of Tri-Chloro Acetyl Chloride and Chloro Acetyl Chloride nationally and as the sole South India based manufacturer.

The ratings are however constrained by the company?s modest scale of operations with a relatively concentrated product and customer profile. Further the commoditized nature of products and limited bargaining power vis-?-vis suppliers and customers exposes SCPL?s profitability to raw material price fluctuations. ICRA has also factored in the exposure of the company?s operations to changing environmental regulations and the costs of compliance for the company arising from the fact that the major by-products (Chlorine and Hydrochloric Acid) are hazardous in nature. Further, the working capital position of the company is stretched on account of high receivables currently.

As its small scale of operations limits the company?s ability to diversify across product range, SCPL intends to grow through forward integration where it envisages debt funded capacity expansion for entering into manufacturing of bulk drugs and formulations. The same is however likely to increase the capitalization levels of the company from the current comfortable levels, and also expose it to funding and other project related risks. While plans are yet to be crystallized in this regard, debt funded expansion is likely to adversely impact the credit profile of the company.