Meghmani Finechem (MFL) said that CRISIL Ratings has upgraded its rating on the company's long term bank facilities to 'CRISIL AA-/Stable' from 'CRISIL A+/Positive'.
CRISIL Ratings said that the rating action follows sustenance of healthy capacity utilization rates across all product segments and faster than estimated ramp up of newly commissioned Hydrogen Peroxide facility resulting in strong revenue growth during the first half of fiscal 2022 while maintaining operating margins at healthy levels.
This improvement is expected to sustain going forward as well and CRISIL Ratings expects MFL to post year on year revenue growth of over 35-40% for the full fiscal while maintaining operating margins at approximately 27-28%.
The capacity expansion plans being undertaken is expected to strengthen MFL's business risk profile over the medium term with increased product diversification and higher share of revenues coming from downstream products thereby mitigating the volatility in margins brought about by the purely commoditized nature of caustic soda.
MFL's financial risk profile has been on an improving trend despite capex being undertaken due to strong operating performance of existing as well as newly commissioned facilities resulting in healthy cash accruals thereby enabling the company to fund its projects in a prudent debt equity mix.
The rating continues to reflect MFL's improving business risk profile supported by steady revenue growth, healthy operating margin and good demand prospects. The rating also factors its adequate and improving financial risk profile.
These strengths are partially offset by the company's high revenue dependence on the intensely competitive chlor alkali industry, exposure to regulatory risks, moderate vulnerability of operating margin to fluctuations in caustic soda prices and also exposure to project implementation risks, though lower than earlier, CRISIL said.
Meghmani Finechem, part of the Ahmedabad-based Meghmani group, was incorporated in September'2007 as a subsidiary of Meghmani Organics, to establish a captive source of caustic soda and chlorine derivatives. Pursuant to NCLT approval for demerger, MFL was listed on the stock exchanges with the promoters currently holding 72.6% of the equity stake with balance being held by public.
The company's net profit rose 83.42% to Rs 47.01 crore on a 61% increase in net sales to Rs 339.63 crore in Q2 FY22 over Q2 FY21.
The scrip was locked in 5% upper circuit at Rs 773.50 on the BSE on Friday.
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