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CRISIL Ratings upgrades rating outlook of Supreme Petrochem to 'positive' As on : 17-Dec-24  10:43

The agency has concurrently reaffirmed the rating on the short-term facilities at 'CRISIL A1+'.

CRISIL Ratings stated that the outlook revision factors in expectation of sustenance of healthy operating performance of SPL, going forward, on the back of forthcoming commissioning of acrylonitrile butadiene styrene (ABS) capacity in last quarter of current fiscal, steady growth in sales volume for its key products and benefits from economies of scale which will sustain operating profit at a level much higher than pre-pandemic levels.

While operating margin could fluctuate, which is an inherent risk in this business, the company is well placed to absorb these fluctuations given its debt-free balance sheet and strong liquidity position.

The financial risk profile is backed by nil debt, strong liquidity and healthy cash accrual.

The company is planning capital expenditure (capex) of Rs 350-400 crore annually over fiscals 2025-2027 for setting up a 140,000-tonne capacity for ABS in a phased manner (Phase 1 with 70,000 tonne capacity expected to be commissioned by last quarter of current fiscal), a greenfield project in Haryana and capacity expansions in existing product segments.

These expansions will be entirely funded through available liquid surplus and internal accrual. SPL is likely to maintain liquid surplus of Rs 400-500 crore and a debt-free balance sheet over the medium term.

The ratings continue to reflect SPL's market leadership in the domestic polystyrene (PS) and expandable polystyrene (EPS) industry, and sound financial risk profile.

SPL has a healthy track record of over 25 years in the PS industry and a diversified customer base. The company has a wide product portfolio, with increasing revenue share from value-added products.

These strengths are partially offset by susceptibility to volatility in raw material prices.

Supreme Petrochem manufactures polystyrene (PS), expandable polystyrene (EPS) compounds of polymers and XPS. It has a manufacturing plant at Nagothane in Raigad, Maharashtra, set up in technical collaboration with ABB Lumus Crest (USA). It also has a manufacturing plant at New Manali Town in Chennai. Furthermore, SPL imports styrene monomer and trades in the domestic market.

For the first half of fiscal 2024, the company reported profit after tax (PAT) of Rs 212 crore (Rs 147 crore in the corresponding period of the previous fiscal) on revenue of Rs 3,079 crore (Rs 2,503 crore in the previous fiscal).

The scrip fell 2.10% to currently trade at Rs 715.70 on the BSE.

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