Rationale

 The ratings draw comfort from Himadri Speciality Chemical Limited's (HSCL) large scale and backward integrated nature of manufacturing operations. The ratings favourably factor in the diversified products of the company, which find usage in the aluminium, graphite, dyes, tyres, paints and other chemical-related products manufacturing industries. ICRA notes that the company's 5-lakh-metric-tonne-per-annum (MTPA) coal tar distillation plant is the largest in India that produces coal tar pitch (CTP) of various grades and naphthalene for further processing into sulphonated naphthalene formaldehyde (SNF) and is integrated with carbon black (CB) manufacturing lines and a 20-MW power plant. The long-term rating is, however, constrained by the cyclicality in the company's user industries viz. aluminium and graphite and weak financial position of its overseas subsidiaries. Despite higher sales volume in FY2021 compared to FY2020, the operating margins were adversely impacted due to a sharp decline in realisations owing to the impact of Covid-19 and competition. Consequently, HSCL's financial performance in FY2021 moderated further compared to FY2020 levels. The 60,000-MT capacity specialty CB unit commercialised in Q4 FY2020, but the company is yet to manufacture value-added specialty products on a large scale and the specialty CB unit continues to manufacture commodity grade CB. Market acceptance and the consequent scale-up of these specialty CB products would provide a scope for improvement in operating margins. ICRA notes that given the limited long-term debt repayment obligations, along with no major capex planned in the near to medium term, the company's overall liquidity position is likely to be adequate. HSCL has curtailed the earlier planned capex of advanced carbon products manufacturing line to a capacity of 5,000 MT, given the current market conditions. The Negative outlook, however, reflects ICRA's expectations that the financial risk profile of HSCL (which deteriorated in FY2021) is likely to remain subdued in the near term. The company's ability to improve EBDITA/MT and sales volumes, resulting in a healthy OPM and an improvement in scale in the near term, remains a key monitorable. Rating for the company's NCD programme of Rs.150.00 crore has been reaffirmed at [ICRA]AA- (Negative) and simultaneously withdrawn in line with ICRA's Withdrawal Policy as the same has been fully redeemed and there is no amount outstanding.