ICRA Upgrades Kothari Petrochemicals Limited Rating to A-

Strategic Insights -

Kothari Petrochemicals Limited, the largest manufacturer of poly iso butylene (PIB) in India, has received a rating upgrade from ICRA. The upgrade considers the company's successful diversification of its feedstock suppliers, including the addition of Vinati Organics Limited and Indian Oil Corporation Limited, which mitigated the risk of raw material availability. The company's feedstock availability is a key concern due to the increasing use of PIB for higher value-added applications. However, Kothari Petrochemicals Limited has consolidated its position as the market leader due to the constrained PIB supply from other domestic producers.

Key Takeaways:

  • ICRA has upgraded Kothari Petrochemicals Limited's fund-based working capital facilities from [ICRA]BBB+ to [ICRA]A- with a stable outlook.
  • The company's successful diversification of feedstock suppliers has mitigated the risk of raw material availability.
  • Kothari Petrochemicals Limited has consolidated its position as the market leader in the PIB market due to the constrained supply from other domestic producers.
  • The company has a plant in Manali adjacent to the Chennai Petroleum Corporation Ltd's refinery, using feedstock from CPCL, HPL, RIL, IOC, and Vinati Organics Limited.
  • The promoter group's shareholding in Kothari Petrochemicals Limited was 70.47% as of March 31, 2014.
  • The company reported operating income and PAT of Rs. 210.2 crore and Rs. 8.1 crore respectively for 2014-15.
  • Kothari Petrochemicals Limited has a installed capacity of 22,000 tonnes per annum (tpa) for PIB manufacturing.
  • The company's vulnerability to commodity price cycles, forex fluctuations, and import duty levels remains a concern and may impact the company's profitability metrics.

Statistics:

  • Revised fund-based facilities: Rs 25.00 crore
  • Original fund-based facilities: Rs 15.00 crore
  • Revised non-fund based facilities: Rs 15.00 crore
  • Original non-fund based facilities: Rs 10.00 crore
  • Operating income (2014-15): Rs 210.2 crore
  • Profit after tax (2014-15): Rs 8.1 crore
  • PIB manufacturing capacity: 22,000 tpa

Sources:

  • [1] ICRA Rating Upgrade - Kothari Petrochemicals Limited (05/2015)
  • ICRA website: www.icra.in