CRISIL Ratings stated that CSL’s revenues are expected to grow by 12-15% in fiscal 2025 driven by higher PVC volumes and improvement in realizations of suspension PVC or S-PVC (60% of consolidated revenues) with expected implementation of provisional anti-dumping duty in the near term, which will support domestic prices.
Besides, improved revenue from CMCD post commencement of phase 2 operations will also support revenue growth. However, realizations for paste PVC are expected to witness limited improvement due to intense competition, mainly from imports.
Operating profitability is expected at 7-8% for fiscal 2025 with operating profits recovering in the second half of fiscal 2025 (Rs 22 crores in fiscal 2024).
CSL’s financial risk profile remains adequate, despite average debt protection metrics, supported by Rs 670 crore of unencumbered cash and cash equivalents as on 30 September 2024.
The ratings continue to factor CSL’s established market presence in the PVC segment (both paste, and S-PVC through its subsidiary, Chemplast Cuddalore Vinyls (CCVL), diversified revenue stream catering to multiple end user industries, long standing relationship with customers and healthy demand prospects for its products.
The rating also factors in the long vintage and experience of the promoters in the PVC and chemicals sector and integrated nature of operations.
However, these strengths are partially offset by commoditized nature of products (S-PVC) which lends variability to operating margins, and the company’s moderate financial risk profile.
Besides there is also high import dependence of key raw materials for PVC business (VCM and EDC), which exposes the company to risk in foreign exchange fluctuations.
CSL is diversifying its businesses by adding more capacity in their higher margin speciality businesses such as paste PVC and custom manufacturing to mitigate this risk. CSL also uses plain vanilla forwards to hedge its imports to reduce forex risk.
Chemplast Sanmar is part of the South India based Sanmar Group. It is among the leading PVC and chemicals player in India.
For the six-month period ended 30 September 2024, CSL reported a net loss of Rs 7 crore on net sales of Rs. 2138 crore, compared with net loss of Rs. 38 crore on net sales of Rs. 1984 crore during corresponding period of previous fiscal.