Tatva Chintan Pharma shares in focus after CRISIL downgrades ratings on bank facilities

Shares of Tatva Chintan Pharma Chem Ltd. (TCPCL) are in focus on Wednesday, June 18, as CRISIL Ratings Ltd has downgraded its ratings on the firm's bank loan facilities.

The long-term rating on Tatva Chintan's bank facilities worth ₹245 crore have been downgraded to CRISIL BBB+ with a stable outlook from CRISIL A-, with a negative outlook.

The short-term rating has also been downgraded to CRISIL A2 from CRISIL A2+ by the ratings agency.

CRISIL highlighted that the revision in Tatva Chintan's ratings and outlook is due to the moderation in the company's business risk profile.

Rationale

During the financial year 2025, TCPCL's revenue declined to around ₹385 crore from ₹393 crore in the previous fiscal. Operating profit margins also cooled off to 9.49% from 18.43% last year.

The moderation in operating profitability was attributed to higher pricing pressure, lower cost absorption, issues related to scaling up and lack of contribution from high margin new products, it said.

During the financial year 2025, structure directing agents (SDA), which is one of the major products of the firm, witnessed moderation in offtake from its major export destination China. Due to the higher adoption of LNG-powered trucks by Chinese companies, TCPCL witnessed substantial demand in SDA from Chinese consumers, CRISIL said.

Also, the group would be entering into the commercial phases of new products in FY26 and the offtake of new products would be crucial for improvement of business risk profile, it said.

"The ratings continue to reflect the company's established market presence, supported by the extensive experience of its promoters and healthy financial risk profile. These rating strengths are partially offset by susceptibility of profitability to fluctuations in raw material prices and higher working capital requirements," the ratings agency said.

Here are the company's strengths and weaknesses CRISIL Ratings listed in its note:

Strengths

Established market presence backed by promoters' experience: TCPCL is the largest manufacturer of SDA for zeolites in India and a leading manufacturer of some of its other products in its portfolio. Also, its promoters' experience of over 25 years should continue to support the business, the ratings agency said.

Healthy financial risk profile: TCPCL's capital structure was strong and debt protection metrics were comfortable at the end of the financial year 2025, CRISIL said, adding that the financial risk profile is expected to remain strong over the medium term.

Weaknesses

Susceptibility of profitability to fluctuations in raw material prices: The raw materials consumed are primarily crude oil derivatives. The company's operating margin remains susceptible to volatility in raw material prices. The company has also witnessed the decline in margin due to lower sales from the SDA segment. While operating margins are expected to improve, sustenance of the improved margins is to be seen, the ratings agency said.

Large working capital requirement: TCPCL's operations are working capital intensive with gross current assets (GCAs) in the range of 220-250 days over the last five years through March 31, 2025. GCAs were estimated around 250 days as on March 31, 2025, driven by inventory and receivable at around 140 and 79 days, respectively, CRISIL said. High cash and cash equivalents have also resulted in high GCA, it added.

Outlook

CRISIL said it believes the company's credit profile will remain under pressure on account of moderation in operating margin. However, it will benefit from its strong and diverse product portfolio, established relations with customers and enhanced manufacturing capabilities, it said.

Shares of Tatva Chintan Pharma Chem Ltd. ended the previous session 0.42% up at ₹950 apiece. The stock has gained 25.79% in the past month, but still trades below its IPO price of ₹1,083 per share.