CRISIL reaffirms ratings of DCM Shriram at 'A1+'

CRISIL Ratings stated that the company's operating income declined by 5% to Rs.10,922 crores in FY24 from Rs.11,547 crores in FY23 mainly due to weak performance of Chloro Vinyl segment which was partly offset by healthy performance across sugar and other segments. Chloro vinyl segment reported 31% decline in its revenue due to fall in realisations for caustic soda and PVC resins.

This has impacted the segment profitability as well leading to decline in overall EBIDTA margins to 9.1% in FY24 compared to 13.9% in FY23. In Q1-fiscal 2025, company reported revenue of Rs.2,876 crores with EBIDTA margins at 8.6%.

With commissioning of 850 TPD caustic soda plant, CRISIL Ratings expects revenue growth to remain healthy at 8-10% mainly driven by incremental volumes from the newly commissioned capacity. Operating profitability is expected to improve to 10-12% in medium term supported by improved cost efficiency with commissioning of captive power plants. The revenue and profitability of DCM will continue to be supported by the diversity in the business profile.

The company has completed its major capex plans which includes 850 TPD expansion in caustic soda and 120 MW power plant in Q1 fiscal 2025 while Hydrogen peroxide and Epichlorohydrin plant are under final stages of completion. The expansion project under sugar segment is expected to be completed this fiscal with studies underway for proposed Epoxy plant project.

Gross debt is expected to increase towards the capex this fiscal. The financial risk profile should remain strong, despite the debt-funded capex, supported by expected steady cash accrual and healthy liquidity.

The rating continues to reflect a healthy and diversified business risk profile and strong financial risk profile of DCM, indicated by comfortable debt protection metrics, healthy capital structure and ample liquidity. These strengths are partially offset by risks related to volatility in the sugar, chlor-alkali and plastics segments and exposure to risks related to regulatory changes in the sugar and fertilizer industries.

DCM is a diversified business group, with presence across the chloro-vinyl (chlor-alkali and plastics), sugar and agricultural inputs (farm solutions; urea and bioseed) businesses. The company is also engaged in Fenesta building system and cement. It operates its chlor-alkali, plastics, urea, and cement businesses from Kota and chlor-alkali operations from Bharuch, where it has captive power plants. The company has four sugar mills in central Uttar Pradesh, with a bioseed division in Hyderabad.

The scrip had advanced 1.34% to end at Rs 1177.60 on the BSE on Friday.