CARE Ratings reaffirms 'AA+' rating of Vinati Organics with 'stable' outlook

The agency has also affirmed the company's short-term rating at 'CARE A1+'.

CARE Ratings stated that the ratings assigned to bank facilities of Vinati Organics (VOL) draw significant comfort from its market leadership in its two key products, 2-acrylamido-2-methylpropane sulfonic acid (ATBS) and isobutyl benzene (IBB) ' in the global market.

CARE Ratings believes that VOL's competitive advantage in both its product segments is expected to sustain in the medium term, as the manufacturing processes are not easy to replicate, and the same acts as an entry barrier for new entrants.

Ratings continue to derive strength from the long-track record and experience of the promoters in the speciality organic chemical industry. VOL continues to benefit from long-term relationship with an established and reputed clientele across geographies. The backward integrated manufacturing process with zero discharge and VOL's cost-efficient operations acts as an entry barrier for new entrants.

Ratings derive strength from the healthy cash flows from operations, the favourable capital structure, strong liquidity, and debt coverage indicators.

Ratings continue to be tempered by the concentration of its total operating income (TOI) from limited key products and VOL's operating margin susceptible to raw material price and foreign exchange fluctuations.

The credit rating agency said that significantly growing TOI on the back of increased demand from the existing products and effective diversification in product profile while maintaining an operating margin of around 27-30% could lead to a positive rating action.

However, factors like significant debt-funded organic or inorganic expansion undertaken by the company that will adversely impact its capital structure and weakening of its return on capital employed (ROCE) below 15% having an adverse impact on its debt coverage indicators could lead to a negative rating action.

Vinati Organics is one of India's leading manufacturers and exporters of specialty organic intermediaries, monomers, and polymers. VOL is the world's largest manufacturer of isobutyl benzene (IBB) and 2-Acrylamido 2-Methylpropane Sulfonic Acid (ATBS).

The scrip shed 0.14% to currently trade at Rs 1989.95 on the BSE.