Further, the agency has assigned "[ICRA] A2+” rating to the short-term debt instruments of Neogen Chemicals.

ICRA said that the ratings consider the established track record of Neogen Chemicals in bromine and lithium-based specialty chemicals, the experience of the promoters, its R&D capabilities, a diversified product mix with low concentration risk and a diversified customer base comprising reputed companies in the domestic and export markets.

ICRA also considers the healthy financial risk profile of the company, with revenue growth at a CAGR of 32% in the last five years (till FY2022), while profit margins have been healthy with OPM and NPM in the range of 16.5-19.1% and 6.8-9.3%, respectively, during the period.

While the company's performance is susceptible to volatility in raw material prices and foreign exchange rates, however due to value added nature of products, the company has been able to pass on the input cost fluctuations to an extent, which mitigates the risk.

The capital structure and coverage indicators have also improved, aided by fund raising in FY2022 and improving scale and profitability. ICRA notes that the company is in the midst of further capacity expansion for existing products as well as new product segments with high growth potential. Timely completion of the capex and scaling up of the capacity utilisation are the key monitorables.

The ratings are, however, constrained by moderate but growing scale of operations, high working capital intensity of operations and exposure to changes in regulatory environment.

The 'stable' outlook reflects ICRA's opinion that the credit profile of the company will remain comfortable in the medium term, aided by expected growth in scale and profitability because of the ongoing capacity expansion and its established presence in the industry. Any new debt-funded capex plan and its impact on the credit profile would remain a key monitorable.

Neogen Chemicals is an over 30-year-old company specialising in bromine-based compounds, Grignard reagents and inorganic lithium salts. Over the years, Neogen has developed several bromine-based intermediates and is a leading manufacturer of these products. Its specialty chemicals are used in pharmaceutical, agro-chemicals, engineering chemicals, electronic chemicals, construction chemicals, aroma chemicals, flavours and fragrances, and other industries with new upcoming usage in lithium-ion battery materials for energy storage and EV application.

The company's consolidated net profit declined 11.72% to Rs 9.87 crore despite a 30.87% rise in sales to Rs 148.12 crore in Q2 FY23 over Q2 FY22.