Rationale

 The upgrade in the ratings factors in Amines and Plasticizers Limited's (APL) revenue growth of 11% to Rs 441.9 crore in FY2021 from 399.1 crore in FY2020 driven by healthy demand for its products, while operating margins also improved to 12.1% in FY2021, compared to 10.5% in FY2020, aided by revenue growth and favorable changes in product mix. Further, the company's financial risk profile, in terms of RoCE, capital structure and coverage indicators, has remained robust over the years. The ratings continue to take into account APL's long operating track record and the technical expertise of the promoters in the chemical manufacturing segment. The company enjoys a strong position and limited competition in the domestic market, given its presence in the niche category of manufacturing chemical products like methyl diethanolamine (MDEA), which is used in petrochemical and oil refineries as a gas sweetening solvent, Ethyl Mono Ethanolamine (EMEA) which is used in pharmaceutical industry and N-methyl morpholine oxide (NMMO), which finds its application as a solvent in the viscose fibre industry. Technology-related entry barriers as well as locational advantage support APL's dominant market position. APL's profitability, however, remains vulnerable to fluctuations in crude oil price movement as the raw materials are crude oil derivatives. The supplier concentration risk also remains high for the company as it remains dependent on a sole supplier for the sourcing of a major raw material i.e. ethylene oxide (EO), which accounts for about 60% of the raw material cost. Further, the ratings also take into consideration, the vulnerability of profitability to foreign exchange fluctuations as exports contribute to 53% of the total revenues. However, the imports provide a natural hedge to the company to some extent. The Stable outlook takes into account the company's established position in the chemicals segment and the stable demand outlook for the sector in the long term.