India Ratings and Research (Ind-Ra) said the outlook revision reflects Ind-Ra's expectation of sustenance of SCIL's strong credit profile over the medium term, driven by the steady growth in its profitability amid a supportive demand environment. The revenues growth is likely to be underpinned by the increased capacity of existing products and launch of new products. The margins are expected to remain resilient due to an improved product mix, backward integration, cost optimisation, and higher operating leverage.

It further said that an improvement in the scale and EBITDA margin, successful execution of the proposed capex within budget, and a steady improvement in the product mix, resulting in an improvement in the overall credit metrics, with the net leverage remaining below 2.0x, all on a sustained basis, could result in a positive rating action.

However, deterioration in the profitability and/or any debt-led capex over and above Ind-Ra's expectation, leading to the net leverage above 2x, all on a sustained basis, could lead to a revision of the outlook back to 'stable'.

SCIL manufactures a wide range of organic, inorganic and effect pigments. The company and its subsidiaries are in the same line of business, except RIECO Industries (SCIL's wholly owned subsidiary) which runs an engineering business.