The agency has upgraded its rating on the fund-based bank facilities to "[ICRA] A+ (Stable)” from “[ICRA] A (Stable)”. It has also upgraded the rating on the non -fund based bank facilities of the company to "[ICRA] A1+” from "[ICRA] A1”.

ICRA said that the ratings upgrade considers the sustained healthy financial performance of Panama Petrochem Ltd (PPL) with healthy capacity utilisation trends. Moreover, the favourable changes in the product mix towards a higher share of value-added products and other cost-control measures helped improve the profitability/tonne. The revenue and margins have also been aided by increased realisation levels following the sharp rise in raw material costs, which the company was able to pass on to its customers to a large extent.

The ratings also consider the established track record of the company in the white oil and allied oil business, along with its strong customer base and long-term relationships with reputed companies across multiple industries. The company's product profile is well-diversified across various end-user industries, such as cosmetics, ink, rubber, textiles, transformer and industrial lubricants, mitigating the risks of a slowdown in a particular sector.

The ratings also favourably consider PPL's diverse manufacturing presence with four manufacturing units in India, strategically located to cater to different industrial clients for different kinds of oil.

The ratings are, however, constrained by the vulnerability of PPL's profitability to the fluctuations in forex rates and base oil prices, which are inherently volatile being crude oil derivatives. The company's operations are also exposed to competition in the industry from other established and unorganised players. The company's net working capital intensity has remained moderately high; however, it has witnessed some moderation in the last three fiscals following the steps taken by the management to reduce its receivables.

The 'stable' outlook on the long-term rating reflects ICRA's opinion that PPL's credit profile will remain healthy, supported by a healthy financial performance on the back of its established relationships with reputed customers, and application in diversified industries and planned capacity expansion.

Panama Petrochem is a manufacturer and exporter of over 80 variants of petrochemicals. The company's key products include liquid paraffin oil (white oil), petroleum jelly and transformer oil. PPL's products are used across six to seven broad industry segments such as printing ink, cosmetics, pharmaceuticals, rubber, textile, transformer and industrial lubricants.

The company's consolidated net profit rose 8.90% to Rs 67.43 crore on an 8.97% increase in sales to Rs 613.84 crore in Q2 FY23 over Q2 FY22.

The scrip rose 2.21% to end at Rs 381.10 on the BSE.