Specialty Chemical Stock Secures Revised Upgrade In Outlook To Positive By ICRA; Do You Own?

In the global industry, Fineotex Chemical holds a dominant position as a producer of specialised chemicals. Fineotex Chemical's stock closed Tuesday's trading session up 0.70% at Rs 372.60 a share, with a market value of Rs 4,127.10 Cr, following the company's announcement that ICRA had upgraded its outlook to positive.

Compared to the November 2023 ICRA ratings, the revised ratings represent an improvement. In its rating action of November 11, 2024, ICRA Limited (ICRA) raised Fineotex Chemical Limited's ratings. ICRA's Rating Committee has revised the Long Term- Fund Based-Cash Credit and Long Term/Short Term-Unallocated outlook from Stable to Positive after considering recent developments.

Commenting on the ratings Mr. Sanjay Tibrewala, Executive Director and CFO, Fineotex Chemical, said: "We are pleased to announce that ICRA has once again reaffirmed our Company's strong financial position by upgrading our credit rating to Positive. This has been the second upgarde in the past 18 months reflecting our continued operational excellence and financial stability."

FCL's credibility is expected to continue to be strong due to the outlook for the long-term fund basis and the long-term/short-term improvement from stable to positive. This is bolstered by the expected growth in cash accruals brought about by the expansion of operations and the continuation of satisfactory profit margins.

"The revision in the outlook factors in the strong demand for the company's products, which is expected to continue, thereby supporting the growth in the scale of operations and higher profitability. ICRA notes that the company has raised around Rs. 192.5 crore of funds through the issuance of common equity and warrants and will be receiving around Rs. 150 crores in FY2026 for the balance payout towards the warrants. The company intends to utilise the funds so raised for undertaking organic as well as inorganic expansion. ICRA believes that given the sizeable fund raised and the robust cash generation, the company will continue to maintain a healthy credit profile while undertaking the inorganic/organic expansions," Fineotex Chemical said in a report.

"The ratings continue to factor in the established track record of the company in textile chemicals, the experience of the promoters and a diversified customer base comprising reputed companies in the domestic and export markets. The ratings also factor in the company's strong credit profile, marked by minimal debt levels, significant free cash and cash equivalents and healthy cash flow from operations," the company informed stock exchanges.

"The Positive outlook on FCL's rating indicates ICRA's expectation of a healthy uptick in its scale of operations, supported by a favourable demand for the products. A steady cash generation and a large equity fund-raise will enable the company to maintain a healthy credit profile in the near to medium term," Fineotex Chemical informed stock exchanges.

"FCL's liquidity position remains strong, supported by a robust cash flow from operations of Rs. 93.0 crore in FY2024 and expectation of healthy cash flow from operations, going forward. The liquidity position is further strengthened by the healthy cash and liquid investments of Rs. 182 crore on March 31, 2024 and availability of unutilised working capital limits. The recent fund-raise by the company through a preferential allotment of equity shares and warrants will further improve the overall liquidity position of the company," ICRA said in a statement.

The firm, which operates in around 70 countries, produces more than 450 speciality chemicals and enzymes for the water treatment, agrochemical, adhesive, textile, apparel, construction, and leather sectors. It is a top producer of textile performance and speciality chemicals. FCL produces and supplies customers worldwide with the full line of materials for pre-treatment, dyeing, printing, and finishing in textile processing. The company has seen a good expansion of operations and has also ventured into the health and hygiene (detergent/handwash) sector. Among other things, the company's Board of Directors will review and approve the financial results for the quarter and a half year that ended on September 30, 2024, at a meeting set for Wednesday, November 13, 2024.