Thirumalai Chemicals Ratings Downgraded by ICRA to [ICRA]BBB(Negative)/[ICRA]A3+
Thirumalai Chemicals' ratings were downgraded by ICRA to [ICRA]BBB(Negative)/[ICRA]A3+. The downgrade is attributed to a US project cost increase to $340 million and a timeline extension to December 2026. This raises leverage and pressures liquidity. The company reported improved operating profits in Q1FY2027.
A credit rating downgrade can significantly impact a company's borrowing costs, investor confidence, and overall financial flexibility, affecting its ability to fund operations and growth.
The credit ratings have been downgraded, and the outlook is negative, indicating a deterioration in the company's financial standing and increased risks.
Thirumalai Chemicals Limited (TCL) has had its credit ratings downgraded by ICRA. The long-term fund-based term loan rating has been revised to [ICRA]BBB (Negative) from [ICRA]BBB+ (Negative) for an amount of ₹445.00 crore. Similarly, working capital facilities totaling ₹334.50 crore have been downgraded to [ICRA]BBB (Negative) from [ICRA]BBB+ (Negative), with an enhanced amount assigned. Short-term non-fund-based facilities have seen a downgrade to [ICRA]A3+ from [ICRA]A2 for ₹684.00 crore (enhanced amount) and ₹175.00 crore (enhanced amount). Unallocated limits were downgraded to [ICRA]BBB (Negative)/[ICRA]A3+ from [ICRA]BBB+ (Negative)/[ICRA]A2. Non-convertible debentures worth ₹100.00 crore were downgraded to [ICRA]BBB (Negative) from [ICRA]BBB+ (Negative).
The downgrade is primarily due to a significant increase in the US project cost to USD 340 million from USD 255 million and an extension in the project timeline to December 2026 from June/July 2026. This revised investment reflects elevated construction costs in the US, higher interest during construction, employee expenses, security costs, project management expenses, and debt-raising costs. The funding gap is expected to be met through additional debt, increasing leverage and pressuring liquidity amid scheduled debt repayments from FY2027.
ICRA noted an improvement in operating profits in Q1FY2027 to ₹32.6 crore from ₹6.2 crore in Q4FY2026, driven by an improvement in PAN-OX spread. The Directorate General of Trade Remedies' recommendation to extend anti-dumping duty on imports from China and South Korea is expected to support domestic PAN manufacturers. The company has also undertaken various fund raises and is exploring divestment of non-core assets to improve liquidity.
The ratings factor in TCL's established track record and strong market position in the phthalic anhydride (PAN) segment, as well as diversification benefits from downstream products. The US project, once stabilized, is expected to offer a favorable product portfolio and geographical diversification, leading to improved operating margins. However, profitability remains susceptible to raw material price fluctuations and competition from imports.
ICRA also noted a breach of financial covenants with some lenders in FY2026, for which a waiver was received. The Negative outlook reflects expectations of constrained debt coverage indicators in the near term due to earnings volatility and high leverage levels. Key rating strengths include extensive experience in PAN and diversification into related chemicals, while credit challenges include margin susceptibility to spread volatility and competition from imports.
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Thirumalai Chemicals Limited filed this with the NSE as a statutory disclosure, categorised under other regulatory filings. It is a primary document, not a recommendation, and the desk marks it high impact, which is the band that most often changes something.
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See the model portfoliosA plain-language summary of a public exchange filing by Thirumalai Chemicals Limited. Read the original for the full detail.