Crisil Ratings revises Chemplast Sanmar's outlook to 'negative'; reaffirms rating at 'A+'

The agency has downgraded the short-term (ST) rating to ?Crisil A1? from ?Crisil A1+?.

Crisil Ratings stated that the rating action follows the agency?s expectations that CSL?s performance would continue to remain under pressure in the near term, due to weak realizations of suspension polyvinyl chloride (S-PVC, 60% of CSL?s revenues) and paste PVC, leading to lower than anticipated operating profits.

While the final anti-dumping duty (ADD) was announced on paste PVC for five years in March 2025 (provisional ADD imposed between July-December 2024), cheaper imports from Europe and Japan, which were excluded in the countries where ADD was applied, continued and impacted domestic realizations.

Further, final findings on ADD on suspension PVC (S-PVC) has been announced and is awaiting implementation, resulting in continuing cheaper imports, impacting realizations, at subsidiary, Chemplast Cuddalore Vinyls (CCVL).

In addition, CSL has invested over Rs 1,000 crore over the past 3-4 fiscals in expanding its capacity in custom manufactured chemicals division (CMCD) which is yet to significantly contribute to operating profits.

Crisil Ratings expects CSL?s revenue growth in fiscal 2026 will be driven by higher offtake at its CMCD, and full benefit of enhanced paste PVC capacity; however will be offset by continued modest realizations of S-PVC and paste PVC.

The debt levels are expected at Rs 1,800-1,900 crore by end of fiscal 2026 due to capacity expansion at the CMCD, preventing envisaged protection in key debt metrics. Meaningful recovery in operating profits will depend on timely implementation of ADD on S-PVC and ADD on paste PVC including Europe and Japan.

While CSL?s financial risk profile is moderate, unencumbered steady state liquid surpluses of Rs 550-600 crore provide comfort, especially when operating cash flows are volatile.

Even though demand for both paste and suspension PVC continues to be strong, and operating profits are expected to materially improve from fiscal 2027.

The ratings continue to factor CSL?s established market presence in the PVC segment, diversified revenue stream catering to multiple end user industries, long standing relationship with customers and healthy demand prospects for its products.

The rating also factors in the long vintage and experience of the promoters in the PVC and chemicals sector and integrated nature of operations.

However, these strengths are partially offset by commoditized nature of products (S-PVC) which lends variability to operating margins, and the company?s moderate financial risk profile.

Besides there is also high import dependence of key raw material for S-PVC business, which exposes the company to risk in foreign exchange fluctuations.

Chemplast Sanmar, part of the South India based Sanmar Group, is among the leading PVC and chemicals player in India.

The company had reported a consolidated net loss of Rs.64.3 crore on net sales of Rs. 1,099.9 crore in the first quarter of fiscal 2026, compared with consolidated profit after tax of Rs 23.9 crore on net sales of Rs 1,144.9 crore during corresponding period of previous fiscal.

The scrip fell 1.83% to currently trade at Rs 428 on the BSE.

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