Tanfac Industries Ltd (TIL), which is in a capacity ramp-up, has received upgraded credit ratings from A- to A (stable) and A1 from A2+ for its long-term and short-term Bank facilities from ICRA.

The outlook of the company has also been upgraded to positive from stable.

The ratings reflect the demonstrated improvement in its operational and financial risk profiles in the recent past and expectations of this trend to sustain going forward, driven by improvement in the volumes and realisations of hydrofluoric acid and the strong operational linkages with Anupam Rasayan, leading to higher offtake of TIL’s products, said the rating agency.

ICRA is of the view that the company’s financial profile has strengthened over the years with healthy profitability, steady annual cash accruals from business operations and limited dependence on debt.

Steady cash flow

The liquidity is expected to remain strong on the back of steady cash flow from operations, healthy cash and bank balance, no term debt repayment obligations and availability of unutilised working capital limits.

The operating profitability, though moderated from FY22 levels, remained healthy in FY23 and H1FY24, aided by TIL’s ability to pass on the volatile raw material prices to the end consumers.

The revenue and profitability are expected to remain strong, given the focus on expanding the capacities for high-margin segments, i.e., hydrofluoric acid (HF), healthy demand for products and improvement in the cost structure. The ratings also factor in TIL’s established track record of over three decades in manufacturing fluorochemicals with a presence in diversified product segments, it added.

The ₹375 crore company, which has its production units in Cuddalore, Tamil Nadu, is one of the largest producers of Anhydrous hydrofluoric acid and aluminium fluoride in India.

The company, a joint venture of Anupam Rasayan India Ltd (Anupam Rasayan) and Tamil Nadu Development Corporation (TIDCO), has embarked on a capacity ramp-up plan, under which it is increasing the capacity of the HF plant from 14,750 MTPA to 29,500 MTPA at an estimated investment of ₹100 crore. This is expected to come on stream in FY25. The capex will be majorly funded from internal accruals.

In FY23, the company posted a net profit of ₹56 crore and EBITDA of ₹83 crore. In H1 of this fiscal, its total revenue was ₹192 crore, while the net profit stood at ₹30 crore.

Tanfac Industries’s scrip grew 1.48 per cent to end at ₹2324.70 apiece on BSE on Monday.