VOL is engaged in manufacturing of speciality organic intermediates and monomers and polymers. It manufactures iso butyl benzene, the prime raw material for the manufacture of ibuprofen -- a vital bulk drug.
On August 9, CARE Ratings upgraded the ratings of VOL's bank facilities with stable outlook. The revision in the ratings factors in the improved market position in 2- Acrylamido 2 Methylpropane Sulfonic Acid (ATBS) segment following the exit of a key global competitor.
“Consequently, VOL reported substantial growth in revenue from this segment in FY19 vis-a-vis FY18. The ratings also takes cognizance of significant improvement in operating profit margin in FY19, as VOL was able to garner better sales realization coupled with improved economies of scale,” CARE Ratings said in rating rational.
For the first quarter (April-June) of financial year 2019-20, VOL had reported 28 per cent year-on-year (YoY) growth in net profit at Rs 82.36 crore over the previous year quarter. Operational revenue during the quarter grew 12 per cent at Rs 291 crore on YoY basis. Earnings before interest, tax, depreciation and amortization (ebitda) margin improved to 41.33 per cent from 33.39 per cent during the quarter.
CARE believes the competitive advantage gained in ATBS segment is expected to sustain in medium term as the manufacturing processes are not easy to replicate and same acts as entry barrier for new entrants. However, the operating profit margins are expected to moderate and remain in the range of 30-35 per cent going forward on account of introduction of Butyle Phenols into the sales mix.
Going forward, VOL's ability to scale up its operations while sustaining its healthy profitability margins through product diversification on the back of new product launches as envisaged and maintain its favorable capital structure together with successful implementation of capex as per the planned funding profile are the key rating sensitivities, it said.