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India Ratings and Research reaffimrs ratings of DCW at 'A/A1'

27-Jun-26   14:44 Hrs IST

India Ratings and Research stated that the affirmation continues to reflect DCW's robust business profile, supported by a diversified product mix with multiple end-use applications.

Further, the company's operational profile is supported by the steady increase in the profitability of its specialty chemicals segment over FY21-FY26, which structurally improves its EBITDA profile.

The higher margins and the lower volatility in the specialty chemicals segment help soften the impact of the weakness and volatility in the commodity chemicals segment, which remained weak over FY24-FY26.

The ratings also benefit from DCW's comfortable credit metrics and adequate liquidity profile, driven by the maintenance of cash and equivalents that support its ability to navigate through volatile commodity cycles.

The agency expects DCW's credit metrics to remain comfortable over FY27-FY28, backed by a healthy EBITDA and the absence of large capex plans.

However, the ratings remain constrained by DCW's scale of profitability and its susceptibility to cyclical lows in prices. While FY22-FY23 witnessed supernormal profits due to a sharp cyclical increase in chemical prices, DCW's FY26 EBITDA remained close to FY21 levels despite increased contribution from the specialty chemicals segment.

Notwithstanding some recovery, led by improved caustic prices and clearance of old synthetic rutile inventory, the commodity segment EBITDA remained significantly lower than the historical averages with margins remaining low (3.5%, around 10%), mainly due to the subdued polyvinyl chloride (PVC) and soda ash prices.

As a result of subdued commodity prices, DCW's EBITDA was lower than the management's expectations for FY26.

The management expects a significant uptick in the EBITDA over the near-to-medium term, driven by increased contribution from the specialty chemicals segment backed by higher CPVC and synthetic iron oxide pigments (SIOP) capacities, as well as some improvement in the performance of the commodity chemicals division.

India Ratings opines that the ability to increase the sustainable EBITDA scale would be a key monitorable.

DCW manufactures a wide range of chemicals. It has five divisions: PVC, soda ash, caustic soda (including synthetic rutile), CPVC and SIOP.

The scrip fell 2.88% to end at Rs 48.23 on the BSE on Thursday.

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