Khaitan Chemicals & Fertilizers Ltd

Instruments Rated

• Bank loan facilities rated IND BBB-/Stable/IND A3; size INR 5,363.1 million; Rating Watch removed

Rating Agency

• Agency: India Ratings and Research (Ind-Ra)

Rationale

• Affirmation cites positive SSP EBITDA despite high sulphur prices from SA by-products.
• SA sales profitability improved due to higher prices and favorable spreads.
• Liquidity strengthened by INR 400.7 million ECLGS 5.0 sanction for FY27.
• Overall EBITDA robust; SSP profitability remains volatile amid raw material price swings and subsidy dynamics.
• Regulated fertiliser industry exposes margins to subsidy timing and policy changes.
• Debt leverage improved to 3.3x in FY26; interest coverage at 3.44x.
• Regulatory constraints and SSP-seasonality contribute to elongated working capital cycle.
• Material change: Rating Watch with Developing Implications resolved; off Rating Watch.

Outlook

• Outlook: Stable for bank loan facilities.

Material Change

• Rating Watch with Developing Implications resolved; off Rating Watch.

SEBI LODR non-compliance fines

• Fines of Rs 11,800 each (NSE and BSE) paid for late dividend intimation.
• Date of direction: May 14, 2026.
• Cause: non-compliance due to delay in dividend agenda inclusion.
• Impact: no material impact on financials, operations, or governance.
• Actions: strengthened internal compliance and pre-notification review processes.
• Outlook: reinforce controls to prevent recurrence.
• Board noted fines were paid promptly and no mala fide intent.
• Management: no change to dividends or financial guidance.

Key updates

• Board approves unaudited Q1 FY27 results for quarter ended June 30, 2026.
• Independent Auditor’s Review Report on Q1 FY27 results is unmodified.
• Board withdraws proposal to delete Common Seal from AOA; retains existing Common Seal provisions.
• No subsidiary/associate companies as of June 30, 2026.
• Segment coverage includes Fertilizers and Chemicals & Speciality Chemicals.
• Review conducted under SEBI Regulation 33; no material misstatement found.

Meeting Details

• Board meeting scheduled for July 13, 2026 to consider unaudited quarterly results for June 30, 2026.
• Time and venue not disclosed.

Key Agenda Items

• Consider and adopt unaudited financial results and limited review report for quarter ended June 30, 2026.

Other Notes

• Trading Window closed from July 1, 2026 to 48 hours after results disclosure.

Regulatory penalty details

• Regulatory action: monetary penalty ₹1,20,782 imposed on Khaitan for coal transfer without transit permit.
• Penalty paid via State Bank Collect e-Challan dated 07 July 2026.
• Violation: transport of coal without transit permit under mining laws.
• Financial impact: ₹1,20,782; no material effect on operations.
• Date of receipt of order: 07 July 2026.

Dematerialisation status

• Securities received for dematerialisation during the quarter were confirmed to depositories as accepted or rejected.
• Securities dematerialised have been listed on stock exchanges where the existing securities are listed.
• Physical certificates for dematerialisation were mutilated and cancelled; depository name substituted as registered owner within 15 days.

Board decisions

• Approved proposal to increase borrowing limits up to INR 800 crores, subject to shareholder approval.
• Approved creation of charge, pledge, hypothecation, or mortgage over company assets up to INR 800 crores.
• Approved alteration of Articles of Association by deleting common seal-related articles.

Rating action

• India Ratings downgraded KCFL’s bank facilities to IND BBB- and placed them on watch with developing implications.
• The agency also assigned the same rating to additional bank loan facilities.

Instruments and ratings

• Bank loan facilities of INR 4,913.1 million: IND BBB-/Rating Watch with Developing Implications; IND A3/Rating Watch with Developing Implications.
• Bank loan facilities of INR 450 million: IND BBB-/Rating Watch with Developing Implications; IND A3/Rating Watch with Developing Implications.

Agency

• Rating agency: India Ratings and Research (Ind-Ra).

Rationale

• Downgrade reflects constrained financial flexibility and subdued SSP profitability amid West Asia conflict.
• Higher sulphur and freight costs have made SSP margins thin at current subsidy and market prices.
• KCFL stopped SSP production at three plants due to unfavourable landed sulphur prices.
• Liquidity is stretched by 84% working-capital utilisation and low free cash balance of INR 0.8 million.
• Improved sulphuric acid profitability partly offsets weakness; EBITDA rose to INR 954 million in 9MFY26.
• Net leverage improved to 3.5x in 9MFY26 from 15.8x in FY25; interest coverage improved to 3.75x.

Sensitivities

• Watch will resolve after clarity on raw material prices and ability to pass on higher costs.
• Upgrade or affirmation depends on maintaining volumes and profitability despite raw material uncertainty.
• Downgrade risk remains if cost increases cannot be passed through or raw material supply stays constrained.

Outlook

• Rating watch with developing implications.

Material changes

• Current action is a downgrade from IND BBB/Stable and IND A3+ in January 2025.
• The rating watch replaces the prior stable outlook.

Financial highlights

• Revenue was INR 7,202 million in FY25 versus INR 5,358 million in FY24.
• EBITDA was INR 231 million in FY25 and INR 954 million in 9MFY26.
• Total debt was INR 3,642 million in FY25; net debt/EBITDA was 15.8x.