Khaitan Chemicals & Fertilizers Ltd

📉 India Ratings Downgrades Khaitan Chemicals & Fertilizers to 'IND BBB-'

- India Ratings downgraded Khaitan Chemicals & Fertilizers' bank loan facilities to 'IND BBB-' and placed them on rating watch with developing implications.

- Downgrade reflects constrained financial flexibility and thin profitability amid rising raw material costs, with sulfur prices surging from USD 150-160/ton in FY25 to USD 500-600/ton.

- SSP production halted at Jhansi, Malwan, and Rajnandgoan facilities due to high sulfur costs and freight expenses.

- Liquidity is stretched, with working capital utilization at 84%, cash balance of INR 0.8 million, and annual interest expense expected at INR 300 million for FY27.

- Near-term liquidity supported by subsidy receivables of INR 1,492 million as of December 2025, but delays could require additional borrowing.

- Profitability improved in 9MFY26 with EBITDA of INR 954 million, driven by higher subsidy rates and better sulfuric acid sales, but remains vulnerable to input cost volatility.

- Net leverage improved to 3.5x in 9MFY26 from 15.8x in FY25, though dependent on SSP profitability amid high sulfur prices.

- Rating watch outcome hinges on KCFL's ability to pass on cost increases, maintain sales volumes, and secure raw materials at reasonable prices amidst Middle East conflict uncertainties.