Sree Rayalaseema Hi-Strength Hypo Ltd

Key Rating Drivers & Detailed Description

Strengths:

• Established market position and healthy relationship with customers: The group is one of the major producers of calcium hypochlorite and stable bleaching powder in India and has consistently expanded its product portfolio. The two decades of experience of the promoters along with an established relationship with customers helped scale up revenue to over Rs 1268 crore in fiscal 2022.

• Healthy financial risk profile: Networth and gearing are estimated at a healthy Rs 570.31 crore and 0.03 time, respectively, as on March 31, 2022. Above-average operating margin and moderate capital structure result in robust debt protection metrics – interest coverage and net cash accrual to total debt ratios are estimated at 46.78 times and 6.11 times, respectively, for fiscal 2022.

Weaknesses:

• Susceptibility to volatility in raw material prices and forex rates: Raw material price fluctuations across products impacts profitability. Also, exports account for about 26% of the revenue and are mainly in US dollars. Against this, imports account for about 47% of raw material requirement, thus exposing the company to forex rate fluctuation risk.

• Exposure to intense competition: Pricing flexibility is constrained by competition from global players in the inorganic chemicals industry.

Source: CRISIL Rating Rationale

Do they actually have a patent on the manufacturing process of making Calcium Hypochlorite that has 70% chlorine? I couldn’t find any source, can some please help in that regard.

Also since it majorly exports to the US, it would be interesting to note that the US Calcium Hypochlorite market is poised to grow at 11.3% CAGR over the next 5 years

9.74% According to Data Bridge Market Research.

According to their website:

• Sree Rayalaseema Hi-Strength Hypo Ltd. has a distinctive edge in the manufacture of this product, thanks to the twin advantages of indigenous raw materials availability and supply of some specialized chemicals by Sree Rayalaseema Alkalies and Allied Chemicals Ltd.
• The company is also a front-ranking producer of Monochloro Acetic Acid. Manufactured by the scientific crystallizer technology, the product meets international quality standards. Monochloro Acetic Acid is used by all leading manufacturers of Non-Steroid Anti-Inflammatory Drugs, other pharmaceuticals, pesticides, organic chemicals etc.

Monochloro Acetic Acid finds applications in:

1. Agrochemical Industry: Mono chloro acetic acid is extensively used in the production of herbicides, specifically glyphosate, which is one of the most widely used herbicides globally. The growth of the agrochemical industry, driven by increasing global agricultural activities and the need for crop protection, has a significant impact on the demand for MCAA.
2. Personal Care and Cosmetics: Mono chloro acetic acid finds applications in the production of personal care and cosmetic products. It is used as a raw material in the production of surfactants, which are essential components of various skincare, haircare, and cleansing products.
3. Textile Industry: MCAA is utilized in the textile industry for the production of thickening agents, which are used to impart desired consistency and texture to textile printing pastes and dyes.
4. Pharmaceutical Industry: Mono chloro acetic acid is also used in the pharmaceutical industry for the synthesis of various pharmaceutical intermediates and active pharmaceutical ingredients (APIs).