IOL Chemicals hits 11-year high; up 25% in 7 days on credit rating upgrade

The stock was up 5 per cent to Rs 207 per share on the BSE, trading at its highest level since January 8, 2008.

Shares of IOL Chemicals and Pharmaceuticals (IOL) were trading 5 per cent higher at Rs 207 per share in morning trade on BSE, extending its past six trading days gain after CARE Ratings improved the credit rating for banking facilities availed by the company.

The stock of the leading manufacturer of APls/bulk drugs and specialty chemicals firm trading at its highest level since January 8, 2008. It touched an all-time high of Rs 220 on January 3, 2008, on the BSE.

During the past seven trading days, IOL Chemicals has rallied 25 per cent from Rs 166 level, as compared to a 0.26 per cent decline in the S&P BSE Sensex.

The rating agency CARE Ratings revised rating on long term bank facilities of IOL to CARE BBB+ from CARE BBB- and of short term bank facilities to CARE A2 from CARE A3.

“The ratings assigned to the bank facilities of IOL Chemicals takes into account the improvement in the operational performance of the company reflected by significant growth in total income and expansion in margins resulting in healthy growth in cash accruals. The revision in ratings also factors in improvement in financial risk profile marked by a reduction in gearing and strengthening of debt service metrics, “CARE Ratings said in a press release dated December 31, 2018.

The ratings, however, remain constrained by raw material availability and price volatility risk, working capital intensive nature of the operations and significant product concentration in revenue profile, it added.

IOL Chemicals had reported a seven-fold jump in net profit at Rs 52.81 crore for the first half (April-September) of the financial year 2018-19 (H1FY19). It had reported profit of Rs 7.41 crore during the same period of FY18. Net revenue from operations was increased by 74 per cent to Rs 785 crore from Rs 451 crore.

The major revenue of the company is derived from the sales of Ibuprofen and ethyl acetate which exposes it to revenue concentration risk. However, the company is trying to mitigate the same by launching of new products in the drugs segment which includes metformin, fenofibrate, and clopidogrel bisulphate.

The company enhanced installed capacity of Metformin (Unit IV) from 3,000 TPA to 4,000 TPA due to increasing demand. The successfully completed Unit V to manufacture Clopidogrel Bisulphate & Fenofibrate with a capacity of 180 TPA will result in higher revenue and operating margins, IOL Chemicals said.

In the past six months, the stock zoomed 133 per cent from level of Rs 89, as compared to unchanged in the S&P BSE Sensex.

At 09:54 am, IOL Chemicals and Pharmaceuticals was trading 3 per cent higher at Rs 202 against a marginal 0.01 per cent decline in the benchmark index. A combined 624,960 equity shares changed hands on the counter on the BSE and NSE so far.