CREDIT RISK UPDATES

Indo Borax & Chemicals Limited sees a credit rating action

Indo Borax & Chemicals LimitedINDOBORAX

TL;DR

The apparent deviation is in working-capital risk indicators, not in a directly comparable DSCR or current-ratio number. India Ratings did not cite a current ratio or DSCR in the rationale.

What specific liquidity or working capital metrics cited in the India Ratings rationale deviate from the company's reported debt-service coverage ratios (DSCR) and current ratios in the most recent quarterly filings?

The apparent deviation is in working-capital risk indicators, not in a directly comparable DSCR or current-ratio number. India Ratings did not cite a current ratio or DSCR in the rationale. It highlighted higher raw-material days, low creditor days caused by advance procurement payments, and future liquidity commitments. The latest company data, by contrast, shows a very high current ratio and no reported borrowings.

Because India Ratings used a standalone analytical view, the closest comparison is standalone Q1 FY27:

The key distinction is that the 20.05x current ratio is a point-in-time balance-sheet measure, whereas India Ratings is focused on the cash-flow consequences of inventory procurement, advance payments, acquisition outflows and future debt servicing. The high ratio is also not equivalent to immediately available cash: Q1 FY27 cash was Rs 13.53 Crores, while current assets included Rs 207.49 Crores of investments [12] [16].

India Ratings also identified a rated bank-facility limit of INR 600 million, equivalent to Rs 60 Crores, and a proposed transaction consideration of INR 2,461.2 million, equivalent to Rs 246.12 Crores [17] [17]. These are forward liquidity and financing exposures, not deviations from the company’s reported current ratio or DSCR.

MetricIndia Ratings rationaleLatest reported Q1 FY27 metricInterpretation
Interest/debt-service coverageGross interest coverage of 405x [1]Interest coverage ratio of 447.20x; DSCR itself is not reported in the cited KPI data [2]Different values, but not a validated DSCR variance because the definitions are not shown to be identical
Current ratioNo current ratio cited20.05x standalone [3]; 20.85x consolidated [4]No direct deviation can be calculated
Raw-material/inventory intensityWorking-capital-intensive operations, reflected in higher raw-material days, with exposure to inventory losses [5]Inventory days were 118.60 days [6]; inventory was Rs 31.83 Crores [7]This is the principal operating working-capital concern
Creditor/payable supportCreditor days remained limited because raw materials are procured with advance payments [8]Payable days were only 12.80 days; trade payables were Rs 3.10 Crores [9] [10]Consistent with limited supplier-financing support despite the high current ratio
Near-term balance-sheet liquidityRating sensitivity includes acquisition outflows, retained debt, financing terms and post-transaction liquidity [11]Cash was Rs 13.53 Crores, current assets Rs 312.03 Crores and current liabilities Rs 15.56 Crores; current borrowings were nil [12] [13] [14] [15]Strong reported static liquidity, but not necessarily sufficient evidence for post-acquisition liquidity

What is the quantum of short-term debt maturing in the next 12 months as per the latest balance sheet, and how does this align with the cash and cash equivalents reported in the most recent quarterly results, given the 'Negative Implications' watch?

The latest reported balance-sheet data shows no debt outstanding, implying zero short-term debt due within the next 12 months. Consolidated total debt was reported at Rs 0.00 Crores, while cash and cash equivalents were Rs 13.61 Crores in the latest quarter, Q1 FY27 [18] [19]. On that reported basis, cash exceeds current reported debt by Rs 13.61 Crores—a 100% cash-to-debt coverage ratio, derived from the two reported figures.

This does not mean the rating watch is immaterial. India Ratings has placed the company’s bank facilities on “Rating Watch with Negative Implications”, with rated bank-loan limits of INR 600 million; however, the rated limit is not the same as drawn debt, and no near-term maturity amount is disclosed in that rating table [1]. The rating rationale points instead to potential acquisition-related cash outflows, debt retained or raised in the transaction, financing terms and post-transaction liquidity, alongside the 100% pledge of promoter shareholding [11] [5].

Analyst read: current reported liquidity appears adequate against current reported debt, but the watch is forward-looking rather than a reflection of an existing short-term refinancing gap. The key risk is that the proposed acquisition and related debt funding could materially change the balance sheet after the latest reported quarter. The sharp reduction in consolidated cash from Rs 93.56 Crores in Q2 FY26 to Rs 13.61 Crores in Q1 FY27 is an additional liquidity signal, although the cause of that decline is not established by the cited balance-sheet data [19].

How does the company’s current working capital cycle (days sales outstanding and inventory days) compare to its historical three-year average, considering that working capital intensity is a frequent driver of rating watch actions in the specialty chemicals sector?

The latest comparable period, FY26, shows a materially leaner operating cycle than the FY24–FY26 average. DSO fell to approximately 17.6 days versus a three-year average of 25.5 days, while inventory days declined to approximately 102.3 days versus an average of 130.6 days. On the two requested metrics, the gross operating cycle improved by roughly 36 days.

Notes: † DSO = year-end trade receivables / annual revenue × 365. ‡ Simple arithmetic average of the three annual ratios. § Inventory days = year-end inventories / annual COGS × 365. All figures are derived on a consolidated basis using FY24–FY26 year-end balances and annual flows: trade receivables of Rs 13.61 Crores, Rs 15.79 Crores and Rs 10.38 Crores [20]; revenue of Rs 191.30 Crores, Rs 175.26 Crores and Rs 215.45 Crores [21]; inventories of Rs 22.38 Crores, Rs 47.07 Crores and Rs 31.83 Crores [22]; and COGS of Rs 102.38 Crores, Rs 81.92 Crores and Rs 113.54 Crores [23].

Analytical read

  • The improvement is meaningful because FY26 revenue rose 25.7% YoY [24], yet trade receivables declined from Rs 15.79 Crores to Rs 10.38 Crores and inventories declined from Rs 47.07 Crores to Rs 31.83 Crores [20] [22]. This is consistent with better collections and inventory normalization rather than growth being funded through a larger receivables or inventory build.
  • The principal volatility remains inventory: inventory days rose to approximately 209.7 days in FY25 before normalizing in FY26. Therefore, the FY26 position is healthier than the average, but the historical range shows that inventory intensity can move sharply.
  • From a rating-watch perspective, the current signal from DSO and inventory days is not one of deterioration. However, this is only the gross operating cycle; a full credit assessment would also require payables, cash generation, debt, and the sustainability of the FY26 inventory reduction.
  • Q1 FY27 revenue is reported at Rs 70.36 Crores [21], but corresponding Q1 trade receivables and inventory balances are not reported in the structured data. Accordingly, FY26 is the latest period for a like-for-like working-capital-days comparison; a Q1 FY27 cycle cannot be calculated without those closing balances.
MetricFY24FY25FY26 currentFY24–FY26 averageFY26 vs average
DSO26.0 days†32.9 days†17.6 days†25.5 days‡7.9 days lower
Inventory days79.8 days§209.7 days§102.3 days§130.6 days‡28.3 days lower
DSO + inventory days105.8 days‡242.6 days‡119.9 days‡156.1 days‡36.2 days lower

Sources

  1. [1]Indo Borax Credit Rating Revised to Rating Watch with Negative Implications by India Ratings — 2026-08-31T19:03:15, p.6
  2. [2]Interest Coverage Ratio
  3. [3]Current Ratio
  4. [4]Current Ratio
  5. [5]Indo Borax Credit Rating Revised to Rating Watch with Negative Implications by India Ratings — 2026-08-31T19:03:15, p.3
  6. [6]Inventory Days
  7. [7]Latest Inventories
  8. [8]Indo Borax Credit Rating Revised to Rating Watch with Negative Implications by India Ratings — 2026-08-31T19:03:15, p.4
  9. [9]Payable Days
  10. [10]Latest Trade Payables
  11. [11]Indo Borax Credit Rating Revised to Rating Watch with Negative Implications by India Ratings — 2026-08-31T19:03:15, p.5
  12. [12]Latest Cash and Equivalents
  13. [13]Latest Current Assets
  14. [14]Latest Current Liabilities
  15. [15]Latest Current Borrowings
  16. [16]Investments
  17. [17]Indo Borax Credit Rating Revised to Rating Watch with Negative Implications by India Ratings — 2026-08-31T19:03:15, p.2
  18. [18]Latest Total Debt
  19. [19]Latest Cash and Equivalents
  20. [20]Trade Receivables
  21. [21]Revenue INR
  22. [22]Inventories
  23. [23]COGS
  24. [24]Revenue YoY

Keep digging

What specific liquidity or working capital metrics cited in the India Ratings rationale deviate from the company's reported debt-service coverage ratios (DSCR) and current ratios in the most recent quarterly filings?

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