Tanfac Industries to Launch ₹100 Crore Capacity Expansion in FY25

Tanfac Industries Ltd (TIL) is gearing up for a significant capacity expansion, as it recently received an upgraded credit rating from ICRA. The credit rating agency elevated TIL's long-term and short-term bank facilities from A- to A (stable) and A2+ to A1, respectively.

The upgraded ratings signify TIL's demonstrated improvement in operational and financial risk profiles, with expectations that this positive trend will continue. The boost is attributed to improvements in the volumes and realizations of hydrofluoric acid, coupled with strong operational ties with Anupam Rasayan, leading to increased offtake of TIL's products.

ICRA emphasized TIL's strengthened financial profile over the years, marked by healthy profitability, steady annual cash accruals from business operations, and limited dependence on debt. The company's liquidity is projected to remain robust, supported by steady cash flow, a healthy cash and bank balance, absence of term debt repayment obligations, and available unutilized working capital limits.

Although the operating profitability moderated from FY22 levels, it remained robust in FY23 and H1FY24. TIL's ability to pass on volatile raw material prices to end consumers played a crucial role in maintaining this profitability.

The company's revenue and profitability outlook remains strong, driven by its focus on expanding capacities for high-margin segments, particularly hydrofluoric acid (HF). The positive outlook also considers healthy demand for products and improvements in the cost structure. ICRA took into account TIL's established track record of over three decades in manufacturing fluorochemicals across diversified product segments.

As part of its capacity ramp-up plan, TIL is increasing the capacity of its HF plant from 14,750 MTPA to 29,500 MTPA at an estimated investment of ₹100 crore. This expansion is slated to be operational in FY25 and will be primarily funded from internal accruals.

Tanfac Industries, with production units in Cuddalore, Tamil Nadu, is a ₹375 crore company and one of the largest producers of Anhydrous hydrofluoric acid and aluminum fluoride in India. It operates as a joint venture between Anupam Rasayan India Ltd (Anupam Rasayan) and Tamil Nadu Development Corporation (TIDCO).

In FY23, TIL reported a net profit of ₹56 crore and EBITDA of ₹83 crore. For the first half of the current fiscal year, its total revenue reached ₹192 crore, with a net profit of ₹30 crore. On Monday, Tanfac Industries's stock grew by 1.48%, closing at ₹2324.70 per share on the BSE.

HBL