This stock from BSE Smallcap index zoomed over 100% in six months

Shares of IOL Chemicals & Pharmaceuticals (IOL) have rallied 6 per cent to Rs 177 per share on the BSE, after CARE Ratings improved the credit rating for banking facilities availed by the company. The rating agency revised rating on long term bank facilities to CARE BBB+ from CARE BBB- and of short term bank facilities to CARE A2 from CARE A3.

The stock of the leading manufacturer of APls / bulk drugs and specialty chemicals company was trading close to its 52-week high of Rs 182, touched on November 16, 2018, in the intra-day trade. It touched an all-time high of Rs 220 on January 3, 2008, on the BSE.

In the past six months, the stock appreciated 122 per cent from Rs 79.65, after reporting robust earnings for the first half (April-September) of the financial year 2018-19 (H1FY19). In comparison, the S&P BSE Sensex was up 2.5% during the same period.

The company had reported a seven-fold jump in net profit at Rs 52.81 crore in H1FY19 from Rs 7.41 crore in the same period of FY18. Net revenue from operations was increased by 74 per cent to Rs 785 crore from Rs 451 crore.

The company installed enhanced capacity of Metformin (Unit IV) from 3,000 TPA to 4,000 due to increasing demand and successfully completed Unit V to manufacture Clopidogrel Bisulphate & Fenofibrate with a capacity of 180 TPA that will result in higher revenue and operating margins. Both capex are funded through internal accrual.

CARE Ratings said the revision in the ratings assigned to the bank facilities of IOL 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 reduction in gearing and strengthening of debt service metrics, it added.

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.

Going forward, the ability of the company to report envisaged improvement in operational performance, diversify revenue stream and register improvement in overall gearing would be the key rating sensitivities, CARE Ratings said.

At 11:07 am, IOL was trading 4 per cent higher at Rs 173 on the BSE, as compared to 0.19 per cent decline in the S&P BSE Sensex. The trading volumes on the counter nearly doubled with a combined 577,627 equity shares changed hands on the BSE and NSE so far.