CRISIL A` and P1` for CHEMBOND CHEMICALS` bank facilities

Rs.90.0 Million Cash Credit / WCDL A/Stable (Assigned)

Rs.145.3 Million Term Loan A/Stable (Assigned)
Rs.30.0 Million Bank Guarantee P1 (Assigned)


CRISIL has assigned its A/Stable/P1` ratings to the bank Iacilities oI Chembond Chemicals Ltd
(Chembond), which is part oI the Chembond group. The ratings reIlect the Chembond group`s wide
product portIolio, diversiIied customer base, and healthy Iinancial risk proIile, marked by steady
revenue generation, low gearing, and strong debt protection metrics. These rating strengths are
partially oIIset by the Chembond group`s large working capital requirements, and exposure to risks
related to intense competition in the chemical industry.
For arriving at its ratings, CRISIL has combined the business and Iinancial risk proIiles oI Chembond
and its various subsidiaries (Chembond Ashland Water Technologies Ltd and Protochem Industries
Pvt Ltd), joint venture (Henkel Chembond SurIace Technologies LTD) and associate companies
(CCL Building Systems Ltd and Chembond Enzyme Company Ltd). This is because the entities
collectively reIerred to as the Chembond group, are under common promoters, and have operational
and Iinancial linkages.
Outlook: Stable
CRISIL believes that the Chembond group will maintain its credit risk proIile over the medium term,
supported by increasing demand Ior its products Irom its key customers and sustained proIitability in
its business. The outlook may be revised to Positive` iI the Chembond group`s scale oI operations
increases substantially, with sustained improvement in proIitability and improvement in debtor
collection cycle. Conversely, the outlook may be revised to Negative`, iI the group`s liquidity
weakens led by Iurther stretching oI receivables or sharp slowdown in customer demand adversely
aIIecting the group`s operating perIormance.
About the Croup
Incorporated in 1975 by Dr. Vinod Shah, Mr. Ashwin Nagarwadia, and Mr. Parviz Dastur, Chembond
manuIactures specialty chemicals and provides a range oI products Ior diverse industrial applications.
It oIIers metal treatment chemicals, water treatment chemicals, and industrial enzymes through its
subsidiaries, associate companies and joint ventures. Chembond also manuIactures construction
chemicals Ior the building construction and inIrastructure sectors, and high perIormance coatings Ior
structural protection Irom corrosion. Recently, it has diversiIied into equipment-based solutions Ior
water treatment. Additionally, it undertakes trading oI building construction chemicals.
Chembond entered in to a JV with Henkel KGaA, Germany Ior metal treatment chemicals, in 1997.
In 2001, the group Iormed another JV with Ashland Inc, USA and simultaneously acquired Drewtreat
Chemicals Ltd Ior water treatment chemicals. It acquired Protochem Industries Ltd in 2009, Iollowed
by a JV with H2O Innovation, Canada in February 2010.
Chembond`s manuIacturing and blending plants are at Tarapur (Maharashtra), Baddi (Himachal
Pradesh), and Dudhwada (Gujarat). Additional blending plants are in Chennai and Balasore (Orissa).
It has its warehouses and branch oIIices in Ahmedabad, Bangalore, Delhi, Faridabad (Haryana),
Jamshedpur (Jharkhand), Kolkata, and Pune.
The Chembond group reported a proIit aIter tax (PAT) oI Rs.148.3 million on net sales oI Rs.1743.7
million Ior 2009-10 (reIers to Iinancial year, April 1 to March 31), against a PAT oI Rs.89.3 million
on net sales oI Rs.1409.7 million Ior 2008-09.

Media Contacts Analytical Contacts CRISIL Rating Desk
Mitu Samar
Head, Market Development &
Communications
CRISIL Limited
Tel: 91-22- 3342 1838
Email. msamarcrisil.com

Tanuja Abhinandan
Market Development &
Communications
CRISIL Limited
Tel: 91-22-3342 1818
Email. tabhinandancrisil.com
Gurpreet S Chhatwal
Director - CRISIL Ratings
Tel: 91-11-4250 5100
Email. gchhatwalcrisil.com

Manish Kumar Gupta
Head - CRISIL Ratings
Tel: 91-11-4250 5100
Email. mkguptacrisil.com
Tel: 91-22-3342 3047 / 3342
3064
Email.
CRISILratingdeskcrisil.com

Note:
This rating rationale is transmitted to you Ior the sole purpose oI dissemination through your
newspaper / magazine / agency. The rating rationale may be used by you in Iull or in part without
changing the meaning or context thereoI but with due credit to CRISIL. However, CRISIL alone has
the sole right oI distribution oI its rationales Ior consideration or otherwise through any media
including websites, portals etc.


Incorporated in 1975 by Dr. Vinod Shah, Mr. Ashwin Nagarwadia, and Mr. Parviz
Dastur,Chembond Chemicals Ltd; which is currently in its 36
th


year oI operation, is a
Specialty Chemicals manuIacturing & marketing company
Financial Highlights:
Equity |Face Value per share oI Rs.10|: Rs.6.36 crores
Consolidated Debt: Rs.22.65 crores ( as oI March 31, 2010)
Liquid assets ( FD in bank): Rs.8.57 crores ( as oI March 31, 2010)
Market Cap: Rs.117 crores (as per price oI Rs.184 on April 11,2011)
Enterprise Value Market Cap Debt-Cash Rs.118.4 crores
Promoter Holding: 66.48
Consolidated Iigures Ior year ended March 2010:
Revenue: Rs.178 crores
Net ProIit: Rs.14.5 crores
EPS: Rs.19.49
Dividend per share: Rs.1.75
Consolidated Iigures Ior 9-months ended Dec 2011:
Revenue: Rs.156 crores (20 growth y-o-y)
Net ProIit |provisional|: Rs.9.6 crores (3 growth y-o-y. NP growth Iigure seems
disproportionate with sales growth as there was an element oI other income oI Rs.1.10 cr
in the 9-months ended Dec 2009)
Key Business Highlights:
1| The primary business oI Chembond is manuIacture & marketing oI Construction
chemicals, coatings - anti-corrosive paints and specialty enzymes.
2| The company has 3 key Joint Ventures:
a| Henkel Chembond SurIace Technologies Ltd is a 51.01 |Henkel, Germany a Fortune 500
company with approx USD 21 billion in sales|: 48.99 |Chembond| JV which is into
manuIacturing oI metal pre-treatment chemicals used in the automotive, auto ancillaries, steel
& coil, appliances & general industries.
b| Chembond Dewtreat is a 54.99 |Chembond|: 45 |Ashland, USA: a Fortune 500
company with approx USD 10 billion in sales| which is Iocused on water treatment chemicals
Ior cooling water & boiler water serving mainly Power, Fertilizer, reIining, Pharma, chemical
& steel industry.
C| H2O Innovation India Ltd is a 51 |Chembond| :49 |H2O Innovation, Canada| oIIers
equipment based solutions Ior water treatment, recycle and reuse.Reverse osmosis and
Desalienation plants Iorm the core product oIIering.
3| Chembond`s head oIIice is located is at Mahape, Navi Mumbai. Chembond`s
manuIacturing and blending plants are at Tarapur (Maharashtra), Baddi (Himachal Pradesh),
and Dudhwada (Gujarat). Additional blending plants are in Chennai and Balasore (Orissa). It
has its warehouses and branch oIIices in Ahmedabad, Bangalore, Delhi, Faridabad (Haryana),
Jamshedpur (Jharkhand), Kolkata, and Pune.
4| The Company has a consistent, uninterrupted dividend record since inception in 1975.
Future prospects:
1| Construction chemicals manuIactured by Chembond are used in large inIrastructure
projects. Notwithstanding the current slowdown, the huge construction activity all over the
country is likely to keep the demand Ior this product very strong.
2| The anti-corrosive paints and coatings are Iormulated to suit tropical & industrial
conditions & Iind use mainly in thermal power, reIining, chemical, paper & pulp & soap &
detergents industry. The demand Irom these user industries is expected to remain stable. The
water treatment chemicals business also has a bright Iuture.
3| All the 3 JV`s companies are expected to do well in the coming years. Though it is early
days Ior H2O Innovation,the product portIolio holds tremendous promise.
4| H2O Innovation India inaugurated last month a 10,000 sq. It. manuIacturing plant near
Vadodara, Gujarat,. The plant`s manuIacturing capabilities are equivalent to those oI the JV
partners plants located in Ham-Nord, QC and Minneapolis, MN. This production capacity
will enable H2O Innovation India to locally ensure detailed engineering, together with
assembly, welding, pipe Iitting, in-house perIormance testing and programming, among other
operations. During its Iirst year oI operation alone, H2O Innovation India was awarded
contracts totalling $4.2 M Ior the supply oI industrial water treatment systems and equipment
Ior industrial customers (including the contracts valued at $2.2 M announced on June 8,
2010). As oI April 6, 2011, H2O Innovation India`s sales backlog stands at $2.6 M Ior Indian
projects only
Valuation:
At the current market price oI Rs.184, Chembond directly and through its JV`s oIIers an
excellent proxy plan on the Construction and Auto sector and a direct play on Total Water
management solutions.

At the time of writing this report, the author /his family have an investment interest in the stock mentioned above.
Under no circumstance does the information in this report represent a recommendation to buy or sell the above-
mentioned stock. This report has been prepared and issued on the basis of publicly available information, internally
developed data & other sources believed to be reliable. This is just a suggestion solely for information purposes and
does not constitute a solicitation to any person to buy or sell a security. While the information contained therein has
been obtained from sources believed to be reliable, no responsibility (or liability) is accepted for the accuracy of its
contents. Readers using the information contained herein are solely responsible for their actions and are advised to
satisfy themselves before making any investments.