CRISIL Ratings has downgraded Laxmi Organic Industries Limited's (LOIL) long-term bank facilities rating to ‘Crisil AA-/Negative’ from ‘Crisil AA/Negative’. The company's short-term bank facilities and commercial paper ratings have been reaffirmed at ‘Crisil A1+’. This revision in ratings is attributed to a steeper-than-anticipated decline in LOIL's revenue and profitability. Revenue from operations decreased by 9% to ₹2,071 crore in the first nine months of fiscal 2026, compared to ₹2,276 crore in the same period of fiscal 2025. This decline was primarily driven by a 22% drop in specialty chemical segment revenues to ₹566 crore and a 3% decrease in essential segment revenues to ₹1,505 crore. Operating margins also deteriorated significantly, falling to 4.4% in the first nine months of fiscal 2026 from 9.5% in the corresponding period of fiscal 2025. This contraction was observed in both the specialty chemical segment (from 24% to 13%) and the essential segment (from 3% to 1%). The company is undertaking a capital expenditure of over ₹700 crore in fiscal 2026, with approximately ₹550 crore allocated to the Dahej plant and the remainder for the Lote plant and maintenance. Despite expected additional debt for capex, the gearing is anticipated to remain below 0.5 times in the near to medium term. The interest coverage ratio deteriorated to 6.00 times in the first nine months of fiscal 2026 from 18.68 times in the previous year. CRISIL highlights LOIL's strong market position, a diversified end-user base, and a generally healthy financial risk profile as key strengths. However, these are partially offset by susceptibility to fluctuations in input prices and foreign exchange rates, and risks associated with the timely execution of its large capex.
