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Shalimar Paints Credit Rating Reaffirmed Negative Outlook
Shalimar Paints Ltd. has had its credit rating reaffirmed at CARE BB+ by CARE Ratings, maintaining a 'Negative' outlook. The rating signals potential for future downgrades if the company's financial performance does not improve.
FY26 Financial Snapshot:
- Total Operating Income: ₹569.03 crore (down from ₹599.25 crore in FY25)
- PBILDT (Operating Loss): ₹20.81 crore (improved from ₹56.48 crore loss in FY25)
- PAT (Net Loss): ₹63.34 crore (improved from ₹80.11 crore loss in FY25)
Reader Takeaway: Narrowing losses and a 'Negative' outlook characterize Shalimar Paints' credit assessment.
What just happened
CARE Ratings has reaffirmed Shalimar Paints' credit rating at 'CARE BB+' and kept the outlook as 'Negative'. This means the agency sees continued risks despite no immediate downgrade. The company reported a total operating income of ₹569.03 crore for FY26, a decrease from ₹599.25 crore in FY25. However, operating losses (PBILDT) narrowed to ₹20.81 crore from ₹56.48 crore in the previous year, and net losses also improved to ₹63.34 crore from ₹80.11 crore.
Why this matters
The 'Negative' outlook from CARE Ratings is a key concern for investors. It suggests that the rating agency foresees potential challenges that could lead to a downgrade if not addressed. Despite narrowing losses, the company continues to report an operating loss, indicating it is not yet generating enough cash from its core business to cover costs. Furthermore, its liquidity position is described as 'stretched', with upcoming debt repayments posing a significant risk.
The backstory
Shalimar Paints is undergoing a strategic shift. Management is intentionally moving away from low-margin products like thinners and low-value customers to improve profitability. Operational efficiency is being targeted through cost optimization measures, including manpower reduction and consolidation of sales depots. Investments in automation and efforts to boost utilization at its Chennai and Nasik plants are also part of this turnaround strategy.
What changes now
For now, the credit rating remains unchanged, providing a temporary reprieve. However, the 'Negative' outlook means increased scrutiny. The company's ability to execute its cost-cutting, automation, and plant utilization plans will be critical. The focus will be on turning around operations to achieve profitability and improve cash flow generation to meet its financial obligations.
Risks to watch
- Sustained Operating Losses: The company continues to report negative PBILDT, hindering its ability to generate internal cash.
- Liquidity Risk: With only ₹7.24 crore in free cash and bank balances against ₹18.30 crore of repayment obligations in FY27, the company faces a significant cash flow mismatch risk.
- High Working Capital Utilization: Average utilization of working capital borrowings stood at around 93% for the 12 months ended March 31, 2026.
- Reliance on Promoter Support: The financial stability of Shalimar Paints is heavily dependent on support from the Hella group.
Peer comparison
(No specific peer comparison data provided in the filing for this rating update.)
Context metrics (time-bound)
- Tangible Net Worth: ₹234.53 crore as of March 31, 2026.
- Overall Gearing: 0.76 times in FY26 (compared to 0.61 in FY25 and 0.40 in FY24).
- Interest Coverage: -0.82 times in FY26 (compared to -3.22 in FY25 and -4.16 in FY24).
What to track next
Investors should monitor the company's progress on its cost optimization and efficiency improvement initiatives. Crucially, the ability to meet upcoming debt repayment obligations in FY27 and any improvement in profitability and cash flow generation will be key factors. Any further rating actions from CARE Ratings will also be important indicators.