Rating Rationale

Brickwork Ratings (BWR) assigns the ratings of BWR BBB-/Stable for the long-term and BWR A3 for the short-term bank loan facilities of the Eco Organics amounting to Rs.84.61 crores. The ratings factor in the entity’s track record, partners' expertise and strong supplier and client base. The assessment also considers the entity's improved revenue performance over the last two years along with an improvement in the EBITDA margin of 5.23% and a net margin of 2.31% based on provisional FY26 results.

Operational momentum remains intact, with ​Eco Organics achieving​ 28% of its projected revenue in Q1 FY27. The company maintains a capital structure, supported by an improved Tangible Net Worth (TNW) of Rs.​30.40 crores​ and improved gearing ratio of ​2.88x and a leverage ratio of ​2.73x as per provisional FY26​ compared to FY25. Driven by steady operational cash flows, TNW is expected to increase to Rs.​37 crores in the current fiscal year. Liquidity remains adequate, backed by sufficient EBITDA to cover interest obligations. Net Cash Accruals (NCA) of Rs. 7.45 Crores in FY26​​ is expected to comfortably cover​ the FY27 debt obligations of Rs.​5.30 crores supported by recurring operational cash flows. The current maturity repayment projected for FY 27 is to the tune of Rs.5​.96 Crores.

However, the ratings are constrained by risks associated with the working capital–intensive nature of operations stemming from a diversified ​product segment. Additionally, the business is susceptible to raw material price volatility​, foreign exchange risk​ and constitution of the entity. Other constraints include the industry's highly competitive and cyclical nature, as well as exposure to evolving government import​ and ESG policies.

The stable outlook indicates a moderate likelihood of a rating change over the medium term, supported by the ​partner's extensive industry experience and entity's established track record and the ​entity's strong relationships with its clientele which are further bolstered by an improved financial risk profile. BWR expects the ​entity to enhance its scale of operations, increase profitability margins and strengthen its capital structure and liquidity position by maintaining adequate cash accruals and improving its operating cycle. Furthermore, the ​BWR ​expects to improve its current ratio, gearing ratios,​ leverage ratio and debt protection metrics in the coming years.

The ​entity is expected to focus on expanding its scale of operations while mitigating business risks and improving its capital structure, both actions could lead to a positive outlook. However, a revision to a negative outlook could occur if there is significant underperformance in revenue, deterioration in profitability, a weakening capital structure​s and deterioration in debt protection metrics or liquidity challenges resulting from an extended working capital cycle.

As per the sanction terms, the entity must maintain standard financial covenants including PAT margin of 1.90% and above, current ratio of minimum 1.38 time, and Adjusted TNW of Rs.30 Crores, Total Term Liabilities/Adjusted TNW should not exceed more than 4.5 times and TOL/ATNW should not exceed more than 5 times and Total debt to EBITDA should not exceed 6 times and DSCR not below 1.20 times as of FY27 projections.

• Diversified client base and product portfolio :

  Eco Organic maintains a diversified and reputed client base across multiple sectors, including oral care, chewing gums, cosmetics, flavors, pharmaceuticals, aromatherapy, food, insecticides, perfumery, FMCG, and agro-based applications. The company effectively serves the domestic Indian market while managing an extensive export network reaching Singapore, Malaysia, China, UAE, USA, UK, Nigeria, Ghana, and South Africa. This broad industry exposure is supported by a well-diversified product portfolio that includes core categories such as clove and menthol products, essential oils, and natural or synthetic aroma chemicals. Additionally, the company provides specialized chemicals including chiral ligands, chiral API intermediates, epichlorohydrin, propanediol, and glycidol, alongside a range of catalysts such as rhodium, triruthenium dodecacarbonyl, ruthenium, and cobalt salen. The portfolio is further rounded out by dementholised oil (DMO) derivatives, encompassing alpha-pinene, beta-pinene, limonene, 1/8 cineole, cis-3-hexenol, graded menthones, methyl acetate, neo-menthol, l-menthol, and iso-menthol.

• Improving scale of operations with improved profitability margins :

  The firm's operating scale improved by ~14% Y-o-Y, achieving a CAGR of 11.85% driven by increased domestic and export sales and a diversified product mix. As of Q1 FY27, the firm recorded a revenue of Rs.86.94 crores with improved operating profitability of Rs.14.77 crores. The operating margin stood at 5.23% compared to 4.36% in FY25, while PAT reached Rs.6.52 crores with a net margin of 2.31% (up from 1.60%). For the full year FY27, the firm is expected to achieve revenue of Rs.309.50 crores with an EBITDA of Rs.15.71 crores (5% OPM) and a PAT of Rs.6.83 crores (2.21% net margin). 

• Experienced promoters/partners with established track record of operations :

  The firm is led by Mr. Vipin Kumar, Founder and Partner, who brings over 45 years of extensive industry experience along with an academic background in Chemical Engineering directing overall management, handling daily operations and driving strategic decision-making. Mr. Vipin Kumar is supported by Mr. Vyom Varshney, a B. Tech graduate with 15 years of professional experience, who manages business development and handles day-to-day administrative activities. They are further assisted by a team of experienced professionals. The promoters’ domain expertise and operational experience have supported the development and continuity of trusted relationships with stakeholders.

• Moderate capital structure, gearing and leverage metrics :

  The capital structure of Eco Organics is moderate, with a Tangible Net Worth (TNW) of Rs.30.40 crores in FY26 (Provisional), compared to Rs.22.36 crores in FY25. For an entity with a topline of Rs.282.31 crores, the gearing ratio stood at 2.88 times; while this reflects an improvement from FY25, it remains slightly stretched due to an increase in debt in line with the topline. The leverage ratio stood at 2.73 times in the FY26 provisionals, showing improvement over FY25. However, reliance on debt is expected to increase, with total debt projected at Rs.126 crores in FY27, which is expected to result in stretched gearing and leverage ratios.

• The firm's operations remain working capital intensive in nature :

  Eco Organics is engaged in the manufacturing of menthol and menthol-allied products, where operations are dependent on the menthol crop. Fluctuations in raw material prices—driven by menthol availability and seasonal disruptions—can increase working capital requirements.

  Approximately 10% of revenue is derived from the export of menthol products. While Eco Organics maintains a diversified product portfolio, it demonstrates a high dependency on working capital facilities, with average utilization at 87% for the last 12 months. According to FY26 provisionals, the operating cycle stood at 123 days and is projected to increase to 155 days. The inventory holding period was 116 days as of the current reporting period due to the seasonal availability of raw materials and the specific nature of the menthol manufacturing business.

• Intense competition in the industry :

  The menthol and specialty chemicals industry continues to witness intense competition and evolving ESG (Environmental, Social, and Governance) and government policies, owing to its fragmented structure, low technological barriers, and limited product differentiation. This environment continues to exert pressure on pricing flexibility and operating margins, while customers retain relatively high bargaining power.

  The firm, Eco Organics, has maintained a market presence in this line of business since 2003. It stands to benefit from growing global demand for organic and naturally derived ingredients, which protects demand in premium food, pharmaceutical, and cosmetic applications where synthetic substitution faces higher hurdles. Additionally, the firm procures menthol and raw materials from its local area, resulting in optimized procurement costs, reduced freight expenses, and a faster supply chain turnaround.

• Raw material seasonality, climatic exposure and price volatility :

  Eco Organics operates exclusively on the seasonal mentha harvest, making production timelines and input costs highly vulnerable to natural calamities, unseasonal rainfall, and floods in northern India. Any adverse climate event directly curtails raw material availability, leading to operational downtime or severe cost pressures.

  Severe price volatility and commodity speculation: Both raw materials (Menthal and mentha oil) and finished products are subject to speculative price swings governed by trading volumes on exchanges (e.g., MCX), global demand shifts, and weather patterns. This unpredictable pricing environment exposes profit margins and the working capital cycle to inventory losses and cash flow mismatches.
  Eco Organics, located in Rampur, UP, is situated in the heart of the prime Mentha-growing belt. This location provides competitive advantages in procurement costs, reduced freight expenses, and a faster supply chain turnaround.

• Constitution of entity as a partnership concern :

  The firm's constitution as a partnership firm introduces inherent structural risks. These include the possibility of capital withdrawal by any partner during personal contingencies, which could adversely affect the firm’s liquidity and operational continuity. Furthermore, the business remains vulnerable to dissolution risks in the event of the death, retirement, or insolvency of a partner.

  From a financing standpoint, the partnership model also limits access to institutional debt, as lenders often base their credit decisions on the individual financial standing of the partners, rather than the entity itself. This constrains financial flexibility, particularly during periods of expansion or financial stress, and may hinder the firm's ability to scale or absorb external shocks.

The entity’s ability to increase its scale of operations, improve profitability and margins, efficiently manage its working capital requirements with adequate liquidity by improved current ratio, gearing, debt protection metrics and strengthen overall credit profile would be the key rating sensitivities. 

Positive Rating Factors: 

• Sustained improvement in the revenue performance with Y-o-Y revenue growth, supported by enhanced profitability, with EBITDA margins exceeding 7%. 
• A healthier debt profile, including gearing Total Debt / TNW below 2 times, TOL/TNW below 3 times, and maintaining debt protection metrics DSCR above 2 times, ISCR above 3 times with adequate liquidity and an improved current ratio above 1.40 times which strengthens working capital efficiency. 

Negative Rating Factors: 

• If the revenue declines by more than 20%, Y-o-Y due to weaker demand, or if profitability weakens, with EBITDA margins dropping under 3%.
• A rising debt burden, accompanied by a decline in key ratios such as Total Debt to Tangible Net Worth (TOD/TNW) above 4 times and TOL/TNW above 5 times, Current Ratio (CR) below 1.30 times, Interest Coverage Ratio (ISCR) falling below 1.50 times, and Debt Service Coverage Ratio (DSCR) falling below 1.20 times and any liquidity concerns.

The company Eco Organics liquidity position is adequate by cash and cash equivalents improving to Rs.0.53 crores in FY26 (provisional) from Rs.0.13 crores in FY25. Operational performance has strengthened, with EBITDA improved to Rs.14.33 crores in FY26 Provisionals from Rs.11.18 crores in FY25, providing comfortable coverage for interest and finance charges of Rs.7.51 crores. Net Cash Accruals also improved to Rs.7.45 crores in FY26 (provisional) from Rs.4.40 crores in FY25, effectively covering the current portion of the debt current maturities of Rs.5.96 crores. The company’s liquidity is further supported by a current ratio of 1.38 times, efficient working capital management with approximately 90% utilization, satisfactory DSCR of 1.69 times and a healthy receivable cycle of under 30 days and projected cash accruals stood at Rs.7.29 crores against the CPLTD of Rs.5.96 crores. Additionally, the partners are expected to continue extending support, if necessary, through unsecured loans to manage any cash flow mismatches. Hence overall liquidity profile is assessed as "Adequate." 

Eco Organics maintains an adequate ESG profile, reflecting a commitment to sustainable and ethical operational standards as per Manufacturing Sector.

Environmental:

Eco Organics has demonstrated compliance with environmental risk regulations by adhering to the Water Act, the Air Act, and the Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016. Waste management practices specifically comply with the Water (Prevention and Control of Pollution) Act, 1974.

The entity utilizes 0.8 KLD of water for domestic purposes, managed through a septic tank and discharged via drains. Regarding atmospheric emissions, the facility operates a 6.0 lakh kcal/hr wood-fired thermic fluid heater with a 30-meter stack for particulate matter control, and a 200 KVA diesel generator set with a stack height 2.5 meters above the nearest roof level.

The factory consumes 400 KVA of electricity for manufacturing operations. Based on a standard industrial utility assessment for a facility of this scale—which includes a 5,500 MT installed capacity and a 6.0 lakh kcal/hr heater—this 400 KVA figure represents the facility's total sanctioned load.However, renewable energy is currently not utilized due to the nature of the chemical factory (flammable or chemical reaction risk). Maintenance of regulated and compliant emission levels remains a priority for the entity.

Assessment Note: The firm mitigates operational emissions risks via a valid No Objection Certificate / Consent to Operate (CTO) from the Uttar Pradesh Pollution Control Board (UPPCB) for Air Pollution (Letter No: 129646/UPPCB/Mardabad/(UPPCBRO)/CTO/Air Rampur/2021) Issued on 31/07/2026 and Valid 1st Aug 2026 to 31/07/2027 and will be renewed every years.

Social:

Social factors hinge on adherence to labor laws, accident prevention frameworks, and human-capital development, with 32 male employees, safety performance, and training initiatives offering insights into operational resilience.

Structural and employee welfare benchmarks are safeguarded via registered statutory frameworks and an explicit commitment to providing equal opportunity to both male and female personnel.

Fire Safety Certificate (UPFS/2024/109355/RAMPPUR/1255/DD): Issued 24 Feb 2024; Valid from 4 March 2024 to 4 March 2027.

Labor Department Registration (Reg No: UPFA5000109): Issued 4 Dec 2019; Valid till 31 Dec 2029.

Governance:

Governance assessment focuses on board independence, committee effectiveness, and robustness of compliance systems, supported by readily available disclosures on board structure, audit mechanisms, and risk-management practices.

The firm is legally structured as an MSME (UDYAM Number: UDYAM UP-63-0001914) managed by experienced partners boasting over a decade of hands-on expertise in the menthol, aroma chemicals, and essential oils sector. Rigorous regulatory accountability and transparent stakeholder engagement are anchored by third-party external statutory audits conducted by independent entities (Akansha Bansal and Associates, UDIN: 25543379BMKXZG1045).

Eco Organics is a partnership firm established in 2003 that specializes in manufacturing and selling menthol and allied products derived from menthol oil and other essential oils. The products are mainly used in oral care products, chewing gum, cosmetics, pharma etc.  The firm is an ISO certified and undertakes to produce 100% natural products free from adulterants. The firm's manufacturing unit is located at B-5/C-5, C-6 and C-7, Industrial Estate, Ajeetpur, Rampur, Uttar Pradesh. Its key operations and leadership are managed by its principal partners: Mr. Vipin Kumar (managing partner) and other partners, Mrs. Rupam Gupta and Mr. Vyom Varshney.

The Complexity Indicator refers to the ease with which the returns associated with the rated instrument could be estimated. It does not indicate the risk related to the timely payments on the instrument, which is rather indicated by the instrument's credit rating. It also does not indicate the complexity associated with analysing an entity's financial, business, industry risks or complexity related to the structural,transactional or legal aspects. Details on the complexity levels of the instruments are available on BWR's website Complexity Levels.

Creadit Rating Agency	Status and Reason for Non-Cooparation	Date of Press Release
ACUITE	Acuité ratings continued the ratings under Issuer Not-Cooperating category due to absence of adequate information for surveillance review.	25May2026

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