Thirumalai Chemicals enters FY2027 with a record that has moved from strain to visible stress: loan covenants were breached and waived, operating cash flow is deeply negative, and a ₹2,175 crore debt pile sits largely inside a layered offshore subsidiary chain whose US project is still under construction. The audit opinions remain unqualified, but the company is funding losses with working-capital lines while capitalising borrowing costs into a ₹2,518 crore work-in-progress base.
Key findings
- Loan covenants were breached and may be breached again, while supply-chain financing surged to ₹195.82 crore
Major- The Group was not in compliance with financial covenants on NCDs of ₹98.95 crore and term loans of the Holding Company (₹427.86 crore) and TCL Intermediates Pvt. Ltd. (₹480.49 crore) as at 31 March 2026, and obtained formal waiver letters from lenders before the financial statements were approved. The Group states it is uncertain about meeting specified covenants as at 30 September 2026 and 31 March 2027. Consolidated supply-chain financing payables rose from ₹10.85 crore to ₹195.82 crore over the same year, with ₹141.16 crore already paid by the finance provider to suppliers on 90-120 day terms. - Borrowing costs capitalised to CWIP rose steadily, reaching ₹104.39 crore in FY2025-26
Major- Consolidated operating cash flow was negative ₹130.73 crore in FY2025-26, the second consecutive year of negative cash flow, while consolidated PAT was negative ₹168 crore. Borrowing cost capitalised to consolidated CWIP rose from ₹6 crore in FY2022-23 to ₹56.31 crore in FY2023-24, ₹62.05 crore in FY2024-25, and ₹104.39 crore in FY2025-26, and CWIP stood at ₹2,518 crore, or 221% of net PP&E of ₹1,141 crore. The company declared no dividend for FY2025-26, and management states that ₹193.11 crore of current liabilities relate to revolving short-term working capital facilities subject to periodic renewal. - A seven-subsidiary offshore-heavy group channels the bulk of its debt and losses through a layered US holding chain
Major- Consolidated borrowings of ₹2,175 crore were 2.9× standalone borrowings of ₹760 crore, while consolidated PAT of ₹-168 crore was 2.6× the standalone PAT of ₹-65 crore. The US operations are held through TCL Global B.V. (Netherlands) → TCL Inc. (USA) → TCL Specialties LLC (USA), with the parent infusing USD 45.7 million into TCL Global B.V. in FY2025-26 alone. A material Indian subsidiary, TCL Intermediates Private Limited, operated without a CFO from 1 April 2023 to 21 March 2024. - Audit opinions remain unqualified, but a recurring audit-trail exception persists and the standalone entity reported its first cash loss
Minor- The standalone and consolidated audit opinions were unqualified in every year from FY2020-21 through FY2025-26. The auditor reported that the accounting software's audit trail feature was not operated throughout the year for all relevant transactions in certain instances in FY2025-26, a finding that has recurred across three years. The standalone entity incurred cash losses of ₹52.19 crore in FY2025-26, the first such cash loss in the six-year window reviewed. - Promoter family dominates board and management with interlocking roles, rising pay, and preferential share issuance to themselves
Minor- Mr. R. Parthasarathy has occupied both Chairman and Managing Director roles throughout FY2020-21 to FY2025-26, while his brother and niece simultaneously held board and key managerial positions. The company issued 18,96,614 equity shares at ₹296 per share on a preferential basis exclusively to 16 promoter and promoter group entities on 23 December 2025, raising ₹56.14 crore. At the 8 August 2020 shareholder meeting, dissent on the reappointment of Mrs. Ramya Bharathram was 195 votes out of 42,207,056 cast. - Contingent liabilities are dominated by a ₹526.89 crore corporate guarantee, while disputed tax demands remain modest
Minor- The company gave a corporate guarantee of ₹526.89 crore on behalf of TCL Intermediates Private Limited relating to term loan facilities taken over during FY2025-26. Disputed income-tax demands on the standalone company rose to ₹7.75 crore as at 31 March 2026 from ₹1.2 crore a year earlier, with no provision made. Disputed excise duty demands of ₹2.00 lakhs for the period 1995-96 remain pending before the Commissioner of Central Excise (Appeals), Chennai as at FY2022-23.
What to watch
- Covenant compliance. The company has stated uncertainty about meeting loan covenants on the test dates of 30 September 2026 and 31 March 2027.
- US subsidiary funding. A prospective lender expressed intention to undertake diligence on 28 May 2026 for a proposed USD 130 million first lien senior secured term loan facility for TCL Specialties LLC.
- Working-capital renewal. The ₹193.11 crore in revolving working capital and cash credit facilities that were current as at 31 March 2026 are subject to periodic renewal.
- Malaysian subsidiary divestment. Management stated in FY2024-25 that it is exploring strategic options including potential divestment of Optimistic Organic Sdn. Bhd..
Bottom line: This is a disclosed record under unqualified audit opinions, but the stress is no longer latent, it sits in breached and waived covenants, negative operating cash flow, and a capitalisation cycle that moves borrowing costs onto a balance-sheet line now standing at over twice the net fixed asset base. The risk is concentrated in the US subsidiary chain, which carries the majority of group debt and losses and is still in construction. Watch whether the covenant tests are met, whether the US project secures its committed funding, and whether the working-capital lines that fund day-to-day operations are renewed.