| Dharmaj Crop Guard Limited | ||||||
| Ratings reaffirmed at 'CRISIL BBB- / Positive / CRISIL A3 '; rated amount enhanced for Bank Debt | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL BBB-/Positive/CRISIL A3’ ratings on the bank facilities of Dharmaj Crop Guard Ltd (DCGL).
On January 18, 2022, CRISIL Ratings had revised the outlook to “Positive” from “Stable”. The revision in outlook reflects the expectations of continued improvement in DCGL’s business profile. In current year, the company is estimated to clock a revenue growth of above 30% over previous fiscal’s Rs. 303 cr driven by increasing branded sales, expanding distributor network and geographic presence and rising exports. These are also expected to result in improved profitability in the year. Over medium term, company is expected to maintain a revenue growth of over 20% with steady margins. DCGL’s financial profile shall also continue to consolidate driven by healthy annual accruals of Rs. 30-35 cr. Further, though DCGL is undertaking a backward integration capex of around Rs. 150 cr, its gearing shall remain moderate below 1.2 times with company maintaining healthy debt protection measures. The tie up of funding shall also ensure adequate liquidity during this phase for the company.
The ratings continue to reflect extensive industry experience of DCGL's promoters in the agro-chemicals industry, diversified product portfolio, wide customer base and established distribution network, moderate working capital cycle and improving financial profile. These strengths are partially offset by risk associated with the ongoing project implementation, exposure to intense competition and inherent risks in the agro-chemicals industry. |
Key Rating Drivers & Detailed Description Strengths:
Weaknesses
DGCL has taken up around Rs 150 cr greenfield capital expansion for backward integration into manufacturing of technicals. The capex is spread through 2 years to fiscal 2023 and shall be funded through Rs. 100 cr term loan. DGCL has recently received the sanction for same. The project is large for DGCL compared to the existing fixed asset base, net worth base or the revenue size. The project exposes DGCL to associated risks, such as time or cost overrun, technology obsolesce, and stabilisation and ramp up in operations post completion. Progress in project implementation and subsequent ramp up, stabilization remains a rating sensitivity factor.
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Liquidity- Adequate The company has adequate liquidity profile backed by rising cash accruals sufficient against repayment obligations, low bank limit utilization, controlled working capital cycle and healthy financial flexibility. The company generate accruals of Rs. 23 cr in fiscal 2021 covering the repayment obligation 10 times. Its accruals are expected to be Rs. 30-35 cr annually over next couple of fiscals, covering the repayment 5-6 times and providing cushion for working capital and capex funding. Its bank limit utilization is low at around 30 percent supported by controlled working capital cycle and enhanced bank limits. Current ratio are healthy at 1.99 times on March 31, 2021. Low gearing and moderate net worth support its financial flexibility. Liquidity over medium term will be contingent to the cash flow management. As DGCL undertakes around Rs. 150 cr capex, a significant portion of accruals shall be deployed in the same. A significant cost overrun, delayed operationalization may affect the liquidity profile. |
Outlook Positive CRISIL Ratings believe DCGL will continue to benefit from the extensive experience of its promoter, established relationships with clients and improving cash accruals. |
Rating Sensitivity factors Upward factor
Downward factor
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About the Company DCGL was incorporated in 2015. It is engaged in manufacturing of agrochemicals such as pesticides, insecticides, herbicides, fungicides, etc. It has manufacturing facility located in Ahmedabad- Gujarat and promoted by Mr. Ramesh R. Talavia and Mr. Jaman Talavia. |
Key Financial Indicators
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
#Includes EPC sublimit of Rs. 15 cr, PCFC sublimit of Rs. 15 cr, Bank guarantee Sublimit of Rs. 1 cr, WCDL sublimit of Rs. 9 cr. |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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