| Heranba Industries Limited | ||||||
| Rated amount enhanced | ||||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ratings on the bank facilities of Heranba Industries Limited (HIL) at “CRISIL A/Positive/CRISIL A1’
The rating continues to reflect the established presence of the company in the agrochemicals market and healthy financial risk profile. These strengths are partially offset by large working capital requirement and exposure to risks inherent in the agrochemicals industry. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of HIL; its subsidiaries- Mikusu India Private Limited (MIPL) and Heranba Organics Pivate Limited (HOPL).
Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Established track record in the agrochemicals industry: HIL is one of the leading players in the agrochemicals industry and has diversified product mix comprising of Technicals, Formulations and Intermediates. The company has more than 350 products across Technicals, Intermediates and Formulations’ business which are commercialized till date. The company has around 45% of the revenue generated from Exports in fiscal 2022 which has reduced to 37% for 9M FY2023. This is majorly because of decline in demand in the international market. The company exports to over 60+ countries across Asia, Africa, Middle East, Southeast Asia, etc. Also, the company has a dealership network comprising of 9400+ dealers and about 21+ depots pan India which support its domestic revenue growth. For fiscal 2023 company has achieved revenue of Rs 1060 crore for 9 months ended December 2022. While group’s operating performance was impacted in Q3 fiscal 2023 due to muted demand it is expected to gradually improve and will remain key monitorable.
Healthy financial risk profile: The networth of the company is healthy at over Rs. 710 crores and the gearing & TOLANW low at 0.07 times & 0.49 times respectively as on March 31, 2022. Debt protection metrics are comfortable, with interest coverage and net cash accrual to adjusted debt ratios at over 68 times and almost 4 times, respectively for fiscal 2022. The company continues to have no term debt liabilities as on March 31, 2022. The company is expected to incur capex of Rs. 100-150 crores towards routine capex as well as new capacity additions for fiscal 2023 and fiscal 2024; however, the same is to be funded via internal accruals and no debt expected to be availed. Financial risk profile is expected to remain comfortable over medium term.
Weakness: Large working capital requirement: Gross current assets were at 207 days as on March 31, 2022, driven by large receivables and moderate inventory. With onset of pandemic, the company had witnessed slowdown in collections however with easing of covid restrictions, the debtors' collection period is expected to improve to 90-100 days but due to the current macroeconomic factor and subdued demand, working capital requirements will be key monitorable. Debtors and inventory was at 125 days and 95 days respectively as on September 30, 2022. Exposure to risks inherent in the domestic agrochemicals market: The demand for agrochemicals is driven by agricultural production, which depends on monsoon. A substantial area under cultivation in India is still not well irrigated and depends on the monsoon for water requirement. Surplus or inadequate rainfall could affect the domestic revenue and profitability of HIL. Furthermore, the agrochemicals industry is regulated by specific and separate registration processes in different countries. Changes in the export and import policy of these countries will affect Indian agrochemical exporters. |
Liquidity: Strong Bank limit utilisation is low at around 65 percent for the past 12 months ended December 2022. Cash accruals are expected to be over Rs 130 crores against no term debt obligations. Current ratio was Comfortable at 2.33 times as on March 31, 2022. Company had healthy cash and bank balance of about Rs. 120 crores as on March 31, 2022. Low gearing and healthy networth support it's financial flexibility, and also provides the financial cushion available in case of any adverse conditions or downturn in the business. Company has capex plans of Rs 100-130 crore every year for fiscal 2023 & fiscal 2024 which will be funded through internal accruals. |
Outlook: Positive CRISIL Ratings believes HIL will continue to benefit from its pan-India presence, established market position, and robust financial risk profile. |
Rating Sensitivity Factors Upward factors
Downward factor
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About the Company HIL was incorporated in 1992, and taken over by current promoters, Mr Sadashiv K Shetty and Mr Raghuram K Shetty, in 1994. It manufactures formulations and active ingredients for insecticides, fungicides, and herbicides at its three units in Vapi, Gujarat. The company made an IPO and got listed on the Bombay Stock Exchange and the National Stock Exchange in March 2021. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure - List of Entities Consolidated
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| 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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This Annexure has been updated on 09-Feb-2023 in line with the lender-wise facility details as on 26-Apr-2022 received from the rated entity.
Criteria Details
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