| Heranba Industries Limited | ||||||
| Rating outlook revised to 'Positive'; Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has revised its outlook on the long-term bank facilities of Heranba Industries Limited (HIL) to ‘Positive’ from ‘Stable’ while reaffirming the rating at ‘CRISIL A’. The short term rating has been reaffirmed at ‘CRISIL A1’.
The revision in outlook reflects expectation of sustained improvement in business risk profile over the medium term. HIL’s revenues grew at healthy rate along with improved operating margin. Company has reported revenue of around Rs 1470 crore with an operating margin of around 19% in fiscal 2022 as against Rs 1220 crore in fiscal 2021. Increased revenue was driven by volume growth, which is expected to sustain over the medium term backed by healthy demand, company’s strong position in Indian pyrethroids market, as well as sales to new geographies. Further, new capacities going on stream will also support growth over the medium term. Operating efficiencies would sustain with better capacity utilisations on back of higher volumes. Consequently, financial risk profile as well as liquidity is expected to further improve with better accretion to reserves.
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. |
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 290 products across technicals, intermediates and formulations’ business. The company also has almost an equal share in both domestic and exports' markets; however, exports were at 42% in fiscal 2022 because of China lockdown and logistics issue. 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.
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. Financial risk profile is expected to remain healthy over medium term on account of low reliance on external debt and healthy operating efficiencies.
Weakness: Large working capital requirement: Gross current assets were at 213 days as on March 31, 2022, driven by large receivables and moderate inventory. Seasonality and irregular demand because of monsoon lead to higher inventory. The debtors' collection period is expected to remain around 100 days. Operations are expected to remain working capital intensive over the medium term.
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. Ban on any key molecules will also be a monitorable. |
Liquidity: Strong Bank limit utilisation is low at around 53 percent for the past 12 months ended 28th February 2022. Cash accruals are expected to be over Rs 225-275 crores against no term debt obligations. Current ratio was moderate at 2.42 times as on March 31, 2022. Company had healthy cash and bank balance of about Rs. 120 crores 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; however, the same is to be funded via internal accruals and no debt is expected to be availed. Low gearing and healthy networth support its financial flexibility and provide the financial cushion available in case of any adverse conditions or downturn in the business. |
Outlook: Positive CRISIL Ratings believes HIL will continue to benefit from its pan-India presence, established market position, and robust financial risk profile. |
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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. |
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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)
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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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Criteria Details
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