| Indofil Industries Limited | ||||||
| Ratings reaffirmed at 'CRISIL A+ / Positive / CRISIL A1+'; CP withdrawn | ||||||
| Rating Action | ||||||
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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 Indofil Industries Limited (IIL; part of Indofil group) at ‘CRISIL A+/Positive/CRISIL A1+’. The rating on the commercial paper programme has been reaffirmed at ‘CRISIL A1+’ and subsequently withdrawn as there was no outstanding against the facility. The same is in line with CRISIL Ratings’ withdrawal policy.
The rating continues to reflect an established market position in the fungicides segment, geographically diversified revenue, an established distribution network, and a strong relationship with reputed customers. Furthermore, the financial risk profile is strong marked by healthy networth, comfortable capital structure, and strong debt protection metrics. These strengths are partially offset by working capital-intensive operations, susceptibility in demand to fluctuations in rainfall and regulatory risks associated with product approvals in key geographies. |
Analytical Approach For arriving at its ratings, CRISIL Ratings has fully consolidated the business and financial risk profiles of IIL, its 11 subsidiaries and partly consolidated the 2 joint ventures, together referred to as 'Indofil group', which are strategically important to, and have a significant degree of operational integration with IIL. CRISIL Ratings considers these entities as being strategic to IIL in view of their strong integration with IIL’s operations.
Please refer Annexure - List of a Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Established market position in the fungicides market with geographically diversified revenue The group has been in the agrochemicals industry since 1962. Over the years, it has diversified in terms of geography as well as products with steady growth in revenues at a 7% CAGR for the past four years ending fiscal 2022. The share of exports in the revenue has remained stable at around 40% to 45% for past 3 fiscals ended fiscal 2022. The group has presence in more than 100 countries in Asia, Europe, South America etc. Revenues grew to Rs 2796 crores in fiscal 2022 as compared to Rs 2420 crores in fiscal 2021, supported by healthy demand from domestic market as well as international regions including South America and Latin America. CRISIL Ratings believes that the business risk profile continues to be aided by such geographical diversity.
Established distribution network and strong relationship with reputed customers With around 892 registrations (a major entry barrier due to long gestation period) and export reach in more than 100 countries, the group has been well-positioned to gain from increased consumption of pesticides globally. The group has well established distribution network of 4645 distributors and 48000 retailers in the domestic market. Further a network of 550 global distributors gives it a global competitive advantage. Over the past few years, group has focused on expanding its global presence and this has been a major revenue driver for the group.
Strong financial risk profile The group's strong financial risk profile is marked by strong networth of Rs 2213 crore and comfortable gearing and TOLANW ratios of 0.31 times and 0.73 times, respectively, as on March 31, 2022. Management is committed to maintain gearing below 0.6 at all times in the absence of large debt funded capital expenditure (capex) or acquisition as well as supported by group’s debt prepayments. Reduction in debt levels has led to healthy debt protection metrics with interest coverage and net cash accrual to adjusted debt ratios of above 9 times and 0.43 time, respectively, in fiscal 2022 (improved from 7.5 times and 0.22 times, respectively, in fiscal 2021). The financial risk profile is expected to remain strong over the medium term with controlled reliance on external debt.
Weakness: Working capital-intensive operations The group's operations are working capital intensive because of nature of industry. Gross current assets were high at 215-285 days over the four fiscals ended March 31, 2022, driven by sizeable debtors and inventory. While Inventory levels have remained around 97 days, debtor days has gradually improved to 103 days (from 109 days a year before) as on March 31, 2022, supported by stricter control on debtors. CRISIL Ratings expects improvement in the working capital cycle to sustain over the medium term; however, group’s operations will continue to remain working capital intensive over the medium term.
Susceptibility to fluctuations in rainfall and regulatory risks associated with product approvals in key geographies The demand for agrochemicals is driven by agricultural production, which in turn depends on the extent of rainfall. As a result, group's revenue and profitability as dependent on extent of rainfall. Hence, operating profitability has remained volatile between 12-19% over the past 4 fiscals ended fiscal 2022. The agrochemicals industry, particularly export, is sensitive to changes in government policies associated with product approval process Changes in regulations could increase the variety of tests and data required, and make it more difficult for exporters to obtain registrations. Considering the nature of toxicity on human health, product usage and its environmental impacts, group has to have strict compliance of local laws and regulations. Any claim on infringement of intellectual property laws or change in import/export policy may also have detrimental impact on the revenue and profitability. |
Liquidity: Strong Cash accruals are expected to remain healthy between Rs 280-300 crore in fiscal 2023 and fiscal 2024 and are expected to be sufficient against repayment obligation of Rs 91 crore and Rs 72 crore, respectively. Bank limit was utilized on average at 46% in the last 12 months ending September 2022. Liquidity is further augmented by cash and cash equivalent (cash, free fixed deposit and liquid mutual fund) of Rs 636 crore as on March 2022 in IIL. With no major capital expenditure plan, liquidity should remain comfortable over the medium term. With gearing of 0.31 times as on March 31, 2022, group has sufficient gearing headroom, to raise additional debt to meet its capex/working capital requirement. CRISIL Ratings expects internal accrual and cash and cash equivalents to be sufficient to meet its repayment obligations as well as working capital requirements, over the medium term. |
Outlook Positive CRISIL Ratings believes the group will continue to benefit over the medium term from an established presence in the agrochemicals industry, geographically diversified revenue, and healthy operating efficiency. |
Rating Sensitivity factors Upward Factor
Downward Factor
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About the Group IIL, established in 1962, is part of the KK Modi group. The company manufactures agrochemicals (technical and formulations) and specialty and performance chemicals, which accounted for 89% and 11%, respectively, of revenue in fiscal 2021. It plants are located Dahej, Gujarat. The corporate office is in Mumbai.
IIL has various subsidiaries in The Netherlands, Bangladesh, Costa Rica, Brazil, Philippines, Indonesia and Italy which cater to marketing and distribution of IIL's products across the globe. IIL also has formed two JV (Joint Venture) namely Indo Baijin Chemicals Private Limited (IBCL) and Indo Reagens Polymer Additives Private Limited (IPPL).
IBCL is a 51:49 joint venture (JV) with Shanghai Baijin Chemicals Group Co Ltd. The JV was formed to set up a manufacturing plant for producing 66,000 MT per annum of carbon disulphide (CS2) using natural gas as raw material in Dahej. CS2 is one of the major raw materials for mancozeb and constitutes around 25% of the raw material requirement. The unit commenced operations in April 2014.
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Key Financial Indicators- Consolidated
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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 11-Nov-2022 in line with the lender-wise facility details as on 07-Dec-2021 received from the rated entity.
Criteria Details
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