| Insecticides (India) Limited | ||||||
| Ratings Reaffirmed | ||||||
| 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 'CRISIL A/Stable/CRISIL A1' ratings on the bank facilities of Insecticides (India) Limited (IIL).
The business risk profile is supported by established brand presence across India with a strong network of over 6,000 distributors, expansion into new geographies and a diversified product portfolio. IIL reported healthy turnover of Rs 1,504 crore in fiscal 2022, as against Rs 1,420 crore in fiscal 2021. Revenue grew by 25.29% to Rs 1,143 crore in the first half of fiscal 2023, compared with Rs 912 crore in the corresponding period of fiscal 2022, driven by improved institutional sales and increased acceptance of newly launched products. The company is expected to clock revenue of more than Rs 1,700 crore in fiscal 2023. It launched four new products during the first half of fiscal 2023 and is committed to launch more products to keep in touch with the changing needs of the domestic agricultural market. (Gross revenue from the new products stood at Rs 244 crore in fiscal 2022, as against Rs 66 crore in fiscal 2018.)
Operating margin was healthy at 11% with return on capital employed (RoCE) maintained at 15% in fiscal 2022. The operating margin is expected at 11-12% in fiscal 2023 with normalisation of supply chain and incremental revenue from value-added products. Furthermore, the company has ploughed back profit from the business over the years, which led to strong networth of Rs 855 crore and gearing of 0.06 time as on March 31, 2022. With limited reliance on external debt, steady accretion to reserve and healthy profitability, the financial risk profile will remain comfortable over the medium term.
The ratings continue to reflect the company’s healthy business risk profile, driven by the extensive experience of the promoters in the agrochemicals industry, strong brands, established industry presence and wide geographical reach in the domestic market. The ratings also factor in the company's comfortable financial risk profile. These strengths are partially offset by large working capital requirement and susceptibility to risks inherent in the agrochemicals industry, including ban on certain pesticides by the government. |
Key rating drivers and detailed description Strengths:
The company has maintained a healthy business risk profile backed by its established industry presence, introduction of new products in the domestic market and robust sales network. It generated revenue of Rs 1,504 crore in fiscal 2022, compared with Rs 1,420 crore in fiscal 2021. Revenue grew by 25.29% to Rs 1,143 crore in the first half of fiscal 2023 from Rs 912 crore in the corresponding period of fiscal 2022 mainly driven by institutional sales and increased acceptance of newly launched products. The company is expected to clock revenue of more than Rs 1,700 crore in fiscal 2023. The operating margin stood at 11-12% and RoCE at ~15% in fiscal 2022. The operating margin is expected at 11-12% over the medium term as well.
The company has diversified revenue streams, with ~53% of the revenue coming from insecticides, 33% from herbicides and 11% from fungicides in fiscal 2022. Revenue diversity is augmented by presence in both branded formulations (70%) and institutional sales (27%). Its large product base in agrochemicals will enable further diversification in revenue aided by regular product launches. It caters to an extensive customer profile, which includes over 70,000 dealers across India.
Capital structure was strong, as reflected in networth, adjusted gearing and total outside liabilities to tangible networth ratio of Rs 855 crore, 0.06 time and 0.61 time, respectively, as on March 31, 2022. Debt protection metrics were comfortable, as indicated by interest coverage and net cash accrual to total debt ratios of 31 times and 2.7 times, respectively, in fiscal 2022. Limited dependence on working capital debt and absence of significant debt-funded capital expenditure (capex) plan should support the financial risk profile over the medium term.
Weaknesses:
Substantial credit extended to farmers results in sizeable receivables. Also, the company is vulnerable to seasonality and irregular demand because of the vagaries of monsoon, along with dependence on imported raw materials, and hence maintains large inventory (173 days as on March 31, 2022). Gross current assets (GCAs) were at 238 days as on March 31, 2022. The working capital requirement will remain large over the medium term.
Demand for agrochemicals is driven by agricultural production, which depends on monsoons. A substantial area under cultivation in India is still not well irrigated and depends on rainfall. Surplus or inadequate rainfall may affect the revenue and profitability of IIL. Furthermore, the agrochemicals industry is regulated by specific and separate registration processes in different countries. Changes in the export and import policies of these countries will affect Indian agrochemical exporters such as IIL. Ban on key molecules will be a monitorable. |
Liquidity: Strong Cash accrual, expected at Rs 130-160 crore per annum, will comfortably cover yearly debt obligation of Rs 2-6 crore over the medium term. Bank limit utilisation averaged 34% for the 12 months through October 2022. Internal cash accrual, cash and equivalent of ~Rs 21 crore as on September 30, 2022, and unutilised bank lines will be sufficient to meet debt obligation and working capital requirement. |
Outlook: Stable CRISIL Ratings believes IIL will continue to benefit from its established market position in the domestic agrochemicals industry. |
Rating sensitivity factors Upward factors:
Downward factors
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About the company Incorporated in 1996 and promoted by Mr Hari Chand Aggarwal and Mr Rajesh Aggarwal, IIL commenced operations in 2002. The company manufactures formulations and technicals for plant protection chemicals and household pesticides; its facilities are in Chopanki, Rajasthan; Samba and Udhampur, Jammu and Kashmir; and Dahej, Gujarat. It had an initial public offering in 2007 and its shares are listed on the Bombay Stock Exchange and the National Stock Exchange. |
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 - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Cash Credit | 50 | HDFC Bank Limited | CRISIL A/Stable |
| Composite Working Capital Limit | 160 | The Hongkong and Shanghai Banking Corporation Limited | CRISIL A/Stable |
| Fund-Based Facilities | 55 | ICICI Bank Limited | CRISIL A/Stable |
| Letter of Credit | 105 | HDFC Bank Limited | CRISIL A1 |
| Proposed Working Capital Facility | 120 | Not Applicable | CRISIL A/Stable |
| Working Capital Facility | 160 | Citibank N. A. | CRISIL A/Stable |
This Annexure has been updated on 09-Feb-23 in line with the lender-wise facility details as on 18-Jan-23 received from the rated entity.
Criteria Details
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