Rating Rationale
March 19, 2024 | Mumbai
Insecticides (India) Limited
Ratings reaffirmed at 'CRISIL A/Stable/CRISIL A1'
 
Rating Action
Total Bank Loan Facilities RatedRs.650 Crore
Long Term RatingCRISIL A/Stable (Reaffirmed)
Short Term RatingCRISIL A1 (Reaffirmed)
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 loan facilities of Insecticides (India) Ltd (IIL).

 

The ratings continue to reflect the company’s established market position and healthy financial risk profile. These strengths are partially offset by the moderate scale of operations and working capital intensive nature of operations

Key Rating Drivers & Detailed Description

Strengths:

  • Established market position : The business risk profile of IIL continues to be supported by its established market position, long-term relationships with customers and suppliers, and its focus on consistently launching new products to meet the continuously changing needs of the Indian agricultural market. The company’s operating income grew at compound annual growth rate (CAGR) of 10% during the three fiscals through 2023, largely on account of growth witnessed in brand formulations and institutional sales. With year-to-date operating income of ~Rs 1,700 crore till December 2023, IIL is expected to clock operating income of Rs 1,900-2,000 crore in fiscal 2024, marking an on-year growth of ~10%. Operating income is further expected to grow by 10-12% in fiscal 2025, largely on account of sales of Maharatna products under the business to consumer (B2C) segment, which shall continue to support the business risk profile of the company.

 

  • Healthy financial risk profile:  Capital structure has been comfortable, as reflected in gearing of 0.18 time as on March 31, 2023. In the ongoing fiscal, with no major debt-funded capital expenditure (capex) and accretion of reserves, the capital structure is expected to remain comfortable with gearing estimated at 0.12-0.15 time as of Mar 31, 2024, providing headroom to take additional debt for business requirement, if warranted. The debt protection metrics have also been healthy in the past and shall continue to remain so over the medium term as well,  interest coverage and net cash accrual to adjusted debt (NCAAD) ratios are expected at 70-80 times and 1.4-1.5 times respectively, in fiscal 2024. With no debt-funded capex proposed to be undertaken over the medium term and operating margin expected to be range-bound at 10-11%, the overall financial risk profile will continue to remain healthy.

 

Weaknesses:

  • Moderate scale of operations: Although the company has achieved an operating income CAGR of ~10% for last three fiscals through 2023, the scale of operations continues to remain moderate. Scalability is susceptible to seasonality in demand, government policies and hence steady realisations. While management intends to launch new products, as per market requirement, steady market penetration leading to sustained volume growth amidst steady realisation will remain a key monitorable.

 

  • Working capital intensive nature of operations: The operations are likely to remain working capital-intensive owing to the commoditised nature of business and shall be closely monitored. An inventory of 150-200 days is usually maintained and hence any volatility in commodity prices significantly impacts the operating profitability. Operating loss of about 9% was incurred during the fourth quarter of fiscal 2023 owing to adverse price fluctuation, resulting in the operating margin dropping to 7% in fiscal 2023 from 10-11% in the past 2-3 fiscals. While operating profitability is expected to recover to 10-11% in the ongoing fiscal, going forward, efficient management of inventory holding risk rendering a sustained growth in operating profitability amid business growth will remain a key monitorable

Liquidity: Strong

IIL is expected to generate net cash accrual of Rs 140-180 crore, which will be sufficient to meet annual debt obligation of Rs 10-15 crore over the medium term. Cash and cash equivalent have been ~Rs 18 crore as of September 2023, which is expected to be Rs 15-20 crore over the medium term. IIL also has access to fund-based working limits, which has been utilised at 38% on average during the 12 months through October 2023.  CRISIL Ratings expects internal accrual, cash and cash equivalent, and unutilized bank lines to be sufficient to meet the debt obligation as well as incremental working capital requirement.

Outlook: Stable

IIL will continue to benefit from its established market position in the domestic agrochemicals industry.

Rating Sensitivity factors

Upward factors:

  • Sustained improvement in operating income aided by volumetric growth along with sustained improvement in operating margins of over 11-12% leading to higher than expected net cash accruals.
  • Efficient management of the working capital cycle leading to lower reliance on bank debt, further strengthening the financial risk profile

 

Downward factors:

  • Decline in operating income or operating margin falling below 8-9% on consistent basis, leading to lower-than-expected net cash accrual.
  • Any stretch in the working capital cycle or large, debt-funded capex weakening the financial risk profile.

About the Company

Incorporated in 1996 and promoted by Mr Hari Chand Aggarwal and Mr Rajesh Kumar 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

Particulars

Unit

9M FY24

2023

2022

Revenue

Rs.Crore

1694

1802

1504

Profit After Tax (PAT)

Rs.Crore

94

63

107

PAT Margin

%

5.5

3.5

7.1

Adjusted debt/adjusted networth

Times

0.18*

0.18

0.06

Interest coverage

Times

17.1

8.8

31.5

*As on Sep’23.

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of the
instrument		 Date of
Allotment		 Coupon
Rate (%)		 Maturity
Date		 Issue size
(Rs.Crore)		 Complexity
Level		 Rating assigned
with outlook
NA Cash Credit NA NA NA 160 NA CRISIL A/Stable
NA Cash Credit NA NA NA 100 NA CRISIL A/Stable
NA Cash Credit NA NA NA 230 NA CRISIL A/Stable
NA Cash Credit NA NA NA 105 NA CRISIL A/Stable
NA Non-Fund Based Limit NA NA NA 55 NA CRISIL A1
Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 595.0 CRISIL A/Stable   --   -- 30-12-22 CRISIL A/Stable 29-10-21 CRISIL A/Stable CRISIL A1 / CRISIL A/Stable
      --   --   -- 13-01-22 CRISIL A/Stable   -- --
Non-Fund Based Facilities ST 55.0 CRISIL A1   --   -- 30-12-22 CRISIL A1 29-10-21 CRISIL A1 / CRISIL A/Stable CRISIL A1 / CRISIL A/Stable
      --   --   -- 13-01-22 CRISIL A1   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 230 HSBC Bank Plc CRISIL A/Stable
Cash Credit 105 ICICI Bank Limited CRISIL A/Stable
Cash Credit 160 Citibank N. A. CRISIL A/Stable
Cash Credit 100 HDFC Bank Limited CRISIL A/Stable
Non-Fund Based Limit 55 HDFC Bank Limited CRISIL A1
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Chemical Industry
Understanding CRISILs Ratings and Rating Scales
CRISILs Criteria for rating short term debt

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