| Jubilant Ingrevia Limited | ||||
| Rating reaffirmed; NCD withdrawn | ||||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 ‘CRISIL A1+’ rating on the commercial paper programme of Jubilant Ingrevia Limited (JVL); the long-term rating on the non-convertible debentures (NCDs) has been withdrawn at the request of the company and on receipt of a no-dues certificate from the debenture holder. The withdrawal is in line with CRISIL Ratings policy on withdrawal of its ratings.
The reaffirmation of short-term rating reflects the expectation of continued strong operating performance over the medium term, supported by the addition of value-added products and capacity expansion plans across three business segments. Revenue growth is expected to remain healthy at 10-15% annually and operating margin will likely sustain above 15%, over the medium term. CRISIL Ratings also expects JVL will sustain its healthy financial risk profile, while undertaking material expansion across its businesses over the medium term, which will be prudently funded, ensuring robust debt protection metrics.
In fiscal 2022, the operating performance of JVL improved sharply owing to healthy cash accrual and consequent improvement in capital structure and debt protection metrics. Revenue grew by 42% year-on-year in fiscal 2022, driven by strong growth in the chemical intermediates (CI) segment, backed by favourable market conditions and commercialisation of capital expenditure (capex). Operating margin remained healthy at 16.8% in fiscal 2022 (17.6% in fiscal 2021) driven by a one-off gain in the CI segment given the favourable pricing environment for key products. The speciality chemicals (SC) and nutrition and health solutions (NHS) segments continued to grow steadily. In the first quarter of fiscal 2023, revenue growth was lower at 2% on a high base of the previous fiscal, with normalisation of realisations and lower acetic acid prices in the CI segment.
JVL repaid/prepaid about Rs 548 crore long-term debt over fiscal 2022 and first quarter of fiscal 2023 using healthy cash accrual; the outstanding gross debt of Rs 285 crore as on June 30, 2022, was entirely in the form of working capital borrowings. Consequently, debt protection metrics improved, with interest coverage ratio of 27.9 times in fiscal 2022 and 36.9 times in the first quarter of fiscal 2023 and net debt to earnings before interest, taxes, depreciation and amortisation (Ebitda) ratio of 0.2 time and 0.4 time, respectively. Financial risk profile will remain stable over the medium term even after factoring in sizeable ongoing and planned capex over fiscals 2022 and 2025, funded mainly through internal accrual.
The rating continues to reflect the healthy business risk profile of JVL, supported by leading market position across most products, vertically integrated operations, and diversified revenue profile across business segments, geographies and end-user industries; the ratings also factor in the healthy financial risk profile. These strengths are partially offset by large working capital requirement and exposure to fluctuations in input prices as well as government policies. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of JVL and its subsidiaries, collectively referred to as the JVL group, as all the entities are under a common management and have operational linkages and fungible cash flow.
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:
JVL benefits from vertically integrated operations across the value chain, leading to cost competitiveness. About 45% of the CI segment volume was consumed by the SC segment and about 52% of the pyridine and picolines output of the SC segment was used in the NHS segment in fiscal 2022. Economies of scale derived from global presence of capacities, high level of integration in manufacturing, deep chemistry knowledge and continuous improvement in cost efficiency have historically supported operating profitability of JVL. Operating profitability remained healthy at 16.8% in fiscal 2022 and is expected to sustain above 15% over the medium term given the expanding portfolio of value-added products and ongoing capacity expansion for current products.
Furthermore, JVL serves diverse end-user industries, such as pharmaceuticals (accounted for 37% of the revenue in fiscal 2022), agrochemicals (22%), nutrition (20%), and industrial segments such as paints, packaging and solvents (18%). This insulates JVL from downturn in any particular industry. Revenue grew 42% year-on-year in fiscal 2022, driven by strong growth in the CI segment, backed by favourable pricing scenario for key products, acetic anhydride and ethyl acetate. The revenue growth was lower at 2%, on a high base of previous fiscal, with normalisation of realisations and lower acetic acid prices in the CI segment. The diversified revenue stream and increasing focus on value-added products will support annual revenue growth of 10-15% over the medium term.
JVL has planned capex of ~Rs 2,050 crore over fiscals 2022 and 2025 towards expansion for diketene derivative products, expansion of facilities for crop protection chemicals, vitamin B3 products and acetic anhydride. The capex is progressing as per schedule and is expected to be funded through internal accrual, with minimal reliance on external borrowings; hence, gearing is likely to remain below 0.3 time while debt metrics will continue to be comfortable over the medium term.
Weaknesses:
Operations are exposed to government policies given the widespread international presence. For instance, JVL faced anti-dumping duty for its pyridine exports to China in 2015. Since then, the company has entered other geographies, thereby de-risking pyridine exposure to China. Furthermore, in November 2019, China terminated the anti-dumping duty. However, any adverse impact of government policies on revenue and profitability will remain a key rating sensitivity factor. |
Liquidity: Strong Net cash accrual is expected to be healthy at over Rs 550 crore per annum. Prepayment of the entire outstanding NCDs on June 3, 2022, resulted in nil debt obligation over the medium term. Also, the company has adequate cushion in its fund-based working capital limit, which was utilised at 35% on average over the 12 months through May 2022. Cash and bank balance was at Rs 57 crore as on June 30, 2022. Capex is expected to be largely funded through internal accrual, thereby reducing dependence on external debt over the medium term. |
Rating Sensitivity factors Downward factors
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About the Company JVL is a global integrated life science products and innovative solutions provider serving pharmaceutical, nutrition, agrochemical and industrial clients with customised products and solutions that are cost effective and conform to premium quality standards.
With more than four decades of presence in the chemical industry and integrated operations, the company offers over 165 products ranging from speciality chemicals, advanced stage complex chemistry solutions, nutraceuticals, straight nutritional ingredients such as vitamin B3, premix solutions for animal and human nutrition, pyridine and picolines and acetyl range of products. It has 1,400 customers globally and five manufacturing facilities across Maharashtra, Gujarat and Uttar Pradesh.
In addition to own proprietary products, the company also offers contract development and manufacturing solutions ranging from route design to process development, process optimisation, scale-up and commercial manufacturing of intermediates for global customers across the pharmaceuticals, agrochemicals and other life science chemical industries.
As on June 30, 2022, the promoter and promoter group held 51.57% stake in JVL, foreign portfolio investors held 10.19%, individuals held 27.61% and the balance was held by others.
In the first quarter of fiscal 2023, the company reported revenue of Rs 1,166 crore (Rs 1,145 crore in the corresponding period of fiscal 2022) and net profit of Rs 79 crore (Rs 168 crore). |
Key Financial Indicators (consolidated)
**Includes 10 months financials of the life science division of Jubilant Pharmova Ltd (erstwhile, Jubilant Life Sciences Ltd) and two months financials of Jubilant Ingrevia Ltd |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Originally issued by Jubilant Pharmova Ltd (erstwhile Jubilant Life Sciences Ltd) |
Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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