Rating Rationale
November 19, 2024 | Mumbai
Nath Bio-Genes India Limited
Rating upgraded to 'CRISIL BBB/Stable'
 
Rating Action
Total Bank Loan Facilities RatedRs.105 Crore
Long Term RatingCRISIL BBB/Stable (Upgraded from 'CRISIL BBB-/Positive')
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 upgraded its rating on the long-term bank facilities of Nath Bio-Genes India Ltd (Nath Bio) to ‘CRISIL BBB/Stable’ from ‘CRISIL BBB-/Positive’.

 

The upgrade in rating factors in improvement in  business risk profile of the company while maintaining healthy financial risk profile. Revenue increased to Rs 332.8 crore in fiscal 2024, from Rs 301.4 crore in the previous fiscal, led by largely volume growth in paddy and cotton. The company achieved revenue of Rs 276 crore in the first half of fiscal 2025 and is expected to achieve on-year growth of 10-15% for the full fiscal, supported by an increase in customer base and continuous product development.

 

Financial risk profile remains comfortable and is expected to improve over the medium term, in the absence of any debt-funded capital expenditure (capex) and high accretion to reserve.

 

The rating continues to reflect Nath Bio's established market presence, backed by experience of the promoters in the domestic seed industry, diversified product portfolio and large customer base along with comfortable financial risk profile. These strengths are partially offset by large working capital requirement and susceptibility of the business to changes in government regulations, monsoon and intense competition.

Analytical approach

CRISIL Ratings has combined the business and financial risk profiles of Nath Bio with its Uzbekistan-based joint venture -- Nath Bio-Genes (Central Asia) LLC -- since the two entities have common management, operational and financial linkages.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key rating drivers and detailed description

Strengths:

  • Extensive experience of the promoters: The promoters have more than three decades of experience in the domestic seed industry; their strong understanding of market dynamics and healthy relationships with suppliers and customers should continue to support the business. The promoters have successfully navigated several business cycles over the years.

 

  • Diversified product portfolio and large customer base: Nath Bio has a diversified product portfolio, including seed varieties of paddy, cotton, vegetable crops, oil seeds etc. It continuously invests in research and development to develop new products. This helped establish a large customer base, comprising about 20,000 distributors and dealers. Consistent addition of products and customers should aid steady revenue growth over the medium term.

 

  • Comfortable financial risk profile: The financial risk profile is expected to remain comfortable over the medium term. The capital structure has been healthy owing to low reliance on external debt; networth stood at Rs 601 crore, gearing at 0.18 time and total outside liabilities to adjusted networth ratio at 0.45 time as on March 31, 2024. Debt protection metrics may continue to be adequate, with interest coverage ratio of 5.5 times and net cash accruals/adjusted debt (NCAAD) of 0.35 times for fiscal 2024.

 

Weaknesses:

  • Large working capital requirement: The working capital cycle is likely to remain stretched due to the seasonal nature of the business and will be closely monitored. Gross current assets have been 588-621 days for past three fiscals and were 621 days as on March 31, 2024, driven by debtors of 104 days and inventory of 297 days. The inventory levels reduced as of September 2024. The company has almost one year of inventory in March which gets offloaded in the first quarter of the next fiscal as kharif crops form a major part of the company’s portfolio.

 

  • Exposure to regulatory changes, vagaries of the monsoon and intense competition: The government closely regulates the seed industry because of its potential impact on farmers. Hence, seed manufacturers remain exposed to the risk of adverse regulatory changes as well as monsoon vagaries. Also, intense competition from multinational companies and Indian players may continue to constrain scalability, pricing power and profitability.

Liquidity: Adequate

Liquidity should remain supported by the absence of any large, debt-funded capex over the medium term. Net cash accrual is  expected to be over Rs 40 crore per annum,  over minimal yearly debt obligation Rs 1-1.5 crore over the medium term; the surplus cash will aid financial flexibility. Bank limit utilisation was over 80% for the 12 months through August 2024. Cash and cash equivalent stood at Rs 2.07 crore as on September 30, 2024. The company has extended corporate guarantee worth Rs 43.6 crore against the term loan facility availed by Paithan Mega Food Park Pvt Ltd (PMFPPL). While the loan has not been invoked yet, it remains a rating sensitivity factor.

Outlook: Stable

The credit risk profile of Nath Bio will continue to benefit from its strong research capabilities, diverse product portfolio and extensive experience of the promoters.

Rating sensitivity factors

Upward factors:

  • Sustained improvement in the working capital cycle
  • Steady revenue growth backed by healthy demand for products coupled with operating margin sustaining above 16%, resulting in higher-than-expected cash accrual
  • Continued reduction in contingent liabilities and exposure to group entities

 

Downward factors:

  • Sharp decline in revenue or operating profitability dropping below 12%, leading to lower-than-expected cash accrual
  • Further stretch in the working capital cycle, especially inventory level impacting liquidity.
  • Invocation of corporate guarantee given to PMFPPL

About the company

Incorporated in July 1993, Nath Bio is promoted by the Kagliwal family. The company is engaged in production and marketing of hybrid seeds of crops such as cotton, wheat, jowar, bajra and vegetables amongst others and plant nutrition products under the Nath brand. Its facility is based in Aurangabad, Maharashtra.

 

Incorporated in 2011, PMFPPL is an SPV formed for setting up a mega food park. Nath Bio holds 19.98% in PMFPPL. Nath Bio has extended corporate guarantee worth Rs 43.6 crore (current outstanding less than Rs 15 crore) against the debt availed by PMFPPL.

Key financials Indicator

Consolidated

As on/for the period ended March 31

Unit

2024

2023

Operating income

Rs crore

332.88

301.47

Reported profit after tax (PAT)

Rs crore

39.62

35.01

PAT margin

%

11.9

11.6

Adjusted debt/adjusted networth

Times

0.18

0.19

Interest coverage

Times

5.50

4.84

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  105 NA  CRISIL BBB/Stable 

Annexure - List of entities consolidated

Names of entities consolidated

Extent of consolidation

Rationale for consolidation

Nath Bio-Genes India Ltd

Full

Holding company

Nath Bio-Genes (Central Asia) LLC

90%

Joint venture
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 105.0 CRISIL BBB/Stable   -- 28-11-23 CRISIL BBB-/Positive 07-10-22 CRISIL BBB-/Stable 27-09-21 CRISIL BBB/Positive CRISIL BBB/Stable
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 15.3 Janakalyan Sahakari Bank Limited CRISIL BBB/Stable
Cash Credit 15 State Bank of India CRISIL BBB/Stable
Cash Credit 59.7 Axis Bank Limited CRISIL BBB/Stable
Cash Credit 15 HDFC Bank Limited CRISIL BBB/Stable
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
Understanding CRISILs Ratings and Rating Scales
CRISILs Criteria for Consolidation

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