| Pidilite Industries 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
The ratings continue to reflect the strong business and financial risk profiles of Pidilite driven by its established position as the market leader in the domestic adhesives and sealants industry, healthy operating efficiency, well-diversified product offerings with strong brand recall, healthy growth prospects in the underpenetrated waterproofing segment and tile jointers, focus on niche products such as floor coating and wood finishes, and strong distribution network. Healthy profitability has supported the financial risk profile, as evident from the strong networth and low gearing. These strengths are partially offset by susceptibility to erratic monsoons, which dampen demand, and volatility in raw material prices. In fiscal 2024, the company’s consumer and bazaar (C&B) and business-to-business (B2B) segments registered healthy underlying volume growth of 10.5% and 12.2%, respectively. This growth was partly offset by price reductions across various products, resulting in a 5% on-year increase in consolidated revenue to Rs 12,393 crore in fiscal 2024. Overall increase in construction, government spending on infrastructure and rising per capita income resulted in healthy demand from both urban and rural markets, with rural markets outpacing urban growth. In the first quarter of fiscal 2025, revenue grew by 4% on-year to Rs 3,395 crore supported by volume growth across C&B and B2B segments. Operating margin expanded by 510 basis points to ~22% in fiscal 2024, as against ~17% in fiscal 2023, aided by softened input prices, which was partly offset by rise in employee costs and selling and advertising expenses. Cooling raw material prices continued to benefit gross margin and profitability in fiscal 2025, with operating margin at 24% in the first quarter of fiscal 2025, compared with 22% in the corresponding period of fiscal 2024. CRISIL Ratings expects revenue to grow at 5-6% over the medium term supported by volume increase and operating margin sustaining at 20-24% driven by stable key raw material prices, efficient cost control measures and healthy operating leverage. The financial risk profile was robust, as reflected in strong networth of Rs 6,754 crore and gearing of 0.02 time as on March 31, 2024. The company remains term debt free with no or minimal utilisation in working capital limit. Debt protection metrics continue to be supported by low debt, as indicated by interest coverage ratio of 53.7 times in fiscal 2024. Liquidity is strong, supported by cash surplus of Rs 2,406 crore as on March 31, 2024, and cash accrual of Rs 1,496 crore. Cash accrual will be healthy and sufficient to cover the planned capital expenditure (capex) and incremental working capital requirement over the medium term. CRISIL Ratings has taken note of the Company’s entering into lending business through its subsidiary - Pargro Investments Pvt Ltd to provide credit to its domain ecosystem |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of Pidilite and its subsidiaries and associates to the extent of its shareholding in these entities as these entities have significant business and financial linkages and common management.
CRISIL Ratings has amortised goodwill and trademarks arising from acquisitions of Pidilite Adhesives Pvt Ltd (formerly Huntsman Advanced Materials Solutions Pvt Ltd) and Tenax Pidilite India Pvt Ltd (formerly known as Tenax India Stone Products Pvt Ltd) over five years and ten years, respectively, owing to expectation of returns being spread over the long term.
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:
Weaknesses:
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Liquidity: Superior Liquidity will likely remain strong aided by sufficient net cash accrual, surplus cash and equivalent, and minimal utilisation of working capital limits for the past six months. The company continues to be term debt-free. Cash accrual, stemming from continued increase in profitability, will sufficiently cover the working capital requirement and capex over the medium term. The company had surplus cash and equivalent over Rs 2,406 crore as on March 31, 2024.
ESG profile CRISIL Ratings believes the environment, social and governance (ESG) profile of Pidilite supports its already strong credit risk profile.
The chemical sector has a significant impact on the environment owing to high water consumption, waste generation and greenhouse gas (GHG) emissions. The sector’s social impact is characterised by health hazards leading to higher focus on employee safety and well-being and the impact on local community given its nature of operations. The company has continuously focused on mitigating its environmental and social risks.
Key ESG highlights:
There is growing importance of ESG among investors and lenders. The commitment of Pidilite to ESG principles will play a key role in enhancing stakeholder confidence and access to capital markets. |
Outlook: Stable CRISIL Ratings believes the operating performance of Pidilite will remain strong, and the company’s management will remain focused on growing the business in existing product lines where it has established market position. |
Rating sensitivity factors Downward factors:
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About the Company Pidilite commenced operations in 1969 with two main divisions: pigment emulsions and adhesives. Over the years, the company diversified into the branded C&B products and B&B segments, which accounted for about 83% and 17%, respectively, of sales in fiscal 2023. Besides the mother brand, Fevicol, its prominent brands include Steelgrip, Dr Fixit, M-seal, Fevicryl, Fevikwik, Fevistik, Fevilite, Fevibond and Acron. The company has 33 manufacturing plants at Mumbai, Mahad, Panvel and Taloja in Maharashtra; Vapi, Gujarat; Daman, Union Territory of Daman and Diu; Baddi and Kala Amb, Himachal Pradesh; Guwahati, Assam; and Vishakhapatnam, Andhra Pradesh. To diversify its revenue streams and facilitate global reach, the company has subsidiaries in Thailand, Dubai, Egypt, Bangladesh, Sri Lanka, Kenya, Indonesia, Singapore, Ethiopia and China.
For the three months ended June 30, 2024, the company reported consolidated revenue of Rs 3,395 crore (Rs 3,275 crore for the corresponding period in the last fiscal) and net profit of Rs 571 crore (Rs 474 crore). |
Key Financial Indicators
*Adjusted for goodwill and trademark amortisation in line with the analytical approach of CRISIL Ratings. PAT report by the Company stood at Rs.1747 crore for fiscal 2024 in comparison to Rs.1289 crore in fiscal 2023. |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
#Fully interchangeable with working capital demand loan/letter of credit/bank guarantee /stand-by line of credit facilities |
Annexure - List of Entities Consolidated
*ceased to be the subsidiary of the company w.e.f. March 28, 2024) |
| 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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##Rs.105 crore interchangeable with working capital demand loan/letter of credit/bank guarantee /stand-by line of credit facilities
*Interchangeable with working capital demand loan/letter of credit/bank guarantee /stand-by line of credit facilities
@@Interchangeable with pre-shipment credit (PC), post-shipment credit (PSC), standby letter of credit (SBLC),bill discounting, overdraft (OD), letter of credit, bank Guarantees (BG's) , buyers credit and Foreign exchange hedge limits
@Fully interchangeable with letter of credit/bank guarantee
Criteria Details
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