| Punjab Chemicals and Crop Protection Limited | ||||||
| Ratings reaffirmed at 'CRISIL BBB+ / Stable / CRISIL A2 '; rated amount enhanced for Bank Debt | ||||||
| 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 |
This Rating Rationale (RR) is being published in continuation to the RR dated August 07, 2023 which communicated that the rating was under appeal. Upon due consideration of the additional information received, the rating has been reaffirmed. The detailed rationale follows:
Detailed Rationale CRISIL Ratings has reaffirmed its 'CRISIL BBB+/Stable/CRISIL A2' ratings on the bank facilities of Punjab Chemicals And Crop Protection Limited (PCCPL).
The ratings continue to reflect the company's extensive industry experience of the promoters, established market position and its healthy financial profile. These strengths are partially offset by susceptibility to adverse changes in government regulations, and customer concentration in revenue profile. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of PCCPL and its wholly owned overseas subsidiary, SD AgChem (Europe) NV (SDAC), together referred to as Punjab Chemicals group.
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: Extensive industry experience of the promoters and established market position: The promoter’s i.e, Dhoot family have an experience of over 5 decades in the APIs, along with other pharmaceutical intermediaries’ business and have established relationships with suppliers and customers. The promoters have developed a strong understanding of the industry dynamics, which has helped them successfully navigate several business cycles as well as build long-standing relationships with customers. The group has a presence across diverse end-user segments like agrochemical, industrial chemicals, and fine/specialty chemical industries. The business risk profile is expected to improve over the medium term supported by above average growth in revenue and sustained operating margins.
Healthy financial profile: Financial risk profile is healthy as reflected in networth and total outside liabilities to tangible networth ratio of Rs 296 crore and 1.11 times, respectively, as on March 31, 2023. Debt protection metrics were comfortable, as indicated by interest coverage and net cash accrual to adjusted debt ratios of 6.89 times and 0.86 times, respectively, in fiscal 2023. With no debt funded capital expenditure (capex) to be done in fiscal 2023 & 2024, the capital structure is expected to remain comfortable over the medium term. Although the financial risk profile is expected to be comfortable, any large debt or cost overruns in the planned capex would remain closely monitorable.
Weaknesses: Exposure to regulatory changes, and seasonality in the agrochemicals sector: The domestic agrochemical formulations industry has many organized players with regional presence. The company faces intense competition from organized as well as unorganized players in the domestic market. Also, the domestic agrochemicals sector is dependent on monsoon and the level of farm income. The fortunes of the sector are, therefore, linked to the quantum, timing, and distribution of rainfall in a year, exposing the players’ revenue to seasonal trends. Besides, surplus, or inadequate rainfall could hit the profitability of players and lead to build-up in the working capital requirement. As the company’s operating margin has remained volatile between 10.5% to 17.5% over the last quarters it will remain monitorable. Though operating margins have improved in Q1 FY24, sustenance of improved operating margins to be seen.
Customer and product concentration in revenue profile: The group faces significant customer concentration risks. Its 3 major customers account for more than 50 per cent of its total sales. The high customer concentration makes the group’s revenue growth and profitability dependent on its key customers’ future growth plans. However, the company is adding new customers to reduce customer concentration and few molecules are getting commercialized which will further help and will remain key monitorable. |
Liquidity: Adequate Net Cash accruals are expected to be over Rs 80 crore per fiscal over the medium term against long debt repayment obligations of Rs 8-10 Crore per annum. Bank limits were moderately utilized at 95% during the 12 months through June-2023. Low gearing and moderate net worth support its financial flexibility and provides the financial cushion available in case of any adverse conditions or downturn in the business. Cash and cash equivalent is Rs 11.45 crore (encumbered & Unencumbered) as on March 31,2023. No major debt funded capex plans over medium term. |
Outlook: Stable CRISIL Ratings believe the group will continue to benefit from the extensive experience of its promoter, and established relationships with clients. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Group Incorporated in 1975, PCCPL is owned & managed by Mr Shalil S Shroff. It is engaged in manufacturing agrochemicals and Contract Research and Manufacturing (CRAMS). Its products include agrochemicals (Technicals), API's, Pharmaceutical Intermediates, Phosphorous Derivatives and Speciality Chemicals.
PCCPL has three manufacturing facilities, one each located at Lalru (Punjab), Derabassi (Punjab) and Pune (Maharashtra).
SDAC is the marketing arm of the group in Europe with various registrations for immediate supply of the Company’s products in the region. |
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 - List of Entities Consolidated
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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 | ||||||||||||||||||||
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Criteria Details
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