CRISIL's ratings on the bank facilities of Jayant Agro-Organics Ltd (JAOL; part of the Jayant group) continue to reflect the Jayant group's leadership position in the castor oil and castor-oil-based derivatives business, backed by its promoters' extensive industry experience. The ratings also factor in the group's healthy operational efficiencies, aided by its integrated operations and robust risk management policies, and its moderate financial risk profile, marked by large networth and moderate debt-protection metrics. These rating strengths are partially offset by the group's exposure to risks inherent in the agricultural commodity business and its increased working capital requirements.
 
For arriving at the ratings, CRISIL has combined the business and financial risk profiles of JAOL and its subsidiaries: Ihsedu Agrochem Pvt Ltd (IAPL), Ihsedu Coreagri Services Pvt Ltd (ICSPL), and Ihsedu Itoh Green Chemicals Marketing Pvt Ltd (IIGCMPL; JAOL's joint venture with Itoh Oil Chemicals Co Ltd). These entities, together referred to as the Jayant group, have significant operational and financial linkages. Moreover, JAOL has provided corporate guarantees for the bank facilities of IAPL.

CRISIL believes that the Jayant group will maintain its leadership position in the castor oil and castor-oil-based derivatives business over the medium term, backed by its large and diverse customer base, strong demand for its products, and its robust risk management policies. The outlook may be revised to 'Positive' if the group significantly increases its accruals, backed by a sustained improvement in its operating profitability, while maintaining its capital structure. Conversely, the outlook may be revised to 'Negative' if the Jayant group contracts substantial debt to fund capital expenditure, thereby weakening its capital structure, or if its working capital cycle does not revert to the historical level within the envisaged timeline, or if there is any change in its risk management policies, thereby, adversely affecting its profitability and accruals.

JAOL, set up in 1992, manufactures castor oil and castor-oil-based derivative products. Its promoters have been engaged in the castor oil business since 1952, when they set up Jayant Oil Mills. Following the separation of the Kapadia and Udeshi promoter families, in 2002, JAOL was separated from Jayant Oil Mills Group (which became a part of the Kapadia group). Since March 2002, the Udeshi family has been in exclusive control of JAOL.
 
IAPL was set up as a backward integration initiative into seed crushing in 2001-02 (refers to financial year, April 1 to March 31); the company currently manufactures castor oil. In October 2013, Arkema (France) acquired 24.9 per cent stake in IAPL for about Rs.300 million.
 
Ihsedu Speciality Chemicals Pvt Ltd (ISCPL) was set up in 2006 as a joint venture of JAOL and Mitsui & Co Ltd, Japan. ISCPL manufactures sebacic acid, a castor-oil-based derivative; it commenced regular commercial production in December 2011. In August 2011, JAOL bought all the shares of ISCPL, making it a wholly owned subsidiary. Subsequently, in October 2011, ISCPL was merged with JAOL.
 
ICSPL was set up to manufacture hybrid seeds. IIGCMPL was incorporated in 2010-11, with JAOL holding 90 per cent equity stake, which reduced to 60 per cent in September 2011 post purchase of stake by Itoh Oil Chemicals Co Ltd, Japan. IIGCMPL commenced commercial activity in April 2012.
 
The Jayant group reported profit after tax (PAT) of Rs.405.9 million on net sales of Rs.15.5 billion for 2013-14, against PAT of Rs.362.4 million on net sales of Rs.16.2 billion for 2012-13. For the quarter ended June 30, 2014, the Jayant group reported PAT of Rs.45.1 million on net sales of Rs.4.2 billion, against PAT of Rs.60.2 million on net sales of Rs.3.7 billion for the corresponding period of the previous year.