Detailed Rationale

Crisil Ratings has reaffirmed its ratings on the non-convertible debentures, fixed deposits, and commercial paper programme of BASF India Limited (BASF India) at ‘Crisil AAA/Stable/Crisil A1+’.

 

During fiscal 2025, revenue grew 10.7% yoy to Rs 15260 crores supported by volume growth on account of healthy demand across all segments, while realizations were muted. Among the segments the Materials, Industrial Solutions and Chemicals segments performed well during fiscal 2025, with healthy double-digit growth, supporting overall revenue growth of the company. Over the medium term, stable volumes and ramp-up of revenue from new product launches are expected to support revenue growth.

 

Operating margin declined to 4.9% in fiscal 2025 from 6.7% in fiscal 2024 due to rise in raw materials prices across segments, while the same was not able to pass on to end customers due to high competition in market limiting pricing power. Over the medium term, stabilisation in key input prices, will help maintain margin at current levels.

 

The healthy business risk profile is complemented by a strong financial risk profile and liquidity. Networth and total outside liabilities to tangible net worth ratio stood at Rs 3,633 crore and 1.31 times, respectively, as on March 31, 2025, against nil debt. Reliance on external debt is expected to remain negligible as the company’s annual cash accrual will be sufficient to meet modest capital expenditure (capex) plans and working capital requirement. 

 

Working capital cycle is prudently managed; bulk of the traded inventory is order-backed and receivables are stable. Liquidity is further supported by sparsely utilized bank limit of Rs 1,511 crore and cash and equivalent of Rs 820 crore as on March 31, 2025. Besides, the company also provides support to other group companies in the form of Inter-corporate Deposits (ICDs) and outstanding ICDs as of March 2025 is Rs 510 crores.

 

Crisil Ratings has taken note of the announcement by BASF India wherein its Board of Directors has given in-principal approval for demerger of the company’s agricultural solutions business (agri business) into a separate legal entity. In fiscal 2025, the agri business contributed ~Rs 2,065 crore to the company’s revenue and ~Rs 311 crore to EBIT (earnings before interest and tax), representing 13.5% and 46.2%, respectively.

 

This demerger is part of the global strategy of BASF SE, Germany (rated ‘A-/Stable/A2’ by S&P Global Ratings), which was announced on September 26, 2024, to complete the legal and enterprise resource planning separation of the agricultural solutions business by 2027. Thereafter, BASF SE is also planning an initial public offering (IPO) of its global agricultural solutions business.

 

As part of the strategy, on Feb 19, 2025, BASF Agricultural Solutions India Ltd (BASIL) was incorporated as a wholly owned non-operational subsidiary of BASF SE, Germany.  Later, the Board of Directors of BASF India on April 25, 2025, has approved the acquisition of 7 fully paid equity shares having face value of Rs. 10 each for a cash consideration aggregating Rs. 70/- (as per independent fair valuation), representing 100% equity interest of BASIL from BASF SE, Germany, and its nominee shareholders. The said transaction was completed on May 2, 2025, and accordingly, BASIL had become a wholly owned subsidiary of BASF India.

 

Further, the Board of Directors of BASF India has approved the demerger scheme based on the recommendations of the Committee of Independent Directors and Audit Committee. Upon the Scheme becoming effective, BASIL will issue and allot 1 equity share of BASIL for every 1 equity share held by existing BASF India shareholders and the equity shares of BASIL shall be listed on exchanges. The Proposed Transaction is, inter alia, subject to receipt of requisite approvals from statutory and regulatory authorities, including the approval from exchanges, Securities and Exchange Board of India (SEBI), shareholder, creditors of BASF India Ltd and BASF Agricultural Solutions India Ltd and National Company Law Tribunal, as may be necessary. The process of demerger is expected to be completed by Jan 2027 and until then the agri business will be with in BASF India. Crisil Ratings will continue to monitor developments related to the bifurcation of assets and liabilities, and any other business segments moving out, and its impact on the credit risk profile of the company.

 

The ratings continue to reflect the stable business risk profile of BASF India, and Crisil Ratings expectation regarding the strong operational and financial support from BASF SE (‘A-/Stable/A2’ by S&P Global Ratings). These strengths are partially offset by susceptibility of profitability to inherent risks in the crop protection sector and volatility in crude prices and foreign exchange (forex) rates.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of BASF India and its wholly owned subsidiaries, BASF India Coatings Pvt Ltd & BASF Agricultural Solutions India Ltd, due to operational similarities and financial linkages. Crisil Ratings has also factored in the potential support expected from its parent, BASF SE. Also, Crisil Ratings believes the company will receive timely support from its parent for debt servicing, as seen in the past. The parent holds 73.33% stake in BASF India, and provides operational, technical and financial support. Besides, the company’s working capital limit has been carved out from the parent’s global lines of credit.

 

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:

• Adequate business risk profile, supported by diverse revenue streams: Business risk profile is supported by a diversified revenue profile and established position in six key segments: agricultural solutions (14% of revenue in fiscal 2025), materials (32%), nutrition and care (19%), industrial solutions (18%), chemicals (13%) surface technologies (3%) and Others (1%). Products cater to various end-user industries, including automotive, personal and home care, agriculture, footwear, pharmaceuticals, petrochemicals, and refining. The diversified revenue streams mitigate the impact of cyclicality and competitive pressures in any particular business segment.

 

• Strong business and financial assistance from the parent: The company receives strong operational as well as product support from BASF SE, one of the world’s leading chemical companies. High level of integration between the parent and the Indian arm reflects synergies arising from similar businesses. Crisil Ratings believes that the parent will extend timely, need-based financial support in case of pressure on cash flows, and support financing of any large capex, if incurred. The company received external commercial borrowings to fund its Dahej (Gujarat) expansion (currently repaid) in the past, and the parent also rearranged the repayment terms when cash generation was impacted.

 

• Strong financial risk profile: Networth improved on the back of steady and healthy accretion to reserve and stood at Rs 3,633 crore as of March 2025. The company remained debt-free, and working capital limit of Rs 1511 crores was sparsely utilized for the twelve months ended Mar 31, 2025. In the absence of any large capex planes and prudent working capital management, the company’s financial risk profile and all the key debt protection indicators are expected to remain strong over the medium term. Unutilised bank limit and cash and bank balance of Rs 820 crore as on March 31, 2025, will continue to aid liquidity. Given its strong liquidity profile, BASF India also extends support to other BASF group entities in India through intercorporate deposits (ICD); as on March 31, 2025, the total ICD outstanding was Rs 510 crore.

 

Weaknesses:

• Exposure to volatility in crude and forex rates: Operating margin in the key business segments of BASF India depends on crude prices as its raw materials are crude derivatives. Most of the inputs are sourced from group companies outside India. Profitability is also vulnerable to adverse movement in the US dollar and Euro against the rupee, despite hedging. Moreover, the company earns a low margin on few traded products.

 

• Exposure to risks inherent in the crop protection sector: The domestic crop protection segment is affected by irregular monsoon and volatility in farm income. The sector is also subject to specific registration processes in different countries and various environmental rules and regulations. This has an impact on BASF India’s agricultural-solutions business, which is a key revenue contributor.

Liquidity: Superior

Crisil Ratings expects the annual cash accruals to remain over Rs 550 crore over the medium term (Rs 595 crore in fiscal 2025). Cash balance stood at Rs 820 crore as on March 31, 2025, and working capital limit of around Rs 1,511 crore remain sparsely utilized. Liquidity is also aided by the expectation of strong financial support extended by the parent, as observed in the past.

 

ESG profile

The environment, social, and governance (ESG) profile of the company supports its already strong credit risk profile.

  

Key ESG highlights: 

• The BASF group, at the global level, has set a target to reduce greenhouse gas (GHG) emissions by 25% by 2030 from its 2018 baseline and achieve net zero emissions by 2050. It plans to achieve this by switching to renewable energy sources and adopting new energy-efficient technologies.
• BASF India’s scope 1 and 2 emission intensity has reduced by ~40% to ~2.2 t CO2E per crore of revenue in fiscal 2024 from ~3.8 tCO2E in fiscal 2023.
• The company’s attrition rate at ~5% in fiscal 2024 is lower compared with its peers. Its lost time injury frequency rate for workers at 0.32 is higher compared with peers and thus an area of improvement.
• The company’s governance structure is characterised by ~33% of its board comprising independent directors, two women directors, and extensive financial disclosures. 

Outlook: Stable

Crisil Ratings believes that BASF India is likely to continue to benefit over the medium term from its diversified revenue profile and improving market scenario. Financial risk profile is expected to remain healthy. BASF India is expected to continue benefitting from the strong parent support. The rating will also remain sensitive to any changes in the credit profile of BASF SE.

Rating sensitivity factors

Downward factors

• Substantial weakening of operating profitability to below 2.5-3% impacting cash generation
• Large, debt-funded acquisition or capex weakening the debt metrics
• Downgrade in the rating of BASF SE by S&P Global Ratings
• Change in expectations regarding support from the parent

About the Company

BASF India, a 73.33% subsidiary of BASF SE, is the flagship company of the BASF group in India. The parent began operations in India after acquiring RA Cole Pvt Ltd (a manufacturer of expanded polystyrene), which was renamed BASF India in September 1967. The portfolio of BASF SE comprises six segments: chemicals, materials, industrial solutions, surface technologies, nutrition and care and agricultural solutions.

Key Financial Indicators^

As on/for the period ended March 31	Unit	2025	2024
Revenue from operations	Rs.Crore	15260	13767
Profit After Tax (PAT)	Rs.Crore	479	563
PAT Margin	%	3.1	4.1
Adjusted debt/adjusted networth	Times	0.00	0.00
Interest coverage	Times	23.25	29.16

^Crisil Ratings adjusted numbers have been referred to in this entire rating rationale.

Any other information: Not Applicable