Rating Rationale
June 30, 2022 | Mumbai
BASF India Limited
Ratings Reaffirmed
 
Rating Action
Fixed DepositsCRISIL AAA/Stable (Reaffirmed)
Rs.20 Crore Non Convertible DebenturesCRISIL AAA/Stable (Reaffirmed)
Rs.750 Crore Commercial PaperCRISIL A1+ (Reaffirmed)
The common independent director on CRISIL Ratings’ and BASF India Limited boards did not participate in the rating committee meeting and the rating process of these instruments.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

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

 

BASF India’s business risk profile would continue to benefit from the diverse revenue streams, operational support from the parent, BASF SE (rated A/Stable/A1 by S&P) and increasing contribution from the Dahej unit.

 

During fiscal 2022, revenues have increased by 37% backed by volume growth as well as pass on of increase in commodity price increase. Materials, Industrial Solutions, Surface technologies and Chemical’s business have grown more than 57% in fiscal 2022. Margins have improved by almost 35 bps to 7.13% on account of volume growth and stringent cost management compared to previous fiscal. BASF India manages its working capital cycle prudently; bulk of the traded inventory is order backed and receivables are stable.

 

With steady accruals and modest capital expenditure plan, debt levels are expected to remain negligible over the medium term. Liquidity is further supported by unutilised bank limit of around Rs.900 crore on 30th March 2022. As demonstrated amply in the past, CRISIL believes support from the parent will be forthcoming in case of any exigencies.

 

The ratings continue to reflect BASF India's improving business risk profile, and strong operational and financial support from BASF SE. These are partially offset by susceptibility of profitability to inherent risks in the crop protection sector and volatility in crude prices and foreign exchange rates.

Analytical Approach

CRISIL Ratings on the debt programmes of BASF India factor in support expected from its parent, BASF SE. CRISIL believes BASF India will, in case of exigencies, receive timely support from its parent for timely debt servicing, as seen in the past. The parent holds 73.33% stake in BASF India, and provides operational, technical and financial support. Besides, part of the working capital lines have been carved out from the parent’s global lines of credit.

Key Rating Drivers & Detailed Description

Strengths:

  • Adequate business risk profile, supported by diverse revenue streams: BASF India’s business risk profile is marked by a diversified revenue profile and established position in key business segments: agricultural solutions (12%), materials (27%) and nutrition and care (19%) Industrial Solutions (17%) in FY22. Products cater to various end-user industries, including automotive, personal and home care, agriculture, petrochemicals, and refining. The diversified revenue streams mitigates the impact of cyclicality and competitive pressures in any particular business segment.

 

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

 

  • Improving financial risk profile: Financial risk profile of BASF India has improved significantly in fiscal 2022. Networth improved on the back of steady and healthy accretion to reserves and stood at Rs 2,088 Crore as of Sep 30, 2021. Reliance on debt has been negligible during fiscal 2022 and the company remains debt free in fiscal 2022. Liquidity is further supported by unutilised bank lines of ~Rs 900 Crore and cash and bank balance of Rs 126.22 Crore as on March 31, 2022.

 

Weaknesses:

  • Exposure to volatility in input and forex rates: Operating margin in key business segments of BASF India depends on crude prices as raw materials are crude derivatives. Most of the raw materials are sourced from other group companies outside India. Thus, profitability is also impacted by adverse movement of the US dollar and Euro against the rupee, despite hedging, and 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

Cash balances stood at Rs 126.22 crore on March 31, 2022 and working capital lines around Rs 900 crore remains mostly unutilised. Besides, the company is expected to generate healthy accruals over the medium term. Liquidity is also aided by strong financial support extended by the parent; this was demonstrated in fiscal 2019, with the parent refinancing ECBs to an extent of USD 20 million with a longer tenure loan.

 

ESG Profile

CRISIL Ratings believes that BASF India’s Environment, Social, and Governance (ESG) profile supports its already strong credit risk profile.

 

The Chemical sector has a high impact on the environment because of the high greenhouse gas (GHG) emissions, high hazardous waste generation by its core operations. The sector has a social impact because of its large workforce, impact on health and wellbeing of its workers and local community on account of its nature of operations.

 

BASF India Ltd has continuously focused on mitigating its environmental and social impact. 

 

BASF India Limited’s Key ESG highlights:

  • ESG disclosures of the company are evolving and it is in the process of further strengthening the disclosures going forward
  • BASF has a goal to reduce their greenhouse gas emissions worldwide by 25'percent by 2030 compared with 2018. Company also aims achieve net zero CO2 emissions by 2050.
  • The Company’s manufacturing site at Mangalore is meeting its electricity power demand with renewable solar energy, which has helped to reduce carbon dioxide emission.
  • By 2030, company aims to increase the proportion of women in leadership positions at BASF worldwide to 30%.
  • BASF’s governance structure is characterized by 50% of its board comprising independent directors, presence of investor grievance redressal mechanism.
  • The company has completed 89 online assessments & 19 audits in the last 4 years through Ecovadis, a third party, and the report is shared with suppliers.

 

There is growing importance of ESG among investors and lenders. BASF’s commitment to ESG principles will play a key role in enhancing stakeholder confidence, given its high share of market borrowings in its overall debt and access to both domestic and foreign capital markets.

Outlook :Stable

CRISIL Ratings believes that BASF India will continue to benefit over the medium term from its diversified revenue profile, and improving market scenario. BASF India’s financial risk profile expected to be healthy over the medium term. BASF will continue to benefit from the strong parent support. The rating will also remain sensitive to any changes in BASF SE's credit profile

Rating Sensitivity factors

Downward factors

  • Downgrade in rating of BASF SE by S&P
  • Change in stance of support from parent
  • Substantial weakening of operating profitability, impacting cash generation
  • Material debt funded acquisition or capex, leading to deterioration of debt metrics

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 is organised under six segments: Chemicals, Materials, Industrial Solutions, Surface Technologies, Nutrition & Care and Agricultural Solutions.

Key Financial Indicators^

As on/for the period ended March 31

Unit

2022

2021

Revenue from operations

Rs crore

13,099

9558

Profit After Tax (PAT)

Rs crore

594

553

PAT Margins

%

4.5

5.8

Interest coverage

Times

54

19.93

^CRISIL Ratings adjusted numbers

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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN

Name of Instrument

Date of

Allotment

Date of

Redemption

Coupon Rate (%)

Issue Size

(Rs. Cr)

Complexity Levels

Rating Assigned

With Outlook

NA

Commercial paper

NA

7-365 days

NA

750

Simple

CRISIL A1+

NA

Non-convertible debentures*

NA

NA

NA

20

Simple

CRISIL AAA/Stable

NA

Fixed Deposit

NA

NA

NA

NA

Simple

CRISIL AAA/Stable

 *yet to be issued

Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper ST 750.0 CRISIL A1+ 23-06-22 CRISIL A1+ 26-07-21 CRISIL A1+ 23-09-20 CRISIL A1+ 28-03-19 CRISIL A1+ CRISIL A1+
      -- 05-05-22 CRISIL A1+   -- 03-04-20 CRISIL A1+   -- --
      --   --   -- 30-01-20 CRISIL A1+   -- --
Fixed Deposits LT 0.0 CRISIL AAA/Stable 23-06-22 CRISIL AAA/Stable 26-07-21 F AAA/Stable 23-09-20 F AAA/Stable 28-03-19 F AAA/Stable F AAA/Stable
      -- 05-05-22 F AAA/Stable   -- 03-04-20 F AAA/Stable   -- --
      --   --   -- 30-01-20 F AAA/Stable   -- --
Non Convertible Debentures LT 20.0 CRISIL AAA/Stable 23-06-22 CRISIL AAA/Stable 26-07-21 CRISIL AAA/Stable 23-09-20 CRISIL AAA/Negative 28-03-19 CRISIL AAA/Stable CRISIL AAA/Stable
      -- 05-05-22 CRISIL AAA/Stable   -- 03-04-20 CRISIL AAA/Watch Negative   -- --
      --   --   -- 30-01-20 CRISIL AAA/Stable   -- --
All amounts are in Rs.Cr.

                                             

Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Chemical Industry
CRISILs criteria for rating fixed deposit programmes
CRISILs Criteria for rating short term debt
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support

Media Relations
Analytical Contacts
Customer Service Helpdesk

Aveek Datta
Media Relations
CRISIL Limited
M: +91 99204 93912
B: +91 22 3342 3000
AVEEK.DATTA@crisil.com

Prakruti Jani
Media Relations
CRISIL Limited
M: +91 98678 68976
B: +91 22 3342 3000
PRAKRUTI.JANI@crisil.com

Rutuja Gaikwad 
Media Relations
CRISIL Limited
B: +91 22 3342 3000
Rutuja.Gaikwad@ext-crisil.com


Anuj Sethi
Senior Director
CRISIL Ratings Limited
B:+91 44 6656 3100
anuj.sethi@crisil.com

Naveen Vaidyanathan
Director
CRISIL Ratings Limited
B:+91 22 3342 3000
naveen.vaidyanathan@crisil.com

Srinidhi Srikant Chari
Management Trainee
CRISIL Ratings Limited
B:+91 22 3342 3000
Srinidhi.Chari@crisil.com		Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com

 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper/magazine/agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL Ratings. However, CRISIL Ratings alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites and portals.


About CRISIL Ratings Limited (A subsidiary of CRISIL Limited)

CRISIL Ratings pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and innovation, we set the standards in the credit rating business. We rate the entire range of debt instruments, such as bank loans, certificates of deposit, commercial paper, non-convertible/convertible/partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 33,000 large and mid-scale corporates and financial institutions. We have also instituted several innovations in India in the rating business, including ratings for municipal bonds, partially guaranteed instruments and infrastructure investment trusts (InvITs).
 
CRISIL Ratings Limited ('CRISIL Ratings') is a wholly-owned subsidiary of CRISIL Limited ('CRISIL'). CRISIL Ratings Limited is registered in India as a credit rating agency with the Securities and Exchange Board of India ("SEBI").
 
For more information, visit www.crisilratings.com 
 



About CRISIL Limited

CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We are India's leading ratings agency. We are also the foremost provider of high-end research to the world's largest banks and leading corporations.

CRISIL is majority owned by S&P Global Inc, a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.

For more information, visit www.crisil.com

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK

CRISIL PRIVACY NOTICE
 
CRISIL respects your privacy. We may use your contact information, such as your name, address and email id to fulfil your request and service your account and to provide you with additional information from CRISIL. For further information on CRISIL’s privacy policy please visit www.crisil.com.



DISCLAIMER

This disclaimer is part of and applies to each credit rating report and/or credit rating rationale (‘report’) that is provided by CRISIL Ratings Limited (‘CRISIL Ratings’). To avoid doubt, the term ‘report’ includes the information, ratings and other content forming part of the report. The report is intended for the jurisdiction of India only. This report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the report is to be construed as CRISIL Ratings providing or intending to provide any services in jurisdictions where CRISIL Ratings does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this report does not create a client relationship between CRISIL Ratings and the user.

We are not aware that any user intends to rely on the report or of the manner in which a user intends to use the report. In preparing our report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the report is not intended to and does not constitute an investment advice. The report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind to enter into any deal or transaction with the entity to which the report pertains. The report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Ratings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold or sell any securities/instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL Ratings assumes no obligation to update its opinions following publication in any form or format although CRISIL Ratings may disseminate its opinions and analysis. The rating contained in the report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the report should rely on their own judgment and take their own professional advice before acting on the report in any way. CRISIL Ratings or its associates may have other commercial transactions with the entity to which the report pertains.

Neither CRISIL Ratings nor its affiliates, third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively, ‘CRISIL Ratings Parties’) guarantee the accuracy, completeness or adequacy of the report, and no CRISIL Ratings Party shall have any liability for any errors, omissions or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the report. EACH CRISIL RATINGS PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Ratings Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. Public ratings and analysis by CRISIL Ratings, as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any), are made available on its website, www.crisilratings.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about ratings by CRISIL Ratings are available here: www.crisilratings.com.

CRISIL Ratings and its affiliates do not act as a fiduciary. While CRISIL Ratings has obtained information from sources it believes to be reliable, CRISIL Ratings does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and/or relies on in its reports. CRISIL Ratings has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL Ratings has in place a ratings code of conduct and policies for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html.

Rating criteria by CRISIL Ratings are generally available without charge to the public on the CRISIL Ratings public website, www.crisilratings.com. For latest rating information on any instrument of any company rated by CRISIL Ratings, you may contact the CRISIL Ratings desk at crisilratingdesk@crisil.com, or at (0091) 1800 267 1301.

This report should not be reproduced or redistributed to any other person or in any form without prior written consent from CRISIL Ratings.

All rights reserved @ CRISIL Ratings Limited. CRISIL Ratings is a wholly owned subsidiary of CRISIL Limited.
 

 

CRISIL Ratings uses the prefix ‘PP-MLD’ for the ratings of principal-protected market-linked debentures (PPMLD) with effect from November 1, 2011, to comply with the SEBI circular, "Guidelines for Issue and Listing of Structured Products/Market Linked Debentures". The revision in rating symbols for PPMLDs should not be construed as a change in the rating of the subject instrument. For details on CRISIL Ratings' use of 'PP-MLD' please refer to the notes to Rating scale for Debt Instruments and Structured Finance Instruments at the following link: https://www.crisil.com/en/home/our-businesses/ratings/credit-ratings-scale.html