Rating Rationale
June 12, 2018 | Mumbai
Bayer Cropscience Limited
Rating removed from 'Watch negative'; Ratings Reaffirmed
Rating Action
Total Bank Loan Facilities Rated Rs.128 Crore
Long Term Rating CRISIL AA+/Stable (Removed from 'Rating Watch with Negative Implications'; Rating reaffirmed)
Rs.200 Crore Short Term Debt CRISIL A1+ (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has removed its rating on the long-term bank facilities of Bayer Cropscience Limited (BCSL) from 'Rating Watch with Negative Implications' and reaffirmed the rating at 'CRISIL AA+'. The outlook on the rating is 'Stable'. The rating on the short-term debt programme has been reaffirmed at 'CRISIL A1+'.

CRISIL had placed the long-term rating on watch on September 27, 2016, following the proposed open offer announced by parent, Bayer AG (Bayer; rated 'BBB/Stable/A-2' by S&P Global Ratings), to acquire 26% stake held by public shareholders. In India, Bayer, along with one or more of its subsidiaries, was likely to participate in the open offer which, if completed, was to result in a cash outflow of over Rs 1100 crore.

The rating action factors in BCSL's recent announcement that its board has approved a proposal to invest an amount of up to, and not exceeding, Rs 400 crore to acquire the public shareholding in Monsanto India Ltd (Monsanto India) in an open offer. This open offer is in continuation to the acquisition of Monsanto Co by Bayer. BCSL will, in concert with its parent, acquire a 26% stake in Monsanto India. The likely outgo for this will be Rs 1200-1300 crore.

BCSL is expected to fund this transaction from its existing liquid surplus (Rs 415 crore as on March 31, 2018), with no plans to contract debt; which will temporarily deplete surplus liquidity. However, given strong business risk profile, expected high cash flow from operations, and moderate capital expenditure (capex), the company is expected to build up healthy cash surplus over the medium term.

The rating action follows the conclusion of Monsanto Co acquisition by Bayer and S&P Global Ratings' downgrade on June 4, 2018, of Bayer's long-term rating to 'BBB' from 'A-', while removing the rating from CreditWatch with negative implications and assigning a stable outlook. The short-term rating on Bayer was reaffirmed at 'A2'.

The reaffirmation reflects CRISIL's belief that BCSL will maintain its strong credit risk profile and remain unaffected by downgrade in parent's rating. CRISIL also expects that there will be no sizeable fund flow to parent or group entities, barring steady dividend outgo.

The ratings continue to reflect BCSL's healthy market position in the Indian agrochemicals segment, operational and product support from Bayer, and strong financial risk profile because of robust liquidity. These strengths are partially offset by susceptibility to regulatory changes and to fluctuations in rainfall.

Key Rating Drivers & Detailed Description
* Healthy market position: BCSL is among the largest players in the Indian agrochemicals sector and benefits from its longstanding relationship with farmers, extensive product portfolio, and strong distribution network. Besides, the company's Seed 2 Harvest initiative (launched in fiscal 2008), which combines its strengths with those of group company, Bayer BioScience Pvt Ltd (BBPL; 'CRISIL AA-/Stable/CRISIL A1+'; engaged in research and development, marketing of seeds, and innovative plant-based solutions); strengthens product offering and farmer connect through integrated solutions. Given healthy prospects for the agrochemicals sector and a strong market position, revenue growth and profitability are likely to remain steady over the medium term.

* Robust product and operational support from parent, Bayer: This has enabled the company to introduce new products and consistently upgrade product range. Given the strategic importance to parent, operational and product support is expected to continue.

* Strong financial risk profile, particularly liquidity: Steady operational cash flow, a large networth, and a debt-free balance sheet have led to a strong financial risk profile. Networth was Rs 1,739 crore as on March 31, 2018. Cash accrual will be adequate to meet funding requirement, thus continuing to restrict debt. Liquidity is expected to be comfortable over the medium term, although likely to decline in the near term to part-fund the stake purchase in Monsanto India. Liquidity is also supported by access to sizeable unutilised working capital limit. Owing to Rs 500 crore share buyback and GST payments, cash balance reduced significantly to Rs 34 crore as on September 30, 2017. However, it increased to about Rs 418 crore as on March 31, 2018, owing to healthy collections and smaller working capital requirement in the second-half of fiscal 2018. Liquid surpluses will build considerably over the medium term after the conclusion of open offer for stake purchase in Monsanto India.

* Exposure to risks inherent in the agrochemicals sector: Demand for agrochemicals is driven by agricultural production, which is affected by monsoon. Surplus or inadequate rainfall impacts revenue and profitability of players, besides leading to build-up in working capital requirement. While BCSL's healthy regional diversification and strong portfolio will support business, it will nevertheless remain susceptible to uneven monsoon. Furthermore, the agrochemicals industry is highly regulated by specific and separate registration processes in different countries, and is subject to environmental rules and regulations. Change in export and import policies of countries will affect Indian agrochemicals manufacturers. Business will also be exposed to the risk of any ban on key products.
Outlook: Stable

CRISIL believes BCSL will maintain its established position in the agrochemicals industry over the medium term, backed by steady revenue growth driven by marketing initiatives, increased market penetration, and product launches supported by Bayer's strong research and development facilities. Financial risk profile will remain strong because of large networth and healthy liquid surplus.

Upside Scenario
* Substantial and sustainable improvement in revenue and cash accrual
* Sustenance of strong financial risk profile

Downside Scenario
* Steep fall in revenue or profitability leading to significantly lower cash accrual, or large debt-funded capex or acquisition affecting capital structure
* Considerable fund outflow, either through dividend or share buyback, and consequent reduction in liquidity.

About the Company

The Bayer group launched its Indian operations in 1958 by setting up an agrochemicals manufacturing unit under BCSL, in which the group has 68.58% stake. The company manufactures and markets crop-protection solutions and trades in seeds on behalf of BBPL.

Key Financial Indicators
Particulars Unit 2018 2017
Revenue Rs crore 2,710 2,816
Profit After Tax (PAT) Rs crore 300 291
PAT Margins % 11.1 10.3
Adjusted debt/adjusted networth Times NA NA
Interest coverage Times 39.66 70.10

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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 Coupon Rate (%) Maturity Date Issue Size (Rs cr.) Rating Assigned with Outlook
NA Fund-Based Facilities* NA NA NA 112.55 CRISIL AA+/Stable
NA Proposed Long-Term Bank Loan Facility NA NA NA 15.45 CRISIL AA+/Stable
NA Short-Term Debt NA NA 7-365 days 200.0 CRISIL A1+
*Fully interchangeable with cash credit, overdraft, short-term loans, letter of credit, and bank guarantee
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Short Term Debt  ST  200.00  CRISIL A1+  14-05-18  CRISIL A1+  16-11-17  CRISIL A1+  27-09-16  CRISIL A1+  24-08-15  CRISIL A1+  CRISIL A1+ 
        14-02-18  CRISIL A1+  06-09-17  CRISIL A1+  26-05-16  CRISIL A1+  05-01-15  CRISIL A1+   
            09-06-17  CRISIL A1+           
            23-03-17  CRISIL A1+           
            18-01-17  CRISIL A1+           
Fund-based Bank Facilities  LT/ST  128.00  CRISIL AA+/Stable  14-05-18  CRISIL AA+/Watch Negative  16-11-17  CRISIL AA+/Watch Negative  27-09-16  CRISIL AA+/Watch Negative  24-08-15  CRISIL AA+/Stable  CRISIL AA+/Stable 
        14-02-18  CRISIL AA+/Watch Negative  06-09-17  CRISIL AA+/Watch Negative  26-05-16  CRISIL AA+/Stable  05-01-15  CRISIL AA+/Stable   
            09-06-17  CRISIL AA+/Watch Negative           
            23-03-17  CRISIL AA+/Watch Negative           
            18-01-17  CRISIL AA+/Watch Negative           
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Fund-Based Facilities* 112.55 CRISIL AA+/Stable Fund-Based Facilities* 112.55 CRISIL AA+/Watch Negative
Proposed Long Term Bank Loan Facility 15.45 CRISIL AA+/Stable Proposed Long Term Bank Loan Facility 15.45 CRISIL AA+/Watch Negative
Total 128 -- Total 128 --
*Fully interchangeable with cash credit, overdraft, short-term loans, letter of credit, and bank guarantee
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for Chemical Industry
CRISILs Criteria for rating short term debt
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support
Mapping global scale ratings onto CRISIL scale

For further information contact:
Media Relations
Analytical Contacts
Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000

Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000

Jyoti Parmar
Media Relations
CRISIL Limited
D: +91 22 3342 1835
B: +91 22 3342 3000

Anuj Sethi
Senior Director - CRISIL Ratings
CRISIL Limited
B:+91 44 6656 3100

Akshay Chitgopekar
Director - CRISIL Ratings
CRISIL Limited
D:+91 22 4097 8309

Varun Verma
Rating Analyst - CRISIL Ratings
CRISIL Limited
D:+91 22 3342 3141
Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
For Analytical queries:


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. However, CRISIL alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.

About CRISIL Limited

CRISIL is a leading agile and innovative, global analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 1,00,000 customers.
We are 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 


About CRISIL Ratings
CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical rigour and innovation, CRISIL sets 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 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the accessibility to rating services to a wider market. Over 1,10,000 MSMEs have been rated by us.


CRISIL respects your privacy. We 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 and other parts of S&P Global Inc. and its subsidiaries (collectively, the “Company) you may find of interest.

For further information, or to let us know your preferences with respect to receiving marketing materials, please visit https://www.crisil.com/en/home/privacy-and-cookie-notice.html. You can view the Company’s Customer Privacy at https://www.spglobal.com/corporate-privacy-policy

Last updated: April 2016


This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of 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 providing or intending to provide any services in jurisdictions where CRISIL 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 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 or otherwise 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 Rating 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 assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its opinions and analysis. CRISIL 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.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL 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 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 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. CRISIL’s public ratings and analysis 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 web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL you may contact CRISIL RATING 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 a prior written consent of CRISIL.

All rights reserved @ CRISIL