Rating Rationale
November 23, 2018 | Mumbai
Bayer Cropscience Limited
Ratings Reaffirmed
Rating Action
Total Bank Loan Facilities Rated Rs.128 Crore
Long Term Rating CRISIL AA+/Stable (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 reaffirmed its 'CRISIL AA+/Stable/CRISIL A1+' ratings on the long-term bank facilities and short-term debt programme of Bayer Cropscience Limited (BCSL).
The rating factors in the announcement by BCSL's board on November 14, 2018, that it has approved the scheme of amalgamation of Monsanto India Ltd (MIL) with BCSL.
The proposed amalgamation is part of a global transaction, wherein BSCL's parent-Bayer AG (Bayer; rated 'BBB/Stable/A-2' by S&P Global Ratings)-has acquired Monsanto Co. and is in process of merging the two entities. The amalgamation in India will be a non-cash transaction, wherein BCSL will issue two equity shares of Rs 10 each for every three equity shares of Rs 10 each held in MIL.
The development is likely to improve diversity and strengthen product offerings across the value chain of BSCL's agricultural input business. The combined research and development capabilities, and wide market reach and farmer connect will benefit the company further. Financial risk profile is also expected to strengthen, backed by healthy cash generation, networth, and sizeable liquid surpluses of MIL. The amalgamation is likely to be concluded by the first half of fiscal 2020, post requisite regulatory approvals.
The ratings continue to reflect BCSL's healthy market position in the Indian agrochemical segment, operational and product support from Bayer, and strong financial risk profile. 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 agrochemical sector and benefits from its healthy relationships with farmers, extensive product portfolio, and strong distribution network. The Seed 2 Harvest initiative launched in fiscal 2008 combines BCSL's strengths with those of the group company-Bayer BioScience Pvt Ltd (BBPL; 'CRISIL AA-/Stable/CRISIL A1+')-to offer integrated farmer solutions. BBPL is engaged in research and development, marketing of seeds, and providing innovative plant-based solutions. The proposed amalgamation should strengthen market position in the seed business, besides enhancing product portfolio and market network.  Given the steady long-term demand prospects for the agricultural input business and robust market position, growth in revenue and profitability is likely to remain stable over the medium term.
* Robust product and operational support from Bayer: Product and operational support from the parent has helped introduce products and consistently upgrade the product range, leading to stable operating margin (averaging 15% in the five fiscals through 2018). Given BSCL's strategic importance, operational and product support from the parent is expected to continue.
* Strong financial risk profile, particularly liquidity: Steady operational cash flow, large networth, and negligible debt 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. Cash balances have been at Rs 400-900 crore historically. However, owing to the Rs 400 crore open offer extended to the shareholders of MIL in the first quarter of fiscal 2019 and the typical working capital build-up in the first half of the year, cash balance reduced significantly to Rs 69 crore as on September 30, 2018, from Rs 418 crore as on March 31, 2018. However, the balances are expected to improve by the end of fiscal 2019 on account of healthy cash flows and improvement in working capital (as typically observed in the second half). Liquidity should remain robust, supported by access to largely unutilised bank lines.
* Exposure to risks inherent in the agrochemical sector: Demand for agrochemicals is driven by agricultural production, which is constrained by monsoon. Surplus or inadequate rainfall impacts revenue and profitability, besides leading to build-up in working capital requirement. While BCSL's healthy regional diversification and strong portfolio support the business, susceptibility to uneven monsoon persists. Furthermore, the industry is highly regulated by specific and separate registration processes in different countries, and subject to environmental rules and regulations. An adverse change in the export and import policies of countries is expected to weaken the credit metrics of Indian agrochemical manufacturers. Exposure to the risk of any ban on key products also persists.
Outlook: Stable

CRISIL believes BCSL will maintain its established position in the agrochemical industry over the medium term, backed by marketing initiatives, increased market penetration, and product launches, which are supported by Bayer's strong research and development capabilities. Financial risk profile should remain strong over the medium term because of large networth, robust gearing, and expected build-up in 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
* Large debt-funded capex or acquisition constraining 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 agrochemical manufacturing unit under BCSL, in which the group has 68.58% stake. BCSL manufactures and markets crop-protection solutions, and trades in seeds on behalf of BBPL.
In the first six months of fiscal 2019, net profit was Rs 290 crore on revenue of Rs 1,936 crore, as against net profit of Rs 302 crore on revenue of Rs 1,145 crore in the corresponding period of the previous fiscal.

Key Financial Indicators
Particulars Unit 2018 2017
Revenue Rs crore 2,710 2,816
Profit after tax (PAT) Rs crore 300 291
PAT margin % 11.1 10.3
Adjusted debt/adjusted networth Times 0.00 0.00
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+  12-06-18  CRISIL A1+  16-11-17  CRISIL A1+  27-09-16  CRISIL A1+  24-08-15  CRISIL A1+  CRISIL A1+ 
        14-05-18  CRISIL A1+  06-09-17  CRISIL A1+  26-05-16  CRISIL A1+  05-01-15  CRISIL A1+   
        14-02-18  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  12-06-18  CRISIL AA+/Stable  16-11-17  CRISIL AA+/Watch Negative  27-09-16  CRISIL AA+/Watch Negative  24-08-15  CRISIL AA+/Stable  CRISIL AA+/Stable 
        14-05-18  CRISIL AA+/Watch Negative  06-09-17  CRISIL AA+/Watch Negative  26-05-16  CRISIL AA+/Stable  05-01-15  CRISIL AA+/Stable   
        14-02-18  CRISIL AA+/Watch Negative  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+/Stable
Proposed Long Term Bank Loan Facility 15.45 CRISIL AA+/Stable Proposed Long Term Bank Loan Facility 15.45 CRISIL AA+/Stable
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

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