Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AA+/Positive/Crisil A1+’ ratings on the bank facilities and commercial paper programme of Chambal Fertilisers and Chemicals Ltd (Chambal). Further, the ratings on the bank facilities worth Rs 3,000 crore has been withdrawn basis client request and post receipt of NOC from bankers. Rating on commercial paper worth Rs 2,000 crore has also been withdrawn basis request of client. The withdrawals are in line with the policy of Crisil Ratings on withdrawal of ratings.

 

The ratings factor in Chambal’s healthy business risk profile owing to sustained superior operating efficiency of the urea plants, the company’s established market position in the urea segment and cash flow diversification expected owing to ongoing improvement in the scale of operations of the agro-chemicals segment and commercialisation of technical ammonium nitrate (TAN) business by the beginning of fiscal 2027. The non-subsidy business including agrochemicals and TAN shall contribute over 25% to the operating profitability in the medium term compared with ~10% expected in fiscal 2026. The company has also shown resilience in trading segment profitability in the current fiscal.

 

While Chambal’s existing urea plants are operating efficiently compared to normative norms and generating healthy accrual, the diversification from non-subsidy businesses will aid in mitigating risk due to any change in regulatory policy.

 

Moreover, the financial risk profile of the company has strengthened significantly over the past few fiscals driven by strong cash accrual. The company had reported net cash surplus of ~Rs 1,439 crore as on December 31, 2025, with entire term debt for G-III prepaid due to healthy accrual and timely receipt of subsidy over the last 4–5 years. The company is expected to maintain a healthy net cash surplus due to strong accrual, expected steady working capital position. Although no major capital expenditure (capex) plans have been finalised at this point, the management may consider further expansions in the fertiliser sector once policy clarity is achieved. Nevertheless, Crisil Ratings will continue to closely monitor the company's significant debt-funded capex plans.

 

The ratings continue to reflect the established market position of Chambal, and the superior operating efficiency of its fertiliser plants. The operating performance remained strong with revenue of Rs 18,009 crore and earnings before interest, taxes, depreciation and amortisation (Ebitda) of Rs 2,484 crore for the first nine months of fiscal 2026 as against Rs 14,198 crore and Rs 2,128 crore, respectively, for the corresponding period last fiscal. The manufacturing plants operated over 100% utilisation and lower than prescribed energy norms, leading to energy efficiency savings. The profitability of the urea division remains immune to the rise seen in feedstock (natural gas) prices, with the increase compensated through subsidy receipts from the government.

 

Chambal is already accounting for the possible tightening of energy efficiency norms which were due for revision from April 2025 onwards. Furthermore, the eight-year period for the applicability of NIP-2012 for Gadepan-III will get over in December 2026. Any tightening beyond expectation for the urea plants, particularly Gadepan-I and Gadepan-II, or change in policy for Gadepan-III impacting the operating performance, will remain a key rating sensitivity factor.

 

The TAN project is progressing as per timelines with the capex being funded through internal accrual. Crisil Ratings expects healthy contribution from this business with expected commercialisation in April 2026 and increasing demand from coal mining segment. Any large debt-funded capex, acquisitions or investments planned in the near term will be monitorable. The crop protection chemicals business reported strong operating performance with revenue of Rs 1,172 crore and Ebitda margin of 23.7% for the first nine months of fiscal 2026 compared with Rs 887 crore and 23.3%, respectively, for the corresponding period last fiscal driven by strong product launches. Ramp up in these segments aiding in cash flow diversification from fertiliser business will be monitorable.

 

Moreover, the government has extended financial support to the fertiliser sector through additional subsidies in the past two fiscals. The announced subsidy of around Rs 1.71 lakh crore in fiscal 2027 will be sufficient to meet the requirement. This, combined with healthy accrual and surplus liquidity, should be sufficient for incremental working capital requirement.

 

The above strengths are partially offset by exposure to regulatory risks.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of Chambal and its subsidiaries because they have strong financial linkages.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers - Strengths

Established market position in urea, especially in north India

Chambal is the largest private player in the urea industry in India in terms of production capacity. Its share in total domestic urea production was ~11% in fiscal 2025. It has a significant market share in north India, including the trading segment, supported by its robust distribution network.

 

Favourable location of plants (near end-user markets and feedstock source), large capacity and low energy consumption are added advantages. The urea plants are near the Hazira-Bijapur-Jagdishpur gas pipeline, which ensures sufficient gas availability.

 

Superior operating efficiency

High operating efficiency is driven by plants functioning at more than 100% of capacity, energy consumption below the prescribed norms and additional fixed cost of Rs 350 per tonne provided by the government for urea players.

 

Overall profitability is driven by the Gadepan-III plant under the new investment policy. This policy is valid for eight years till the end of December 2026. Any change in this policy impacting on the profitability of this unit will remain monitorable.

 

The operating performance of the urea production division remains immune to the rise in feedstock (natural gas) prices, as it is passed through entirely to be compensated through subsidy receipts from the government.

 

Post energy efficiency capex in the fourth quarter of fiscal 2024, the Gadepan-I and -II plants operated below 5.20 giga calorie per tonne in fiscal 2025, and in the first nine months of fiscal 2026 which is well below the current energy norm of 5.50 giga calorie per tonne. While there may be tightening of energy norms, the same is cushioned by further scope of energy efficiency and healthy fixed cost reimbursement for these plants. The Gadepan-III unit consumed less than 5.00 giga calorie per tonne which is best in class, improving the operating efficiency of the urea manufacturing business. Hence, the plants are expected to operate below the current prescribed norms over the medium term.

 

Strong financial risk profile

Adjusted gearing is nil as on March 31, 2025, compared with 0.24 time a year earlier. The company had reported net cash surplus of Rs 1,439 crore as on December 31, 2025, compared with ~Rs 1,051 crore as on March 31, 2025, due to healthy accrual and low working capital intensity. Adjusted interest coverage ratio remained strong at over 50 times in fiscal 2025 compared with over 13 times in fiscal 2024. The debt protection metrics are likely to remain strong over the medium term with healthy profitability, however, any large, debt-funded capex plans or acquisition plans in the near term will be monitorable. The capex towards TAN plant will be funded through internal accrual.

Key Rating Drivers - Weaknesses

Exposure to regulatory risks

Given the government’s thrust on self-sufficiency in food grain production, the fertiliser industry is strategic but highly controlled. Hence, players are susceptible to regulatory changes. The government has been focusing on reducing subsidies without increasing prices by urging companies to adopt efficient methods for urea production. In line with these measures, the government has tightened energy consumption norms under New Urea Policy, 2015. The current energy norms are applicable till the end of fiscal 2025 which may further get tightened for players including Chambal and is likely to impact the industry’s profitability. Furthermore, the policy for reimbursement of plants under the New Urea Investment Policy (NUIP), 2012, beyond eight years has not been announced yet and can have a material impact on the profitability for players under NUIP beyond policy regime. Any such change in policy regime is monitorable.

 

Despite regular subsidy payments in the recent 4–5 fiscals and adequate subsidy budget announced for fiscal 2027, fertiliser companies are still susceptible to any delays in subsidy payments from the government, leading to high reliance on working capital debt. Deferment in the disbursement of subsidy on account of under-budgeting and change in the regulatory scenario will remain key rating sensitivity factors.

Liquidity Strong

Cash and equivalents were ~Rs 1,439 crore as of December 2025. Fund-based bank limit of Rs 4,000 crore was utilised minimally over the 12 months through February 2026. Strong annual cash accrual expected over Rs 2,000 crore over the near term should adequately cover dividend, routine capex and incremental working capital requirement.

ESG Profile

Crisil Ratings believes that the company’s ESG profile supports its already strong credit risk profile.

 

The chemical sector has a significant impact on the environment, due to the high greenhouse gas (GHG) emissions and hazardous waste generated by its core operations. In line with this, Chambal has been continuously focusing on mitigating its environmental and social risks to ensure minimal impact.

 

Key ESG highlights:

• Chambal reported lower-than-peer-average intensities of energy consumption (~2MWh per tonne of production), scope 1 and 2 emissions (~0.42 tCO2e per tonne of production), owing to energy efficient manufacturing process.
• The company is further implementing measures such as utilising waste heat, increasing renewable energy consumption, and using energy efficient products, to improve energy efficiency and reduce emissions. Also, its Gadepan-III plant operates as a zero liquid discharge facility and effluents from this plant are treated in a reverse osmosis–zero liquid discharge system, and the permeate is used for cooling towers. This has significantly reduced the intake of fresh water from the river surrounding the campus.
• The company has reported better than peers’ performance on attrition rate (~6%), lost-time injury frequency rate (LTIFR; nil for employees and 0.21 for workers vs 0.25). Furthermore, it reported high share of employment generated in the rural areas (around 65% of the total wages paid are to workforce employed in rural areas)
• Its governance structure is characterised by adequate board size with 50% being independent directors and ~13% being women directors, majority independent committees except corporate social responsibility committee and high average attendance of independent directors at the board and committee meetings (~99%).
   

There is growing importance of ESG among investors and lenders. Chambal’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 capital markets.

Outlook Positive

The financial risk profile is likely to remain strong, with TAN plant expected to further aid profitability and revenue diversification. Furthermore, the financial risk will be supported by the expectation of adequate subsidy budget allocation by the government. Business profiles will sustain over the medium term, supported by strong market position, healthy operating efficiency and diversification.

Rating sensitivity factors

Upward factors

• Significant growth in non-subsidy business segments, leading to diversification in revenue and high accrual
• No stretch in subsidy receivable or significant debt-funded capex, leading to sustenance of a net cash* positive position
• Substantial positive impact of any regulatory/policy change

*Net cash = cash and equivalents - total debt

 

Downward factors

• Larger-than-expected, debt-funded capex or acquisition or significant stretch in the working capital cycle, leading to net debt to OPBDIT ratio persistently remaining above 1 time
• Substantial adverse impact of any regulatory/policy change

About the Company

Incorporated in 1985 and based in Kota (Rajasthan), Chambal has the largest installed urea capacity of 3.30 million tonne in the private sector in India. Its significant market share in north India is supported by its strong Uttam Vir brand and robust distribution network. The company also trades in complex fertilisers, crop protection chemicals and specialty nutrients. During the first nine months of fiscal 2026, the company achieved profit after tax (PAT) of Rs 1,784 crore on total income of Rs 18,009 crore as against Rs 1,525 crore and Rs 14,180 crore, respectively, during the corresponding period of the previous fiscal.

Key Financial Indicators (consolidated)*

Particulars	Unit	2025	2024
Operating income	Rs crore	16,694	18,028
PAT	Rs crore	1,649	1,276
PAT margin	%	9.9	7.1
Adjusted debt/adjusted networth	Times	NA	0.2
Interest coverage	Times	50	13.4

*As per analytical adjustment by Crisil Ratings

Any other information: Not applicable