Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AAA/Stable/Crisil A1+’ ratings on the bank loan facilities of Coromandel International Ltd (Coromandel).

 

The ratings consider the company’s robust market position in India’s phosphatic-fertiliser market and strong operating efficiency supporting a healthy business risk profile. Coromandel continues to be the largest-single super phosphate player in the domestic market, with a share of ~15% in fiscal 2024; and the second-largest player in other complex phosphatic (diammonium phosphate-nitrogen, phosphorus and potassium [DAP+NPK]) fertilisers with a primary share of ~15%. Financial risk profile remains robust, with a strong net cash position as of December 2024.

 

Crisil Ratings notes the announcement regarding acquisition of 53% stake worth ~Rs 820 crore in NACL Industries Ltd (NACL; rated ‘Crisil BB+/Watch Positive/A4+’) on March 12, 2025. The purchase will be funded via strong net liquidity (of over ~Rs 2,000 crore as of December 2024) and internal cash accrual; hence, Coromandel’s financial risk profile is expected to remain strong. This transaction should be completed by the first half of fiscal 2026, subject to regulatory approvals.

 

This acquisition will augment the crop protection business of Coromandel, strengthen its presence in the domestic formulations business, expand existing product portfolio and help in securing contract manufacturing relationships with NACL’s established customer relationships. NACL’s operating profitability has remained weak over fiscals 2024 and 2025 due to subdued realisations along with certain provisions on debtors. However, there should not be any significant impact on operating performance of Coromandel in the near term since it will contribute to around 10% of the combined entity’s revenue and profitability. Synergies from combined sourcing, consolidation of research and development center, benefit from the management’s expertise and financial reputation shall improve NACL’s business and financial risk profiles in the near to medium term. This will remain monitorable.

 

The reaffirmation factors in healthy operating performance, with revenue of Rs 19,097 crore and the earnings before interest, taxes, depreciation, and amortisation (Ebitda) margin of 11.5% compared to Rs 18,146 crore and 11.7% respectively for the corresponding period of last fiscal. Coromandel’s ability to prioritise NPK production, which is fungible with DAP, backward integration measures undertaken and favourable supply agreements have supported profitability. The annual Ebitda per tonne is likely to remain healthy and sustain over Rs 5,000 going forward with the expectation of adequate Nutrient Based Subsidy (NBS) rates in line with raw material prices. Any significant revision in NBS rates and resultant impact on operating profitability will remain monitorable over the medium term.

 

Furthermore, the company has announced capital expenditure (capex) to increase the backward integration capacity of both its key raw materials, phosphoric acid and sulphuric acid, at the Kakinada (Andhra Pradesh) plant, which was the company’s only non-integrated plant. This will further help improve availability of raw material and cushion profitability over the medium term.

 

The government has also demonstrated its financial support to the fertiliser sector via additional subsidies in the past two fiscals. The announced subsidy of ~Rs 1.67 lakh crore for fiscal 2026 should be sufficient to meet the requirement. This, combined with healthy cash accrual and surplus liquidity will be sufficient to fund working capital requirement, thus enabling it to maintain its net debt-free position over the medium term. Since timely disbursement of the entitled subsidy is crucial for the company to maintain its robust financial risk profile, any change in policy support or sustained delays in payouts would remain monitorable.

 

The ratings continue to reflect the strong position of Coromandel in India’s phosphatic-fertiliser market, strong operating efficiency supported by backward-integration facilities and robust financial risk profile. These strengths are partially offset by exposure to risks related to the regulated nature of the fertiliser industry in India.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of Coromandel and its associate and subsidiary companies, considering the operational, managerial and financial linkages among them.

 

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:

• Strong position in India’s phosphatic-fertiliser market: Coromandel is the second-largest player in the phosphatic-fertiliser industry in India with a primary market share of ~15% in DAP/NPK; and the largest share of ~15% in single super phosphate for fiscal 2024. Its market position is underpinned by an entrenched and leading position in Andhra Pradesh and Telangana – India’s largest complex-fertiliser market – and a wide product portfolio. The company has also been gradually increasing the sale of non-subsidy-based products, including crop protection, speciality nutrients (secondary and micro-nutrients [sulphur, zinc, calcium and boron], water-soluble fertilisers and compost), and bioproducts (non-fertiliser segments contributed ~17% to the overall revenue in the first nine months through fiscal 2025). It operates around 850 retail outlets and has tied up with over 14,000 dealers, through which it sells fertilisers, crop-protection chemicals, speciality nutrient products, seeds, sprayers, veterinary products, among others.

 

• Strong operating efficiency: Operations benefit from economies of scale, better raw material procurement due to established relationships with suppliers, captive production of phosphoric acid, superior plant infrastructure and low handling and transportation costs. Captive phosphoric acid meets close to 50% of the company’s total requirement while captive sulfuric acid meets ~60%. There are further plans to improve the backward integration in the near term by ramping up sulphuric acid and phosphoric acid capacities in the Kakinada plant. Operating efficiency is also supported by the ability to adjust product mix (between DAP and other complex fertilisers).

 

Scale of operations of the crop protection business has also improved over the years, with revenue of ~Rs 1,938 crore for the nine months through December 2024 and Ebit margin of 13.5% compared to Rs 1,893 crore and 12% respectively in the corresponding period of the previous fiscal. This is expected to significantly improve with the acquisition of NACL, which should be completed by the first half of fiscal 2026. Turnaround in operating profitability in NACL, with synergies arising post-acquisition, will remain monitorable. Focus on increasing the share of non-subsidy-based products will reduce the vulnerability of profits to changes in the government subsidy policies.

 

• Robust financial risk profile: Coromandel maintains a net cash position of over Rs 2,000 crore (net of acceptances/suppliers credit/buyer’ credit of ~Rs 4,600 crore) as on December 31, 2024. Annual capex of Rs 800-1,000 crore, acquisition of NACL worth ~Rs 820 crore and incremental working capital requirement over the medium term will be met through strong yearly cash accrual of Rs 1,500-1,700 crore. Accordingly, the company is expected to remain net debt free over the medium term. Any larger-than-expected, debt-funded capex or acquisition that could materially alter capital structure would be monitorable.

 

Weakness:

• Exposure to regulated nature of the fertiliser industry and volatility in raw material prices: The fertiliser industry is strategic, but highly controlled, with fertiliser subsidy being an important component of profitability. The phosphatic-fertiliser industry was brought under the NBS regime from April 1, 2010. Under this scheme, the Government of India fixes the subsidy payable on nutrients for the entire fiscal (with an option to review this every six months), while retail prices are market driven. Manufacturers of phosphatic fertilisers are dependent on imports for their key raw materials, such as rock phosphate and phosphoric acid. Cost of raw materials accounts for about 75% of the operating income. The regulated nature of the industry and susceptibility of complex fertiliser players (including Coromandel) to raw material price volatility under the NBS regime continues to be key rating sensitivity factors.

 

Fertiliser companies are also exposed to subsidy payments from the government, which may get delayed, leading to reliance on short-term working capital borrowing.

Liquidity: Superior

Cash and equivalent (net of acceptances) stood at ~Rs 2,000 crore and unutilised fund-based limit was around Rs 1,500 crore, as on December 31, 2024. Annual cash accrual of Rs 1,500-1,700 crore, with no term debt repayment and annual capex of Rs 800-1000 crore over the medium term, further supports liquidity.

Outlook: Stable

Business risk profile will remain comfortable over the medium term, with continued focus on improving operating efficiency and diversification of operations into the agrochemicals segment. Continued and timely release of subsidies by the government will remain key to maintaining strong financial risk profile.

Rating sensitivity factors

Downward factors:

• Significant and sustained weakening of operating performance, with unfavourable change in government policies
• Sizeable rise in subsidy receivables or any large, unexpected debt-funded capex or acquisition, weakening the financial risk profile; resulting in net debt to Ebitda ratio increasing to beyond 1 time on a sustained basis

About the Company

Coromandel, one of the flagship companies of the Murugappa group, was established as a private company in 1961. As on December 31, 2024, E.I.D. Parry (India) Ltd, a Murugappa group company, owned 56.16% of Coromandel.

 

The company’s business structure is bifurcated into two segments: nutrient and other allied businesses, and crop protection business. The nutrient and other allied segment includes the manufacturing and marketing of phosphatic fertilisers, speciality nutrients, organic fertilisers and retail. The crop protection business includes manufacturing of bio-based and chemical pesticides.

 

The company has the capacity to manufacture over 3.6 million tonne (MT) of fertilisers and pesticides and 1.0 MT of single super phosphate per annum. Besides this, the company manufactures water-soluble fertilisers, biopesticides and agrochemical technicals and formulations.

 

For the first nine months of fiscal 2025, profit after tax (PAT) was Rs 1,477 crore on total income of Rs 19,097 crore, against Rs 1,477 crore and Rs 18,146 crore, respectively, during the corresponding period of the previous fiscal.

Key Financial Indicators

Particulars	Unit	2024	2023
Operating income	Rs crore	22,058	29,628
PAT	Rs crore	1,641	2,013
PAT margin	%	7.4	6.8
Adjusted debt/adjusted networth	Times	0.01	0.0
Adjusted interest coverage	Times	13.82	15.46

As per the Crisil Ratings analytical adjustment.

Any other information: Not Applicable