| Dharmaj Crop Guard Limited | ||||||
| Ratings reaffirmed at 'Crisil BBB+/Stable/Crisil A2'; Rated amount enhanced for Bank Debt | ||||||
| Rating Action | ||||||
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| Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale Crisil Ratings has reaffirmed its ratings on the bank facilities of Dharmaj Crop Guard Limited (DCGL) at ‘Crisil BBB+/Stable/Crisil A2’.
The ratings factor in the moderation in operating margin, which declined to 9-9.7% in fiscals 2023 and 2024 from 11.7% in fiscal 2022. The margin remained volatile in the last 4-5 quarters ended December 2024 and is estimated to further moderate to ~8.5% in fiscal 2025 on account of higher operational expense of the new technical plant and uneven rainfall that affected the Kharif and Rabi seasons. Overall revenue remained at Rs 741 crore in the first nine months of fiscal 2025 and is estimated to grow at a healthy rate for the full fiscal on the back of stable demand for the company’s branded and domestic formulations and ramp up of the new technical plant. However, the export segment has remained static. Improvement in the profitability will be a key rating sensitivity factor. Financial risk profile remained comfortable with adequate liquidity.
The ratings continue to reflect the extensive experience of the promoters in the agricultural (agro)-chemicals industry, diversified product portfolio, wide customer base, established distribution network and strong financial risk profile. These strengths are partially offset by exposure to large working capital requirement, intense competition and inherent risks in the industry. |
Analytical Approach Crisil Ratings has evaluated the standalone business and financial risk profiles of DCGL. |
Key Rating Drivers & Detailed Description Strengths: Extensive experience of the promoters and improvement in revenue: The promoters have more than two and a half decades of experience in the agro-chemicals industry; their strong understanding of market dynamics and healthy relationships with suppliers and customers should continue to support the business.
The company manufactures a wide variety of pesticides, weedicides, fungicides, and herbicides and has an active portfolio of over 250 products catering to a wide customer base, including bulk consumers, retailers and export customers; exports contribute 5-10% to the revenue. The company also has a network of over 5,000 distributors/dealers spread across the country. Revenue is expected to increase at a compound annual growth rate of 34% during the three fiscals through 2025 and is estimated to grow at a healthy rate in fiscal 2025.
Comfortable financial risk profile: The capital structure has been comfortable owing to moderate reliance on external borrowing. Networth is estimated to be over Rs 395 crore, gearing at ~0.27 time and total outside liabilities to adjusted networth ratio at 0.67 time as on March 31, 2025. Debt protection metrics are estimated to be adequate, with interest coverage and net cash accrual to total debt ratios of ~7.66 times and 54%, respectively, for fiscal 2025.
Weaknesses: Large working capital requirement: Gross current assets are estimated to be ~140 days as on March 31, 2025, due to raw material and finished goods inventory of ~55 days given the seasonality and irregularity in demand and uneven monsoon; receivables were also stretched at 76 days. The working capital cycle is aided by credit of 60-70 days from the suppliers. Working capital requirement will moderate over the medium term considering healthy growth prospects and the nature of business.
Susceptibility to fluctuations in raw material prices, acceptance of new products and inherent risks in the domestic agrochemicals market: The demand for agrochemicals is driven by agricultural production, which depends on the monsoon. A substantial area under cultivation in India is still not well-irrigated and depends on the monsoon for water requirement. Surplus or inadequate rainfall could affect the domestic revenue and profitability of the company. Furthermore, the agrochemicals industry is regulated by specific and separate registration processes in different countries. Changes in the export and import policies of these countries will affect Indian agrochemical players.
The domestic agro-chemicals industry remains vulnerable to ban on products by the government and erratic monsoon. Furthermore, the presence of spurious pesticides and insecticides could endanger the brand equity of players and damage crop production. The operating margin is estimated to remain at 8.5-9% for fiscal 2025, but is likely to improve once the technical plant fully ramps us.
Intense price and product competition among local players and multinational corporations also limit the pricing power against customers. Furthermore, given the rapid ramp up in operations, ability of the company to manage its volatility amid the competitive pressure will be monitorable. |
Liquidity: Adequate Bank limit utilisation was moderate at around 52% for the 12 months through March 2025. Cash accrual is expected to be over Rs 55 crore against term debt obligation of Rs 11-12 crore for fiscals 2025 and 2026 each; and the remaining accrual will cushion the liquidity. Current ratio was healthy at 1.81 times as on March 31, 2024. The promoters are likely to extend equity and unsecured loans to meet working capital requirement and debt obligation. Strong gearing and moderate networth provide financial flexibility and cushion against any adverse condition or downturn in the business. |
Outlook: Stable DCGL is likely to continue to benefit from the extensive experience of its promoters, established relationships with clients, improving cash accrual and strong financial risk profile. |
Rating sensitivity factors Upward factors
Downward factors
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About the Company DCGL, incorporated in 2015, is promoted by Mr Ramesh R Talavia and Mr Jaman Talavia. The company manufactures agrochemicals such as pesticides, insecticides, herbicides and fungicides at its facility in Ahmedabad and Bharuch, Gujarat. On December 8, 2022, the company was listed on the Bombay Stock Exchange and the National Stock Exchange. |
Key Financial Indicators – Crisil Ratings-adjusted numbers:
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||
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Criteria Details
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