Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AA/Stable/Crisil A1+’ ratings on the bank loan facilities and commercial paper program of E.I.D. Parry India Ltd (EID Parry, a part of Murugappa group).

 

The ratings continue to reflect EID Parry’s established market position in the sugar business, derived from the integrated nature of operations with diversified revenue profile, average and adequate financial risk profile, and superior financial flexibility on account of being the holding company of Coromandel International Ltd (CIL, rated ‘Crisil AAA/Stable/Crisil A1+’). The ratings also factor in the strong support from Murugappa group as EID Parry is an integral part of the group  These strengths are partially offset by the susceptibility of its business performance to downturn in the sugar business and to regulatory changes in the sugar and distillery sector, and modest albeit improving performance of its subsidiary engaged in the sugar refinery business, Parry Sugars Refinery India Pvt Ltd (PSRIPL, rated ‘Crisil A+/Stable/Crisil A1’).

 

EID Parry’s business risk profile expected to remain stable in the near-to-medium term despite ongoing changes in the regulatory environment for sugar and allied products. The amount of sugar cane crushed is expected to be ~48-49 lakh tonne in the current fiscal despite lower sugar cane production in Karnataka, Maharashtra and Tamil Nadu due to EID Parry’s strong relationship with sugar cane producers which will lead to stable production of sugar at ~4.6-4.8 lakhs tones in the current fiscal. The performance of the refinery division is expected to moderate in the current fiscal with white sugar prices gradually reducing following oversupply in the global markets with increase in supplies from Europe, Thailand and Pakistan. Revenue on a consolidated basis is expected to grow by 2-3% in fiscal 2025. This growth to be largely driven by sugar segment aided by growth in consumer product and lifting of restrictions on sugar exports upto 1 million tonnes, as well distillery business due to increase in distillery capacity and removal of restrictions regarding sugar diversion for ethanol production effective from Ethanol Supply year 2025. Revenue from other business segments (co-generation and nutraceutical) are expected to decline marginally. Revenues are expected to grow 4-5% from  fiscal 2026 onwards with stable distillery volumes and improving realizations. 

 

While consolidated revenues registered a growth of over 10% in the first half of fiscal 2025, EID-Parry reported operating losses, due to weak profitability of the sugar, co-generation and consumer products businesses. Profitability of the sugar segment was impacted due to reduction in the volume of cane crushed, and operational challenges leading to lower recovery in two of the company’s plants in Tamil Nadu and Karnataka impacting sugar sales volumes. While sale volumes are expected to improve in the second half of fiscal 2025, higher cost of cane and moderation in profitability at refinery, will offset higher contribution from distillery, leading to operating margins of ~2-2.5% in fiscal 2025. However, with full benefit of relaxation of sugar diversion towards ethanol from EY2025, enhanced capacity in distillery operations to 582 kilo litres per day (KLPD) from 417 KPLPD along with permitting of sugar exports, operating profitability is expected to improve to 4-5% fiscal 2026 onwards.

 

EID-Parry’s financial risk profile is expected to remain stable with debt protection metrics such as interest coverage ratio, gearing and TOL/TNW (total outside liabilities/total tangible net worth) ratios remaining adequate. Interest coverage is expected to remain at 2.8-3.0 times in the near-to-medium term compared to 3.1 times in fiscal 2024. Gearing and TOL/TNW ratios are likely to continue at 0.8-0.9 time and 2.1-2.3 times, respectively, in the near-to-medium term with debt levels likely to remain elevated with higher reliance on working capital borrowings due to expected moderation in cash generation. EID-Parry has steadily enhanced its distillery capacity at the Haliyal and Nellikuppam units in the current fiscal, and these units are expected to contribute to revenues and profits in the near to medium term. The company is expected to incur capex of ~Rs.100-150 crore annually over the medium term, mainly for routine modernisation, which will be funded largely from accruals. EID Parry’s liquidity is adequate with expected net cash accrual of Rs 150-250 crore in the near-to-medium term against modest repayment obligations.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of EID Parry with its two subsidiaries namely PSRIPL, and US Nutraceuticals INC (USN) and their subsidiaries.  PSRIPL also has a Dubai (UAE)-based subsidiary, Parry International DMCC, primarily established for sourcing customers for its sugar business and as operations were negligible, same was not consolidated till fiscal 2023. However with overall improvement in scale of operations, Parry international DMCC has been consolidated from fiscal 2024 onwards. Crisil Ratings has also moderately consolidated its joint venture (JV) Algavista Greentech Pvt Ltd (Algavista) to the extent of support required over the medium term. This is because these entities are in the similar line of business as EID Parry. Crisil Ratings also believes EID Parry will extend both business and need-based financial support, to scale up operations.

 

Crisil Ratings has also factored in support from the Murugappa group, since EID Parry is an integral part of the Murugappa group representing the group’s presence in the sugar industry. The group is also expected to extend financial support in case of exigencies.

 

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:

• Diversified revenue profile due to integrated nature of operations: EID-Parry is a large integrated sugar producer. It has the capacity to crush 40,800 tonne per day (TPD) of sugarcane, a co-generation plant of 140 megawatt (MW), distillery of 582 KLPD and sugar refinery of 9 lakh MT per year (through PSRIPL). Large scale, integrated operations with the power and distillery business along with nutraceuticals provide moderate cushion from cyclicality in the sugar business. EID-Parry is expected to crush ~48-49 lakh MT of sugar cane in fiscal 2025. Lifting of restriction on sugar exports will aid profitability of the sugar division moderately. Also, the company is expected to produce more than 1600 lakh litre of ethanol in fiscal 2025 with the removal of restrictions on diversion of sugar for production of ethanol for EY2025. Average realisation for ethanol is also expected to improve to Rs~65/litre in the near term.

 

Performance of refinery segment is likely to moderate in the current fiscal with white sugar prices starting to decline from the third quarter of the current fiscal mainly due to oversupply in the global markets. This is expected to result in flattish volume and decline in realizations translating to a drop in revenue from the refinery segment in the current fiscal. Performance of the other businesses (co-generation and nutraceutical) is expected to be stable in the near term. With increasing focus on distillery operations and with additional capacity becoming available from the second half of fiscal 2025, vulnerability of performance to volatile sugar production and prices is expected to gradually reduce over the medium-term.

 

• Adequate financial risk profile: EID Parrys’ financial risk profile is expected to remain adequate and improve gradually over the medium term, as benefits from current distillery expansion fructify. The company’s total debt is expected to be at Rs 1400-1500 crore by end March 2025, including long-term debt added for distillery expansion, and then gradually reduce over the medium term, with progressive debt repayment and only modest annual capital spending of ~Rs100-150 crore from fiscal 2025 onwards. Interest coverage ratio is expected to remain at 2.8-3.0 times in the near-to-medium term compared to 3.10 times in fiscal 2024. Gearing and TOL/TNW ratios are expected to continue at 0.8-0.9 time and 2.1-2.3 times, respectively, in the near-to-medium term, with debt levels elevated towards the end of the fiscal due to the need to stock sugar for the non-crushing season; average TOL/TNW during the year is much lower. Earlier, EID-Parry’s standalone net profits were also impacted in fiscal 2024 by provision in diminution in value of investment in Dubai based trading subsidiary of PSRIPL.

 

• Financial flexibility, being part of the Murugappa group: EID Parry is one of the leading entities in the Murugappa group of companies. It also derives substantial financial flexibility from being the holding company for CIL. Its 56.2% stake in CIL was valued at ~Rs 31000 crore on January 17, 2025. CIL has a healthy dividend track record, which is expected to continue over the medium term. EID-Parry received dividend of almost Rs 1,100 crore between fiscals 2018 and 2024 from CIL. Steady dividend flows support EID Parry’s overall profits and help mitigate the impact of volatility in its business. The company also sold ~4% stake in CIL during fiscal 2021, proceeds of which has largely been used to pare debt. The group also enjoys strong reputation with the lending community, which helps entities including EID-Parry to raise funds at attractive coupon rates. Any change in the structure of the Murugappa group, resulting in moderation in credit profile of the group, will be a key monitorable.

 

Weaknesses:

• Susceptibility to volatility in sugar prices and regulatory changes: While input prices are driven by the government; sugar prices are volatile and based on open market prices (which are dependent on the production levels) leading to volatility in players’ profitability. Besides, the government regulates domestic demand-supply through restrictions on imports and exports, and stock holdings. Regulatory mechanisms and dependence on monsoons have rendered the sugar industry cyclical. EID-Parry's operating profitability will continue to improve due to cost reduction initiatives, closure of loss-making plants in Tamil Nadu and integrated nature of operations.

 

The government of India advanced the 20% ethanol blending target (with gasoline) to 2026 from 2030. Additionally, the government has made supplies profitable by raising ethanol prices every fiscal, in addition to differential pricing for B-Heavy and the direct cane juice route and providing interest sops on loans for setting up ethanol-based distilleries. Further the recent lifting of restrictions announced by GOI on diversion of sugar for ethanol production from EY2025 along with lifting of curbs on sugar exports in ongoing Sugar season 2025 is expected to augur well for the profitability of integrated sugar players in the near term. Since the sugar industry is highly regulated, any change in the regulatory stance and continuation of government support to sugar sector (including distilleries and ethanol pricing) will remain key monitorables.

 

• Modest performance of PSRIPL: Refinery Division under PSRIPL had recorded a strong performance during fiscal 2024 with a healthy revenue growth of over 50% aided by strong growth in refined sugar volumes to 8.26 LMT from 7.78 LMT (fiscal 2023) and improved realization mainly due to elevated international sugar prices. This trend of higher international  sugar prices continued till the first half of current fiscal 2025 resulting in higher spreads between white and raw sugar, benefitting revenue growth and accordingly enabling operating profit of Rs.50 crore (operating losses of Rs.15 crore in corresponding period of fiscal 2024). However, with international sugar prices beginning to moderate from the third quarter of fiscal 2025 due to oversupply in global markets resulting from higher supplies from Brazil, Europe & Pakistan, PSRIPL is likely to report degrowth in revenues by 9-10% in fiscal 2025, and subsequently, revenue is expected to grow by 2-3% from fiscal 2026 onwards with a slow recovery in international sugar prices. The company is expected to report modest operating profits in fiscal 2025, with further improvement expected next fiscal.

 

PSRIPL’s standalone financial risk profile improved during fiscal 2024 due to firm sugar prices, resulting in operating profits of Rs.65 crores, compared with operating losses of Rs.115 crore in fiscal 2023. This coupled with reduction in debt levels to Rs.294 crore at March 31, 2024 from Rs.814 crore at March 31, 2023, benefitted debt metrics. However, PSRIPL’s financial risk profile is expected to moderate with increase in debt levels on account of lower profitability and cash generation in fiscal 2025 impacting debt metrics. Net worth continues to remain negative, and is expected to remain so until substantial infusion of equity by the parent.

Liquidity: Strong

EID Parry’s liquidity will remain strong due to its sizeable stake in CIL (valued at Rs.31,000 crore at January 17, 2025), and expected net cash accrual of Rs ~150-250 crore in the near-to-medium term, which will be sufficient to meet repayment obligations of Rs 70-90 crore per annum and incremental capex and working capital requirements. Fund-based working capital line of ~Rs 1640 crore was moderately utilised at 45% in the past 12 months. Support from Murugappa group is also expected to be forthcoming, in the event of any need.

 

ESG profile of EID Parry:

Crisil Ratings believes that EID Parry’s Environment, Social, and Governance (ESG) profile supports its already strong credit risk profile. The company’s commitment to ESG principles will play a key role in enhancing stakeholder confidence.

 

Sugar production has a significant impact on the environment owing to moderate emissions, water consumption and waste generation. The sector’s social impact is also sizeable considering the impact of operational activities on the company’s own employees. The company is focusing on mitigating environmental and social risks

 

Key ESG highlights:

• The Company has a continuous focus on conservation of energy. Targets in terms of sourcing mix and cost are set every year and action plans are drawn.
• Share of energy from renewal sources has increased to 84.3%(fiscal 2024) from  82.60% (fiscal 2023) which was better than the industry
• Company has a gender diversity of 2% and Loss time Injury Frequency Rate (LTIFR) rate of 0.82 for fiscal 2024
• The governance structure is characterized by 50% of its board comprising independent directors. Position of the chairman and CEO are split. It has a committee at the Board level to address investor grievances and also put out extensive disclosures.
• There is growing importance of ESG among investors and lenders. The commitment of EID Parry to ESG principles will play a key role in enhancing stakeholder confidence, given its access to both domestic and foreign capital markets.

Outlook: Stable

Crisil Ratings expects better contribution from EID Parry’s sugar, distillery and refinery operations, as well as co-generation operations, will help enhance cash generation over the medium term. Debt metrics are expected to remain at adequate levels, supported by steady cash generation and prudent funding of capex. Also, support from Murugappa group is expected to be forthcoming, if required.

Rating sensitivity factors

Upward factors:

• Better-than-expected improvement in business performance at distillery, co-generation unit and PSRIPL, benefitting cash generation
• Sustaining debt at modest levels of below Rs 800 crore, which along with better cash generation, will further strengthen debt metrics
• Upward movement in the credit profile of Murugappa group

 

Downward factors:

• Substantially weaker business performance due to decline in sugar prices or sizeable increase in cane prices, or weaker-than-expected profitability from distillery and PSRIPL, impacting cash generation
• Slower-than-expected reduction in inventory or higher-than-expected capex leading to debt increasing sharply, impacting key debt metrics; average TOL/TNW remaining above 2.0-2.3 times on sustained basis.
• Change in stance of support from the Murugappa group or moderation in the credit profile of the group, including due to internal restructuring.

About the Company

EID-Parry is part of the Rs. ~78,000 crore Chennai based Murugappa group. The group has diverse business activities that include abrasives, automotive components, cycles, sugar, farm inputs, fertilisers, plantations, construction and bio-products.

 

EID-Parry represents the group's sugar manufacturing interests. The promoters held 42.22% stake in the company as on September 30, 2024. EID-Parry acquired 76% stake in Karnataka-based SSL for Rs.49.62 crore in October 2009 and increased the stake to 100% in September 2011 for Rs 18.0 crore. In May 2014, SSL was merged with EID-Parry (effective from April 1, 2013). In 2010, EID-Parry acquired 65% stake in GMR Industries Ltd (which was subsequently renamed Parry Sugar Industries Ltd or PSIL) for Rs 98.87 crore. In March 2013, the company completed the merger of two of the three mills of PSIL, at Haliyal in Karnataka and at Sankili in Andhra Pradesh, with itself (effective April 1, 2012). In April 2017, the third mill in PSIL was also merged with EID Parry (effective from April 1, 2016).

 

In December 2017, EID-Parry announced slump sale of its in-house bio-pesticides business along with its entire stake in fully owned subsidiary – Parry America Inc, USA to CIL for a total purchase consideration of Rs 338 crore, which was received in April 2018. The company also commenced a 50:50 JV, Algavista, with Synthite Industries Pvt Ltd. The JV is involved in manufacturing value-added algae products and natural food coloring agent called phycocyanin.

 

For the first six months of fiscal 2025, EID-Parry (on standalone basis) reported net revenues of Rs. 1507 crores (Rs. 1425 crores in the corresponding period of fiscal 2024) and net loss of Rs.50 crore (profit after tax of Rs.40 crore).

 

For the first six months of fiscal 2025, EID-Parry (consolidated excluding CIL) reported net revenues of Rs. 3915 crores (Rs. 3404 crores in the corresponding period of fiscal 2024) and net loss before tax of Rs.175 crore (net loss before tax of Rs.155 crore).

Key Financial Indicators

Particulars*	Unit	2024	2023
Revenue	Rs.Crore	7411	5659
Profit After Tax (PAT)	Rs.Crore	53	48
PAT Margin	%	0.7	0.8
Adjusted debt/ adjusted networth	Times	0.73	0.73
Interest coverage	Times	3.10	2.78

*Crisil Ratings Adjusted numbers

Any other information: Not Applicable