Detailed Rationale

Crisil Ratings has revised its outlook on the long-term bank facilities of Excel Industries Limited (EIL) to 'Stable' from ‘Negative’ while reaffirming the rating at ‘Crisil A+’. Crisil Ratings has also reaffirmed its ‘Crisil A1’ rating on the short-term bank facilities of the company.

 

The revision in outlook follows improvement in operational performance during fiscal 2025 on account of recovery in demand across both domestic and overseas markets as well as stabilisation in realisation across product segment. While the prices seem to have bottomed out, healthy demand will support the business risk profile in the medium term. The financial risk profile continues to be strong supported by healthy networth and almost debt-free balance sheet.

 

The ratings continue to factor in the company’s established market position in the Di-ethyl Thiophosphoryl Chloride (DETC) and phosphonates; presence in diversified customer segments, and geographies; and a strong financial risk profile because of healthy networth and negligible debt. These strengths are partially offset by limited-yet-improving product diversity and exposure to risks inherent in agricultural chemical industry.

 

Revenue recuperated to Rs 978 crore registering 18% on-year growth in fiscal 2025 following a sharp degrowth of 24% in fiscal 2024. While excess inventory following supply deluge from China resulted in muted demand and steep fall in realisation across chemical industry during fiscal 2024, gradual recovery in demand and improvement in realisation supported the growth in revenue during fiscal 2025. Revenue from exports grew by 36% to Rs 177 crore (Rs 130 crore in fiscal 2024) in fiscal 2025 while domestic segment grew by 15% to Rs 801 crore (Rs 696 crore). With normalisation of channel inventory and restocking in the overseas market closer to the sowing season and healthy domestic demand, Crisil Ratings expects steady growth in revenue over the medium term. The operating margin expanded by ~920 bps to 12.2% in fiscal 2025 from 3% in fiscal 2024 on account of demand revival, leading to better operating leverage and stabilisation of prices of key input materials. The operating margin is expected to sustain in line with previous fiscal over the medium term.

 

The financial risk profile continues to be healthy with strong networth of Rs 1,565 crore (Rs 1,407 crore as on March 31, 2024) and debt-free balance sheet as on March 31, 2025. Total outside liabilities to tangible networth (TOLTNW) which was at 0.21 time as on March 31, 2025, is expected to sustain at similar comfortable level over the medium term. The capital expenditure (capex) of Rs 200-300 crore is envisaged spread over three years and to be funded largely through cash surplus and internal accrual. Unencumbered cash surplus including liquid investments stood at Rs 223 crore (including short-term investments) as on March 31, 2025. This, along with expected annual cash accrual of Rs 100-130 crore, should be sufficient to meet capex and incremental working capital requirement. Unutilised fund-based bank limit of Rs 65 crore will act as buffer during exigencies. The company had various strategic investments (including group companies) valued at Rs 875 crore as on March 31, 2025, and it is not envisaging sizeable additional investment over the near to medium term.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of EIL and its wholly owned subsidiaries - Kamaljyot Investments Ltd, Excel Bio Resources Ltd and Excel Rajkot C&D Waste Recycling Pvt Ltd.

 

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 across end-user industries, customer segments and geographies

Domestic sales accounted for ~82% of revenue in fiscal 2025 while the remaining portion is from exports. The company has pan-India presence and caters to major overseas markets such as US, LATAM and Europe. The company started as an agrochemical intermediate manufacturer and has expanded its product portfolio over the years by leveraging its process chemistry capabilities in other segments such as performance and speciality chemicals, polymer additives and pharmaceutical inputs. Performance and speciality chemicals cater to diverse segments such as soaps and detergents, water treatment, and paints and coating. The diversified product basket and end-user industry reduce dependence on agrochemicals.

 

•   Comfortable financial risk profile

The capital structure remains comfortable as indicated by healthy networth of Rs 1,565 crore as on March 31, 2025, owing to steady accretion to reserve over the years and minimal debt. Absence of any large, debt-funded capex and prudent working capital management will enable low reliance on bank funding. Hence, the capital structure and debt protection metrics should remain strong over the medium term with TOLTNW ratio expected below 0.23 time over the medium term. This along with growing scale and improving profitability should further boost the financial risk profile.

 

Weaknesses:

• High product concentration in revenue

DETC had about 43% share in overall revenue in fiscal 2025, which exposes the company to the inherent risk associated with price volatility determined by the supply situation in China. DETC is used in making chlorpyrifos and profenofos, which are agrochemical technicals. The product concentration risk is, however, partially offset by the contribution from the non-agrochemical segment, which contributed to 38% of the revenue in fiscal 2025. Any adverse regulatory decision or significant decline in prices of DETC may have a material impact on the performance of the company and will be a key monitorable.

 

• Exposure to inherent risks in the agrochemical business and regulatory changes

The agrochemical revenue is susceptible to vagaries of the monsoon such as its timing and distribution across the country. Revenue and profitability are also affected by any unfavourable impact of government policies with respect to pollution control, product toxicity, or import and export of raw materials. Further, any ban on key products could impinge on the business of the company. Though increasing focus on other segments should result in a more diversified revenue profile, and provide some cushion, revenue and profitability will be linked to these risks as a large part of income is derived from agrochemical intermediaries.

Liquidity: Strong

The liquidity of the company remains strong with unencumbered cash surplus including liquid investments at Rs 223 crore (including short-term investments) as on March 31, 2025. This along with expected annual cash accrual of Rs 100-130 crore should be sufficient to meet capex and incremental working capital requirement. The company also has access to Rs 65 crore of unutilised fund-based bank limit, which provides cushion.

Outlook: Stable

Crisil Ratings believes that EIL’s business risk profile will benefit from its established market position and diversified revenue profile and prudent working capital management. The financial risk profile will continue to remain strong over the medium term driven by negligible debt, healthy liquidity, strong debt protection metrics and absence of any large debt-funded capex.

Rating Sensitivity Factors

Upward Factors

• Significant revenue growth with material diversification in revenue profile; increase in share from specialty chemical/ pharma/ polymer divisions
• Maintenance of operating margin over 14-15%, benefitting cash generation
• Sustenance of a healthy financial risk profile and improvement in liquidity

 

Downward Factors

• Sustained decline in revenue with operating margin falling below 10% on sustained basis
• Larger-than-expected, debt-funded capex or working capital requirement, increasing the gearing to above 1 time.

About the Company

Incorporated as a private-limited company in 1960, EIL was reconstituted into a public-limited company in 1971. Following the demerger of its crop protection business to Excel Crop Care Ltd, EIL began focussing more on chemical intermediaries used in agrochemicals, commodity polymers, engineering polymers, soaps and detergents, water-treatment chemicals and biocides. The promoter group owned 52.66% stake in the company as of March 2025.

Key Financial Indicators (Crisil Ratings-adjusted numbers)

As on/for the period ended March 31	Unit	2025	2024*
Revenue	Rs.Crore	978	830
Profit After Tax (PAT)	Rs.Crore	85	13
PAT Margin	%	8.7	1.6
Adjusted gearing	Times	0.0	0.0
Interest coverage	Times	63.07	17.46

*Financials for fiscal 2024 include amortisation of goodwill worth Rs 18.85 crore on acquisition of the Visakhapatnam plant of Netmatrix Crop Care Ltd for five years starting fiscal 2020

Any other information: Not Applicable