| GSP Crop Science Private Limited | ||||||
| Rating Reaffirmed and Withdrawn | ||||||
| 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Ratings has reaffirmed its ratings on the bank facilities of GSP Crop Science Private Limited (GSP) and subsequently withdrawn the ratings at the company's request and on receipt of no-objection certificate from the bankers. The withdrawal is in line with CRISIL Ratings’ policy on withdrawal of bank loan ratings. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of GSP and its subsidiaries, Rajdhani Petrochemicals Pvt Ltd and Indo GSP Chemicals Pvt Ltd, because of significant business and 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 & Detailed Description Strengths: Well-diversified product portfolio: Presence of around four decades in the agro chemicals industry has enabled the company to successfully grow its business by modernising, enhancing production capacity and catering to other large agrochemical companies. Revenue profile is well-diversified, with branded sales contributing 20-30% to revenue and exports accounting for 20%; any single product accounts for below 10% of total turnover. Presence in the retail market and established relationships with large players will enable consistent sales growth and enhanced market share over the medium term.
Above-average financial risk profile: Networth was large at Rs 463 crore due to steady accretion to reserves while gearing was strong at 0.69 time, as on March 31, 2022. Investment of Rs 95 crore in fiscal 2015 from a private equity (PE) firm had also strengthened networth. In April 2022, GSP bought back partial stake of the PE at around Rs 110 crore. Though this had marginally leveraged capital structure, it is expected to remain stable over the medium term. Debt protection metrics remained comfortable, with interest coverage and net cash accrual to total debt ratios of 5.95 times and 0.29 time, respectively, in fiscal 2022.
Healthy prospects for the agrochemicals segment: Agrochemicals play a critical role in ensuring food and nutrition security. GSP will improve its business performance over the medium term on the back of the important role its products play in India’s agricultural industry.
Weaknesses: Large working capital requirement: Operations are inherently working capital intensive, as reflected in gross current assets of 202-257 days over the five fiscals through 2022. Receivables and inventory levels were high at 90-120 days each as on March 31, 2022. With ramp-up in operations, working capital requirement will remain large over the medium term.
Exposure to inherent risks in the domestic agrochemicals market: The agrochemicals industry is highly regulated by specific and different registration processes in various countries and is subject to environmental rules. The industry has to continuously meet the requisite norms and regulations, which are updated and revised. This imposes significant cost on the business and financials of entities and can constrain revenue growth and profitability. |
Liquidity: Adequate Expected cash accrual of Rs 82-100 crore per annum should suffice to cover yearly term debt obligation of Rs 19-32 crore, over the medium term. Bank limit utilisation averaged 85% for the 12 months through September 2022. Current ratio was estimated to be 1.59 times as on March 31, 2022. Controlled gearing and healthy networth provide financial flexibility to leverage in case of any contingency. In the absence of any large capex, liquidity is expected to remain strong over the medium term on the back of healthy accrual, though restrained by high working capital intensity. |
Outlook: Positive GSP will maintain its improving business performance over the medium term, supported by its established market position and diversified revenue profile. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company GSP (formerly, Gujarat Super Phosphate Industries Pvt Ltd) manufactures a wide range of generic technical pesticides, herbicides and fungicides that are used at various stages of the agricultural process to protect crops from insects, pests, fungus and weeds; and to enhance the yield.
In 2015, GSP had received PE investment of Rs 95 crore from Oman India Joint Investment fund (OIJIF, whose general partners are State General Reserve Fund of Oman and State Bank of India) for equity stake of about 11.7%. In April 2022, GSP bought back partial stake of OIJIF for a consideration of about Rs 110 crore, limiting the stake of OIJIF to around 5.3% in GSP. |
Key Financial Indicators (Consolidated)
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
1 crore = 10 million |
Annexure – List of entities consolidated
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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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