Detailed Rationale

Crisil Ratings has reaffirmed its 'Crisil A1+' rating on the commercial paper programme of Godrej Agrovet Ltd (GAL).

 

While the operating income of the company declined marginally by 1.7% for fiscal 2025 to Rs 9,410 crore, the operating margins were significantly better at 9.0% against 7.6% in the previous fiscal. The decline in operating income was due to – a) lower volume sales and de-growth realisations in the animal feed segment, b) lower volume sales in the dairy segment given the decision to undertake price revision, c) lower demand for herbicides in crop protection segment, and d) decision to gradually reduce exposure to live birds in the poultry and processed food segment. Nonetheless, the overall profitability improved and can be attributed to improvement in realisations in vegetable oil segment, favourable commodity positions in animal feed segment, and improved milk spread and cost efficiency measures in the dairy segment. Consequently, absolute operating profit improved to Rs 849 crore in fiscal 2025 from Rs 725 crore for the previous fiscal. The operating income is expected to cross Rs 10,000 crore in fiscal 2026, supported by growth in crop protection, dairy and animal feed segments, however, operating margin is expected to moderate with normalisation of realisation in the edible oil segment.

 

GAL announced to the exchange on March 11, 2025, that its board has approved the acquisition of the balance stake of 48.06% in its subsidiary, Creamline Dairy Products Ltd (CDPL, rated ‘Crisil AA-/Stable/Crisil A1+’) through cash consideration of Rs 930 crore. As on date, the company has completed acquisition of 47.38% and as on date holds 99.32% stake in the company. Although the net worth declined to Rs 2,251 crore as on March 31, 2025 (Rs 2,569 crore as on March 31, 2024) on account of the acquisition, the financial risk profile remains strong. Adjusted gearing and total outside liabilities to tangible net worth (TOL/TNW) ratio stood at 0.57 time and 1.28 times, respectively, as on March 31, 2025. Further, the debt protection metrics continue to be supported by healthy operating performance. Interest coverage and net cash accruals to adjusted debt (NCAAD) for fiscal 2025 were 6.84 times and 0.33 time, respectively. Further, financial flexibility is supported by average bank limit utilisation of ~47% for the twelve months through March 2025, and unencumbered cash and equivalents of Rs 40 crore as on March 31, 2025. The financial risk profile is expected to remain comfortable over the medium term in the absence of inorganic growth and capital expenditure (capex) of Rs 300-350 crore annually, which is expected to be met through expected internal accrual of over Rs 400 crore.

 

The rating continues to reflect the diverse and healthy business risk profile. The company is one of the leading players in the domestic organised animal feed industry and enjoys a substantial market share in the palm oil segment. The rating also factors in strong financial risk profile and financial flexibility arising out of association with the Godrej group. These strengths are partially offset by susceptibility to volatility in raw material prices, intense competition in some of the business segments and vulnerability to weather conditions and government regulations.

Analytical Approach

Crisil Ratings has considered the consolidated business and financial risk profiles of GAL and its subsidiaries, associates and joint ventures (JVs). This is because these entities, collectively referred to as GAL, have common promoters and are in similar lines of business.

 

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 business presence: The company’s focus on diversification into newer segments such as palm oil, crop protection, dairy and poultry and processed foods over the past 7-8 fiscals in order to lower its concentration in the animal feed business (revenue contribution down to around 48% for the fiscal 2025 from around 80% in fiscal 2012) supports its overall business risk profile and provides cushion against slowdown in any business segment.

 

While the operating income of the company declined marginally by 1.7% for fiscal 2025 to Rs 9,410 crore, the operating margins were significantly better at 9.0% against 7.6% in the previous fiscal. The decline in operating income was due to – a) lower volume sales and de-growth realisations in the animal feed segment, b) lower volume sales in the dairy segment given the decision to undertake price revision, c) lower demand for herbicides in crop protection segment, and d) decision to gradually reduce exposure to live birds in the poultry and processed food segment. Nonetheless, the overall profitability improved and can be attributed to improvement in realisations in vegetable oil segment, favourable commodity positions in animal feed segment, and improved milk spread and cost efficiency measures in the dairy segment. Consequently, absolute operating profit improved to Rs 849 crore in fiscal 2025 from Rs 725 crore for the previous fiscal.

 

The operating income is expected to cross Rs 10,000 crore in fiscal 2026, supported by growth in crop protection, dairy and animal feed segments, however, operating margin is expected to moderate with normalisation of realisation in the edible oil segment.

 

• Dominant position in the domestic animal feed and palm oil segments: GAL enjoys a dominant position in the domestic organised animal feed industry with presence across various sub-categories such as cattle, broiler, layer, fish, shrimp and other feeds. The company's efforts are driven by research and development to achieve cost leadership and competitiveness. The company entered the pig feed segment during fiscal 2025, which has a better margin compared to the other segments it operates in. The presence in various sub segments also mitigates concentration risks associated with various kinds of epizootics.
   

The company is also among the few domestic palm oil producers. Being the second largest consumer of palm oil in the world, India’s demand for domestic palm oil is expected to remain robust. The segment registered a compound annual growth rate of 16% over the five fiscals through 2025. Strong volume growth, along with the longer shelf-life volumes coming from the newly set up oil refinery as well as plans to enter into value added products, will support this segment over the medium term.

 

• Strong financial risk profile: The financial risk profile is supported by adjusted gearing and TOL/TNW ratio of 0.57 time and 1.28 times, respectively, as on March 31, 2025. Further, the debt protection metrics are also healthy supported by improving operating performance. Interest coverage and NCAAD for fiscal 2025 were 6.84 times and 0.33 time, respectively. Debt protection metrics are expected to remain comfortable over the medium term in the absence of inorganic growth and capex of Rs 300-350 crore annually, which is expected to be met through expected internal accrual of over Rs 400 crore.

 

The financial risk profile is further supported by average bank limit utilisation of ~47% for the twelve months through March 2025, and unencumbered cash and equivalents of Rs 40 crore as on March 31, 2025.

 

• Strong financial flexibility from being part of the Godrej group: GAL enjoys strong financial flexibility being part of the Godrej group and has the ability to raise debt at competitive rates and on short notice. It is able to directly derive implicit benefits being part of the Godrej group and without a formal arrangement of support with the parent, group companies or promoters.

 

Weaknesses:

• Exposure to volatility in raw material and commodity prices and intense competition: Operations remain susceptible to volatility in raw material and commodity prices in the animal feed, palm oil, dairy and poultry segments. Given the intense competition in the animal feed business, the company's ability to pass on the increase in prices is with a lag or at times, limited. During fiscal 2024, operating margin was impacted by high raw material cost in the animal feed segment. Also, revenue sharing with farmers in the palm oil business is formula driven and linked to international crude palm oil prices and, hence, revenue and operating margin remain susceptible to fluctuations in commodity prices.

 

• Susceptibility to weather conditions and government regulations: Operating income and profitability are susceptible to weather conditions as well as government regulations. In fiscals 2023 and 2025, erratic monsoons in key states impacted the application opportunities for agrochemicals in the crop protection segment. Further, the palm oil business has been impacted by extreme heat in the past, which resulted in lower oil extraction from fresh fruits, resulting in a decline in yield. Nonetheless, the company's presence across diverse agriculture-related businesses mitigates these risks to some extent.

Liquidity: Strong

Net cash accrual (post dividend) of over Rs 400 crore shall be sufficient to cover annual debt servicing requirements of Rs 44-161 crore over the three fiscals through 2028 and capex requirements. Non-convertible debentures of Rs 148 crore due in fiscal 2027, pose refinancing risk, but the same is mitigated by GAL’s financial flexibility reflected in the track record of refinancing and benefits derived from association with the Godrej brand, which provides favourable access to capital markets. Financial flexibility is further supported by average utilisation of working capital lines of Rs 932 crore for the 12 months through March 2025 at ~47% and unencumbered cash and equivalents of Rs 40 crore as on March 31, 2025. 

 

Environment, social and governance (ESG) profile

GAL’s ESG profile supports its healthy credit risk profile.

 

The animal feed and agrochemicals sectors have significant impact on the environment owing to higher emissions, waste generation and water consumption. The sectors also have a significant social impact because of their large workforce across its own operations and value chain partners, and due to their nature of operations affecting local community and health hazards involved. GAL has been focusing on mitigating its environmental and social risks.

 

Key ESG highlights:

• GAL aims at achieving carbon neutrality by 2035. In this direction, the company reported a 21 pps on-year jump in share of renewable energy in its energy mix to ~89% in fiscal 2024, with lower-than-peer average scope 1 and 2 emissions intensity (~6 tCO2E per Rs crore of revenue).
• The company’s lost time injury frequency rate (LTIFR) for employees was broadly in line with peers (0.07). However, it reported two worker fatalities in fiscal 2024.
• The company governance structure is characterised by 54% of its board comprising of independent directors and 46% women directors, ~100% investor complaint redressal rate, and extensive financial disclosures.
   

There is growing importance of ESG among investors and lenders. GAL’s commitment to ESG will play a key role in enhancing stakeholder confidence, given access to domestic capital markets.

Rating sensitivity factors

Downward factors:

• Significant decline in revenue and profitability impacting accrual, return indicators and coverage metrics
• Large debt-funded acquisition or capex impacting the financial risk profile with gearing of more than 1 time on a sustained basis

About the Company

GAL, part of the Godrej group, has presence across the animal feed, palm oil, crop protection, dairy, poultry and processed foods segments with 50+ facilities and a wide distribution network across the country. The company is one of the largest organised animal feed manufacturers in India offering cattle, layer, broiler, shrimp, fish and other feeds. In addition, GAL has interests in animal feed through its JV, ACI Godrej Agrovet Pvt. Ltd in Bangladesh.

 

In the crop protection business, the company has products across the insecticides, fungicides and plant growth regulator segments with a pan-India network of ~7,000 distributors. Through its subsidiary Astec LifeSciences Ltd, GAL is involved in the manufacturing and sale of intermediates, active ingredients and formulations.

 

In the palm oil segment, GAL has palm tree plantations across nine states for producing crude palm oil and palm kernels.

 

The company has a presence in the dairy segment through its subsidiary CDPL and in the processed poultry and vegetarian food products segment through Godrej Foods Ltd (formerly, Godrej Tyson Foods Ltd).

Key financial indicators*

As on/for the period ended March 31,		2025	2024
Revenue	Rs crore	9,410	9,577
Profit after tax (PAT)	Rs crore	403	358
PAT margin	%	4.3	3.7
Adjusted debt/Adjusted net worth	Times	0.57	0.51
Interest coverage	Times	6.84	7.27

*Crisil Ratings-adjusted

Any other information: Not applicable

Annexure – List of entities consolidated

Name of entity	Extent of consolidation	Rationale for consolidation
Godvet Agrochem Ltd	Full	Subsidiary
Astec LifeSciences Ltd	Full	Subsidiary
Behram Chemicals Pvt. Ltd	Full	Subsidiary
Comercializadora Agricola Agroastrachem Cia Ltda	Full	Subsidiary
Creamline Dairy Products Ltd	Full	Subsidiary
Godrej Foods Ltd	Full	Subsidiary
Godrej Cattle Genetics Pvt. Ltd (formerly, Godrej Maxximilk Pvt. Ltd)	Full	Subsidiary
ACI Godrej Agrovet Pvt. Ltd	Equity	JV
Omnivore India Capital Trust	Equity	JV
Al Rahba International Trading LLC, United Arab Emirates	Equity	Associate (up to April 18, 2023)

*As per audited annual report for fiscal 2024