Rating Rationale
December 19, 2018 | Mumbai
Insecticides (India) Limited
Ratings Reaffirmed
 
Rating Action
Total Bank Loan Facilities Rated Rs.650 Crore
Long Term Rating CRISIL A/Stable (Reaffirmed)
Short Term Rating CRISIL A1 (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its 'CRISIL A/Stable/CRISIL A1' ratings on the bank facilities of Insecticides (India) Limited (IIL).
 
The ratings continue to reflect a healthy business risk profile driven by the extensive experience of the promoters, strong brands, an established presence, and a wide geographical reach in the domestic market; and a comfortable financial risk profile. These strengths are partially offset by large working capital requirement, susceptibility to risks in the domestic agrochemicals industry including ban on certain pesticides by the government.

Key Rating Drivers & Detailed Description
Strengths
* Healthy business risk profile: A presence of more than three decades in the agrochemical industry has enabled the promoters to develop a large portfolio of products comprising pesticides, insecticides, and herbicide formulations and technicals. They have also established a nationwide sales infrastructure.
 
* Comfortable financial risk profile: The gearing was healthy at 0.2 time as on March 31, 2018. The debt protection metrics improved, with interest coverage and net cash accrual to total debt ratios at 9.3 times and 0.84 time, respectively, in fiscal 2018 as against 5.6 times and 0.32 time, respectively, in the previous fiscal. Capital expenditure (capex) of Rs 130 crore towards the Dahej, Gujarat, plant, is planned to be completely funded by internal cash accrual over the medium term. Despite the capex plans, the financial risk profile is expected to remain comfortable.  

Weakness
* Large working capital requirement: Substantial credit extended to farmers results in stretched receivables. Also, seasonality and irregular demand due to monsoon, along with dependence on imported raw materials entail large inventory. Gross current assets were thus high at 245 days, driven by sizeable inventory of 161 days and receivables of 78 days, as on March 31, 2018.
 
* Exposure to risks inherent in the domestic agrochemicals market: A substantial area under cultivation is still not well-irrigated and depends on the monsoon. Thus, the fortune of the agrochemicals industry is linked to rainfall received during a year. There is intense price and product competition from local players and multi-national corporations. Operations are also exposed to government regulations. In August 2018, the Ministry of Agriculture and Farmers Welfare prohibited four pesticides (contributing around Rs 160 crore in fiscal 2018) being manufactured by IIL. However, continuous addition of products mitigates the risk to a large extent.
Outlook: Stable

CRISIL believes IIL will continue to benefit over the medium term from its established market position in the domestic agrochemicals industry. The outlook may be revised to 'Positive' if the operating margin increases substantially due to higher revenue from value-added and technical products, and efficient working capital management. The outlook may be revised to 'Negative' if a stretch in the working capital cycle, or large, debt-funded capex weakens the financial risk profile, or there is significant impact on revenue or profitability of the ban on listed pesticides by the government.
 
Liquidity
Liquidity is adequate, driven by sufficient cash accrual of Rs 94 crore and Rs 104 crore in fiscals 2019 and 2020, respectively, against low debt repayment of Rs 8-10 crore per fiscal. Average fund-based bank limit utilisation was 32% and non-fund-based bank limit utilisation 44% for the 12 months through October 2018. The unused bank lines provide financial flexibility. Internal cash accrual, cash and cash equivalents, and unutilised bank lines should be sufficient to meet repayment obligation as well as incremental working capital requirement. Despite the capex plans, liquidity is thus expected to remain comfortable over the medium term.

About the Company

Incorporated in 1996 and promoted by Mr Rajesh Aggarwal and his family members, IIL commenced operations in the agrochemicals industry in 2002. It manufactures formulations and technicals of plant protection chemicals and household pesticides at its seven facilities at Chopanki in Rajasthan, Samba and Udhampur in Jammu and Kashmir, and Dahej.  The company had an initial public offering in 2007 and its shares are listed on the Bombay Stock Exchange and National Stock Exchange.

Key Financial Indicators
Particulars Unit 2018 2017
Revenue Rs crore 1073.2 994.2
Profit after tax (PAT) Rs crore 84.0 59.4
PAT Margin % 7.8 6.0
Adjusted debt/adjusted networth Times 0.2 0.5
Interest coverage Times 9.3 5.6

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.
Annexure - Details of Instrument(s)
ISIN Name of Instrument Date of Allotment Coupon
Rate (%)
Maturity Date Issue Size
(Rs Cr)
Rating Assigned with Outlook
 NA Cash Credit NA NA NA 250.0 CRISIL A/Stable
 NA Term Loan NA NA Apr-2020 20.0 CRISIL A/Stable
NA Letter of Credit NA NA NA 350 CRISIL A1
NA Proposed Fund-Based Bank Limits NA NA NA 30.0 CRISIL A/Stable
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  300.00  CRISIL A/Stable      29-12-17  CRISIL A/Stable  19-09-16  CRISIL A/Stable  28-07-15  CRISIL A/Negative  CRISIL A/Negative 
                    03-07-15  CRISIL A/Negative   
Non Fund-based Bank Facilities  LT/ST  350.00  CRISIL A1      29-12-17  CRISIL A1  19-09-16  CRISIL A1  28-07-15  CRISIL A2+  CRISIL A2+ 
                    03-07-15  CRISIL A2+   
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Cash Credit 250 CRISIL A/Stable Cash Credit 250 CRISIL A/Stable
Letter of Credit 350 CRISIL A1 Letter of Credit 350 CRISIL A1
Proposed Fund-Based Bank Limits 30 CRISIL A/Stable Term Loan 50 CRISIL A/Stable
Term Loan 20 CRISIL A/Stable -- 0 --
Total 650 -- Total 650 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for Chemical Industry
CRISILs Bank Loan Ratings
The Rating Process
Understanding CRISILs Ratings and Rating Scales

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