Rating Rationale
December 29, 2017 | 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 its healthy business risk profile driven by strong brand, established presence, and wide geographical reach in the domestic market; and comfortable financial risk profile. The strengths are partially offset by large working capital requirement, susceptibility to risks in the domestic agrochemicals industry, and volatility in raw material prices and foreign exchange (forex) rates.

Key Rating Drivers & Detailed Description
Strengths
* Healthy business risk profile, marked by promoters' extensive experience, strong brand positioning, and wide geographical reach: Presence of more than three decades in the agrochemical industry has enabled the promoters to develop a vast portfolio of products comprising pesticides, insecticides, and herbicide formulations and technical; and establish nationwide geographical presence.

* Comfortable financial risk profile: Gearing was healthy at 0.52 time as on March 31, 2017. Also, debt protection metrics improved, with interest coverage and net cash accrual to total debt ratios of 6.2 times and 0.29 time, respectively, in fiscal 2017; against 3.5 times and 0.24 time, respectively, in the previous fiscal.

Weaknesses
* Large working capital requirement: Large credit extended to farmers results in stretched receivables; on the other hand, seasonality and irregular demand due to monsoon, along with dependence on imported raw materials, entail companies to hold large inventory. IIL's gross current assets were 233 days as on March 31, 2017, due to sizeable inventory of 157 days and receivables of 66 days.

* Exposure to risks inherent in the domestic agrochemicals market: A substantial area under cultivation is still not well-irrigated and depends on monsoon. Thus, the fortunes of the agrochemicals industry are linked to rainfall received during a year. The industry is also marked by intense price and product competition from local players and multi-national corporations.
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 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 stretch in working capital cycle or large, debt-funded capital expenditure weakens financial risk profile.

About the Company

Incorporated in 1996 and promoted by Mr Rajesh Aggarwal and family, 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 in Chopanki in Rajasthan, Samba and Udhampur in Jammu & Kashmir, and Dahej in Gujarat. The company had an initial public offering in 2007 and its shares are listed on the Bombay Stock Exchange and National Stock Exchange. Promoters held 68.75% stake in the company as on September 30, 2017.

In the half-year ended September 30, 2017, IIL reported a profit after tax (PAT) of Rs 66.64 crore on revenue of Rs 764.5 crore. Net profit was Rs 58.13 crore on net sales of Rs 1107.38 crore in fiscal 2017, against a net profit of Rs 39.17 crore on net sales of Rs 987.46 crore in fiscal 2016.

Key Financial Indicators
Particulars Unit 2017 2016
Revenue Rs Cr. 1107.40 988.22
Profit After Tax (PAT) Rs Cr. 58.13 39.17
PAT Margin % 5.25 3.96
Adjusted Debt/Adjusted Networth Times 0.52 0.51
Interest coverage Times 6.18 3.54

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-2022 50.0 CRISIL A/Stable
NA Letter of Credit NA NA NA 350 CRISIL A1
Annexure - Rating History for last 3 Years
  Current 2017 (History) 2016  2015  2014  Start of 2014
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper  ST    --    --    --    --  29-09-14  Withdrawal  CRISIL A2+ 
Fund-based Bank Facilities  LT/ST  300  CRISIL A/Stable    No Rating Change  19-09-16  CRISIL A/Stable    No Rating Change    No Rating Change  CRISIL A/Negative 
Non Fund-based Bank Facilities  LT/ST  350  CRISIL A1    No Rating Change  19-09-16  CRISIL A1    No Rating Change    No Rating Change  CRISIL A2+ 
Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release.
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
Term Loan 50 CRISIL A/Stable Term Loan 50 CRISIL A/Stable
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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