Detailed Rationale

Crisil Ratings has upgraded its rating on the long-term bank facilities of Krishana Phoschem Ltd (KPL; part of the Ostwal group) to ‘Crisil A+/Stable’ from ‘Crisil A/Stable’ and has reaffirmed its ’Crisil A1’ rating on the short-term bank facilities.

 

The upgrade reflects the improved operating performance of the company as reflected in higher-than-expected growth in revenue and profitability. In the first nine months of fiscal 2026, revenue increased by 88% on-year to Rs 1,663 crore (Rs 1,366 in fiscal 2025 and Rs 924 in fiscal 204), and Ebitda (earnings before interest, tax, depreciation and amortisation) improved to Rs 209 crore, up by 65% on-year. The improved operating performance is due to healthy sales volume and healthy realisation, supported by healthy demand, the upward revision in the NBS rates in fiscal 2026 and the ability of the company to take price hikes. Moreover, trading volumes also contributed to revenue and profitability growth. The company manufactures only one grade of NPK (20:20:0:13) along with single super phosphate (SSP). However, healthy NPK demand in the ongoing fiscal resulted in high capacity utilisation, along with demand for other grades of NPK fertilisers. This additional demand was met through imports.

 

While the operating Ebitda improved, the Ebitda margin declined to 12.6% in the first nine months of fiscal 2026 (14.0% in fiscal 2025 and 13.9% in fiscal 2024) due to trading volumes (contributing around 24% to the revenue) which have low margin.

 

The operating margin is expected to remain healthy in the medium term for the manufacturing division supported by healthy backward integration and benefits of bulk procurement. The overall margin will continue to depend on the proportionate mix of trading volumes.

 

The ratings also factor in likely improvement in the market position with overall granulation capacity increasing to 6.15 lakh MT by fiscal 2026 from ~4.5 lakh MT. The group continues to be the second-largest SSP player. Further, with the planned capacity expansion in NPK/diammonium phosphate (DAP) capacities, the company will become a sizeable player in complex fertilisers segment. The projects have seen substantial progress with debt fully tied up. Timely progress in capital expenditure (capex) will remain a key monitorable.

 

The ratings reflect the healthy business risk profile of the company supported by its established market position in the SSP fertiliser industry, strong linkages with the parent, Ostwal Phoschem India Ltd (OPIL; ‘Crisil A+/Stable/Crisil A1’), and the healthy operating margin of KPL aided by backward integration. The financial risk profile remains comfortable, supported by high cash accrual, leading to healthy debt protection metrics and prudent capex funding. These strengths are partially offset by exposure to regulatory risks in the fertiliser industry.

 

The interest coverage ratio improved to ~4.9 times in fiscal 2025, compared with ~3.5 times in fiscal 2024, owing to healthy profitability. The financial risk profile will likely remain comfortable with debt to earnings before interest, tax, depreciation and amortisation (Ebitda) ratio expected to sustain below 3 times and interest coverage ratio sustaining over 4 times over the medium term.

 

The government has allocated Rs 1.71 lakh crore subsidy budget for fiscal 2027 with Rs 1.17 lakh crore earmarked for urea and Rs 0.54 lakh crore for complex fertilisers. Crisil Ratings estimates the allocation for complex fertilisers may face a shortfall due to the sustained high prices of raw material and imported fertilisers, however track record of timely subsidy disbursement and additional allocation in the past is likely to keep working capital cycle stable. Given that the fertiliser industry remains highly strategic and controlled by the government, any deferment or delay in disbursing subsidy or any change in the regulatory scenario would be a key rating sensitivity factor.

Analytical Approach

Crisil Ratings has applied its parent notch-up framework to factor in the strong linkages between KPL and OPIL.

Key Rating Drivers - Strengths

Established market position in the SSP industry with diversification into DAP/NPK

KPL is an established player in the SSP industry, with OPIL (at a consolidated level, including KPL) being the second-largest manufacturer with market share of ~9% in fiscal 2025. Its products are sold under the well-known brand Annadata. The group has an established distribution network, comprising of 2,500 wholesalers and dealers and 30,000 retailers. Additionally, it has witnessed healthy ramp up in volumes in the first nine months of fiscal 2026. KPL is likely to maintain its healthy market position, backed by the established position of OPIL in the SSP industry and focus on import substitution for DAP/NPK.

 

Strong linkages with OPIL and experienced promoters

The promoter group and OPIL hold ~72.3% stake in KPL, which is one of the main operating companies of the group with ~45% contribution to revenue in fiscal 2025. KPL benefits from the common sourcing of raw materials for the group. Furthermore, OPIL has extended corporate guarantee and the promoters have extended personal guarantee to the debt facilities of KPL. The group has common directors with decades of experience in the fertiliser industry.

 

Robust operating profitability owing to backward integration

KPL has a relatively higher operating margin than peers, driven by strong backward integration for raw materials undertaken by the Ostwal group, with captive capacity for sulfuric acid, rock phosphate beneficiation and phosphoric acid. The group has long-term supply agreement for procurement of rock phosphate with entities such as Jordan Phosphate Mines Company for import and Rajasthan mining companies for indigenous supply. This ensures continuous availability and low cost of production. The operating margin is expected to be healthy ~14% over the medium term.

Key Rating Drivers - Weaknesses

Exposure to regulatory risks

Given the government’s thrust on self-sufficiency in food grain production, the fertiliser industry is important but highly controlled. Hence, players are susceptible to regulatory changes. KPL is vulnerable to delays in subsidies from the government, leading to high reliance on working capital loans. Deferment in disbursement of subsidies on account of under-budgeting and regulatory changes will remain monitorable.

Liquidity Strong

Cash and equivalent were Rs 9 crore as on December 31, 2025. Fund-based limit was utilised 31% on average for the 12 months through December 2025. Expected cash accrual of Rs 150- 200 crore in fiscals 2027 and 2028 will sufficiently cover annual debt obligation of Rs 35-45 crore and working capital requirement. The company has undertaken capex of Rs 140 crore, of which Rs 75 crore will be funded through debt and cash accrual. The new unit is expected to commence commercial production by the end of fiscal 2026. Liquidity is supported by the need-based support from the Ostwal group.

Outlook Stable

The business risk profile of KPL will sustain over the medium term driven by healthy market position in SSP, recent expansion of the DAP/NPK capacity and strong operating efficiency. The financial risk profile will remain stable, driven by healthy cash accrual and strong linkages with the Ostwal group.

Rating Sensitivity Factors

Upward Factors

• Upgrade in the credit rating of OPIL by one or more notch
• Significant ramp up in capacity utilisation leading to increase in revenue and stable operating profitability
• Improvement in the working capital cycle resulting in lower gross current assets

 

Downward Factors

• Downgrade in the credit rating of OPIL by one or more notch
• Lower-than-expected ramp up in capacity utilisation or subdued volume leading to decline in operating margin
• Large, debt-funded capex or acquisition weakening the financial risk profile
• Adverse impact of any regulatory/policy changes.

About the Company

KPL was incorporated in 2004 and taken over by the Ostwal group in 2007. The company was listed on the National Stock Exchange Emerge Platform in 2017 and then shifted to the main platform in 2019. KPL manufactures SSP, DAP and NPK fertilisers. It has six plants in Meghnagar, Madhya Pradesh, with installed capacity of 1.20 lakh T of SSP, 2.6 lakh T of sulfuric acid, 99,000 T of phosphoric acid, 1.98 lakh T of BRP (crushing) acid and 3.3 lakh T of DAP/NPK per annum.

 

As on December 31, 2025, the company's profit after tax was Rs 97 crore and operating income was Rs 1,663 crore, as against Rs 54 crore and Rs 885 crore, respectively, a year earlier.

Key Financial Indicators*

Particulars	Unit	2025	2024
Revenue	Rs crore	1358	924
Profit after tax (PAT)	Rs crore	87	40
PAT margin	%	6.40	4.33
Adjusted debt/adjusted networth	Times	1	1.45
Adjusted interest coverage	Times	4.75	3.53

*As per analytical adjustments made by Crisil Ratings

Any other information: Not Applicable