Detailed Rationale`

Crisil Ratings has revised its ratings on the bank facilities of NACL Industries Ltd (NACL, a part of the NACL group) to 'Crisil D/Crisil D’ from ‘Crisil BB+/Crisil A4+' and simultaneously upgraded it to 'Crisil BB+/Crisil A4+' and ratings continues on 'Rating Watch with Positive Implications'

 

The downgrade is on account of a delay in principal repayment in March 2025, where the payment was made on March 10, 2025, five days after the due date of March 5, 2025. The ratings have been simultaneously upgraded due to the company's track record of timely servicing its debt obligations for over 90 days. The delay in repayment during March 2025 was on account of liquidity challenges, exacerbated by lenders' restrictions on its working capital limits. Furthermore, the company and erstwhile management (prior to CIL acquisition) misrepresented to Crisil Ratings by submitting No Default Statement for March 2025, despite the delay. However, since then, the company has maintained a track record of timely debt repayments.

 

Coromandel International Limited's (CIL) has acquired 53.08% stake of NACL on August 8, 2025 post which it became a subsidiary of CIL. There has been a change in the board of directors and some of the key managerial personnel following the acquisition.

 

The upgrade in the ratings are on account of current improved liquidity position, due to full access to working capital limits along with improved operating performance. Following the announcement of CIL's acquisition of the company in March 2025, the lenders lifted the restrictions on the utilization of working capital limits between March and April 2025, thereby easing the company's liquidity position. These restrictions, which were in place under the previous management, were removed after the acquisition announcement, allowing the company to access its working capital limits without any constraints.

 

Crisil Ratings has observed that the company has made timely repayments in the months following the announcement of its acquisition by Coromandel International Limited (CIL), with no further delays reported since then. The business performance also has witnessed a recovery in Q1 FY26 with NACL group reported total income and profit after tax of Rs 449.53 crore and Rs 13.04 crore for the quarter ended June 2025 as against Rs. 202.05 crores and net loss of Rs. 50 crores respectively in the previous quarter.

 

The acquisition of the company by Coromandel International Limited (CIL) was completed on August 8, 2025, resulting in a change in the board of directors, with the previous promoters being replaced.

 

The ratings have been placed on Watch Positive due to the expected benefits of the acquisition by Coromandel International Limited (CIL), which is anticipated to enhance the financial flexibility of NACL as part of the Murugappa group. The acquisition is likely to provide NACL with strong operational, managerial, and financial support from CIL, leading to a potential improvement in its business profile and financial risk profile. Crisil Ratings has taken note of the completion of the acquisition and is currently assessing the potential benefits and synergies that may arise from it. Ratings shall be removed from Watch after a detailed understanding on these aspects along with the plans of the new promoter and management team for the NACL group.

 

The ratings reflect the strong market presence and brand of NACL in the agrochemicals industry, supported by the extensive experience of the management, its established clientele, geographic diversification in revenue and a moderate financial risk profile. These strengths are partially offset by the large working capital requirement, and susceptibility to competition, regulatory changes and seasonality inherent in the agrochemicals sector.

Analytical Approach

Crisil Ratings has evaluated the consolidated business and financial risk profiles of NACL and its subsidiaries and associate companies. These entities, collectively referred to as the NACL group, are engaged in the same business, under common promoters and have strong business and financial linkages. Also, NACL holds 26% stake in Nasense Labs Pvt Ltd, which has been consolidated accordingly.

 

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:

Established market presence in the agrochemical segment

NACL has built a strong market position in the agrochemicals segment over the past three decades. The management has built healthy relationships with customers across geographies. Clients include reputed players such as Syngenta Asia Pacific Pte Ltd, Saraswati Agro Chemicals India Pvt Ltd and Nissan Chemical Corporation. NACL sells a wide range of insecticides, fungicides, herbicides and plant growth regulators. Its ability to develop products to meet demand may further drive growth over the medium term.

 

Moderate financial risk profile

The financial risk profile is marked by a healthy networth of Rs 399 crore and moderate gearing of one time as on March 31, 2025, as against debt of around Rs 404 crore (Rs 810 crore as on March 31, 2024). Following the release of full working capital limits and business resuming normalcy, debt may increase in fiscal 2026. Capital structure is likely to remain moderately leveraged with gearing projected at 1.5 times in the medium term. Debt protection metrics were impacted due to subdued profitability in fiscal 2025. Interest coverage ratio may improve to over 2 times with recovery in business in the medium term.

 

Weaknesses:

Working capital-intensive operations

Receivables improved to less than 100 days as on March 31, 2025, on account of lower sales in the fourth quarter, vis-a-vis sales recorded in the corresponding quarter of the previous fiscal. With likely recovery in business, receivables are expected to be in the range of 130-140 days, as the company offers extensive credit in the domestic formulations business. Inventory may remain high around 90 days, given the significant number of stock-keeping units, import of raw materials and seasonality in operations. Operations may remain working capital intensive with gross current assets in the range of 220-230 days in the medium term.

 

Susceptibility to competition, regulatory changes and seasonality in the agrochemicals sector

There are several organised agrochemical players operating at a regional level. As NACL is into generic molecules, it faces intense competition from organised as well as unorganised players in India. Fortunes of the agrochemical sector are linked to the quantum, timing and distribution of rainfall in a year and the level of farm income, thereby exposing the players’ revenue to seasonal trends. Besides, surplus or inadequate rainfall could impact profitability of players and cause a stretch in the working capital cycle. NACL’s business performance, similar to that of other agrochemical manufacturers, could be further impacted by regulatory changes, such as export and import policies, registration policies and product and environment safety requirements.

Liquidity: Adequate

Liquidity should remain adequate with cash accrual expected to cover debt obligations in fiscal 2026. The pressure on liquidity has also eased with restrictions placed by lenders on usage of working capital limits being lifted. Utilisation of the fund-based working capital limit averaged 64% for the four months ended July 2025. Further, the company had a cash balance of around Rs 25.97 crore as on July 31, 2025.

Rating sensitivity factors

Upward factors

• Improvement in financial flexibility and credit profile of the group, aided by operational and managerial support, post-acquisition of stake by CIL
• Steady growth in revenue and operating margin leading to net cash accrual of more than Rs 70 crore
• Strengthening of the financial risk profile, especially debt protection metrics and improvement in liquidity

 

Downward factors

• Decline in revenue to less than Rs 800 crore, along with sizeable cash losses
• Significant stretch in the working capital cycle or any large capital expenditure, weakening the financial risk profile and liquidity

About the Group

NACL, incorporated in 1986, manufactures and exports crop protection technicals (active ingredients) and formulations. The company manufactures pesticides, insecticides, herbicides, fungicides and other plant growth chemicals. The company sells formulations through a large retail dealer network in the domestic market and also has a range of branded formulations.

 

The company has a manufacturing unit each in Srikakulam and Ethakota in Andhra Pradesh and a research and development centre in Telangana. The management has recently changed with CIL acquiring a controlling stake in the company. Dr Raghuram Devarakonda is the current Managing Director and CEO of NACL Industries.

 

NACL Spec-Chem Ltd, set up in April 2020, has a manufacturing unit in Dahej Industrial Zone, Gujarat. The unit has an installed capacity of 6,000 tonne per annum for agrochemical technicals and intermediates for domestic as well as export markets.

 

The NACL group reported total income and profit after tax of Rs 449.53 crore and Rs 13.04 crore for the quarter ended June 30, 2025, as against Rs 202.05 crore and loss of Rs 50 crore, respectively, recorded in the corresponding quarter of fiscal 2024.

Any other information: Not Applicable