| NACL Industries Limited | ||||||
| Ratings downgraded to 'CRISIL A-/Stable/CRISIL A2+' | ||||||
| Rating Action | ||||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has downgraded its ratings on the bank facilities of NACL Industries Ltd (NACL; a part of the NACL group) to ‘CRISIL A-/Stable/CRISIL A2+’ from ‘CRISIL A/Negative/CRISIL A1’.
The downgrade reflects the significantly weaker-than-expected operating performance of the NACL group in fiscal 2024 on account of muted overseas demand and significant decline in price realisations. Consequently, the revenue and operating margin are expected to decline to around Rs 1.900 crore and 2.5-3.2% for fiscal 2024 — the margin was 8.5% for the previous fiscal. For the nine months through December 2023, the group reported revenue of Rs 1,321 crore and operating margin of less than 1%, resulting in net loss of around Rs 50 crore. Revival in overseas demand and improvement in price realisations and operating margin will remain monitorable.
The ratings continue to reflect the strong market presence and brand of NACL in the agrochemical space, supported by the extensive experience of the management team, established clientele and geographical diversification in revenue. The ratings also factor in the above-average financial risk profile. These strengths are partially offset by large working capital requirement, expected moderation in business performance, exposure to competition and susceptibility to regulatory changes and seasonality inherent in the agrochemicals sector. |
Analytical approach CRISIL Ratings has combined the business and financial risk profiles of NACL and all its subsidiaries and associate companies. This is because all the entities, collectively referred to as the NACL group, are in the same business, and have common promoters and strong business and financial linkages. Also, NACL holds 26% stake in Nasense Labs Pvt Ltd, which has been consolidated proportionately.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key rating drivers and detailed description Strengths:
Weaknesses:
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Liquidity: Adequate Bank limit was utilised 82%, on average, for the 12 months through December 2023. The company had free cash balance of around Rs 36 crore as of December 2023, which supports liquidity. Cash accrual is expected to be lower than the debt obligation in fiscal 2024 and the gap will be met through the cash flow from operations and available liquidity. |
Outlook: Stable CRISIL Ratings believes the NACL group will continue to benefit from its established market position and diverse product profile. |
Rating sensitivity factors Upward factors
Downward factors
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About the company NACL, incorporated in 1986, manufactures and exports crop protection technicals (active ingredient) and formulations. It manufactures all kinds of pesticides, insecticides, herbicides, fungicides and other plant growth chemicals. The formulations business is mainly in the Indian market, and the company sells through a large retail dealer network spread across the country. It also has a range of branded formulations. The company has two manufacturing units at Srikakulam and Ethakota in Andhra Pradesh, and one research and development centre in Telangana. Ms K Lakshmi Raju is the promoter and Mr M Pavan Kumar manages the operations.
NSCL has set up a manufacturing unit at Dahej with installed capacity of 6,000 tonne per annum for manufacturing technicals and intermediates for the domestic as well as overseas markets.
The NACL group reported revenue and net loss of Rs 1,326 crore and Rs 49.88 crore, respectively for the first nine months of fiscal 2024, as against revenue of Rs 1,528 crore and net profit of Rs 61.34 crore for the corresponding period of the previous fiscal. |
Key financial indicators (consolidated)
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of instrument(s)
*Working capital demand loan (WCDL) and pre- and post-shipment credit are sublimits of cash credit |
Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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