Rating Rationale
March 17, 2025 | Mumbai
Neogen Ionics Limited
Rating placed on 'Watch Developing'
 
Rating Action
Total Bank Loan Facilities RatedRs.1150 Crore
Long Term RatingCrisil A-/Watch Developing (Placed on 'Rating Watch with Developing Implications')
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 placed its rating on the long term bank facilities of Neogen Ionics Limited (NOL; part of Neogen group) on ‘Rating Watch with Developing Implications’

 

Crisil Ratings has placed the ratings on watch developing following a fire incident at one of the manufacturing plant of the parent, Neogen Chemicals Limited’s (NCL; part of Neogen group; Rated: 'Crisil A/Crisil A1/Watch Developing') in Dahej SEZ  on March 05, 2025. As informed by the management the loss of assets and business interruption are both adequately covered by insurance. However, the final assessment and settlement by the insurance company is yet to be completed.

 

Neogen Ionics facility for manufacturing electrolyte salt and electrolytes was not affected during the fire.

 

The rating reflects synergy derived from the parent NCL with an established market position in the specialty chemical segment, healthy operating efficiency, and a strong financial risk profile. Rating also factors in presence in niche segment. These strengths are partially offset by exposure to risks related to project implementation and timely completion along with steady ramp-up of operations

Analytical Approach

For arriving at ratings, Crisil Ratings has applied its parent notch-up framework to factor business, managerial, and financial/distress support from NCL. This is because NOL is the wholly owned subsidiary of NCL, and NCL has provided corporate guarantee for the debt facilities availed in NOL.

 

Neogen group consists of NCL, Dhara Fine Chem Industries, Neogen Chemicals Japan Corporation Limited and NOL.

 

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:

  • Synergy derived from parent NCL: NOL is a wholly owned subsidiary of NCL. NCL has an established market position and healthy operating efficiency in bromine and lithium chemistry. Promoters of the Neogen group have extensive industry experience and the proven track record in developing bromine and lithium derivatives which continue to support the business risk profile. Research and development initiatives have enabled the shift in focus to more niche, high value-added products, from bulk bromine-based compounds. Constant efforts to control the cost of production per unit have helped maintain a healthy operating margin, despite the competition.

 

  • Presence in niche lithium electrolyte, salts and additives segment: NOL is setting up plant for manufacturing lithium electrolyte, salts and additives which find application in battery industry. The presence in both electrolyte and salt segments gives the company the ability to cater to both export and domestic market. With limited companies available in the industry, the company is expected to face limited competition and establish its position in the market.

 

Weaknesses:

  • Exposure to risks related to project implementation and timely completion: Group is exposed to project implementation and stabilization risk for ongoing electrolyte and salt manufacturing green field project. However, the group's track record of calibrated expansion strategy with a prudent funding mix of debt and equity, promoters experience and manufacturing technology tie up with MU Ionic Solutions Corporation, Japan aid the business risk profile. Crisil Ratings will continue to monitor said project. Project is being undertaken phase wise. A steady ramp-up for operational capacity will remain key monitorable.

 

  • Susceptibility of operations to adverse movements in raw material prices and regulatory risk: The operating income and profitability is vulnerable to adverse movements in the prices of raw material, lithium. In the past, group has witnessed decline in revenue due to sharp decline in lithium and bromine prices

Liquidity: Adequate

On group level, net cash accrual is expected to improve to over Rs.75 crore per fiscal over the medium term against debt obligation in the range of 30-40 crore per fiscal over the medium term. NOL has repayment of Rs 22 crore in FY 2026

Rating sensitivity factors

Upward factors:

  • An upward revision in the rating of NCL by 1 notch or change in its outlook could result in similar rating action on NOL.
  • Successful ramp up of operational capacity resulting in higher-than-expected revenue and operating margin and thus cash accruals of above Rs 20 crore.

 

Downward factors:

  • Change stance of parent with regards to support/equity infusion resulting in higher than expected debt .
  • A downward revision in the rating of NCL by 1 notch or change in its outlook could result in similar rating action on NOL.
  • Significant delay in completion or significant cost overrun impacting the financial risk profile particularly liquidity

About the Group

NCL was incorporated in 1989, promoted by Mr. Haridas Kanani. The company manufactures bromine and lithium-based organic and organo-metallic compounds, used in the pharmaceutical, agricultural chemicals, and engineering industries. The manufacturing units are at Mahape in Navi Mumbai, Maharashtra, Vadodara in Gujarat, Dahej SEZ Gujrat, Patancheru,Telangana and Pakhajan Gujrat . The company made an IPO in May 2019 and is currently listed on the Bombay Stock Exchange and the National Stock Exchange.

 

Company acquired BuLi Chemicals India Pvt. Ltd (BuLi Chem) on May 5th 2023 and same is merged in NCL with effect from 01 April 2024.

 

Neogen Ionics Limited is WOS of the Neogen Chemicals Limited who will be undertaking green fied capex for manufacturing electrolyte and Salts

Key Financial Indicators (Consolidated)

As on/for the period ended March 31

Unit 

2024

2023

Operating income

Rs,Crore

691

686

Reported profit after tax

Rs.Crore

36

50

PAT margins

%

5.1

7.3

Adjusted Debt/Adjusted Networth

Times

0.60

0.76

Interest coverage

Times

2.62

3.86

Any other information: Not Applicable

Note on complexity levels of the rated instrument:
Crisil Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

Crisil Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the Crisil Ratings` complexity levels please visit www.crisilratings.com. 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.Crore) Complexity Levels Rating Outstanding with Outlook
NA Working Capital Facility NA NA NA 20.00 NA Crisil A-/Watch Developing
NA Long Term Bank Facility NA NA NA 894.00 NA Crisil A-/Watch Developing
NA Long Term Bank Facility NA NA NA 80.00 NA Crisil A-/Watch Developing
NA Proposed Long Term Bank Loan Facility NA NA NA 156.00 NA Crisil A-/Watch Developing

Annexure - List of Entities Consolidated

Names of Entities Consolidated

Extent of Consolidation

Rationale for Consolidation

Dhara Fine Chem Industries

Full

90%  share in partnership firm

Neogen Chemicals Limited

Full

Parent

Neogen Chemicals Japan Corporation Limited

Full

wholly owned subsidiaries of parent

Annexure - Rating History for last 3 Years
  Current 2025 (History) 2024  2023  2022  Start of 2022
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 1150.0 Crisil A-/Watch Developing   -- 27-11-24 Crisil A-/Stable   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Long Term Bank Facility 894 State Bank of India Crisil A-/Watch Developing
Long Term Bank Facility 80 Axis Bank Limited Crisil A-/Watch Developing
Proposed Long Term Bank Loan Facility 156 Not Applicable Crisil A-/Watch Developing
Working Capital Facility 20 Axis Bank Limited Crisil A-/Watch Developing
Criteria Details
Links to related criteria
Basics of Ratings (including default recognition, assessing information adequacy)
Criteria for factoring parent/ group/government linkages
Criteria for consolidation

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