Detailed Rationale CRISIL Ratings has upgraded its ratings on the bank loan facilities of Parijat Industries India Private Limited (PIIPL) to ‘CRISIL BBB+/Stable/CRISIL A2’ from ‘CRISIL BBB/Stable/CRISIL A3+’.
The revision in the rating takes into account the improved business risk profile of the group due to higher capacity utilisation in the new plant set up in fiscal 2021 and geographical expansion in the domestic market while sustaining the growth coming from export market. There is also addition of new products and customers in this fiscal which would further support the business profile. Despite the lockdown, scale of operation was stable marked by estimated revenue of Rs. 670 crores in fiscal 2021 and expected to grow by 20-25% over the medium term. Furthermore, company has shown the improvement in the operating margin from 3.76% in fiscal 2020 to 7.85% in fiscal 2021 on account of better realisation. Company has already achieved a revenue of Rs 315 crore till July 2021 and is expected to achieve H1 revenue of Rs 490 crore.
Revision in the rating also factors in the improved financial risk profile with estimated networth of Rs 176.82 crore as on March 31, 2021 (improving from Rs 144.37 crore a year before) and improvement in gearing from 1.3 times in fiscal 2020 to 0.63 times in fiscal 2021.With no major debt based capex plans, the financial profile is expected to improve further over the medium term.
Liquidity continues to remain comfortable with moderate bank limit utilisation in the range of 60-70% for the past 12 months ended May 30, 2021. Net cash accruals are expected to be over Rs 35 crore for fiscal 22, which are sufficient against the term debt obligations of around Rs 6 crores in the medium term. Need based funding support through promoters by way of unsecured loans further supports the liquidity. The company also has the plans to raise funds through public issue. Any material development on the same shall remain monitorable.
The ratings reflect PIIPL's comfortable market position in the agro chemical industry, comfortable financial profile, geographical diversification in revenues, diversified product portfolio with continuous product planning and innovation. These strengths are partially offset by exposure to intense competition in agro chemical industry, exposure to risks inherent in agro chemicals market and working capital intensive operations. |
Analytical Approach The subsidiary companies of PIIPL are engaged in same line of business, the team has thus consolidated the business and financial risk profile of PIIPL with its subsidiaries.
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: Comfortable market position in the agro chemical industry: The promoters have four decades experience in the agro-chemical industry. The company is present in around 20 states in India and more than 60 countries globally. With extensive experience and wide presence, PIIPL has been able to build strong ties with its stakeholders in the industry and build a strong position for itself in the market.
Comfortable financial profile: PIIPL capital structure have been at healthy level due to lower reliance on external funds yielding low total outside liabilities to tangible networth (TOL/TNW) of around 1.9 times as on 31st March 2021. PIIPL debt protection measures have also been at healthy level due to leverage and healthy profitability. The interest coverage and net cash accrual to total debt (NCATD) ratio are at 3.04 times and 0.23 times for fiscal 2021 .PIIPL debt protection measures are expected to remain at similar level over medium term.
Geographical Diversification in revenues: PIIPL has a diversified revenue mix with around 60-70 % revenue coming from domestic market and remaining from the export market. In both retail and institutional segment, there is very low concentration risk as the group has geographical reach in around 20 states in India with extensive customer reach and is further looking for expansion in the domestic market. PIIPL's global segment also experiences low customer concentration with presence in 60 countries.
Diversified product portfolio with continuous product planning and innovation: PIIPL's product portfolio includes various products such as insecticides, fungicides, herbicides and other bioproducts. Over 50 per cent of its revenue comes from insecticides due to its wide usage in agriculture.
However, fungicide and herbicide remains the highest growing product category. Its product portfolio also includes bio products. Moreover PIIPL has its Research & Development facilities at Ambala, which focuses on innovating and upgrading the products on a continuous basis. Through continuous R&D, PIIPL has been able to register more than 300 products globally.
Weaknesses: Exposure to intense competition in agro chemical industry: Agro chemical industry is an intensely competitive industry even though there are sufficient entry barriers. There are well established players such as Bharat Rasayan Ltd, Crystal Crop Protection Pvt Ltd and Insecticides India Ltd. PIIPL's exposure to intense competition in the industry will affect its ability to secure higher market share and operating margin over the medium term.
Exposure to risks inherent in agro chemicals market: With a seasonal nature of business, PIIPL is exposed to cyclicality in the agro chemical industry, which is highly dependent on timely arrival of monsoon and on the level of farm incomes. The agro chemicals industry faces risks such as erratic monsoon, marketing of spurious pesticides and insecticides, and intense competition. The demand for agro chemicals is driven by agricultural production, which depends on the monsoon. The fortunes of the agro chemicals industry are, therefore, linked to the rainfall received during a year. Marketing of spurious pesticides and seeds is another major risk. These counterfeit products endanger the brand equity of industry players and damage crop production. The industry is also marked by intense price and product competition from local players and multinational companies.
Working capital intensive operations: Gross current assets were at 225-239 days over the three fiscals ended March 31, 2021. Its intensive working capital management is due to high inventory days and debtor days of around 102 days and 121 days respectively in FY21.The inventory is maintained for a longer time due to the seasonal nature of the industry and PIPL extends longer credit to the farmers leading to higher debtor days. |
Liquidity : Adequate The liquidity position is expected to remain strong over medium term as reflected in the moderate bank limit utilisation of around 70% in the last twelve months ended May 2021.In FY 22, cash accruals are expected to be around Rs 35 crores against repayment obligations of Rs 6 crores. Current ratio is moderate at around 1.3 times on March 31, 2021. |
Outlook Stable CRISIL Ratings believes that the company will benefit from the extensive experience of the promoters in the industry. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company PIIPL was incorporated in 1995 by Mr. Keshav Anand and Mr.Vikram Anand, later joined by their third brother Mr. Sharat Anand. It is engaged in manufacturing and distribution of formulations, insecticides, fungicides, herbicides & technical of agro chemicals. It has three manufacturing facilities, two located at Ambala-Haryana and one at Hyderabad-Telangana. Currently the company has more than 300 agro chemical formulation registrations in its portfolio. |
Key Financial Indicators-Standalone
*Provisional |
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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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)
^Cash credit limit as a sublimit |
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 | |||
| Facility | Name of Lender | Amount (Rs.Crore) | Rating |
| Cash Credit | HDFC Bank Limited | 35 | CRISIL BBB+/Stable |
| Cash Credit | IndusInd Bank Limited | 27 | CRISIL BBB+/Stable |
| Foreign Currency Term Loan | Kotak Mahindra Bank Limited | 1.97 | CRISIL BBB+/Stable |
| Fund-Based Facilities | IDFC Limited | 33 | CRISIL BBB+/Stable |
| Letter of Credit | DBS Bank Limited | 29 | CRISIL A2 |
| Letter of Credit | ICICI Bank Limited | 10 | CRISIL A2 |
| Letter of Credit | Kotak Mahindra Bank Limited | 10 | CRISIL A2 |
| Letter of Credit | RBL Bank Limited | 30 | CRISIL A2 |
| Non-Fund Based Limit | IndusInd Bank Limited | 15 | CRISIL A2 |
| Packing Credit in Foreign Currency^ | ICICI Bank Limited | 15 | CRISIL BBB+/Stable |
| Packing Credit in Foreign Currency | Kotak Mahindra Bank Limited | 20 | CRISIL BBB+/Stable |
| Proposed Short Term Bank Loan Facility | Not Applicable | 20 | CRISIL A2 |
| Proposed Working Capital Facility | Not Applicable | 23.09 | CRISIL BBB+/Stable |
| Proposed Working Capital Facility | Not Applicable | 1 | CRISIL BBB+/Stable |
| Working Capital Facility | HDFC Bank Limited | 4.4 | CRISIL BBB+/Stable |
| Working Capital Facility | IndusInd Bank Limited | 2.73 | CRISIL BBB+/Stable |
| Working Capital Facility | Kotak Mahindra Bank Limited | 4.31 | CRISIL BBB+/Stable |
| Working Capital Facility | RBL Bank Limited | 4.5 | CRISIL BBB+/Stable |
| Working Capital Term Loan | IDFC Limited | 14 | CRISIL BBB+/Stable |
Criteria Details
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