Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AA+/Stable/Crisil A1+' ratings on the bank facilities of Rallis India Ltd (Rallis India). Crisil Ratings has also reaffirmed its rating on the commercial paper at ‘Crisil A1+’.

 

The ratings continue to reflect the company’s established position in India’s crop protection market, strong branding and healthy relationship with farmers, and an overall comfortable financial risk profile. The ratings also factor in the strategic importance to the parent, Tata Chemicals Ltd (TCL; rated ‘Crisil AA+/Stable/Crisil A1+’) having 55.08% shareholding in Rallis India, and the consequent operational and need-based funding support available from TCL. These rating strengths are partially offset by flat revenues in the last few fiscals, vulnerability to risks inherent in the crop protection segment and working capital-intensive operations.

 

Revenue during the first quarter of fiscal 2026 grew healthy at 22.2% to Rs 957 crores (first quarter of fiscal 2025: Rs 783 crore) supported by healthy growth of 16% in crop care segment and 38% in seeds business largely due to better volumes offtake in domestic markets with pre-buying on account of early monsoon. However, the growth is expected to moderate in subsequent quarters with floods across Punjab which is one of key domestic region. Crisil Ratings expects Rallis India’s business profile to benefit over the medium term supported by steady increase in demand from domestic markets.

 

Earlier, in fiscal 2025, the company’s revenue was flat at Rs.2,660 crore in fiscal 2025 (Rs 2,650 crore in fiscal 2024) despite decline in exports on account of healthy domestic volumes in the crop care segment and better offtake in Soil & Plant Health (SPH) segment. The export crop care segment witnessed a decline of 14.7% to Rs.545 crore in fiscal 2025 primarily due to global inventory de-stocking and continued Chinese dumping across key export markets. Domestic sales witnessed healthy volumes during fiscal 2025 supported by new product launches especially in Herbicide segment coupled with stable prices. The seeds business, which contributes 15.7% of the sales, witnessed flattish growth at Rs 418 crore in fiscal 2025 with stable offtake especially in cotton seeds.

 

Operating margins during the first quarter of fiscal 2026 improved to 16.92% compared to 12.9% during the same period in the previous fiscal due to better offtake on account of pre-buying with early monsoon thereby benefitting operating leverage. Over the medium term, the margins is expected to remain stable in the range of 11-12% supported by phase out of low margin tail end products and launch of new products. Earlier, operating margin moderated to 11.1% in fiscal 2025 compared to 12.3% in fiscal 2024, primarily due to decline in operating leverage with flattish revenues.

 

The company’s financial risk profile is strong on account of healthy capital structure with almost nil term debt and networth of Rs 1,654 crore as on March 31, 2025. As a result, the company’s debt metrics were healthy with an interest coverage of 22.1 times in fiscal 2025. Gearing and total outside liabilities to tangible networth (TOL/TNW) ratios also remained comfortable at nil and 0.65 times, respectively, as on March 31, 2025. In the absence of any major debt-funded capex plans, these metrics are expected to be maintained at similar levels over the medium term.

 

Liquidity position is comfortable with cash accrual of Rs 197 crore and cash and cash equivalents of Rs 445 crore as on March 31, 2025. Over the medium term, in the absence of term debt repayments, annual cash accrual of Rs 150-200 crore and liquid surplus of around ~500 crore will be sufficient to meet annual capex plan of ~Rs. 100-120 crore and incremental working capital requirement.

Analytical Approach

Crisil Ratings has considered the standalone business and financials of Rallis India and has applied the parent notch up framework to factor in support from TCL, which has 55.08% stake in Rallis India. Crisil Ratings believes that Rallis India will, in case of exigencies, receive support from TCL.

Key Rating Drivers - Strengths 

Strengths:

• Established market position: Rallis India is a major player in the crop protection sector with a strong presence in pesticide industry (insecticides, fungicides, and herbicides), hybrid seeds and plant growth nutrients. The company derives ~82% of its revenues from crop care segment, ~16% from seeds segment and rest ~2% from non-agrochemical products. In the crop care segment, the domestic sales constitute ~76%, which includes branded formulations (~58%), technical (~5%) and SPH (~10%). Of the total domestic branded formulations, the company has presence in all three segments viz. insecticides (~44% of domestic branded formulations), fungicides (~32%), and herbicides (~23%). Further, Rallis India exports crop care products to 41 countries and ~20% of the total revenue is currently derived from the exports.

 

The company is also focusing on launching new products to further strengthen its presence in the domestic market. The Innovation Turnover Index (ITI) is used to track the performance of new products, which represents the revenue share of new products (launched within the past four years), which stood at 14% for the Crop Protection segment in fiscal 2025. With changing labour dynamics and growing demand for Herbicide products in domestic market, the company is more focused in launching products in this segment. Moreover, the company is planning to bring more products into Rs 100+ crores category like Diggaz, a cotton hybrid seed product which was launched a few years back, has gained market traction especially in the North India. The company is expanding its reach to Deccan Plateau Region, which accounts for majority of cotton production and launched new variants which will further strengthen its market position.

 

• Strong focus on branding and relationship with farmers: Strong brand and steady engagement with farmers facilitates regular launch of new products. Rallis India through its several farmer facing initiatives provides agricultural solutions to farmers to enhance their knowledge and improving productivity of crops basis analysis of crop stage & geography.

 

The Company leverages digital platforms like the Rallis Krishi Samadhan app, Dr. Vishwas helpline, and social media channels for seamless farmer interactions. Dhaanya Progressive Farmer initiative engages progressive farmers, providing them with early access to new seed launches and empowering them to act as advocates within their communities. Digital tools such as QR codes, missed-call facilities, vernacular landing pages, and a WhatsApp-based chatbot provide farmers with easy access to product information and support, have been rolled out for improving engagement with farmers and partners across the value chain.

 

• Comfortable financial risk profile: Rallis India has generated healthy cash flows over time, which has strengthened its networth and lowered reliance on debt. Its tangible networth (excluding intangible assets) was healthy at Rs 1654 crore, and gearing at nil, as on March 31, 2025, while other debt metrics too were robust; for instance, interest cover (EBITDA/Interest & finance charges) was at 22.1 times in fiscal 2025. With only moderate capital spending over the medium term, and continuing moderately working capital-intensive operations, debt metrics will continue to be healthy.

 

• Support from the parent: Managerial, operational and financial support from TCL continues to benefit the company. TCL is engaged in the manufacturing of soda ash and related chemicals, including sodium bicarbonate, caustic soda and bromides. In fiscal 2025, TCL generated revenue of Rs.14,887 crore and EBITDA margin of 13.1%. Rallis India is also strategically important to TCL as it is the only company in the group catering to the agrochemical space. Further, it might be noted that TCL increased its stake in Rallis India to 55.08% in July 2023 from 50.09% earlier further reiterating Rallis India’s strategic importance to the parent. TCL is expected to provide need-based support to Rallis India.

 

TCL’s revenue moderated ~3% during fiscal 2025, mainly on account of industrywide dip in realisations for soda ash, a key product for TCL. This resulted in operating margin moderating to 12.9% in fiscal 2025 as against 18.2% during fiscal 2024. At a consolidated level, gross debt increased to Rs 6,304 crore as on March 31, 2025 (against Rs 5,064 crore a year earlier), while the company has healthy liquid surplus of Rs 1426 crore as on March 31, 2025.

Key Rating Drivers - Weaknesses 

Weaknesses:

• Subdued revenue growth over past few fiscals: Company revenue growth has been modest with a CAGR of 2% over the past 5 fiscals has as compared to ~7-8% CAGR witnessed by the domestic formulator industry. This is primarily due to lack of new product launches in the past and decline of exports. However, company is actively taking steps to improve the ITI from 14% to 20% levels over the medium term, which is expected to result in improvement in revenue growth.

 

• Vulnerability to risks inherent in the crop protection sector: The agrochemical industry remains exposed to risks such as irregular monsoon, and volatility in farm income, specific registration processes in different countries, and various environmental rules and regulations. Any ban on key products will also pose a threat to business of players such as Rallis India. However, the company has a strong pipeline of products, which can be launched to offset/lower impact of possible ban of any key pesticides.

 

• Working capital-intensive operations: The domestic crop protection industry is working capital intensive. Crisil Ratings believes that Rallis India’s working capital requirement will remain moderately intensive because of the nature of its business. Inventory is moderately high due to the numerous stock-keeping units and seasonality in the geographies it operates in. Overall inventory is 110-120 days (about 116 days as on March 31, 2025) and average receivables are 70-80 days (about 75 days as on March 31, 2025) and is expected to remain at similar levels over near-to-medium term. 

Liquidity: Strong

Liquidity position is comfortable with cash accrual of ~Rs 197 crore and cash and cash equivalents of Rs 445 crore as on March 31, 2025. Over the medium term, annual cash accrual of Rs 150-200 crore and liquid surplus of over ~500 crore will be sufficient to meet annual capex of Rs. 100-120 crore, dividend payout of around ~Rs 50 crore, incremental working capital requirement and nil term debt repayments.

Outlook: Stable

Crisil Ratings believes the business risk profile will continue to be supported by steady demand prospects for Rallis India’s products in the domestic market.  The financial risk profile is expected to remain healthy with steady cash generation, which would be sufficient to cater to capex and increasing working capital requirements. Rallis India will remain critical for TCL, as it houses the group's agrochemical business and is expected to receive operational, managerial, and financial support.

Rating sensitivity factors

Upward factors

• Sustained revenue growth with EBITDA margin of 15-17%.
• Substantial improvement in working capital situation with lower inventory and receivables and higher cash surplus.

 

Downward factors

• Revenue growth remaining below 9-10% due to weaker volumes or realizations, delaying improvement in operating margins.
• Larger-than-expected, debt-funded capital spending, or substantial acquisition resulting in moderation of capital structure and debt protection metrics.
• Material stretches in working capital levels.
• Downward revision in parent rating.

About the Company

Rallis India, a part of the Tata group, is one of the leading players in the domestic crop protection sector and manufactures insecticides, herbicides, and fungicides at its factories. These agrochemicals are sold across 80% of India’s districts through an extensive distribution network. The Rallis Innovation Chemistry Hub (RICH) caters to domestic and global requirements. In fiscal 2010, Rallis India became a subsidiary of TCL; earlier, it was jointly owned by multiple Tata group companies.

 

Rallis India acquired a majority stake in Metahelix Life Sciences Ltd, a Bengaluru-based seeds company, to focus on hybrid seeds development and sales. Rallis India had also acquired a stake in Maharashtra-based Zero Waste Agro Organics Ltd, which manufactures scientifically prepared organic compost. Both these companies were merged with Rallis India Ltd.

About the Parent

TCL was incorporated in 1939 to manufacture soda ash and related chemicals, including sodium bicarbonate, caustic soda, and bromides. The company commenced operations in 1944 with a 30,000 tonne per annum (tpa) plant at Mithapur. Over the years, it has expanded its gross soda ash capacity to 10,91,000 tpa. It entered the iodised vacuum salt business in 1986. Tata Salt is the leading iodised edible salt brand in India. TCL also has a 440,000-tpa cement plant in Mithapur, which was set up to effectively utilise the solid waste generated during soda ash production.

Any other information: Not Applicable