Key Rating Drivers & Detailed Description

Strengths:

Comfortable financial risk profile: Gearing has remained strong at below 0.2 time over the three fiscals through 2023 and was 0.17 time as on March 31, 2023; networth was around Rs 108 crore. Debt protection metrics were healthy, with interest coverage and net cash accrual to adjusted debt ratios of 7.6 times and 0.51 time, respectively, for fiscal 2023. Financial risk profile will continue to be supported by the absence of any large, debt-funded capital expenditure (capex).

Strong market position: Teesta is the sole manufacturer of single super phosphate (SSP) fertiliser in West Bengal and northeastern states. The company has 10 marketing offices across West Bengal, Assam, Delhi and Punjab; and has also set up a unit in Rajasthan. Despite government subsidy being insufficient to cover cost of transporting the fertiliser over long distances, the strategic location of units enables it to comfortably reach out to farmers in the Northeast who cultivate potatoes, oil seeds, mustard and vegetables.

Weaknesses:

Modest operating efficiency: Since fertiliser is a seasonal commodity in the geography the company operates in, operating efficiency remains below average for the plant at Jalpaiguri, West Bengal. Average capacity utilisation was less than half in fiscal 2023 and is expected to remain at similar levels over the medium term, thereby constraining business risk profile. Hence, Ebitda (earnings before interest, taxes, depreciation, and amortisation) margin was muted at 4.7% for fiscal 2023. Faster ramp-up of the Chittorgarh plant and improvement in capacity utilisation will remain key monitorables over the medium term.

Susceptibility to government regulations: Since the fertiliser industry is strategically important, it will continue to be extensively regulated by the government. Intervention by the government in deciding output prices as well as changing subsidy rates will continue to impact operating margin.

Annexure - Details of Instrument(s)

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