Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil A/Stable’ rating on the long-term bank facility of Tropical Agrosystem India Private Limited (TAIPL).

 

The rating continues to reflect the long-standing presence of TAIPL in the domestic agrochemical formulations industry, strong marketing and distribution network and geographic reach, and improving financial risk profile supported by healthy cash accrual generated from sustained revenue growth and steady profitability. These strengths are partially offset by large working capital requirement, exposure to risks inherent in the domestic agrochemical sector and susceptibility to volatility in input prices and fluctuation in foreign exchange (forex) rates.

 

During first nine months of fiscal 2025, TAIPL has recorded a strong revenue growth of 20% over the corresponding period of the previous year. This growth is driven by healthy demand for pesticides following favourable monsoon and addition of new market-relevant products including biologicals, and enhancement of market reach. Earlier in fiscal 2024, revenue grew at steady pace of 13% to Rs 1,423 crore despite the challenges faced by other large agrochem players owing to adverse weather conditions and sluggish export demand. Strong product basket, TAIPL’s longstanding relationship with its dealers, better product mix along with launch of new products supported healthy growth in revenue in fiscal 2024. TAIPL is estimated to register a strong growth of 16-18% in fiscal 2025 reaching Rs 1,600 crore and steady growth of 10% over medium term aided by normal monsoon, steady increase in crop production and rise in minimum support prices.

 

Operating profitability recovered strongly registering a growth of ~400 basis points from 8.5% in first nine months of fiscal 2024 to 12.4% in the first nine months of fiscal 2025, aided by moderation in input costs, operating leverage benefits and various cost reduction initiatives. Profitability had earlier moderated in fiscal 2024 on account of high discounts and sales promotion expenses which the company had extended considering the sluggish demand situation. Operating profitability is expected to sustain at 10.5-11% in line with the pre-covid level, aided by operating leverage benefits due to strong growth in revenue, increase in share of revenue from manufacturing and launch of new products with better margin.

 

The rating also reflects TAIPL’s co-marketing arrangement with leading multinational companies (MNCs), increased sales in biological and plant growth regulators, continued new product launches leading to healthy business risk profile. Also, TAIPL’s manufacturing revenue has steadily increased over the years reaching ~76% of overall sales during the first nine months of fiscal 2025 as against ~60% in fiscal 2020. TAIPL continues to generate ~82% and ~17% revenue from pesticide and bio-pesticide products, respectively, while the remaining is generated from fertilisers and seeds.

 

The financial risk profile also improved to healthy level in fiscal 2024 and the trend is expected to continue over the medium term despite moderate increase in debt primarily utilised for working capital purposes. Gearing fell to 0.59 time as on March 31, 2024, from 0.69 time a year earlier, and is expected to remain comfortable below at ~0.4-0.5 time in the near to medium term.Debt to earnings before interest, taxes, depreciation and amortisation (Ebitda) ratio has fallen to 2.06 times in fiscal 2024 from 2.15 times in fiscal 2023. Capital expenditure (capex) spend for fiscals 2025 and 2026 is expected at Rs 70-80 crore, which is likely to be funded through internal accrual.

 

Crisil Ratings also notes the completion of the demerger of TAIPL's non-core assets with book value of Rs 0.88 crore as on March 31, 2023, into three separate entities — Green Pesticides Pvt Ltd (GPPL), Concept Agrosystem India Pvt Ltd (CAIPL) and Techno Farm Sciences Pvt Ltd (TFSPL) — which are owned by the promoters of TAIPL. National Company Law Tribunal approval was obtained by TAIPL for the above transaction on March 1, 2024 and same was effective from April 1, 2023. Rental income derived from these properties is around Rs 0.30 crore, which will no longer be generated. As part of the said transaction, TAIPL has received non-convertible redeemable preference shares of Rs 0.88 crore for which dividend of 8% will be paid by these three entities which will be fully closed at the end of three years.

 

Crisil Ratings also takes note of the plans by one of the existing promoters, Mr V.K Jhaver and family, to dilute stake to extent of 10-15% in favour of a private equity investor, by way of offer for sale/secondary sale and not a strategic sale. The process is in its initial stages and is expected to materialise by July-August 2025.

Analytical Approach

Crisil Ratings has considered the standalone business and financial risk profiles of TAIPL.

Key Rating Drivers & Detailed Description

Strengths:

Established market presence in the domestic agrochemical formulations, supported by wide product portfolio and geographic reach: TAIPL sells a wide range of biologicals, organic manures, plant growth regulators, insecticides, fungicides and herbicides. It has over 376 registrations for formulations in the domestic market and 12 import registrations. The company also has co-marketing arrangements with leading MNCS such as DuPont, UPL Ltd (‘Crisil AA+/Negative/Crisil A1+’), Bayer and Syngenta. TAIPL has been increasingly focusing on high-margin products such as plant growth regulators and bio-pesticides. It should continue to benefit from the long-standing presence in the domestic market; the increasing share of high margin products will continue to support operating profitability, which is expected to be over 10.5% in the medium term.

 

Strong marketing and distribution network: Operations of TAIPL are supported by a wide distribution network that includes depots across 25 states, 15,000 distributors and 1,00,000 retailers across the country. The company also has a strong marketing team with experienced professionals aiding to maintain healthy and longstanding relationship with its existing dealers and retailers.

 

Improving financial risk profile: The financial risk profile continues to improve supported by steady increase in cash generation, moderate capex and prudent working capital management. Networth is estimated at over Rs~540 crore as on March 31, 2025. Gearing improved to 0.59 time as on March 31, 2024, from 0.69 times a year ago and estimated to be at ~0.4-0.5 time as on March 31, 2025, and medium term. The debt protection metrics should continue to be adequate with estimated interest coverage ratio at 6.5 times and net cash accrual to total debt ratio at 0.4 time in fiscal 2025. Further, the promoters are likely to continue extending timely, need-based unsecured loans to support operations. Promoter loan of ~Rs 9 crore as of March 31, 2024, has been repaid entirely in fiscal 2025. With prudent funding of capex and working capital management, the debt protection metrics are expected at adequate level over the medium term.

 

Weaknesses:

Large working capital requirement: TAIPL has prudently managed its working capital cycle with gross current assets (GCAs) days steadily decreasing from 266 days as on March 31, 2021, to 243 days as on March 31, 2022, and March 31, 2023, which have further reduced to 228 days despite increase in scale of operations due to efficient management of inventory and receivables and are expected at 210-220 days in the medium term. TAIPL offers considerable credit in the domestic formulations business and has to maintain adequate inventory owing to diverse product portfolio, number of stock keeping units, import dependance for raw materials and seasonality in operations. In case of plant growth regulators and biologicals, which account for about 20% of revenue, TAIPL extends longer credit period than for other products. This is because these products require concept selling and hence take relatively longer time for testing and acceptance.

 

Receivables improved to 140 days as on March 31, 2024, from 146 days a year earlier. Inventory reduced to 79 days as on March 31, 2024, from 82 days. As on December 31, 2024, receivables were Rs 966 crore compared with Rs 543 crore as on March 31, 2024. Increase in receivables is on account of seasonal nature and increased scale of operations, however the same is estimated to reduce with improved collections during the fourth quarter of fiscal 2025. Incremental working capital requirement has been managed efficiently through a mix of cash accrual and bank borrowing. Nevertheless, given the nature of the industry, especially the biological segment, operations will remain working capital intensive over the medium term and prudent management of the same will be critical.

 

Susceptibility of profitability to volatility in input prices and fluctuation in forex rates: Profitability remains susceptible to supply disruptions and steep increase in input prices owing to limited pricing flexibility in the competitive domestic formulations business. Around 20% of the raw material is imported, and the company does not hedge its forex exposure. Consequently, profitability is susceptible to adverse forex movements.

 

Exposure to competition and susceptibility to changes in regulations and seasonality inherent in the agrochemicals sector: The domestic agrochemical formulations industry has several unorganised players with regional presence. As TAIPL is into generic molecules, it faces intense competition from both organised and unorganised players in the domestic market. Also, the domestic agrochemicals sector is dependent on monsoon and the level of farm income. Fortune of the sector is, therefore, linked to the quantum, timing, and distribution of rainfall during a year, exposing the revenue of players to seasonal trends. Besides, surplus or inadequate rainfall could constrain profitability and lead to build-up in working capital requirement. Business performance of TAIPL, like that of other agrochemical manufacturers, may also be impacted by changes in regulatory requirement such as export and import policies, registration policies, and product and environment safety requirement in India and abroad.

Liquidity: Adequate

Liquidity will be benefitted with estimated annual net cash accrual of Rs 120-130 crore over the medium term against nil debt obligation and will be sufficient for meeting incremental capex and working capital requirement. TAIPL had liquid surpluses of Rs.44 crore on March 31, 2025. Further additional headroom is also available in the form of bank limit of Rs 525 crore which was moderately utilised at 55% on average for the 12 months ended March 31, 2025. Also, promoters are likely to continue extending timely, need-based unsecured loans to support operations. Any material decline in liquid surplus due to erosion in value of equity investments due to market volatility will remain monitorable.

Outlook: Stable

TAIPL will continue to benefit from its established position in the domestic agrochemical industry, strong product portfolio, wide distribution network and stable operating margin. The financial risk profile is also expected to improve over the medium term, supported by steady operating performance and only moderate capex, leading to better debt protection metrics.

Rating sensitivity factors

Upward factors

• Sustained double-digit revenue growth and operating profitability improving to 10.5-11%, leading to high cash accrual
• Prudent working capital management and capital spend, leading to continued improvement in the financial risk profile and debt protection metrics

 

Downward factors

• Sustained decline in revenue and operating profitability falling below 7-8%, impacting cash generation
• Financial risk profile weakening owing to sizeable debt-funded capex or stretch in working capital cycle

About the Company

Established in 1969, TAIPL is a closely held private limited company, specialised in crop protection, crop nutrition and pest management industry. It has 320+ formulations registered with Central Insecticide Board (CIB) and is majorly engaged in B2C (95%) segment of supplying pesticides, bio-pesticides and other fertilisers for crop protection and plant nutrition. The company also has 12 import registrations. Product portfolio consists of insecticides, herbicides, fungicides, plant growth regulators and biopesticides. TAIPL currently has plants in three locations — Chennai, Loni and Sikandarabad.

About the Group

The Jhaver group of companies was started in 1894 by R Srikrishna Jhaver as a trading and distribution company. Over the time, it has expanded into diverse fields such as drugs, pharmaceuticals, agrochemicals, zippers, textile chemicals, coated fabrics, pesticides formulations and information technology. The group was restructured in fiscal 2018, where businesses were divided among the Jhaver brothers. Post restructuring, TAIPL is under the faction headed by Vijaykishan Jhaver and Jaikishan Jhaver.

Key Financial Indicators

As on / for the period ended March 31		2024	2023
Operating income	Rs crore	1423	1254
Reported profit after tax (PAT)	Rs crore	90	67
PAT margin	%	6.3	5.3
Adjusted debt/adjusted networth	Times	0.59	0.69
Interest coverage	Times	6.17	4.60

For the first nine months of fiscal 2025, TAIPL recorded PAT of Rs 112 crore on operating income of Rs 1448 crore as against Rs 57 crore and Rs 1,209 crore during the corresponding period of the previous fiscal.

Any other information: Not Applicable