Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AA+/Negative/Crisil A1+’ ratings on the bank facilities and commercial paper programme of UPL Ltd (UPL).Simultaneously, Crisil Ratings has withdrawn the ratings on the bank facilities of Rs 3,400 crore as per company’s request subsequent to the transfer of bank limit to wholly owned subsidiary, Superform Chemistries Ltd (SCL; ‘Crisil AA+/Negative’) and with the receipt of necessary documentation. This is in line with the Crisil Ratings policy on withdrawal of bank loan ratings.

 

UPL’s revenue grew 9% on-year in fiscal 2025, driven by volume growth (13% on-year) across key geographies, majorly US, Europe and India. Volume growth was muted in Latin America (LatAm) owing to competitive intensity. Product realisation declined by 3% (22% decline in fiscal 2024) and continued to remain under pressure owing to supply glut from China. Operating profitability improved by 620 bps to 16.8% in fiscal 2025 supported by better volume, low input costs and benefits of cost optimisation.

 

Crisil Ratings expects that UPL’s revenue will grow by low to mid-single digits in fiscal 2026 supported by steady demand across regions supporting the volume growth while no material improvement in realisation is anticipated. Operating profitability is expected to improve to 17-18% in fiscal 2026, albeit will remain lower than 18-20% registered by the company up to fiscal 2023. LatAm (~38% of UPL’s revenue) witnessed instances of dealer delinquencies in fiscal 2025. UPL created provision for expected credit loss of ~Rs 170 crore ($20 million) in fiscal 2025. Continuing dealer delinquencies due to pressure in the region could lead to additional provisions by UPL. Further, there might be rebalancing of trade flow owing to tariff imposed by the US, which might increase the competitive intensity in LatAm. This will remain monitorable.

 

Gross debt declined to Rs 25,029 crore as on March 31, 2025, from Rs 29,736 crore as on March 31, 2024, supported by fund raise through rights issue, proceeds from divestment of stake in the subsidiary, Advanta Enterprise Ltd (AEL, ‘Crisil AA+/Negative’) and efficient management of working capital.

 

In November 2023, the board’s approval was obtained for raising funds up to $500 million. In November 2024, UPL’s board finalised the fundraise of $400 million by equity rights issue. Out of the $400 million, $100 million of funds was raised in December 2024 by way of partially paid rights shares. UPL exercised its option to call a further $100 million of funds in January 2025 and monies were received in March 2025. Furthermore, UPL’s board approved the divestment of 12.5% stake in AEL to a leading global investment fund, Alpha Wave Ventures, for a total consideration of $350 million, which included $250 million for secondary sale of shares by UPL and $100 million primary infusion in AEL. The transaction was completed in March 2025. Working capital level declined owing to inventory optimisation and tightened credit period with UPL realigning its strategy to place the products closer to application. As a result, the ratio of net debt to earnings before interest, taxes, depreciation and amortisation (net debt/Ebitda) declined to 1.94 times in fiscal 2025 from 5.3 times in fiscal 2024. Interest coverage ratio improved to 2.16 times (1.21 times in fiscal 2024) albeit remains modest compared with previous level of 4-5 times. This is primarily on account of increase in interest costs commensurate with high benchmark interest rates while the operating profits have not surpassed previous high.

 

Cash surplus increased to Rs 9,857 crore as on March 31, 2025, from Rs 6,129 crore a year earlier. In May 2025, the company exercised its option to call the perpetual bonds of $400 million as the bonds were up for repricing at prevalent market rates. Recently in the first quarter of fiscal 2026, the perpetual bonds were retired mainly from cash surpluses.

 

UPL is expected to incur annual capital expenditure (capex) of Rs 2,000-2,500 crore over the medium term, which will be met by cash accrual. While the working capital level is expected to increase in fiscal 2026 and thereafter in line with high business level,  improved operating profit is expected to lead to net debt/Ebitda sustaining below 2 times in fiscal 2026, and witnessing further improvement over the medium term. Interest coverage ratio is expected to gradually recover to above 3 times over the medium term.

 

In March 2025, UPL prepaid principal repayment obligation of $250 million ( ~Rs 2100 crore) due in September 2025, using proceeds from rights issue and free cash flow. Further, the company has debt obligation of Rs 4,274 crore in March 2026 which will be serviced through available cash balances and free cash flow generated. UPL also has the flexibility to exercise option to call the remaining $200 million of rights money. However, the company has sizeable debt obligation of Rs 7,693 crore and Rs 6,633 crore in fiscals 2027 and fiscal 2028, respectively, which will require part refinancing. Timely refinancing of debt obligation, including raising new debt with extended maturity, will remain critical.

 

The ratings continue to reflect the UPL’s strong business risk profile supported by robust market position, wide product portfolio, geographical diversification in revenue and adequate operating efficiency. These strengths are partially offset by average financial risk profile, which has moderated from its strong position but is expected to gradually improve in the near to medium term; the company’s large working capital requirement and susceptibility to risks inherent in the agrochemical sector.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of UPL and its subsidiaries, collectively known as UPL. This is because all these companies are under a common management and have close operational linkages and fungible cash flow. Crisil Ratings follows a moderate integration approach for investment in associates and joint ventures in which UPL has significant influence but not a controlling interest—specifically, Crisil Ratings factored in UPL's share in the profit of these entities and any incremental investment required.

 

Goodwill on the acquisition of Arysta which was acquired in fiscal 2019 is being amortised over 15 years commencing from fiscal 2019. Consequently, reported profit after tax (PAT), networth and ratio computations are adjusted.

 

USD-denominated Perpetual Subordinated Capital Securities (bonds) of $400 million (interest coupon rate of 5.25% per annum) raised by UPL Corporation Ltd (subsidiary of UPL) was treated as 50% debt and 50% equity till fiscal 2025. With UPL exercising the option to call the perpetual bonds, the treatment has been discontinued.

 

Non-recourse factoring of receivables has not been treated as debt.

 

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:

• Large scale with diverse geographical presence: UPL is among the top five players in the global agrochemical industry. The revenue base is well diversified with ~70% generated from LatAm, Europe and North America. Wide geographical reach reduces susceptibility to cyclicality in demand from any one region. The company is also the leading agrochemical player in the domestic market, which contributed less than 15% to its turnover in fiscal 2025. UPL has grown through inorganic acquisitions over the years, the largest being that of Arysta, which strengthened its position as a leading global agrochemical player.

 

• Wide product portfolio: UPL is also present across the crop lifecycle from seeds, seed-treatment products, pre- and post-harvest products to storage-treatment products. This ensures low business volatility compared with peers with a less diversified portfolio. The business risk profile remains healthy, aided by a portfolio of more than 15,000 registrations, more than 1,800 product formulations and more than 2,700 patents. UPL is present in 140+ countries with 43 manufacturing locations, employing more than 12,000 people across the globe.
   
• Adequate operating efficiency, supporting profitability: Backward integration and supply-chain management have strengthened operating efficiency, which along with steady revenue growth translated into healthy operating profitability of 19-21% between fiscals 2018 and 2023. As a sizeable portion of raw material and power requirement is met in-house, the group is assured a steady supply with less price volatility. Flexible and multi-product manufacturing facilities, and robust supply chain and distribution network support its profitability.
   

However, sluggish offtake and pricing pressure exacerbated by cheap Chinese supplies, had forced industry players, including UPL, to offer rebates, impacting realisation and operating profitability in fiscal 2024. With the write-down of inventories, low rebates with selling closer to season, and demand picking up gradually, the operating profitability of UPL increased to 16.8% in fiscal 2025 from 10.4% in fiscal 2024. Further improvement in the operating profitability is expected over the medium term owing to better demand and the intrinsic strength of UPL’s established product.
 

Weaknesses:

• Large working capital requirement: The crop protection business is seasonal in nature. Sales occur at the start of the season, but payment is realised post-harvest, resulting in stretched receivable cycle. Furthermore, as goods are manufactured in one place and distributed to other locations, a sizeable stock of finished goods needs to be maintained. The large credit required by customers in key LatAm markets also leads to a stretch in the working capital cycle. However, UPL will contain the exposure to markets with long credit cycle to less than one-third of its revenue and utilise securitisation benefits (without recourse) wherever available, thereby mitigating the impact of a stretched cycle on the overall credit profile.
   
• Average financial risk profile: The financial risk profile is supported by sizeable networth of over Rs 27,501 crore as on March 31, 2025. The acquisition of Arysta in fiscal 2019 was funded through substantial debt (~$3 billion), which led to gross debt of ~Rs 29,000 crore as on March 31, 2019, and resulted in moderation in the debt protection metrics. Debt peaked ~Rs 30,200 crore as on March 31, 2020, and thereafter reduced by ~Rs 5,000 crore a year later, supported by strong operational cash generation and partial pre-payment. The gross debt then increased by ~Rs 2,500 crore in fiscal 2022, mainly on account of high working capital requirement and then declined by Rs 2,880 crore to Rs 24,379 crore as on March 31, 2023, supported by cash flow from stake sale in some of its businesses, and increase in non- recourse factoring.
   

While the debt was expected to reduce further due to prudent capex spend, gross debt increased to Rs 29,331 crore as on March 31, 2024, owing to modest cash generation, stretched working capital cycle and reduced non-recourse factoring. Due to modest performance in fiscal 2024, net debt to Ebitda and interest coverage ratios were 5.3 times and 1.2 times, respectively, compared with below 2 times and 3.6 times, respectively, in fiscal 2023. Improved cash generation due to better performance and better management of working capital, and proceeds from the rights issue and divestment, led to the net debt to Ebitda ratio declining to 1.94 times in fiscal 2025. With improvement in performance and further raising of remaining funds through rights issue, the net debt to Ebitda ratio is expected to sustain below 2 times over the medium term.
 

UPL Corporation’s minority investors, ADIA and TPG, each with ~11% stake, who had invested in UPL Corporation to support the acquisition of Arysta have the option to sell their stakes, to which UPL has the right of first refusal. These stakes have now moved to UPL, Cayman under the recent restructuring. While the stake sale is unlikely in the next 1-2 years, any material debt addition by UPL to buy back these stakes in UUPL, Cayman from these investors, and consequent increase in its leverage will be monitorable.

 

• Susceptibility to risks inherent in the agrochemicals sector: The crop protection sector remains susceptible to specific and separate registration processes in different countries, and to various environmental rules and regulations. Changes in regulatory requirement such as export and import policies, and environmental and safety requirement in countries where the company has significant exposure, could weaken the growth prospects. Tariffs levied by US will also bear watching in the road ahead. Furthermore, the sector is highly dependent on monsoon and the level of farm income. Hence, timing and distribution of rainfall during a year plays a crucial role. This is somewhat mitigated by the geographically diverse base of UPL.

Liquidity: Strong

Cash and equivalent were at Rs 9,857 crore as on March 31,2025, as the proceeds from divestment of stake in AEL were received in March 2025. With the redemption of perpetual bonds, the cash surplus would have moderated, however the company is expected to sustain cash surplus of Rs 6000-6500 crore. The utilisation of domestic fund-based working capital limit was moderate at 31% (of total drawing power) on average for the six months through April 2025. The annual capex of Rs 2,000-2,500 crore is expected to be funded by internal accrual and no long-term debt addition is expected. Annual cash accrual will be Rs 4,000-5,000 crore over the medium term.

 

UPL does not have any material long-term debt obligation till February 2026. The company has debt obligation of Rs 4,274 crore in March 2026 which will be serviced through free cash flow generated. UPL also has the flexibility to exercise option to call the remaining $200 million of rights money. However, the company has sizeable debt obligation of Rs 7,693 crore and Rs 6,633 crore in fiscals 2027 and 2028, respectively, which will require part refinancing. Timely refinancing of debt obligation, including raising new debt with extended maturity, will remain critical.

 

Crisil Ratings expects UPL to be able to refinance the required portion of their obligation, given past instances of successfully arranging for similar refinancing, ahead of actual repayment.

 

ESG profile of UPL

Crisil Ratings believes that UPL’s ESG profile supports its already strong credit risk profile.

The agrochemical sector has a high impact on the environment because of high greenhouse gas (GHG) emissions, water use and high hazardous waste generation by its core operations. The sector has a social impact because of its large workforce and has an impact on the health and well-being of its workers and local community on account of the nature of operations.

UPL has undertaken various initiatives and efforts towards mitigating its environmental and social impact and strengthening its ESG profile. 
 

Key ESG highlights:

• UPL has reduced 49% specific water, 38% specific CO2 & 25% specific waste compared to fiscal  2020; Furtrher, UPL achieved 37% revenues from sustainable and differentiated products in 2025. UPL also achieved 60% sustainable sourcing by 2025
• UPL’s governance structure is characterised by the majority of its board comprising independent directors, and extensive disclosures.
• UPL is ranked the No. 1 agrochemicals company in the 2024 Dow Jones Sustainability Indices (DJSI) for the second year in a row.
   

There is growing importance of ESG among investors and lenders. The commitment of UPL to ESG principles will play a key role in enhancing stakeholder confidence, given the high share of market borrowing in its overall debt and access to both domestic and foreign capital markets.

Outlook: Negative

Crisil Ratings believes that the performance of UPL will improve gradually over the medium term with the revival in demand for agrochemicals in the domestic and international markets benefitting the operating profitability and cash generation. Progressive debt reduction, including through proposed rights issue of equity, will be critical to improve the debt protection metrics, which are at average level.

Rating sensitivity factors

Upward factors:

• Better-than-expected growth in revenue, with operating profitability over 20-21%, ensuring strong cash generation
• Net debt to Ebitda ratio sustaining at 1.00-1.25 times, due to strong cash generation and lower debt due to prudent working capital management or equity infusion.
   

Downward factors:

• Continued demand sluggishness due to delay in revival of demand for agrochemicals, and operating profitability remaining below 13-15%, further impacting cash generation
• Net debt to Ebitda ratio increasing to over 2.35-2.50 times on sustained basis and interest coverage ratio remaining sub-par, due to delay in equity raise, more-than-anticipated capex, material acquisitions and stretched working capital cycle, or due to increased stake in UPL, Cayman, leading to high debt

About the Company

Incorporated in 1969 and promoted by Rajnikant Shroff, UPL manufactures, markets and distributes crop protection products, intermediates, speciality chemicals and other industrial chemicals; and undertakes research in these segments. Over time, UPL has made several acquisitions and entered strategic alliances to diversify its product profile and increase geographical reach. UPL now includes over 200 entities. Apart from UPL, the other key operating companies in the group are UPL NA Inc (US), UPL Europe Ltd (UK), UPL Agro SA DE CV (Mexico), UPL Argentina SA (Argentina), UPL France, UPL Italia SRL, UPL South Africa PTY Ltd and UPL do Brasil Industria e Comercio de SA (Brazil). UPL group has manufacturing units in India, France, Argentina, the UK, Vietnam, Turkey, Brazil, the USA, China, Thailand, Italy, Australia and Columbia.

Key Financial Indicators

Particulars for year ending March 31	Unit	2025	2024
Revenue	Rs crore	46,610	42,915
Adjusted PAT^	Rs crore	(290)	(2988)
PAT margin^	%	-0.6	-7.0
Adjusted debt/adjusted networth^	Times	0.91	1.24
Adjusted interest coverage	Times	2.16	1.21

^Crisil Ratings-adjusted numbers for treatment of goodwill

Any other information: Not applicable