Rating Amount Rating Action In Crore As on January 2016
Fund Based Limits 30.0 (reduced from 50.0) [ICRA]A+ (stable) reaffirmed
Non Fund Based Limits 33.35 (reduced from 50.56) [ICRA]A1+ reaffirmed
ICRA has reaffirmed the long-term rating of Dhanuka Agritech Limited (DAL)† at [ICRA]A+
(pronounced ICRA A plus) for a reduced amount of Rs. 30.0 crore‡ (earlier Rs. 50.0 crore) fund
based facilities. The outlook for the long-term rating is stable. ICRA has also reaffirmed the short- term rating at [ICRA]A1+ (pronounced ICRA A one plus) for a reduced amount of Rs. 33.35 crore
(earlier Rs. 50.56 crore) non-fund based limits of DAL.
The ratings reaffirmation factors in the long experience of the promoters and DAL’s established
track record of operations in the agrochemical industry; and its strong brand presence, which is
supported by a wide distribution network and a diverse product portfolio. Leveraging on these
strengths, DAL has developed strong relations with reputed international technicals manufacturers,
which has enabled the company to regularly launch new formulations (speciality) and sustain its
revenue growth and profitability margins in recent years. This has translated into healthy internal
accrual generation, which has been deployed for funding the working capital requirements,
resulting in low gearing and robust debt protection metrics. The company enjoys strong liquidity
marked by negligible utilisation of the bank limits and sizeable cash/liquid investments. DAL is also
in the process of setting up a new facility in Keshwana (Rajasthan), likely to get commissioned by
the end of the current fiscal, which along with a healthy specialty product pipeline is likely to drive
the revenue growth and profitability going forward. Additionally the ratings also take into account
DAL’s diversified presence across all the regions of the country and across product categories,
which largely mitigates risks related to adverse demand for any particular geography, crop or
chemical.
However these strengths are partially offset by the agrochemical industry’s susceptibility to
variability in agro-climatic conditions; as also demonstrated by the moderation of revenue growth
during FY15 and the current financial year, on the back of weak monsoon seasons. The ratings also
factor in the high working capital intensity of the business due to high inventory and debtor levels;
and competitive intensity of the industry, which limits the pricing flexibility of the industry
participants including DAL. Additionally the company’s profitability remains susceptible to
volatility in foreign exchange rate and raw material prices (also linked to crude oil prices) and DAL
also remains exposed to regulatory risk arising from any restrictions on the use of hazardous
pesticides.
Going forward, DAL’s ability to maintain its revenue growth and profitability margins and timely
commissioning and stabilisation of operations at the new facility would be the key rating
sensitivities.
Company Profile
Dhanuka Agritech Ltd. (DAL) is a part of the Delhi based Dhanuka Group and engaged in the
formulation and marketing of agrochemicals like insecticides, pesticides, herbicides etc. The
company has manufacturing facilities in Gurgaon (Haryana), Sanand (Gujarat) and Udhampur
(Jammu and Kashmir). The company is also in the process of setting up a new manufacturing
facility in Rajasthan. In addition to the agrochemical business; DAL is also engaged in the seeds
business, though its contribution to the total turnover has remained modest.
Recent Results
For FY2015, the company has achieved an operating income of Rs. 785.1 crore and a Profit After
Tax of Rs. 106.1 crore. DAL has achieved an operating income of Rs. 450.6 crore and a Profit After
Tax of Rs. 56.3 crore in H1-FY2016 (as per provisional financial results).
