India Ratings and Research (Ind-Ra) has revised Coromandel International's (CIL) outlook to positive from stable while affirming its long-term issuer rating at 'IND AA+'.
The credit rating agency has also affirmed the rating on the company's commercial paper (CP) at 'IND A1+', the issue size of which has been reduced to Rs 1,000 crore from Rs 2,000 crore earlier. The CP proceeds will be used for meeting CIL's working capital requirements.
The 'positive' outlook reflects India Ratings' expectation of a sustained improvement in CIL's profitability in FY22, with improved stability in its EBITDA margin, led by an enhanced product mix, and its continued strong credit metrics.
Ind-Ra expects CIL's non-subsidised business (led by continued strong research and development efforts and the introduction and acceptance of new molecules in this segment) to witness continued growth, resulting in increased market share and healthy margins.
The outlook revision also factors in the sustained resilience of the company's nutrient & allied business (NAB) segment.
The financial risk profile of the entity also improved structurally during FY21 post the clearance of subsidy backlog by the Government of India (GoI) resulting in a meaningful improvement in working capital cycle and credit metrics. This, the agency believes will sustain in the medium term given strong cash flow generation and limited capex plans.
Ind-Ra said that a sustained increase in profitability with improved stability in EBITDA margin led by an improved product mix and higher level of backward integration, while maintaining the current credit profile, could lead to a positive rating action.
However, deterioration in operating profitability, or any adverse regulatory policy movement and/or the net leverage exceeding 1.5x on a sustained basis could lead to a outlook revision to 'stable'.
CIL, a flagship company of the Murugappa Group, operates in two segments: crop protection chemicals (CPC) and nutrient & allied business (NAB). The company's facilities are spread across India, but are largely concentrated in south India. The company has the capacity to manufacture over 3.5 million tonnes per annum of fertilisers and pesticides, and 1 million tonnes per annum of single super phosphate.
The company's consolidated net profit surged 34.80% to Rs 337.78 crore on a 14.02% jump in revenue from operations to Rs 3,663.87 crore in Q1 June 2021 over Q1 June 2020.
The scrip shed 0.07% to end at Rs 767.60 on Friday.
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