Rationale

 The assigned ratings for the bank lines of Parijat Industries India Limited (PIIL/the company) factors in the long and established track record of the promoters and the company in the agrochemical business. The company has a diversified product profile with a sizeable registration portfolio as well as a healthy product pipeline. Its revenue stream is diversified across products and product segments. The company undertakes retail as well as institutional sales in the domestic market and also exports agrochemicals to East Africa, Middle East, Asia-Pacific, Latin America, Canada, Europe, West African nations and Russia. The ratings are, however, constrained by regulatory and the agroclimatic risks faced by the company’s operations in the domestic and export markets. Its operations remain working capital-intensive owing to the sizeable credit period offered to the customers and the elongated receivables from the export markets. Additionally, the inventory levels maintained by the company tend to be sizeable owing to a diversified product portfolio, which requires manufacturing a wide variety of products and procuring a variety of raw material ahead of the Kharif season – the major agrochemical consumption season. The company has to stock up inventory in short bouts as well as deliver large export orders with short delivery timelines. Its profitability can also be impacted by the volatility in raw material prices, given the elevated competitive intensity in the industry. Additionally, as the company only partly hedges its forex exposure, its profitability may be impacted by the adverse movement in the currency markets. However, the company’s exports provide a natural hedge to its forex exposure to an extent. ICRA notes that the company is in the process of undertaking an initial public offering (IPO) wherein it plans to raise ~Rs. 160 crores of fresh equity which will be used to reduce the borrowing levels. The completion of the IPO and its impact on the credit profile will remain a key monitorable. The Stable outlook on PIIL’s rating reflectsICRA’s expectation that the growing scale of operations and a healthy product profile will support the cash flow from operations and keep the credit profile stable.