Press Release

Press Release

December 09, 2024

CROP CARE ORGANICS LLP
Rating Assigned and Upgraded

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	24.00	ACUITE BB \| Stable \| Assigned	-
Bank Loan Ratings	39.00	ACUITE BB \| Stable \| Upgraded	-
Bank Loan Ratings	11.00	-	ACUITE A4+ \| Upgraded
Total Outstanding	74.00	-	-
Total Withdrawn	0.00	-	-

Rating Rationale

Acuité has upgraded its long-term rating to ‘ACUITE BB’ (read as ACUITE double B) from ‘ACUITE BB-’ (read as ACUITE double B minus) and short term rating to ‘ACUITE A4+‘ (read as ACUITE A four plus) from ‘ACUITE A4‘ (read as ACUITE A four) to the Rs. 50.00 Cr. bank facilities of Crop Care Organics LLP (CCOLLP). The outlook is 'Stable'.
Also, Acuité has assigned its long-term rating of ‘ACUITE BB’ (read as ACUITE double B) to the Rs. 24.00 Cr. bank facilities of Crop Care Organics LLP (CCOLLP). The outlook is 'Stable'.

Rationale for rating upgradation
The rating upgrade factors in the augmentation in scale of operations and profitability margins. The rating also considers comfortable financial risk profile of the firm backed by adequate liquidity position and Net Worth. However, rating is constrained by limited operational track record of the firm, working capital intensive nature of operations and competitive and fragmented nature of agro chemical industry.

About the Company

Established in the year 2019, Crop Care Organics LLP(CCOLLP) is engaged in manufacturing of technical-grade pesticides and formulated pesticides. The manufacturing plant is located in Nazibabad, Bijnor, Uttar Pradesh. The products include technical grade insecticides, rodenticides, fungicides, herbicides, PGR, and formulated pesticides like E.C, S. L., C.S., W.P., W. D. G. The registered office is situated in Muzaffarnagar, Uttar Pradesh. The Current Partners of the company are Mr. Udit Mishra, Ms. Divya Kansal, Mr. Vatsal Singhal, Mr. Kapil and Mr. Virendra Kumar Chaudhary.

Unsupported Rating

Not Applicable

Analytical Approach

Acuite has considered standalone business and financial risk profile of CCOLLP.

Key Rating Drivers

Strengths

Experienced and established track record of partners
CCOLLP was established in December 2019 by Mr. Udit Mishra, Mr. Amit Mishra and Mr. Virendra Choudhary. Partners of the firm has more than two decades of experience in agro chemical industry in India and overseas, before incorporation of the CCOLLP all the partners were engaged with reputed companies in this segment which has helped them in building relationships with suppliers and customers within the industry. Partners are supported by team of qualified professionals in managing operations of the firm. Firm is able to receive adequate orders through promotor’s established relationships with customers in the segment. Acuite believes that firm will continue to benefit from its experienced partners and their established track record in the industry.

Improvement in Revenue and Profitability
CCOLLP has booked revenue of Rs. 64.64 Cr. in FY2024 as against Rs. 1.69 Cr. in FY2023 as the firm’s manufacturing plant was partially operational since December 2022 and is fully operational from July 2023. The firm has achieved revenue of Rs. 67.25 Cr. as on 31st October 2024 and is expected to book revenue of Rs. 125.00 Cr. in FY2025. The firm’s operating profit stood at Rs.10.54 Cr. and operating margin stood at 16.30 percent in FY2024. Going forward, operational profits are expected to in range of 10 to 11 percent. The PAT margin stood at 0.33 percent in FY2024. Going forward, the firm’s ability to further improve on its scale of operations and its profitability levels will be a key rating monitorable.

Comfortable financial risk profile
Firm’s financial risk profile is comfortable marked by average gearing ratio, comfortable debt protection metrics and average net worth. Firm’s net worth has improved and stood at Rs. 34.12 Cr. as on March 31st, 2024, as against Rs. 23.70 Cr. as on March 31st, 2023, due to infusion of capital from the partners. The Partners are committed to maintain capital account balance of Rs.14.62 Cr. and the unsecured loan are subordinated to bank loan and shall not withdraw during the currency of the loan, therefore firm has converted its unsecured loan of Rs.19.50 Cr. into quasi equity and undertaking has been received for the same. Firm’s has total debt of Rs. 62.03 Cr. as on March 31, 2024, consisting of Long term loan of Rs 23.70 Cr. and short-term debt of Rs. 38.32 Cr. The gearing ratio stood at 1.82 times as on March 31, 2024, as against 1.31 times as on March 31, 2023. The firm’s interest coverage and debt service coverage ratio stood at 2.73 times as on March 31, 2024. Acuité believes that the financial risk profile of the group is likely to remain comfortable in medium term on account of no major debt funded capacity expansion.

Weaknesses

Limited operational track record
CCOLLP established in December 2019 and partially commenced operations in December 2022 and is fully operational from July 2023, thus firm has limited operational track record of ~ 2 years in chemical industry.

Working capital intensive nature of operations
Firm’s operations are working capital intensive in nature as reflected by GCA days of 369 days in FY2024. GCA days are majorly driven by inventory days of 248 days in FY2024. The debtor days stood at 51 days and Creditor days stood at 91 days in FY2024. Average bank limit utilisation stood at 71.05 percent for 6 months ending September 2024. Acuite believes that working capital operations of the company continue to remain intensive over the medium term.

Susceptibility of profit margins to fluctuating raw material prices in a highly competitive and fragmented Industry
The imports account for about 30% of total purchases, and the rest is domestic. About 70% of imports are sourced from China. The volume and source of imports are subject to market dynamics and specific requirements. The company uses forward contracts as hedging mechanisms. The agro chemical industry has a large number of players which makes this industry highly fragmented and intensely competitive. CCOLLP’s is also a moderate sized player, thereby limiting its bargaining power and susceptibility to pricing pressure is also higher compared to well-established and larger players.

Rating Sensitivities

Continuous improvement in the scale of operations while maintaining profitability leading to improvement in overall financial risk profile.
Stretch in working capital cycle, leading to an increase in working capital borrowing and weakening of financial risk profile.
Withdrawal of partner’s capital or quasi capital

Liquidity Position

Adequate

The firm’s liquidity position is adequate marked by sufficient net cash accruals against its maturing debt obligation. The firm generated the net cash accruals of Rs. 6.71 Cr. in FY2024 against no maturing debt obligation in the same period. Firm’s cash accruals are expected to range between Rs. 7.86 Cr. to Rs. 11.36 Cr. in FY2025-2026 against repayment obligation ranging between Rs. 3.74 Cr. to Rs. 5.18 Cr. during the same period. Firm’s current ratio stood at 1.23 times as on March 31st, 2024. Average bank limit utilisation stood at 71.05 percent for 6 months ending September 2024.
Acuite believes that liquidity profile of CCOLLP is expected to remain adequate over medium term.

Outlook: Stable

Other Factors affecting Rating

None

Key Financials

Particulars	Unit	FY 24 (Actual)	FY 23 (Actual)
Operating Income	Rs. Cr.	64.64	1.69
PAT	Rs. Cr.	0.22	(3.05)
PAT Margin	(%)	0.33	(180.05)
Total Debt/Tangible Net Worth	Times	1.82	1.31
PBDIT/Interest	Times	2.73	645.45

Status of non-cooperation with previous CRA (if applicable)

Not Applicable

Any other information

None

Applicable Criteria

• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm
• Rating Process and Timeline: https://www.acuite.in/view-rating-criteria-67.htm
• Manufacturing Entities: https://www.acuite.in/view-rating-criteria-59.htm
• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm

Note on complexity levels of the rated instrument

In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in.

Rating History

Date	Name of Instruments/Facilities	Term	Amount (Rs. Cr)	Rating/Outlook
12 Sep 2023	Letter of Credit	Short Term	3.00	ACUITE A4 (Assigned)
	Term Loan	Long Term	20.00	ACUITE BB- \| Stable (Assigned)
	Term Loan	Long Term	6.50	ACUITE BB- \| Stable (Assigned)
	Cash Credit	Long Term	10.00	ACUITE BB- \| Stable (Assigned)
	Proposed Long Term Bank Facility	Long Term	10.50	ACUITE BB- \| Stable (Assigned)

Annexure - Details of instruments rated

Lender’s Name	ISIN	Facilities	Date Of Issuance	Coupon Rate	Maturity Date	Quantum (Rs. Cr.)	Complexity Level	Rating
Punjab National Bank	Not avl. / Not appl.	Cash Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	5.00	Simple	ACUITE BB \| Stable \| Upgraded ( from ACUITE BB- )
HDFC Bank Ltd	Not avl. / Not appl.	Cash Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	6.00	Simple	ACUITE BB \| Stable \| Upgraded ( from ACUITE BB- )
HDFC Bank Ltd	Not avl. / Not appl.	Cash Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	24.00	Simple	ACUITE BB \| Stable \| Assigned
HDFC Bank Ltd	Not avl. / Not appl.	Letter of Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	11.00	Simple	ACUITE A4+ \| Upgraded ( from ACUITE A4 )
HDFC Bank Ltd	Not avl. / Not appl.	Term Loan	Not avl. / Not appl.	Not avl. / Not appl.	01 Aug 2029	5.00	Simple	ACUITE BB \| Stable \| Upgraded ( from ACUITE BB- )
Punjab National Bank	Not avl. / Not appl.	Term Loan	Not avl. / Not appl.	Not avl. / Not appl.	30 Sep 2029	17.75	Simple	ACUITE BB \| Stable \| Upgraded ( from ACUITE BB- )
Punjab National Bank	Not avl. / Not appl.	Term Loan	Not avl. / Not appl.	Not avl. / Not appl.	30 Sep 2029	5.25	Simple	ACUITE BB \| Stable \| Upgraded ( from ACUITE BB- )

Contacts

Mohit Jain
Senior Vice President - Rating Operations

Nidhi Gala
Associate Analyst - Rating Operations

Contact details exclusively for investors and lenders

Mob: +91 8591310146
Email ID: analyticalsupport@acuite.in

About Acuité Ratings & Research

Acuité is a full-service Credit Rating Agency registered with the Securities & Exchange Board of India (SEBI). The company received RBI Accreditation as an External Credit Assessment Institution (ECAI) for Bank Loan Ratings under BASEL-II norms in the year 2012. Acuité has assigned ratings to various securities, debt instruments and bank facilities of entities spread across the country and across a wide cross section of industries. It has its Registered and Head Office in Kanjurmarg, Mumbai.

Disclaimer: An Acuité rating does not constitute an audit of the rated entity and should not be treated as a recommendation or opinion that is intended to substitute for a financial adviser's or investor's independent assessment of whether to buy, sell or hold any security. Ratings assigned by Acuité are based on the data and information provided by the issuer and obtained from other reliable sources. Although reasonable care has been taken to ensure that the data and information is true, Acuité, in particular, makes no representation or warranty, expressed or implied with respect to the adequacy, accuracy or completeness of the information relied upon. Acuité is not responsible for any errors or omissions and especially states that it has no financial liability whatsoever for any direct, indirect or consequential loss of any kind, arising from the use of its ratings. Ratings assigned by Acuité are subject to a process of surveillance which may lead to a revision in ratings as and when the circumstances so warrant. Please visit our website (www.acuite.in) for the latest information on any instrument rated by Acuité. Please visit https://www.acuite.in/faqs.htm to refer FAQs on Credit Rating.

Note: None of the Directors on the Board of Acuité Ratings & Research Limited are members of any rating committee and therefore do not participate in discussions regarding the rating of any entity.