Coromandel International Limited - Long-term rating upgraded to 'CRISIL AAA/Stable', Short-term reaffirmed

CRISIL Ratings has upgraded its rating on the long-term bank facilities of Coromandel International Limited (Coromandel) to 'CRISIL AAA/Stable' from 'CRISIL AA+/Positive'; the rating on the short-term bank facilities is reaffirmed at 'CRISIL A1+'. The rating on the commercial paper programme of Rs 2000 crore is withdrawn as per client request. The withdrawal is in line with CRISIL Ratings' policy for withdrawal of ratings.

The rating upgrade reflects CRISIL Rating's expectation of Coromandel sustaining its improved business risk profile, supported by the backward-integration facilities established over the years. To insulate its operating performance from volatility in raw material prices, the company has ensured that a major share of phosphoric acid requirement is produced inhouse. This has enabled the company to record robust operating performance, despite the industry witnessing a pressure of the rise in raw material prices. Financial risk profile continues to remain robust, with a net debt free position maintained.

Additional subsidies announced by the government over the past two fiscals had enabled Coromandel to attain a net debt free position. This fiscal too, the government has continued to showcase its financial support to the fertilizer sector. While initially a subsidy payout of Rs. 105,222 crore was budgeted for fiscal 2023, through additional payouts, the budget has been revised to Rs. 225,222 crore. Basis CRISIL Ratings' estimates, the revised budget could however still fall short by around Rs 30,000-35,000 crore. This could resultantly lead to a subsidy buildup for Coromandel too this fiscal, however the healthy accruals combined with the surplus liquidity maintained should be sufficient to fund the company's working capital requirements, thus enabling it to maintain its net debt free position.

The above-mentioned strengths are however partially offset by the company's exposure to risks related to regulated nature of the fertilizer industry in India. Since timely disbursement of the entitled subsidy is crucial for the company to maintain its strong financial risk profile, any change in policy support or sustained delays in payouts would continue to remain a key rating monitorable.

Coromandel has budgeted to incur annual capital expenditure (capex) of Rs. 700-900 crore, to further strengthen the operating efficiency of the fertilizer segment, as well as to further grow in the agro-chemicals segment. The annual cash accruals of around Rs. 1500 - 1700 crore should be adequate to meet these capex plans. Any higher-than-expected debtfunded capex or acquisitions which then materially alters its financial risk profile would remain a key rating monitorable.

Shares of Coromandel International Limited was last trading in BSE at Rs. 914.10 as compared to the previous close of Rs. 913.15. The total number of shares traded during the day was 7872 in over 920 trades.

The stock hit an intraday high of Rs. 919.05 and intraday low of 905.15. The net turnover during the day was Rs. 7198531.00.

Source : Equity Bulls

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CoromandelInternational INE169A01031 Fertilizers RatingUpdate Upgrade