Aegis Agro Chemicals India Private Limited

February 15, 2018

Summary of rated instruments

Instrument Current Rated Amount(Rs. crore) Rating Action
Term loan 5.78 [ICRA]BB- (Stable); Assigned
Cash credit 3.00 [ICRA]BB- (Stable); Assigned
Unallocated limits 0.22 [ICRA]BB- (Stable)/[ICRA]A4; Assigned
Total 9.00

Rating action
ICRA has assigned a long-term rating of [ICRA]BB- (pronounced ICRA double B minus) to the Rs. 8.78 crore of fund-based
limits and ratings of [ICRA]BB-/[ICRA]A4 (pronounced ICRA A four) to Rs. 0.22 crore unallocated limits of Aegis Agro
Chemicals India Private Limited (AACIPL, “the company”). The outlook on the long-term rating is ‘Stable’.

Rationale
The assigned rating favourably factors in the extensive experience of the promoters for over 20 years in the
agrochemicals manufacturing and trading business; diversified product portfolio with 52 products spanning across
insecticides, fungicides and herbicides segments; and moderate customer concentration risk with top 3 customers
contributing 24.4% of total revenue in FY2017. However, the rating is constrained by the low capacity utilisation in
FY2017; limited geographical presence with sales primarily confined to Andhra Pradesh and Telangana states; and high
working capital intensity of the company owing to large receivables and inventory levels. The rating also considers high
competitive intensity in the agrochemicals manufacturing segment constraining profitability margins.

Outlook: Stable
The stable outlook reflects ICRA belief that AACIPL will continue to benefit from the extensive experience of its
promoters in the agrochemicals business. The outlook may be revised to 'Positive' if substantial growth in revenue and
profitability, and efficient working capital management. The outlook may be revised to 'Negative' if cash accrual is lower
than expected, or if any major capital expenditure, or stretch in the working capital cycle, weakens liquidity.

Key rating drivers

Credit strengths
Experience of promoters in agrochemicals industry spanning over 20 years: Incorporated in August 2012 by Mr. Samba
Siva Reddy and other family members, AACIPL was into trading of insecticides, fungicides, pesticides and bio products
between FY2013 and FY2015. The trading of bioproducts business was shifted to its group company Legend
agrochemicals LLP in FY2016 while AACIPL commenced agrochemicals manufacturing in July 2016.

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Diversified product portfolio: The company manufactures various formulations of insecticides, herbicides and fungicides
like imidacloprid, acephate, bifenthrin, emamectin benzoate, fipronil, difenthuron, glyphosate etc. The top 4 products
accounted for 28.73% of sales in FY2017 resulting in low product concentration with majority of sales coming from
insecticides segment. The firm is also doing contract manufacturing for Janani Crop Care Pvt. Ltd and Meghmani Organics
Ltd.

Moderate customer concentration risk: The top 3 customers accounted for 24.4% of total revenue in FY2017. The
customers are predominantly fertiliser dealers who directly sell to farmers. In addition to the manufacturing and
marketing of products, the company is exploring contract manufacturing opportunities with companies like Adama India
Pvt Ltd, Amish crop science, Atul agro chem etc.

Credit challenges
Low capacity utilisation in FY2017 being the first year of operations: The company commenced its manufacturing
operations from July 2016. The capacity utilization is low at 2.46% for liquid formulations and 3.54% for solid
formulations in FY2017 being the first year of operations. AACIPL is also doing contract manufacturing for Janani Crop
Care Pvt. Ltd and Meghmani organics Ltd. The improvement in utilization is contingent upon company ramping up
contract manufacturing customers, and expansion of dealer network.

Limited geographical presence with sales primarily confined to Andhra Pradesh and Telangana states: The company
derived entire revenues from states of Andhra Pradesh and Telangana till FY2017. The company expanded the dealer
network to Karnataka and Maharashtra in FY2018 and is associated with ~1800 dealers as on December 31, 2017.

High working capital intensity of the business owing to large receivables and inventory: The working capital intensity is
high at 22% in FY2017 owing to high receivables and inventory levels. The company extends an average of 90 days credit
period to its customers. The inventory levels are high as on year end owing to the seasonality associated with sales. The
company has received extended credit period days from their suppliers based on their relationship with the company
which supported the working capital requirements to an extent.

Increasing competitive intensity in the agrochemicals manufacturing segment to constrain profitability margins: The
operating margins are vulnerable to fluctuation in raw material costs and end-product realizations. Further, increasing
competitive intensity in the agrochemicals manufacturing segment to constrain the profitability margins in the near
term.

Analytical approach: For arriving at the ratings, ICRA has applied its rating methodologies as indicated below.

Links to applicable criteria:

Corporate Credit Rating Methodology

Rating Methodology for entities in the Agrochemicals Industry

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About the company:
Aegis Agro Chemicals India Private Limited (AACIPL) was established in August 2012. The company was into trading of
insecticides, fungicides, pesticides and bio products between FY2013 and FY2015. Trading of bioproducts was shifted to
its group company Legend agrochemicals LLP in FY2016 while the firm commenced its manufacturing operations in July
2016. AACIPL procures technicals from manufacturers located in Delhi, Hyderabad, Maharashtra and manufactures
different formulations of insecticides, herbicides and fungicides. The company’s portfolio consists of 52 products
including Imidacloprid, Acephate, Bifenthrin, Emamectin benzoate, fipronil, Difenthuron, Glyphosate etc.

Key financial indicators (audited)

FY2016 FY2017
Operating Income (Rs. crore) 7.25 19.55
PAT (Rs. crore) 0.02 0.60
OPBDIT/ OI (%) 5.39% 13.08%
RoCE (%) 7.86% 19.05%

Total Debt/ TNW (times) 2.21 2.09

Total Debt/ OPBDIT (times) 18.38 3.96
Interest coverage (times) 3.32 3.34
NWC/ OI (%) 23.85% 21.94%

Source: AACIPL

Status of non-cooperation with previous CRA: Not applicable

Any other information: None

Rating history for last three years:

Chronology of Rating History for the
Current Rating (FY2018) past 3 years
Date & Date & Date &
Amount Amount Date & Rating in Rating in Rating in
Rated Outstanding Rating FY2017 FY2016 FY2015
Instrument Type (Rs. crore) (Rs Crore) Feb 2018 - - -
1 Term loan Long 5.78 5.78 [ICRA]BB- - - -
Term (Stable)
2 Cash credit Long 3.00 - [ICRA]BB- - - -
Term (Stable)
3 Unallocated Long 0.22 - [ICRA]BB- - - -
term (Stable)/
[ICRA]A4

Complexity level of the rated instrument:

ICRA has classified various instruments based on their complexity as "Simple", "Complex" and "Highly Complex". The
classification of instruments according to their complexity levels is available on the website www.icra.in

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Annexure-1: Instrument Details
Date of Amount
Instrument Issuance / Coupon Maturity Rated Current Rating and
ISIN No Name Sanction Rate Date (Rs. crore) Outlook
NA Term loan 15/09/2016 - 30/12/2022 5.78 [ICRA]BB- (Stable)
NA Cash credit 15/09/2016 - - 3.00 [ICRA]BB- (Stable)
[ICRA]BB-
NA Unallocated NA NA - 0.22
(Stable)/[ICRA]A4
Source: AACIPL

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ANALYST CONTACTS
Mr. K. Ravichandran Mr. R Srinivasan
+91 44 4596 4301 +91 44 4596 4315
ravichandran@icraindia.com r.srinivasan@icraindia.com

Mr. Vinay Kumar G Mr. Naren Rajeev Kumar K

+91 40 4067 6533 +91 40 4067 6529
vinay.g@icraindia.com naren.kumar@icraindia.com

RELATIONSHIP CONTACT
Jayanta Chatterjee
+91 80 4332 6401
jayantac@icraindia.com

MEDIA AND PUBLIC RELATIONS CONTACT

Ms. Naznin Prodhani
Tel: +91 124 4545 860
naznin.prodhani@icraindia.com

Helpline for business queries:

+91-124-2866928 (open Monday to Friday, from 9:30 am to 6 pm)

info@icraindia.com

About ICRA Limited:

ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and financial services
companies as an independent and professional investment Information and Credit Rating Agency.

Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited
Company, with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The international Credit
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For more information, visit www.icra.in

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