NACL Industries : Credit Rating

Regd. Office: Plot No. 12-A,'C' Block, Lakshmi Towers, No. 8-2-248/1/7/76,Nagarjuna Hills, Panjagutta, Hyderabad - 500082, Telangana, INDIA. 11 [phone] oo, � [phone], [e-mail]@www.nacllnd.com CIN: L24219TG1986PLCO16607

Kindly take the same into records.

Thanking you,

for NACL Industries Limited

Satish Kumar Subudhi

Vice President -Legal& Company Secretary Encl: As above

Short Term Rating

1) BSE Limited

Phiroze Jeejeebhoy Towers Dalal Street,

Fort, Mumbai, Mumbai - 400001 Stock Code: 524709

Dear Sir,

Sub: Intimation of Credit Rating - reg.

Ref: NACL/SE/2022-23

Pursuant to the Regulation 30(6) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, we would like to inform that, CRISIL has assigned the credit rating to the Long Term & Short Term Bank Facilities vide its letter dated August 08, 2022. The details of the same are given herein below:

Facility Rating TypeRating Action

Bank Long Term Rating CRISIL A/Stable

Loan(Assigned)

CRISIL A 1 (Assigned)

�,

Responsible

� 600 crores

Rated Amount

2) National Stock Exchange of India Ltd Exchange Plaza, 5thFloor

Plot No.Cf1 G Block,

Bandra -KurlaComplex, Bandra (E) Mumbai-400051.

Symbol: NACLIND

August 08, 2022

NJGfRJUNA NACL Industries Limited

NACL

Care®

OUR COMMrTHENT TO SUSTAINABIUlY

continue to benefit from the experience and expertise of its promoters and management and leverage its customer relationships.

• Above-averagefinancial risk profile: The above-average financial risk profile of NACL is reflected in its moderate capital structure and comfortable debt protection metrics. Gearing is estimated at less than 1.1 times and total outstanding liabilities to adjusted networth ratio at less than 2.14 times as on March 31, 2022. Debt protection metrics were comfortable, indicated by interest coverage and net cash accrual to total debt ratios estimated at 5.4 times and 0.17 time, respectively, in fiscal 2022.

Weaknesses:

• Large working capital requirement: Operations are working capital intensive, as indicated by gross current assets of 210-240 over the four fiscals through 2022. The company offers considerable credit in the domestic formulations business and has to maintain adequate inventory on account of the number of stock keeping units, import of raw materials and seasonality in operations. Receivables are 100-120 days and inventory 70-90 days on average. The incremental working capital requirement is managed efficiently through a mix of internal accrual and bank borrowings. Nevertheless, operations will remain working capital intensive, especially in the biological segment, on account of the nature of the industry; prudent working capital management will be critical.
• Exposure to competition, regulatory changes and seasonality in the agrochemicals sector: The domestic agrochemical formulations industry has a large number of organised players with regional presence. As NACL is into generic molecules, it faces intense competition from organised as well as unorganised players in the domestic market. Also, the domestic agrochemicals sector is dependent on monsoon and the level of farm income. The fortunes of the sector are, therefore, linked to the quantum, timing and distribution of rainfall in a year, exposing the players' revenue to seasonal trends. Besides, surplus or inadequate rainfall could hit the profitability of players and lead to build-upin the working capital requirement. The business performance of NACL, like that of other agrochemical manufacturers, may also be impacted by regulatory changes, such as export and import policies, registration policies and product and environment safety requirements in India and abroad.

Liquidity: Strong

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Bank limit utilisation averaged 60% over the 12 months through June 2022. Cash accrual, expected at over Rs 90 crore per annum, will sufficiently cover yearly debt obligation of Rs 29 crore over the medium term. Cash and bank balance was healthy at around Rs 70 crore and current ratio was moderate at 1.3 times on March 31, 2022.

Outlook: Stable

NACL will continue to benefit from the promoters' extensive experience and healthy relationships with clients.

Rating Sensitivity Factors

Upward factors

• Steady increase in revenue and sustenance of the operating margin at 9-10% leading to higher cash accrual
• Efficient working capital management leading to material improvement in the capital structure and debt protection metrics
• Stabilisation of operations at the Dahej plant (NACL Spec-chem Ltd)

Downward factors

• Sustained decline in revenue, with profitability at below 7%

• Stretched working capital cycle leading to material increase in debt or debtor write-offs, weakening the financial risk profile

About the Group

NACL, incorporated in 1986, manufactures and exports crop protection technical (active ingredient) and formulations. It manufactures all kinds of pesticides, insecticides, herbicides, fungicides and other plant growth chemicals. The company's formulation business is mainly in the Indian market, and it sells through its large retail dealer network spread across India; it also has a range of branded formulations. The company has two manufacturing units at Srikakulam and Ethakota in Andhra Pradesh and one research and development centre in Telangana. Ms K Lakshmi Raju is the promoter of the company, and operations are managed by M Pavan Kumar.

NACL Spec-chem Ltd is undertaking a greenfield project at Dahej, Gujarat. The unit is being set up with an installed capacity of 6,000 tonne per annum for manufacturing technical and intermediate for domestic as well as export markets. The total project cost of Rs 202 crore is funded via a debt-equity mix of 3.2:1.

Key financial indicators(Consolidated)

As on/for the period ended March 31	Unit	2022	2021
Operating income	Rs.Crore	1638	1184
Reported profit after tax (PAT)	Rs.Crore	73	51
PAT margin	%	4.5	4.3
Adjusted debt/adjusted networth	Times	1.1	0.48
Interest coverage	Times	5.47	4.32

Any other information: Not applicable

Note on complexity levels of the rated instrument:

CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity

levels are available on www.crisil.com/complexitylevels. Users are advised to refer to the CRISIL Ratings' complexity
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levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries
on specific instruments.
Annexure - Details of instrument(s)
ISIN	Name of	Date of	Coupon	Maturity	Issue size	Complexity	Rating assigned
instrument	allotment	rate (%)	date	(Rs crore)	levels	with outlook
NA	Cash Credit	NA	NA	NA	118	NA	CRISIL A/Stable
NA	Non-Fund Based Limit	NA	NA	NA	204	NA	CRISIL A1
NA	Packing Credit in Foreign Currency	NA	NA	NA	77	NA	CRISIL A1
NA	Term Loan	NA	NA	Mar-29	36	NA	CRISIL A/Stable
NA	Working Capital Demand Loan	NA	NA	NA	165	NA	CRISIL A/Stable

Annexure - List of Entities Consolidated

Names of entities consolidated	Extent of	Rationale for consolidation
consolidation
LR Research Laboratories Pvt Ltd	Full	Same line of business, common promoters and
Nagarjuna Agrichem (Australia) Pvt Ltd	Full	strong business and financial linkages. NACL holds
NACL Spec-Chem Ltd	Full

NACL Multichem Pvt Ltd

Full

a 26% stake in Nasense Labs Pvt Ltd and has

Nasense Labs Pvt Ltd

26%

been consolidated accordingly

Annexure - Rating History for last 3 Years

Current

2022 (History)

2021

2020

2019

Start of

2019

Instrument

Type

Outstanding

Rating

Date

Rating

Date

Rating

Date

Rating

Date

Rating

Rating

Amount

Fund Based

CRISIL

LT/ST

396.0

A1 /

--

--

--

--

--

Facilities

CRISIL

A/Stable

Non-Fund Based

ST

204.0

CRISIL

--

--

--

--

--

Facilities

A1

All amounts are in Rs.Cr.

Annexure - Details of Bank Lenders & Facilities

Facility

Amount (Rs.Crore)

Name of Lender

Rating

CRISIL A/Stable

Cash Credit

10

Bandhan Bank Limited

CRISIL A/Stable

Cash Credit

12

SBM Bank (India) Limited

CRISIL A/Stable

Cash Credit

1

IndusInd Bank Limited

Cash Credit

10

The Karnataka Bank

CRISIL A/Stable

Limited

I

CRISIL A/Stable

Cash Credit

26

HDFC Bank Limited

Cash Credit

14

Kotak Mahindra Bank

CRISIL A/Stable

Limited

Cash Credit

35

SVC Co-Operative Bank

CRISIL A/Stable

Limited

CRISIL A/Stable

Cash Credit

10

RBL Bank Limited

CRISIL A1

Non-Fund Based Limit

25

HDFC Bank Limited

CRISIL A1

Non-Fund Based Limit

20

Axis Bank Limited

CRISIL A1

Non-Fund Based Limit

15

Bandhan Bank Limited

Non-Fund Based Limit

55

Bank of Bahrain and

CRISIL A1

Kuwait B.S.C.

I

Non-Fund Based Limit

30

SBM Bank (India) Limited

CRISIL A1

CRISIL A1

Non-Fund Based Limit

30

YES Bank Limited

CRISIL A1

Non-Fund Based Limit

29

IndusInd Bank Limited

Packing Credit in Foreign

14

YES Bank Limited

CRISIL A1

Currency

CRISIL A1

Packing Credit in Foreign

15

Axis Bank Limited

Currency

Ir

11

I

I