HIL (India) Ltd. (erstwhile Hindustan Insecticides Ltd.)

Brickwork Ratings revises the ratings for the Bank Loan Facilities of Rs. 300.00 Crs. of HIL (India) Ltd. (erstwhile Hindustan Insecticides Ltd.)

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (11 Aug 2021)	Present
Fund Based	250.00	250.00	Long Term	BWR D Downgrade	BWR BB /Stable Upgrade
Non Fund Based	50.00	50.00	Short Term	BWR D Downgrade	BWR A4 Upgrade
Grand Total	300.00	300.00	(Rupees Three Hundred Zero Crores Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure

RATING ACTION / OUTLOOK

Brickwork ratings has upgraded the Long Term rating to BWR BB, with a ‘Stable’ outlook and short term rating to BWR A4, of HIL (India) Ltd (referred to as ‘HIL’ or ‘the company’), from BWR D/ D, as the company has been regular in servicing of its debt obligation for the last six months. Furthermore, the ratings derives strength from the company’s position as a Government of India enterprise, its established position as the sole public sector enterprise in India for the manufacturing of Dichlorodiphenyltrichloroethane (DDT), pesticides and agro chemicals, etc., and diversified product mix & geographical presence of the company. The ratings are, however, constrained by the weak financial risk profile, competition from various players and delays in realization of receivables from the customers.

Outlook: Stable

BWR believes that the business and financial risk profile of HIL will be maintained over the medium term. The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. The outlook may be revised to 'Positive' in case revenue and profitability show a sustained improvement leading to an improved financial and liquidity profile. The rating outlook may be revised to 'Negative' in case the profitability generated is much lower than anticipated, or there is a significant deterioration in the overall liquidity profile of the company.

KEY RATING DRIVERS

Credit Strengths:

Timely servicing of the debt obligation :
The company has been regular in servicing of its debt obligation since August-2021. The same has also been confirmed by the lender of the company.
Wholly owned GOI (Government of India) undertaking, with a well established business :
HIL, formerly known as Hindustan Insecticide Limited, is a Government of India Enterprise incorporated in the year 1954. HIL is the only manufacturer of Dichlorodiphenyltrichloroethane (DDT) and also the only central public sector enterprises (CPSE) operating in Public Health and Crop Protection segments in India. The Company is one of the five national level seed agencies in India and derives a significant part of its sales from state governments.
Diversified product mix and geographical presence of the company :
HIL is the primary and sole supplier of DDT to the National Vector Borne Disease Control Programme of the Ministry of Health. The company gradually diversified into agrochemicals and is presently the sole public sector enterprise in the pesticides field. The product range of the company includes Insecticides, Herbicides, Weedicides and Fungicides etc.The company also exports its agro products to Netherlands, UK, Jamaica, UAE, Manila, South Korea, Belgium, Guatemala, France, Germany, Argentina, Ethiopia, Egypt, Spain, etc. and its products are well-accepted internationally. HIL has reputed clientele viz., Ministry of Chemicals & Fertilizers, Ministry of Health & Family Welfare, Ministry of Agriculture, Steel Authority of India Limited, Indian Oil Corporation, Bharat Electronics Limited., Coal India Limited, Haryana Tourism etc. The Company majorly supplies its products to MoHFW (Ministry of Health and family welfare) and various state governments.

Credit Risks:

Weak financial risk profile :
The company has reported a decline of ~3% in its operating income in FY21 (from Rs.394.09 crs in FY20 to Rs. 382.19 crs in FY21) due to reduction in orders of DDT from the Ministry of health and family welfare in Q1FY21. The capital structure (Total debt/ Tangible Networth) of the company also deteriorated from 1.50x, as on March 31, 2020 to 1.97x, as on March 31, 2021, on account of availment of new term loans. The interest service coverage ratio of the company also stood weak (at below unity) in FY21. Insufficient profitability had resulted in cash flow mismatches in the past which led to delays in the servicing of the bank debt obligation. However, the banking conduct of the company has remained satisfactory, with no delays reported since Aug-2021.
Highly competitive Industry :
The agrochemical industry is considered to be highly competitive due to the presence of many small & large private players. The company faces high competition from a large number of players in both organized and unorganized sectors in Pesticides, Fertilisers, etc.
Delays in realization of debtors :
Historically, the average collection period of the company has remained high and the same stood at 379 days, as on March 31, 2021 (Previous year: 358 days). Since the company sells its products majorly to Government bodies and State governments, it receives the payments from these entities with a delay.

HIL has availed a term loan from the Government of India for which the outstanding amount (including interest) stood at Rs.79.86 Crs, as on March 31, 2021. The same was availed against the receivables from the MOHFW (Ministry of Health and Family welfare). However, owing to delay in realization of these debtors (Rs.99 Cr., as on March 31, 2021), HIL has not been able to repay the term loan to the GoI and has requested the Government to adjust the same with the receivables from MOHFW.

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, BWR has applied its rating methodology as debited in the Rating Criteria detailed below ( hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Positive: The rating may be upgraded in case the revenues and profit show sustained improvement backed by healthy liquidity.

Negative: The rating may be downgraded in case revenues of the company substantially deteriorates from the current level. Rating may also be adversely affected in case of deterioration in gearing, coverage ratios, liquidity profile and delay in receipt of funds from the land deals.

LIQUIDITY INDICATORS - Stretched

The operating cycle of the company has remained elongated historically and the same stood at 259 days, as on March 31, 2021 (PY: 234 days), owing to high average collection and average inventory holding days. Due to covid - 19, the company had faced issues in the realization of payment from the Ministry of Chemicals and Fertilizers, resulting in delays in debt servicing till July-2021. However, there were no instances of over utilization in the cash credit facility and no delays were observed in the servicing of debt obligation in the term loan and GECL facilities, in the last six months i.e from Aug 2021. A DSRA of Rs.15 cr. has also been maintained by the company at the bank which provides a liquidity cushion. The fund-based working capital facility of Rs.150 Cr., remained ~83% utilized, on an average, in the six month period from Aug-2021 to Jan-2022. The Company had achieved cash accruals of Rs 6.46 Crs in FY 21 which improved slightly from Rs. 6.13 Cr in FY20. The company has a repayment obligation of ~Rs.23 Cr. in FY22 and ~Rs.35 Cr. in FY23, which is projected to be met through the cash accruals and proceeds expected from the sale of land. HIL has sold a parcel of land admeasuring 4.60 acres to Haryana Shahari Vikas Pradhikaran (formerly HUDA), for widening of highway. Against the total consideration of Rs.80 Cr. to be paid to HIL, the company has received Rs. 21 Crs. in the current financial year (so far) and is expected to receive Rs.16 Crs by the end of the financial year FY22. The remaining amount (Rs. 43 Cr.) is expected to be received in FY23. The same is expected to support the liquidity profile of the company. Also, the company has entered into an agreement with NBCC (India) Ltd to develop a vacant land situated at Zakhira, New Delhi having total area of 5.12 acre which is expected to be completed in the next 3 years. The successful development and sale of the land will provide additional cash flows to HIL. However, timely receipt of cash flows from the sale of these land parcels shall remain a key rating sensitivity going forward. HIL is also carrying out capex in various product lines to further expand its product portfolio. These projects are being majorly funded through the financial support from the GoI in the form of grants.

ABOUT THE ENTITY

HIL (INDIA) LTD formerly known as Hindustan Insecticide Limited is a Government of India Enterprise. The Company is under the administrative control of the Department of Chemicals and Petrochemicals, under Ministry of Chemicals and Fertilizers. HIL is the only manufacturer of Dichlorodiphenyltrichloroethane (DDT) and also the only central public sector enterprises (CPSE) operating in the Public Health and Crop Protection segments in India. The company has gradually diversified into agrochemicals and is presently the sole public sector enterprise in the pesticides field. The product range of the company includes Insecticides, Herbicides, Weedicides and Fungicides etc. The Company has three manufacturing units in Rasayani (Maharashtra), Udyogamandal (Kerala) and Bhatinda (Punjab). The company exports its agro-products to Netherlands, UK, Jamaica, UAE, Manila, South Korea, Belgium, Guatemala, France, Germany, Argentina, Ethiopia, Egypt, Spain, etc. and its products are well-accepted internationally. HIL has a reputed clientele viz., Ministry of Chemicals & Fertilizers, Ministry of Health & Family Welfare, Ministry of Agriculture, Steel Authority of India Limited, Indian Oil Corporation, Bharat Electronics Limited., Coal India Limited, Haryana Tourism etc.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	382.19	394.09
EBITDA	Rs.Crs.	12.55	-6.42
PAT	Rs.Crs.	1.15	0.59
Tangible Net Worth	Rs.Crs.	108.31	108.10
Total Debt/Tangible Net Worth	Times	1.97	1.50
Current Ratio	Times	1.39	1.22

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2022)			2021		2020		2019
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	250.00	BWR BB/Stable (Upgrade)	11Aug2021	BWR D (Downgrade)	11May2020	BWR BBB-Stable (Upgrade)	20Sep2019	BWR BB+Stable (Downgrade/ISSUER NOT COOPERATING*)
Non Fund Based	ST	50.00	BWR A4 (Upgrade)	11Aug2021	BWR D (Downgrade)	11May2020	BWR A3 (Upgrade)	20Sep2019	BWR A4+ (Downgrade/ISSUER NOT COOPERATING*)
Grand Total		300.00	(Rupees Three Hundred Zero Crores Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.

Hyperlink/Reference to applicable Criteria

Analytical Contacts
Neha Wahi Ratings Analyst Board : +91 11 2341 2232 nehawahi@brickworkratings.com	Sudeep Sanwal Associate Director - Ratings sudeep.s@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

HIL (India) Ltd. (erstwhile Hindustan Insecticides Ltd.)

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Union Bank of India	Term Loan - Sanctioned	100.00	_	100.00
2	Union Bank of India	Cash Credit - Sanctioned	150.00	_	150.00
3	Union Bank of India	Letter of Credit - Sanctioned	_	50.00	50.00
Total			250.00	50.00	300.00
TOTAL (Rupees Three Hundred Zero Crores Only)

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