Gujarat Narmada Valley Fertilizers & Chemicals Ltd.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 2900.00 Crs. of Gujarat Narmada Valley Fertilizers & Chemicals Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (02 Aug 2021)	Present
Fund Based	2000.00	2000.00	Long Term	BWR AA+ /Stable Assignment	BWR AA + /Stable Reaffirmation
Non Fund Based	900.00	900.00	Short Term	BWR A1+ Assignment	BWR A1 + Reaffirmation
Grand Total	2900.00	2900.00	(Rupees Two Thousand Nine Hundred 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 (BWR) has reaffirmed BWR AA+/Stable/A1+ ratings for the bank loan facilities of Gujarat Narmada Valley Fertilizers & Chemicals Ltd (GNFC or the company).

The ratings derive comfort from the company’s demonstrated track record in the fertilisers and chemicals businesses, diversified product profile with it being the sole/largest manufacturer of key chemicals such as Toluene Di-Isocyanate (TDI), aniline and acetic acid, presence in multiple states and strong brand recall in these areas, strong financial risk profile with high financial flexibility on account of the absence of any long-term debt, negligible utilisation of working capital limits, and the generation of substantial cash accruals and realisation of significant subsidy receivables under the Atmanirbhar Bharat scheme, bringing down the overall receivables level.

The ratings however, remain constrained on account of the company’s exposure to regulatory risks, considering fertilisers is a highly regulated sector, and the susceptibility of the profitability margins to volatility associated with the chemicals business, arising out of movements in fuel prices and exchange rates.

The outlook has been assigned as Stable as the company’s financial risk profile is expected to remain healthy on account of the company’s strong operational efficiencies, its market position and limited reliance on external funding to manage operations.

KEY RATING DRIVERS

Credit Strengths:

Demonstrated Track Record of Operations and Market Position :
GNFC has a demonstrated track record of operations in the both the fertilisers and chemicals segments. The company manufactures both urea and nitrophosphatic fertiliser and sells its products under the brand name Narmada, with a strong recall in multiple states. GNFC is also the market leader for various chemicals and is the sole/largest manufacturer of chemicals such as TDI, aniline and acetic acid in the country, giving it an edge over the other players. The company has also been undertaking regular capex to enhance its capacities and revamp its plants for better performance.
Presence in Multiple States :
GNFC sells its products in multiple states such as Gujarat, Madhya Pradesh, Uttar Pradesh, Rajasthan, Punjab, Haryana and Maharashtra. Nearly 65% of the company's revenue in the fertilisers segment comes from Gujarat through a network of government institutions and cooperatives, and the balance comes from the remaining states through a network dominated by private dealers.
Diversified Product Profile :
The company has a diversified product profile under both the fertilisers and chemicals segments, which has helped the company deal with price volatility over the years, leading to sustained profitability indicators. The company also keeps adding capacities in line with market demand.
Strong Financial Profile :
The company's financial risk profile continues to remain strong with the absence of any long-term debt, healthy net worth and lower utilisation of the working capital limits. The company’s profitability indicators also showed considerable improvement during FY22, with the OPBDIT margin improving from 20% in FY21 to 28%. The net margin also improved from 13% in FY21 to 20% in FY22. The company's gearing has remained less than 0.20x in the past three years, and the coverage indicators have also remained exceptionally high due to the absence of any long-term debt and related financial costs in the books. On account of negligible debt in the books, the company’s financial flexibility also remains high.

Credit Risks:

Volatility Associated with the Chemicals Business :
The company is dependent on the chemicals business for its profitability, and the same is exposed to volatility on account of movements in fuel prices and exchange rates. As natural gas is a key component in the manufacturing process, any adverse change in its prices affects the prices of the products manufactured by the company. Additionally, as all the products are import substitutes, pricing is based on the import parity approach and is thus, linked to exchange rate movements. Nonetheless, despite all the fluctuations, GNFC has been able to maintain profitable operations due to the benefit of diversification that it derives from its multiple product offerings.
Exposure to Regulatory Risk :
Fertilisers is a highly regulated business, under which the movement of products and their prices is controlled by the central government. Manufacturers are compensated by way of a subsidy; however, it is mandatory to achieve energy efficiency norms to claim the full recovery of costs. Going forward, if there are adverse changes in regulations, the company will also be affected negatively.

ANALYTICAL APPROACH - Consolidated

BWR has analysed the company’s standalone and consolidated financial statements while arriving at the rating. However, as GNFC is the only contributing entity in the group, reliance is more on the standalone statements.

RATING SENSITIVITIES

Upward: Reporting of stable profit margins in the fertilisers segment, and the receivables level is significantly brought down from the current levels

Downward: If the prices of the products deteriorate, and the company misses the energy efficiency targets to claim full subsidy for the fertilisers segment

LIQUIDITY INDICATORS - Superior

The company’s liquidity position is superior, with the absence of any long-term debt and with the generation of substantial cash accruals every year on the back of profitable operations. GNFC has sanctioned secured fund-based working capital limits of Rs. 1500 Crs, which largely remained unutilised. The company also reported healthy cash balances, including current investments of Rs. 1081.13 Crs as on 31 March 2022, providing adequate liquidity backup.

ABOUT THE ENTITY

Gujarat Narmada Valley Fertilizers & Chemicals Ltd (GNFC) was incorporated in 1976 by the Government of Gujarat (GoG) and Gujarat State Fertilizers and Chemicals Limited. The shareholding of the GoG was later transferred to Gujarat State Investments Limited, the investments arm of the GoG. GNFC is a manufacturer and trader of fertilisers and industrial chemicals, covering a wide range of products. Other than that, the company also offers various IT solutions and services.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 21-22 (Audited)	FY 20-21 (Audited)
Operating Revenue	Rs.Crs.	8642.29	5128.69
EBITDA	Rs.Crs.	2383.78	1006.15
PAT	Rs.Crs.	1703.75	689.21
Tangible Net Worth	Rs.Crs.	7878.88	5962.57
Total Debt/TNW	Times	Not Available	Not Available
Current Ratio	Times	3.61	3.57

KEY FINANCIAL INDICATORS (Consolidated)

Key Parameters	Units	FY 21-22 (Audited)	FY 20-21 (Audited)
Operating Revenue	Rs.Crs.	8642.29	5128.69
EBITDA	Rs.Crs.	2383.78	1003.33
PAT	Rs.Crs.	1710.41	696.95
Tangible Net Worth	Rs.Crs.	7970.07	6047.10
Total Debt/TNW	Times	Not Available	Not Available
Current Ratio	Times	3.61	3.57

KEY COVENANTS OF THE FACILITY RATED

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

ANY OTHER INFORMATION

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	2000.00	BWR AA+/Stable (Reaffirmation)	02Aug2021	BWR AA+ Stable (Assignment)	NA	NA	NA	NA
Non Fund Based	ST	900.00	BWR A1+ (Reaffirmation)	02Aug2021	BWR A1+ (Assignment)	NA	NA	NA	NA
Grand Total		2900.00	(Rupees Two Thousand Nine Hundred 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
Shamkant Dattatray Deshmukh Ratings Analyst shamkant.d@brickworkratings.com	Vipula Sharma Director - Ratings Board : +91 80 4040 9940 vipula.s@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Gujarat Narmada Valley Fertilizers & Chemicals 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	Axis Bank Ltd.	ILC/FLC	_	50.00	50.00
2	Bank of Baroda	Cash Credit	690.00	_	690.00
3	Bank of Baroda	ILC/FLC	_	395.00	395.00
4	Bank of India	Cash Credit	100.00	_	100.00
5	Bank of India	ILC/FLC	_	25.00	25.00
6	Federal Bank	ILC/FLC	_	50.00	50.00
7	Federal Bank	Cash Credit	10.00	_	10.00
8	HDFC Bank	Cash Credit	263.00	_	263.00
9	HDFC Bank	ILC/FLC	_	55.00	55.00
10	ICICI Bank	Cash Credit	10.00	_	10.00
11	Kotak Mahindra Bank	ILC/FLC	_	150.00	150.00
12	Kotak Mahindra Bank	Cash Credit	125.00	_	125.00
13	Others	Cash Credit - Proposed	230.00	_	230.00
14	State Bank Of India (SBI)	ILC/FLC	_	175.00	175.00
15	State Bank Of India (SBI)	Cash Credit	572.00	_	572.00
Total			2000.00	900.00	2900.00
TOTAL (Rupees Two Thousand Nine Hundred Crores Only)

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