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

NON-COOPERATION WITH PREVIOUS CREDIT RATING AGENCY

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)

Print and Digital Media

The Rating Rationale is sent to you for the sole purpose of dissemination through your print, digital or electronic media. While it may be used by you acknowledging credit to BWR, please do not change the wordings in the rationale to avoid conveying a meaning different from what was intended by BWR. BWR alone has the sole right of sharing (both direct and indirect) its rationales for consideration or otherwise through any print or electronic or digital media.

About Brickwork Ratings

Brickwork Ratings (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by Reserve Bank of India [RBI], offers credit ratings of Bank Loan, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. BWR has rated over 12,000 medium and large corporates and financial institutions’ instruments. BWR has also rated NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations. BWR has Canara Bank, a leading public sector bank, as one of the promoters and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations.

Disclaimer

Brickwork Ratings India Pvt. Ltd. (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by the Reserve Bank of India [RBI], offers credit ratings of Bank Loan facilities, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. [ hereafter referred to as "Instruments"]. BWR also rates NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations.

BWR wishes to inform all persons who may come across Rating Rationales and Rating Reports provided by BWR that the ratings assigned by BWR are based on information obtained from the issuer of the instrument and other reliable sources, which in BWR's best judgment are considered reliable. The Rating Rationale / Rating Report & other rating communications are intended for the jurisdiction of India only. The reports should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in Europe and also the USA).

BWR also wishes to inform that access or use of the said documents does not create a client relationship between the user and BWR.

The ratings assigned by BWR are only an expression of BWR's opinion on the entity / instrument and should not in any manner be construed as being a recommendation to either, purchase, hold or sell the instrument.

BWR also wishes to abundantly clarify that these ratings are not to be considered as an investment advice in any jurisdiction nor are they to be used as a basis for or as an alternative to independent financial advice and judgment obtained from the user's financial advisors. BWR shall not be liable to any losses incurred by the users of these Rating Rationales, Rating Reports or its contents. BWR reserves the right to vary, modify, suspend or withdraw the ratings at any time without assigning reasons for the same.

BWR's ratings reflect BWR's opinion on the day the ratings are published and are not reflective of factual circumstances that may have arisen on a later date. BWR is not obliged to update its opinion based on any public notification, in any form or format although BWR may disseminate its opinion and analysis when deemed fit.

Neither BWR nor its affiliates, third party providers, as well as the directors, officers, shareholders, employees or agents (collectively, "BWR Party") guarantee the accuracy, completeness or adequacy of the Ratings, and no BWR Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Rating Rationales or Rating Reports. Each BWR Party disclaims all express or implied warranties, including, but not limited to, any warranties of merchantability, suitability or fitness for a particular purpose or use. In no event shall any BWR Party be liable to any one for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Rating Rationales and/or Rating Reports even if advised of the possibility of such damages. However, BWR or its associates may have other commercial transactions with the company/entity. BWR and its affiliates do not act as a fiduciary.

BWR keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of BWR may have information that is not available to other BWR business units. BWR has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.

BWR clarifies that it may have been paid a fee by the issuers or underwriters of the instruments, facilities, securities etc., or from obligors. BWR's public ratings and analysis are made available on its web site, www.brickworkratings.com. More detailed information may be provided for a fee. BWR's rating criteria are also generally made available without charge on BWR's website.

This disclaimer forms an integral part of the Ratings Rationales / Rating Reports or other press releases, advisories, communications issued by BWR and circulation of the ratings without this disclaimer is prohibited.

BWR is bound by the Code of Conduct for Credit Rating Agencies issued by the Securities and Exchange Board of India and is governed by the applicable regulations issued by the Securities and Exchange Board of India as amended from time to time.