CRISIL has reaffirmed its 'CRISIL BB+/Stable' rating on the bank facilities of Darrick Insecticides Limited (DIL). The ratings continue to reflect the extensive experience of DIL's promoters in the pesticides industry, a diversified product portfolio and comfortable debt protection metrics. These strengths are partially offset by working capital intensive-and modest scale of-operations.

According to CRISIL, unsecured loans of Rs 1.23 crore (as on March 31, 2020) from non-banking finance companies and other financial institutions have been treated as 100% debt.

The report says that DIL is procuring technicals from established players such as United Phosphorous, Excel Crop Care, Meghmani, and Bharat Rasayan. Whereas the large network of over 1200 distributors is spread across Punjab, Haryana, Rajasthan and Maharashtra.

The diversified product portfolio comprising 100 varieties of insecticides, weedicides, herbicides, fungicides, and anti-termite formulations, shields the company from any adverse impact of discontinuation of, or ban on, a particular variety.

 According to CRISIL, financial risk profile is expected to remain healthy over the medium term supported by moderate debt protection metrics. Interest coverage and net cash accrual to adjusted debt ratios of 5.33 times and 0.40 time, respectively, in fiscal 2020, support the financial risk profile, which is expected to continue to improve over the medium term.

 On weakness, the report says that working capital intensive operations: Operations are expected to remain working capital intensive over the medium term. Gross current assets have been 176-194 days over the three fiscals ended March 31, 2020 because of high debtors of 113-125 days and moderate inventory days of 52-74. Payables of 48-75 days support working capital. Operations are expected to remain working capital intensive over the medium term.

 Also, the modest scale of operations is expected to continue to constrain the business risk profile and limit operating flexibility. Intense competition is likely to keep revenue growth stagnant over the medium term at Rs 84.74 crore in fiscal 2020.

Incorporated in 1995, Delhi-based DIL manufactures and trades in pesticide formulations - insecticides weedicides, herbicides, fungicides, and anti-termite formulations. The manufacturing plants are in Bahadurgarh (Haryana) and Jammu & Kashmir.