S&P Global Ratings has turned more bullish on UPL Corp., revising its outlook to positive from stable while affirming the company’s 'BB' long-term issuer credit rating and 'BB' rating on its senior unsecured notes.

 

The ratings agency expects a gradual recovery in crop-protection volumes over the next 12 months to support UPL’s sales and earnings, while disciplined balance-sheet management should keep its funds from operations (FFO)-to-debt ratio comfortably above the 20% threshold for a potential upgrade.

 

S&P said UPL’s earnings have already shown resilience. EBITDA for the fiscal year ended March 31, 2026, came in 17% above its estimate, while momentum carried into the first quarter of fiscal 2027, helped by favorable currency movements and stronger performance in the seeds business.

 

Although volumes declined as distributors delayed procurement amid heightened price volatility, S&P expects restocking demand to drive a recovery through the remainder of fiscal 2027.

 

UPL’s balance sheet has also improved significantly. S&P-adjusted debt fell to a multi-year low as of March 31, 2026, reflecting the company’s focus on deleveraging in recent years.

 

The company’s FFO-to-debt ratio rose to 23% in fiscal 2026, beating S&P’s earlier 18% estimate. The agency now expects the ratio to remain between 22% and 25% through fiscal 2028—well above its 20% upgrade threshold.

 

The recovery in Latin America, one of UPL’s key markets, is expected to provide another tailwind. S&P Global expects the crop-protection market in the region to grow 4% in value in 2026 and 7% in 2027, driven by higher harvested area and crop yields.

 

Still, UPL faces significant risks, including volatile raw-material costs and the continuing conflict in the Middle East.

 

UPL’s ability to refinance upcoming debt maturities will be critical to the positive outlook.

 

A US$500 million sustainability-linked term loan is due in December 2026. S&P said UPL is considering multiple refinancing options, including term loans, rupee- and dollar-denominated bonds and committed facilities.

 

Another US$500 million maturity falls due in September 2027. S&P said refinancing this debt will become increasingly important as it enters the 12-month liquidity window.

 

The agency nevertheless noted UPL’s track record of addressing previous maturities on time.

 

The path to an upgrade is not without obstacles. Severe El Niño conditions could hurt crop yields and weaken demand for crop-protection products. S&P estimates that a 10% decline in volumes from its base case could push UPL’s FFO-to-debt ratio below the 20% upgrade threshold.

 

Sharp swings in active-ingredient prices could also squeeze margins, particularly if falling crude prices and easing supply-chain constraints trigger inventory losses.

 

Working capital is another pressure point. S&P expects UPL’s working-capital requirements to rise by INR14 billion in fiscal 2027, largely because stronger sales will require higher inventory levels. The agency expects incremental usage to fall below INR10 billion in subsequent years.

 

However, an additional INR20 billion working-capital requirement could push the FFO-to-debt ratio below 20%, underscoring the sensitivity of UPL’s credit profile to cash-flow swings.

 

S&P said it could raise UPL’s rating if resilient earnings, proactive refinancing and prudent working-capital management lead to a sustained improvement in credit quality.

 

An upgrade would also require liquidity to strengthen further and the FFO-to-debt ratio to remain comfortably above 20%.

 

Conversely, S&P could return the outlook to stable if a delayed recovery in crop-protection demand leaves volumes stagnant and margins under pressure, or if debt rises materially because of a prolonged working-capital cycle, major acquisitions or elevated shareholder distributions.

 

For now, however, the message from S&P is clear: UPL’s stronger earnings, falling debt and disciplined financial policy have put the company on a firmer path toward a potential rating upgrade.