Moody's Ratings (Moody's) has affirmed UPL Corporation Limited's (UPL Corp) Ba2 corporate family rating (CFR) and senior unsecured debt rating. At the same time, it changed the ratings outlook to stable from negative.

"The ratings affirmation and outlook change to stable are driven by the strengthening in UPL's credit profile supported by continuous efforts in structurally improving working capital management, which we believe will be sustained," says Kaustubh Chaubal a Moody's Ratings Senior Vice President.

"Gross debt reduction and earnings expansion will pave the way for the company's debt/EBITDA leverage to correct towards 4.5x by March 2026, enhancing the company's financial flexibility as it looks to refinance its upcoming debt maturities in 2026," adds Chaubal who is also the lead analyst on UPL.

Ratings Rationale

We expect UPL's revenue growth to remain modest at around 4% in the fiscal year ending 31 March 2026 (FY25–26), tapering to 1.5% - 2.0% thereafter, with EBITDA margins improving toward 18% over the next two to three years - though still below the historical average of 20%. This reflects stabilized industry inventories, UPL's disciplined working capital management, its backward integration strategy, and low operating breakeven, which support margin recovery as market conditions normalize.

UPL derives about 10% of its global revenue from the US. While it operates manufacturing facilities in the US, it imports some raw materials from India that would be subject to the 25% blanket tariff effective August 7.

Nonetheless, UPL's geographically diversified operations should help mitigate the overall impact. Although tariffs on imports from India are lower than those from China, we do not expect a material competitive advantage, particularly as trade flows may shift to other markets where UPL is present.

Channel inventories at distributors and farmers across various markets have now somewhat stabilized, but a global oversupply of agrochemicals and geopolitical and trade tensions will constrain product price increases, at least over the next two years. In addition, a shift in buying patterns with distributors restocking closer to planting seasons will keep volume growth moderate for UPL.

Meanwhile, the company continues to streamline working capital and reduce reliance on higher-cost short-term debt. As a result, we expect Moody's-adjusted gross debt/EBITDA to improve to around 4.0x by March 2027 from approximately 5.0x at March 2025, pro forma for the $400 million perpetual notes repaid in May. Lower interest expense will also support a recovery in EBITDA/interest coverage to 2.5x–3.0x over FY25–26 and FY26–27.

UPL's Ba2 CFR continues to reflect its substantial scale, leading global position in post-patent agrochemicals, and geographically diversified, vertically integrated operations. The company's in-house production of key raw materials and broad product portfolio—spanning crop cultivation, protection, and preservation—support its competitive profile across the agricultural value chain.

Nonetheless, like peers, UPL remains exposed to weather variability and the long gestation cycle of agricultural production, which contributes to structurally elongated working capital requirements.

Outlook

The stable outlook reflects our view that UPL will sustain its strong business profile and maintain at least adequate liquidity. We anticipate that the company's credit metrics will remain appropriate for its Ba2 ratings. The stable outlook also incorporates our expectation that the company will pursue a balanced growth strategy while adhering to prudent financial policies.