Rationale

 While arriving at the rating, ICRA has considered the consolidated financials of Jayant Agro-Organics Limited (JAOL, parent entity), three of its subsidiaries, viz. Ihsedu Agrochem Private Limited (IAPL), Ihsedu Coreagri Services Private Limited (ICSPL) and Ihsedu Itoh Green Chemicals Private Limited (IIGCMPL), as well as JAOL's share in the joint venture (JV) company, Vithal Castor Polyols Private Limited (VCPPL), on account of substantial operational and financial linkages among them. These entities are collectively referred to here as the Jayant Group or the Group. The ratings assigned to JAOL takes into account the extensive experience of the promoters of over five decades in the castor oil industry and the Jayant Group's leadership position in the castor oil and castor oil-based derivatives business. The ratings factor in the Group's diversified product portfolio catering to several end-user industries and the strategic tie-ups that the Group has with a few reputed global chemical companies, assuring long-term volume. The ratings also factor in the healthy net worth and comfortable capital structure of the Group at a consolidated level. The rating is, however, constrained by the exposure of the Group's profitability to volatility in commodity prices. ICRA notes that the Group reported a net operating loss of ~Rs. 80 crore at a consolidated level in Q3 FY2020 mainly attributable to sharp decline in castor prices. However, the commodity prices have stabilised over the past 12 months and the Jayant Group has reported stable profitability of 5-6% at a consolidated level over the said period. The ratings also factor in the counter-party risk as some of its customers failed to honour committed contracts in FY2020, though mitigated to some extent by the cashagainst-documents policy and other measures adopted for majority of its customers. The ratings also take into consideration the moderate working capital intensity of the Group due to relatively high raw material inventory and the risks related to competition from substitute products. The Stable outlook reflects ICRA's expectations that while the consolidated revenue for the Group would be impacted by the adverse impact of the Covid-19 pandemic in FY2021, the same should improve rapidly, mainly supported by its leadership position in the castor oil industry.