The agency has also affirmed the company’s short-term rating at "[ICRA] A1+”.

ICRA said that the reaffirmation of ratings continues to take into account the diverse presence of Godrej Agrovet (GAVL) in agri-focused businesses such as animal feed, vegetable oil (palm oil), crop protection (agri inputs), dairy and poultry, which insulates the company from downturns in any particular business sector.

Among the various sectors in which it operates, GAVL enjoys a strong position in the domestic organised animal feed segment, which accounts for nearly 50% of its consolidated revenues. Moreover, GAVL has gained further market share in this segment in the recent quarters.

The ratings also factor in the company’s comfortable capitalisation metrics. The company also continued to demonstrate a comfortable interest coverage, aided by steady profitability and containment of finance costs.

It further draws comfort from GAVL’s strong parentage (it is apart of the Godrej Group), which imparts financial flexibility. ICRA also notes that GAVL has been gradually increasing its stake in its subsidiary companies such as Astec LifeSciences (Astec).

GAVL’s operational performance in FY2024 largely remained steady. While the company reported a recovery in margins in dairy and poultry & processed food segments on the back of favourable input costs and increasing salience of value-added / branded products in the overall revenue mix, muted demand in the enterprise segment impacted the business performance of Astec in FY2024.

GAVL’s cost structure and profitability remain susceptible to raw material price fluctuations due to its exposure to a price-sensitive consumer segment, which limits its ability to fully pass on any increase in input prices.

In this context, GAVL’s ability to pass on the input cost fluctuations to end-consumers either through strengthening market position or increasing salience of value-added/differentiated products for protecting its margins, remains a key rating monitorable.

The agri-focused business portfolio of GAVL remains vulnerable to factors such as adverse weather conditions and Government regulations.

The company also faces intense competition in the agro-chemicals business from the domestic as well as external players, which may influence the profitability in this segment.

Godrej Agrovet is a part of the Godrej Group, which has diverse business interests spanning fast moving consumer goods, consumer products, oleo chemicals, animal feed, real estate development, crop protection, and oil palm plantation through various Group companies. Godrej Industries holds 64.88% stake in Godrej Agrovet (as on March 31, 2024).

The scrip fell 1% to currently trade at Rs 521 on the BSE.