Rationale

 The ratings draw comfort from Godrej Industries Limited's (GIL) position as the holding company of the Godrej Group (Group) of companies and GIL's healthy investment portfolio in Group companies. GIL's primary listed investee entities include Godrej Consumer Products Limited (GCPL, [ICRA]AAA (Stable)/[ICRA]A1+), Godrej Properties Limited (GPL, [ICRA]AA (Positive)/[ICRA]A1+), and Godrej Agrovet Limited (GAVL, [ICRA]AA (Stable)/[ICRA]A1+), which have healthy credit profile and relatively low debt levels. The company's healthy unencumbered listed investment portfolio also provides a stable source of dividend income and lends strong financial flexibility because of its market value, which is significantly higher than the net debt outstanding. The company's market value of unencumbered listed investments has increased to Rs. 59,804 crore as on November 12, 2021 from Rs. 33,686 crore in FY2018, with net debt to market value of investments remaining at sub 10% historically. Further, these investee companies are present in diverse segments and there are no material investment requirements apart from the already committed ~Rs. 850 crore to be infused over FY2022 and FY2023 in Godrej Capital Limited (GCL). The ratings also draw comfort from GIL's leadership position in the domestic oleochemicals industry, which generated revenue of Rs. 1,368.0 crore in H1 FY2022 and a PBIT margin of 8.3% (as against revenue of Rs. 695.0 crore in H1 FY2021 and a PBIT margin of 5.8%) The company's leverage and coverage indicators remain moderate. Also, while company's investments in GCL would result in an increase in GIL's net leverage in FY2022, its strong financial flexibility arising from the significant market value of listed investments over its net debt provide comfort. Further, while GIL's reliance on short-term borrowings for meeting its funding requirements exposes it to refinancing risks, the company has been able to refinance its commercial paper at sub 4% p.a., indicating its strong financial flexibility and investor comfort. Additionally, following the issue of Rs. 3,000 crore nonconvertible debentures in H2 FY2021 and H1 FY2022, its debt mix has improved sequentially. ICRA notes that while the company's investments in GCL will result in diversification of GIL's business areas into housing finance and non-banking finance, the NBFC business is currently at a nascent stage of operations and its ability to generate and scale up cash flows remains to be seen.