Rationale

 ICRA has taken a consolidated view on Godrej Agrovet Limited (GAVL), which includes its subsidiaries, step-down subsidiaries, associate companies and joint ventures while assigning the credit ratings, given the common management and significant operational and financial linkages between them. The rating reaffirmation continues to factor in GAVL's diverse presence in agri-focused businesses like animal feed, vegetable oil (palm oil) and crop protection (agri inputs), which insulates the company from downturns in any individual business segment. GAVL also enjoys a strong position in the domestic organised animal feed industry. The company's capitalisation metrics remained comfortable as reflected in a gearing (total debt/net worth) of 0.5 time and TOL/TNW (total outside liabilities/net worth) of 0.94 times as on March 31, 2021. Moreover, the company's interest coverage metric improved to 12.4 times in FY2021 from 10.2 times in FY2020, supported by improvement in profitability. The rating also derives comfort from GAVL's strong parentage as part of the Godrej Group, which imparts financial flexibility. ICRA notes that GAVL had been increasing its stake in its subsidiary companies, viz. Astec LifeSciences Limited and Godrej Maxximilk Private Limited. Despite its dominant position in the organised animal feed industry, 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 the increase in input prices. Furthermore, GAVL's agri-focused business portfolio also remains vulnerable to weather conditions and Government regulations. Nonetheless, the company's presence across diverse agri-businesses mitigates the risks to some extent. ICRA has also noted the modest profit margin in the dairy business. The Stable outlook reflects ICRA's opinion that GAVL will continue to benefit from its strong business profile, healthy financial risk profile and strong parentage as part of the Godrej Group