The agency has assigned a short-term rating of ‘[ICRA] A1+’ to the debt facilities of the company.

ICRA stated that the rating reaffirmation considers the established position of Rashtriya Chemicals and Fertilizers (RCF) as one of the largest urea manufacturers in India with vertically integrated operations in fertilisers and chemicals, coupled with the healthy operating efficiency of its urea operations, reflected in the high plant utilisation levels.

The ratings also factor in the sustained comfortable receivable cycle owing to the timely release of subsidy by the Government of India (GoI) and expectation of the trend continuing.

The ratings also factor in the low demand risk for urea and RCF’s parentage with the GoI holding a 75% stake in the company and the exceptional financial flexibility arising out of its strategic importance to the GoI.

Further, its large sovereign ownership and ability to access the debt markets at competitive rates supports its liquidity profile.

The ratings, however, are constrained by the vulnerability of the fertiliser business to regulatory and agro-climatic risks and the high working capital intensity of the operations.

While the subsidy payments in recent years have been timely, inadequate increase in subsidies or delays in payments can have an adverse impact on the company’s financial profile.

The profitability of the chemical division is vulnerable to commodity price cycles, exchange rate fluctuations and a potential reduction in import duty.

The company has large capex plans in the medium term for modernisation, energy-saving projects and product diversification, which will be funded by debt and internal accruals, exposing the company to project execution risks and may put some pressure on the credit metrics.

Rashtriya Chemicals & Fertilizers (RCF) has a diversified product portfolio of urea (51% of overall sales in FY2024), complex fertilisers (13%), traded fertilisers (25%) and industrial chemicals (10%). The Government of India holds a 75% stake in the company.