March 19, 2021

Godrej Industries Limited: [ICRA]AA (Stable) assigned to Rs. 1,500 crore proposed Non-
Convertible Debenture programme; ratings reaffirmed for other facilities
Summary of rating action
Previous Rated Amount Current Rated Amount
Instrument* Rating Action
(Rs. crore) (Rs. crore)
Proposed Non-Convertible
- 1,500.00 [ICRA]AA (Stable); assigned
Debenture Programme
Non-Convertible Debenture
1,500.00 1,500.00 [ICRA]AA (Stable); reaffirmed
Programme
Long-term, Fund-based Facilities 90.00 90.00 [ICRA]AA (Stable); reaffirmed
Long-term Loans 1,200.00 1,200.00 [ICRA]AA (Stable); reaffirmed
Long-term, Non-fund Based
50.00 50.00 [ICRA]AA (Stable); reaffirmed
Facilities
Short-term Loans 200.00 200.00 [ICRA]A1+; reaffirmed
Short-term, Non-fund Based
600.00 600.00 [ICRA]A1+; reaffirmed
Facilities
Commercial Paper Programme 1,440.00 1,440.00 [ICRA]A1+; reaffirmed
Commercial Paper Programme^ 60.00 60.00 [ICRA]A1+; reaffirmed
Total 5,140.00 6,640.00
^Carved out of the above mentioned long-term, fund-based limits
*Instrument details are provided in Annexure-1

Rationale
The rating takes into account the status of Godrej Industries Limited (GIL) as the flagship company of the Godrej Group and its
leadership position in its core business of oleochemicals in the domestic market. GIL has a healthy portfolio of investments in
the Group companies, which provides a stable source of dividend income and lends financial flexibility because of its market
value, which is significantly higher than its net debt outstanding. Besides being an investment holding company, GIL’s
standalone business profile remains restricted to its oleochemicals and estate management businesses.
Over the years, GIL has gradually evolved as a holding company for the Group's new business initiatives and has demonstrated
its capability to incubate businesses. While the ratings favourably factor in the diverse business profile of GIL’s investee
companies, its credit profile remains vulnerable to their performances and funding requirements.

In 9M FY2021, GIL reported ~13% YoY decline in its operating income (OI), primarily due to lower dividend income from its
investee companies. This further resulted in a net loss of Rs. 66.1 crore in 9M FY2021, against a profit after tax (PAT) of Rs.
29.8 crore in 9M FY2020. Its financial profile remains vulnerable to the cyclicality in its oleochemicals business, which has
remained volatile over the years owing to fluctuating raw material prices.

The company’s leverage and coverage indicators remain moderate. ICRA notes that GIL’s reliance on short-term borrowings
for meeting its funding requirements leads to refinancing risks. Nonetheless, following the issue of Rs. 1,500 crore non-
convertible debentures in the current fiscal, its debt mix has improved sequentially. Furthermore, GIL has announced fund
raising for an amount not exceeding Rs. 1,500 crore through debt instruments over the next one year to fund the expansion
and diversification into housing finance and non-banking finance business through acquisition of 51.16% stake (to be further
increased to 81.25%) in Pyxis Holdings Private Limited (PHPL) and 95% stake in Godrej Housing Finance Limited (GHFL) from
Anamudi Real Estates LLP (AREL). Coupled with the ongoing investment and capital expenditure (capex) plans, this acquisition
will result in an increase in GIL’s standalone net leverage (net debt/OPBDITA1) over the next few years. However, ICRA draws

1
Operating profit before depreciation, interest, tax and amortisation

www.icra .in
Page | 1
 comfort from the sizeable market value of GIL’s listed investments vis-à-vis its net debt outstanding, which lends high financial
flexibility. GIL has a track record of monetising investments to support its cash flows, whenever required, and ICRA expects
this trend to continue. ICRA notes that the volatile stock market conditions may reduce GIL’s financial flexibility derived from
the market value of its listed investments in Group entities. ICRA notes that the acquisition will result in diversification of GIL’s
business areas into housing finance and non-banking finance and leverage the Group’s established presence in the real estate
sector via Godrej Properties Limited. However, the company’s ability to scale up and generate cash flows from the financial
services business, thereby leading to an improvement in the credit metrics, would be a key monitorable.
The Stable outlook reflects ICRA’s opinion that GIL will continue to benefit from the significant market value of its listed
investments, which lends strong financial flexibility.

Key rating drivers and their description

Credit strengths
Flagship company of Godrej Group imparts financial flexibility – GIL is the flagship company of the Godrej Group and has a
sizeable investment portfolio, comprising investments in subsidiaries and other Group companies. This imparts strong financial
flexibility to the company with market value of its quoted investments aggregating to ~Rs. 41,893 crore as on December 31,
2020. Over the years, GIL has evolved as a holding company for the Group's new business initiatives. It has demonstrated its
capability to incubate businesses and successfully tied-up joint ventures (JVs) and strategic alliances with leading global players
for new businesses.

Leadership position in the domestic oleochemicals industry – The company is one of the market leaders in the domestic
oleochemicals industry with presence in various sub-segments (like fatty acids, fatty alcohols, glycerine and surfactants). GIL
also caters to export markets through this segment.

Diverse business segments reduce dependence on single business – On a standalone basis, GIL’s business is structured into
three major business divisions (oleochemicals, finance and investments and estate management), while its investee entities
have interests in and leadership positions across diverse business areas (including property development, oil palm plantation,
animal feeds and agri-inputs, dairy, personal care and household care). Further, GIL has recently announced expansion and
diversification into housing finance and non-banking finance business. This reduces GIL’s dependence (directly as well as
indirectly, in terms of dividend income and aggregate market value of investments) on a single business segment.

Embedded value of investment portfolio significantly higher than debt outstanding; divestment of stake in some companies
in the past – The sizeable market value of GIL’s listed investments vis-à-vis its net debt outstanding, as reflected in its net
debt/market value of listed investments of 7.0% as on December 31, 2020 (10.4% as on March 31, 2020), imparts strong
financial flexibility. Furthermore, the company has a track record of monetising these investments to support its cash flows, a
trend expected to continue.

Dividend income supports cash flows against cyclicality in oleochemicals business – GIL's financial flexibility remains driven
by its healthy investment portfolio, through which it derives regular dividend income. This income (~Rs. 63 crore in 9M FY2021
and ~Rs. 245 crore in FY2020) provides cushion to cash flows against cyclicality in the oleochemicals business. However, ICRA
notes that GIL’s dividend income was muted at ~Rs. 63 crore in 9M FY2021 vis-à-vis ~Rs. 196 crore in 9M FY2020, which may
be attributed to the cash conservation policies of the investee companies owing to the uncertainties associated with the
pandemic.

www.icra .in
Page | 2
 Credit challenges

Moderate coverage indicators; high short-term borrowings expose the company to refinancing risks; however, sizeable
market value of listed investments lends financial flexibility – GIL's coverage indicators remain moderate because of its
sizeable debt (net debt of ~Rs. 2,920 crore as on December 31, 2020), which has been primarily deployed towards capex
requirements, increased investments in key subsidiaries and incremental working capital requirements. In 9M FY2021,
following the impact of the pandemic on the company’s standalone business operations and lower dividend income from
investee companies, GIL’s coverage metrics moderated, as reflected in interest coverage of 0.7 time (against 1.3 times in
FY2020) and net debt/OPBDITA of 25.9 times as on December 31, 2020 (against 8.3 times as on March 31, 2020). ICRA also
notes GIL's high reliance on short-term borrowings for meeting its funding requirements, which expose it to refinancing risks.
Nonetheless, following the issue of Rs. 1,500 crore non-convertible debentures in the current fiscal, through two tranches of
Rs. 750 crore each in July 2020 and October 2020, the company’s debt mix has improved sequentially. Coupled with the
ongoing investment and capex plans, the acquisition of GHFL will result in an increase in GIL’s standalone net leverage (net
debt/OPBDITA) over the next few years. However, ICRA draws comfort from the sizeable market value of GIL’s listed
investments vis-à-vis its net debt outstanding, which lends high financial flexibility.

Volatile stock market conditions may reduce GIL’s financial flexibility arising from the market value of its listed investments

Cyclicality in oleochemicals business results in lumpy cash flows; susceptible to raw material price movements – GIL's
standalone business profile remains dominated by its oleochemicals business, which contributes 85-95% to its standalone
revenues. In 9M FY2021, GIL’s oleochemicals business registered a YoY decline of ~4% in revenues due to the adverse impact
of the pandemic during Q1 FY2021 (~38% YoY decline in revenues) and consequently its PBIT margin also witnessed
moderation to 6.9% over 8.4% in 9M FY2020. Overall, GIL's financial profile remains vulnerable to the performance of this
cyclical business, which has remained volatile over the years owing to the fluctuations in raw material prices and product mix.

Dividend income dependent upon investee companies – GIL's financial flexibility remains driven by its healthy investment
portfolio, through which it derives regular dividend income. However, considering the company's leveraged position, the
cyclicality and moderate profitability of its oleochemicals business have resulted in an increased reliance on dividend income.
Consequently, GIL’s liquidity remains susceptible to the performance / cash conservation / dividend policy of its key investee
companies and any adverse impact of these factors on its dividend income may pressure GIL’s liquidity.

Liquidity position: Adequate

GIL has scheduled long-term debt repayments of ~Rs. 16 crore due in Q4 FY2021, ~Rs. 101 crore in FY2022 and ~Rs. 154 crore
in FY2023. As on December 31, 2020, GIL had free cash and liquid investments of ~Rs. 1,065 crore and a cushion of ~Rs. 1,320
crore in the form of undrawn short-term fund-based bank lines, which is adequate for meeting GIL’s debt repayment
obligations and capex and investment requirements in the near to medium term. Further, the company has announced an
investment of ~Rs. 1,000-1,500 crore in GHFL over FY2022 to FY2023, which is likely to be entirely funded through debt
instruments. However, the company has a track record of monetising investments to support its cash flows, whenever
required, and ICRA expects this trend to continue. In addition, as the Godrej Group's flagship company, GIL enjoys healthy
access to capital markets and strong relationships with the banks. These factors, cumulatively, are expected to support the
company's liquidity position.

Rating sensitivities
Positive factors - Significant improvement in the credit profile of the major investee companies and considerable improvement
in GIL’s asset liability mismatch (ALM) position, leading to an improvement in its credit profile, would be a positive trigger.
Furthermore, a sizeable reduction in debt levels, leading to improved leverage metrics on a sustained basis, would also be a
positive trigger.

Negative factors - Downward pressure on the rating could arise if there is any significant weakening in the credit profile of
GIL’s major investee companies, leading to a significant decline in the market value of GIL’s investments, which limits its

www.icra .in
Page | 3
 financial flexibility. Furthermore, any further deterioration in GIL’s ALM position, or sustained weakening of GIL’s standalone
business and financial profile, which stretches its cash flows may also lead to a downward pressure on the company’s ratings.

Analytical approach
Analytical Approach Comments
Corporate Credit Rating Methodology
Applicable Rating Methodologies
Rating Methodology for Holding Companies
Parent/Group Support Not applicable
Standalone. Besides GIL’s standalone business, ICRA considers the expected
dividend inflows and incremental investments in investee companies. ICRA also
Consolidation/Standalone considers the credit quality of the investee companies and financial flexibility
arising from the market value of GIL’s quoted equity investments in Group
entities.

About the company

A conglomerate with interests and leadership positions across diverse areas, GIL is a part of the Godrej Group. The Godrej
Group held a 66.37% equity in the company as on December 31, 2020. GIL is one of the Group’s holding companies, which is
involved in the oleochemicals business on a standalone basis. It has significant interests in real estate, agriculture and
consumer goods (through its subsidiaries, associate companies and JV companies).

As on December 31, 2020, GIL's investment portfolio stood at ~Rs. 2,639 crore (market value of listed investments remaining
at ~Rs. 41,893 crore), with key investments in Godrej Consumer Products Limited (23.8% stake), Godrej Agrovet Limited (59.5%
stake) and Godrej Properties Limited (a 49.4% stake). The company’s manufacturing facilities are located in Ambernath (Thane,
Maharashtra), Dombivali (Thane, Maharashtra), Wadala (Mumbai) and Valia (Gujarat). GIL also generates income from its
premises in Vikhroli, Mumbai, which are given out to various corporates on a leave-and-license basis.

During 9M FY2021, GIL, on a standalone basis, reported a net loss of Rs. 66.1 crore on an OI of Rs. 1,308.0 crore, against a
profit after tax of Rs. 30.8 crore on a OI of Rs. 1,502.5 crore in 9M FY2020.

Key financial indicators (audited)

GIL Standalone FY2019 FY2020
Operating Income (Rs. crore) 2144.4 1968.7
PAT (Rs. crore) -101.4 30.8
OPBDIT/OI (%) 19.3% 15.5%
PAT/OI (%) -4.7% 1.6%
Total Outside Liabilities/Tangible Net Worth (times) 2.2 2.1
Total Debt/OPBDIT (times) 7.7 9.5
Interest Coverage (times) 1.7 1.3
PAT: Profit after Tax; OPBDIT: Operating Profit before Depreciation, Interest, Taxes and Amortisation

Status of non-cooperation with previous CRA: Not applicable

Any other information: None

www.icra .in
Page | 4
 Rating history for past three years
Chronology of Rating History
Current Rating (FY2021)
for the past 3 years
Amount Date & Rating Date & Rating Date & Rating
Instrument Amount Date & Rating in
Outstanding as in FY2020 in FY2019 in FY2018
Type Rated
on Dec 31, 2020 Mar 4, 2021 Feb 25, 2020
(Rs. crore) Mar 19, 2021 Jan 17, 2019 Jan 8, 2018
(Rs. crore) Dec 3, 2020 Nov 20, 2019
Proposed Non-
Convertible Long- [ICRA]AA
1 1,500.00 - - - - -
Debenture term (Stable)
Programme
Non-Convertible
Long- [ICRA]AA [ICRA]AA [ICRA]AA
2 Debenture 1,500.00 1,500.00 - -
term (Stable) (Stable) (Stable)
Programme
Non-Convertible
Long-
3 Debenture - NA - - - - Withdrawn
term
Programme
Fund-based Long- [ICRA]AA [ICRA]AA [ICRA]AA [ICRA]AA [ICRA]AA
4 90.00 NA
Facilities term (Stable) (Stable) (Stable) (Stable) (Stable)
Long- [ICRA]AA [ICRA]AA [ICRA]AA [ICRA]AA [ICRA]AA
5 Term Loans 1,200.00 578.00
term (Stable) (Stable) (Stable) (Stable) (Stable)
Non-fund Based Long- [ICRA]AA [ICRA]AA [ICRA]AA [ICRA]AA [ICRA]AA
6 50.00 NA
Facilities term (Stable) (Stable) (Stable) (Stable) (Stable)
Mediu
7 Public Deposits m- - NA - - - - Withdrawn
term
Short-
8 Short-term Loans 200.00 NA [ICRA]A1+ [ICRA]A1+ [ICRA]A1+ [ICRA]A1+ [ICRA]A1+
term
Non-fund Based Short-
9 600.00 NA [ICRA]A1+ [ICRA]A1+ [ICRA]A1+ [ICRA]A1+ [ICRA]A1+
Facilities term
Commercial Paper Short-
10 60.00 NA [ICRA]A1+ [ICRA]A1+ [ICRA]A1+ [ICRA]A1+ [ICRA]A1+
Programme^ term
Commercial Paper Short-
11 1,440.00 1,030.00 [ICRA]A1+ [ICRA]A1+ [ICRA]A1+ [ICRA]A1+ [ICRA]A1+
Programme term
Amount in Rs. crore; *as on December 31, 2020; ^ carved out of the above mentioned long-term, fund-based limits

Complexity level of the rated instrument

ICRA has classified various instruments based on their complexity as "Simple", "Complex" and "Highly Complex". The
classification of instruments according to their complexity levels is available on the website www.icra.in

www.icra .in
Page | 5
 Annexure-1: Instrument details
ISIN No Instrument Name Date of Coupon Maturity Amount Current
Issuance / Rate Date Rated Rating and
Sanction (Rs. crore) Outlook
Proposed Non-Convertible [ICRA]AA
NA NA NA NA 1,500.00
Debenture (Stable)
[ICRA]AA
INE233A08022 Non-Convertible Debenture Jul-2020 6.24% Jul-2023 750.00
(Stable)
[ICRA]AA
INE233A08030 Non-Convertible Debenture Oct-2020 6.43% Apr-2024 750.00
(Stable)
[ICRA]AA
NA Fund-based Facilities NA NA NA 90.00
(Stable)
1 year [ICRA]AA
NA Term Loan 1 Mar-2019 Mar-2025 500.00
MCLR (Stable)
[ICRA]AA
NA Proposed Term Loans NA NA NA 700.00
(Stable)
[ICRA]AA
NA Non-fund Based Facilities NA NA NA 50.00
(Stable)
NA Short-term Loans NA NA NA 200.00 [ICRA]A1+
NA Non-fund Based Facilities NA NA NA 600.00 [ICRA]A1+
NA Commercial Paper Programme Not placed NA NA 435.00 [ICRA]A1+
INE233A14QX0 Commercial Paper Programme Dec-20 NA May-21 60.00 [ICRA]A1+
INE233A14QY8 Commercial Paper Programme Dec-20 NA Jun-21 50.00 [ICRA]A1+
INE233A14QZ5 Commercial Paper Programme Jan-21 NA Apr-21 60.00 [ICRA]A1+
INE233A14RA6 Commercial Paper Programme Jan-21 NA Apr-21 70.00 [ICRA]A1+
INE233A14RB4 Commercial Paper Programme Jan-21 NA Apr-21 75.00 [ICRA]A1+
INE233A14RC2 Commercial Paper Programme Jan-21 NA Apr-21 75.00 [ICRA]A1+
INE233A14RD0 Commercial Paper Programme Jan-21 NA Apr-21 75.00 [ICRA]A1+
INE233A14RE8 Commercial Paper Programme Feb-21 NA May-21 65.00 [ICRA]A1+
INE233A14RF5 Commercial Paper Programme Feb-21 NA May-21 75.00 [ICRA]A1+
INE233A14RG3 Commercial Paper Programme Feb-21 NA May-21 75.00 [ICRA]A1+
INE233A14RH1 Commercial Paper Programme Feb-21 NA May-21 65.00 [ICRA]A1+
INE233A14RI9 Commercial Paper Programme Feb-21 NA May-21 65.00 [ICRA]A1+
INE233A14RJ7 Commercial Paper Programme Feb-21 NA Aug-21 60.00 [ICRA]A1+
INE233A14RK5 Commercial Paper Programme Mar-21 NA Jun-21 60.00 [ICRA]A1+
INE233A14RL3 Commercial Paper Programme Mar-21 NA Jun-21 60.00 [ICRA]A1+
INE233A14RM1 Commercial Paper Programme Mar-21 NA Jun-21 75.00 [ICRA]A1+
Source: Company; ^Carved out of the above mentioned long-term, fund-based limits

Annexure-2: List of entities considered for consolidated analysis: Not applicable

www.icra .in
Page | 6
 ANALYST CONTACTS
Shamsher Dewan Kinjal Shah
+91 124 4545 328 +91 22 6114 3442
[email protected] [email protected]

Anurag Bhootra
+91 79 4027 1526
[email protected]

RELATIONSHIP CONTACT
L. Shivakumar
+91 22 6114 3406
[email protected]

MEDIA AND PUBLIC RELATIONS CONTACT

Ms. Naznin Prodhani
Tel: +91 124 4545 860
[email protected]

Helpline for business queries

+91-9354738909 (open Monday to Friday, from 9:30 am to 6 pm)
[email protected]

About ICRA Limited:

ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and financial services
companies as an independent and professional investment Information and Credit Rating Agency.

Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited Company,
with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The international Credit Rating Agency
Moody’s Investors Service is ICRA’s largest shareholder.

For more information, visit www.icra.in

www.icra .in
Page | 7
ICRA Limited

Registered Office
1105, Kailash Building, 11th Floor; 26 Kasturba Gandhi Marg; New Delhi 110001
Tel: +91 11 23357940-50

Branches

© Copyright, 2021 ICRA Limited. All Rights Reserved.

Contents may be used freely with due acknowledgement to ICRA.
ICRA ratings should not be treated as recommendation to buy, sell or hold the rated debt instruments. ICRA ratings are subjec t to a process of surveillance,
which may lead to revision in ratings. An ICRA rating is a symbolic indicator of ICRA’s current opinion on the relative capabi lity of the issuer concerned to
timely service debts and obligations, with reference to the instrument rated. Please visit our website www.icra.in or contact any ICRA office for the latest
information on ICRA ratings outstanding. All information contained herein has been obtained by ICRA from sources believed by it to be accurate and reliable,
including the rated issuer. ICRA however has not conducted any audit of the rated issuer or of the information provided by it. While reasonable care has been
taken to ensure that the information herein is true, such information is provided ‘as is’ without any warranty of any kind, a nd ICRA in particular, makes no
representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information. Also, ICRA or any of its group
companies may have provided services other than rating to the issuer rated. All information contained herein must be construed solely as statements of
opinion, and ICRA shall not be liable for any losses incurred by users from any use of this publication or its contents.