plans to use part of the bond proceeds towards debt repayment and keep the remainder to shore up its liquidity amid the challenging operating environment, Moody’s said.
The proposed bond issuance comes at a time when the coronavirus andemic could lead to elongated working capital cycles, cause some supply disruptions and reduce free cash flow generation during fiscal 2021. This could lead to an increase in gross debt levels and slow the company's deleveraging.
The proposed transaction as a liquidity booster and a reflection of UPL management's proactive approach to liability management and prudent financial policies, Moody’s added.
The Baa3 ratings reflect UPL's large scale and status as the world's largest post-patent agrochemicals
company. They also reflect its geographically diversified operations and presence across the entire spectrum of the agricultural value chain.
UPL's operations comprise UPL Limited, the ultimate holding company of the group, UPL Corp, and various operating subsidiaries. All UPL companies
operate through a centralized treasury function that is housed under UPL Limited. There is significant overlap between the group's Indian and overseas operations.
The coronavirus pandemic has a moderate impact on UPL's credit quality. As an agricultural chemical producer, demand for UPL's products should largely remain resilient, supporting mid-single digit revenue growth and EBITDA margin in the 21%-23% band during the fiscal year ending 31 March 2021 (fiscal 2021), said Moody's.