The agency has reaffirmed the company’s short-term rating at '[ICRA]A1+’.

ICRA stated that the upgrade in the long-term rating and reaffirmation of the short-term rating of Godrej Industries Limited (GIL) factor in the sustained strong credit profile of its key investee companies and expectation that the same will continue over the medium term.

Despite some moderation expected in market cover on account of anticipated increase in debt levels to finance further investments, the ratio is expected to remain at a comfortable level, going forward.

Further, GIL has also started receiving increased dividend income from two of its investee companies, thus supporting its cash flows and liquidity.

ICRA continues to take comfort from the management-stated guidance of maintaining its borrowings at an optimum level and monetising its investments, whenever required.

The ratings continue to derive comfort from GIL’s position as the holding company of the Godrej Group (GILAC Group) with its primary listed investee entities – Godrej Consumer Products (GCPL), Godrej Properties (GPL) and Godrej Agrovet (GAVL) – present in diverse business segments.

ICRA notes that GIL’s oleochemicals business performance has started improving on account of better demand in the global oleochemicals industry. It thus expects an improvement in GIL’s interest coverage ratio and DSCR over the near term, also supported by the increased dividend income.

While there are no major investment requirements in listed investees, GIL will continue to invest in its financial services arm, Godrej Capital (GCL), for strategic purposes over the next two-three years. CRA notes that while the company’s investments in GCL have resulted 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 remain to be seen.

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 lower rates than its peers in the rating category, indicating its exceptional financial flexibility and investor comfort.

Godrej Industries (GIL) is the holding company of the GILAC Group Companies, which has interests in real estate, chemicals, agriculture and consumer goods (through its subsidiaries, associate companies and JVs). On a standalone basis, apart from being the holding company for the Group, GIL manufactures oleochemicals, where it is the domestic market leader with presence in various sub-segments (like fatty acids, fatty alcohols, glycerine and surfactants). The chemicals business caters to several end-user industries including FMCG, oil & gas, chemicals intermediates, pharmaceuticals, tyres etc.