*+++UPLL IN (Buy, TP:Rs 725): UPL to reduce US$410 mn debt considering favourable business outlook in H2FY21*
· UPL informed exchanges that its subsidiary UPL Corporation to redeem US$410 mn 3.25% Senior Notes (out of US$500 mn) earlier against maturity in Oct 2021 out of the cash in hand to de-leverage balance sheet.
· The decision was taken considering strong performance in H1FY21 and better business prospects in H2FY21 driven favourable weather conditions and agri commodities prices. The notes will be redeemed on Dec 28, 2020.
*Our View*: UPL is expected to reduce debt by about US$750 mn in FY21 to bring net debt/ebitda at about 2x. The repayment of US$410 mn is in-line with UPL’s guidance to bring down debt. UPL was keeping a higher cash balance in H1FY21 due covid-19 related uncertainties but as business across the regions is normalized, UPL is now targeting to reduce debt. We continue to remain optimist on UPL considering 1) Robust H2 outlook based on favourable growth in North/Latin American market 2) Aggressive plans to reduce debt by FY21/22 3) Substantial integration benefits (cost/revenue) after Arysta acquisition and 4) Strong growth prospect for UPL’s bio product portfolio.
Regards Surya Patra PhillipCapital