CARE Ratings has downgraded the credit rating for Waterbase Limited (TWL), citing continuous subdued financial performance and operational challenges. The rating agency has lowered the company's long-term and short-term bank facilities ratings from CARE BBB; Stable/CARE A3+ to CARE BBB-; Stable/CARE A3.

Financial Performance and Operational Challenges

The downgrade reflects TWL's ongoing financial struggles, characterized by:

• Cash losses in FY25 and H1FY26
• Declining capacity utilization in the shrimp feed unit, dropping to 13%
• Increased debt levels
• Reduced liquidity buffer

Rating Details

The revised ratings for Waterbase Limited's facilities are as follows:

Factors Influencing the Downgrade

CARE Ratings highlighted several factors contributing to the downgrade:

1. Subdued financial performance: The company reported cash losses in FY25 and H1FY26.
2. Low capacity utilization: The shrimp feed unit's utilization dropped to approximately 13% in FY25 and H1FY26, down from 20% in FY24.
3. Increased debt: The company's debt levels have risen, impacting its financial flexibility.
4. Reduced liquidity: TWL's liquidity buffer has decreased, potentially affecting its ability to meet short-term obligations.

Operational Performance

Waterbase Limited's total operating income (TOI) declined from ₹339.25 crore in FY24 to ₹277.89 crore in FY25. This reduction was primarily due to a 35% decrease in shrimp feed sales, attributed to a shift from a credit model to a cash and carry model.

In H1FY26, the company's TOI grew by approximately 25% compared to H1FY25, driven by increased revenue from the processed shrimp segment. However, the feed business continued to experience a decline of about 20%.

Diversification Efforts

Despite the challenges, CARE Ratings acknowledged TWL's efforts to diversify its revenue streams:

• Venturing into processing shrimps in-house instead of relying on third-party processing
• Introducing farm care products under the brand 'Baylife'
• Launching frozen seafood products under the brand 'Prize Catch'

These initiatives have shown some positive results, with the contribution from farm care, processing, and hatchery business improving to over 50% of TOI in FY25 and H1FY26, compared to about 43% in FY24.

Outlook

CARE Ratings has maintained a 'Stable' outlook on TWL's long-term rating, considering the company's strong leverage position and the expectation of improvement in total operating income and reduction of losses in the medium term. The rating agency also factored in the potential for need-based support from the KCT group, of which Waterbase Limited is a part.

While Waterbase Limited faces significant challenges, its efforts to diversify and the support from its parent group may provide some stability as it works to improve its financial and operational performance in the coming periods.

Waterbase Limited , a pioneer in the Indian aquaculture industry, has announced its financial results for the second quarter of fiscal year 2026, revealing the impact of challenging market conditions on its performance.

Financial Performance

The company reported the following key financial metrics for Q2FY26 and H1FY26:

Factors Affecting Performance

Several external factors contributed to the company's financial challenges:

1. Extended Monsoon Conditions: Prolonged rainfall affected farming activities, leading to subdued feed sales.
2. Disease Outbreaks: Widespread disease outbreaks in key aquaculture regions further dampened farming activity.
3. US Tariff Uncertainty: Ongoing uncertainty surrounding US tariff policies negatively impacted farmer sentiment.
4. Market Access Limitations: The continued loss of access to the US market affected pricing, as global buyers leveraged India's dependence on alternative markets.

Business Segment Performance

Feed Business

• Feed sales were subdued due to lower farming activity.
• The company maintained a strict cash-and-carry policy to safeguard financial discipline, potentially leading to short-term market share loss.

Export Operations

• The export business maintained its growth trajectory with higher volumes.
• Upgraded processing infrastructure and improved supply chain execution supported export performance.
• However, pricing remained under pressure due to global market dynamics.

Management Commentary

Mr. Ramakanth V. Akula, Whole Time Director and CEO, commented on the results, stating, "While our export business maintained its growth trajectory, supported by higher volumes and operational efficiencies, overall profitability remained under pressure due to multiple external headwinds."

He further added, "We are closely monitoring the ongoing discussions between the Indian Government and US authorities on the tariff front and are hopeful that a favourable outcome will revive export opportunities to the US market."

Future Outlook

Despite near-term challenges, the management expressed cautious optimism about the industry's medium-term outlook. The company plans to:

1. Continue building resilience and driving efficiencies.
2. Focus on farmer relationships, quality products, and service excellence to regain momentum.
3. Leverage its integrated business model and prudent financial management to capture growth as market conditions stabilize.

Conclusion

Waterbase Limited faces a challenging quarter due to various external factors affecting the aquaculture industry. While the company's export business shows resilience, the overall financial performance reflects the impact of market volatility and regulatory uncertainties. The management's focus on operational excellence and financial discipline may help position the company for recovery as market conditions improve.

Investors and stakeholders will be watching closely to see how Waterbase navigates these challenges and capitalizes on potential opportunities in the coming quarters.