Ind-Ra Warns Geopolitical Risks Strain Small, Mid-sized Rice Exporters
India’s small and mid-sized rice exporters face mounting liquidity pressures due to elongated working capital cycles and high bank limit utilisation, leaving them with little cushion to absorb rising freight and insurance costs from recent geopolitical disruptions, India Ratings and Research (Ind-Ra) said.
Although tensions from the Iran-Israel conflict have eased for now, any recurrence during peak shipping season could further stretch already thin liquidity buffers and impair credit profiles, particularly for entities rated BB+ and below, the agency warned.
“Even a ten-day increase in working capital cycles could reduce interest coverage ratios to as low as 0.9 to 1.0 times for lower-rated exporters, significantly weakening their financial flexibility,” said Abhash Sharma, senior director, mid corporates at Ind-Ra.
The disruptions, which began in June 2025, have already increased shipping timelines to key destinations such as West Africa and the Gulf by 10-15 days, pushing total delivery periods to 40 to 45 days. This extension coincides with a traditionally lean export period, providing some short-term operational headroom. However, any escalation could trigger liquidity stress as mid-sized players face cost inflation and logistical delays.
Ind-Ra’s sensitivity analysis shows mid-sized exporters, with working capital-to-revenue ratios above 35 per cent and short-term debt utilisation of 94 to 95 per cent of sanctioned limits, are particularly vulnerable. Many entered the current crisis with elevated operating cycles averaging 130 days and near-full utilisation of bank lines, leaving little room to absorb shocks.
The ongoing instability in the Middle East, compounded by Red Sea disruptions, has heightened refinancing pressures. Lower-rated exporters may become reliant on temporary liquidity support or government interventions if further delays materialise, the agency said.
Policy Support Limited By Structural Challenges
While government measures such as diverting over five million tonne of rice for ethanol blending and domestic use aim to ease export bottlenecks, structural hurdles persist for mid-sized players. Agencies like the Agricultural and Processed Food Products Export Development Authority and the All India Rice Exporters Association are working with the Commerce Ministry to address port congestion and shipment delays, particularly for exports to Iran.
Infrastructure initiatives, including the proposed Basmati Export Development Foundation centre in Pilibhit, are also intended to enhance processing and shipment efficiency.
However, Ind-Ra cautioned that the effectiveness of these measures remains uncertain. “Structural issues like capital blockages, stringent bank limits, and inherent bottlenecks continue to weigh on mid-sized exporters’ ability to navigate geopolitical volatility,” Sharma added.
This article has been republished from The BusinessWorld.