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CRISIL has reaffirmed its ratings on Sun Pharmaceutical Industries Ltd’s (Sun Pharma’s) bank facilities at ‘CRISIL AAA/Stable/CRISIL A1+’. CRISIL has also withdrawn its rating on Sun Pharma’s commercial paper programme on the company’s request. Sun Pharma has not issued the commercial papers, as its cash accruals and bank balances have been adequately supporting its liquidity. The ratings continue to reflect Sun Pharma’s established position in the fast-growing chronic therapeutic segments in the Indian market, strong profitability, and healthy financial risk profile. These rating strengths are partially offset by the intensifying pricing pressure, and legal and regulatory risks faced by Sun Pharma in the regulated generics market. Sun Pharma has a strong market position in the fast-growing cardiology, neurology, gastroenterology, and diabetology segments in India. These segments account for over 70 per cent of the company’s domestic formulation sales. In the domestic formulation market, Sun Pharma is India’s fifth-largest player, with a market share of 3.74 per cent as per ORG-IMS, May 2011. After acquiring Taro Pharmaceuticals Industries, Sun Pharma’s revenues from its US operations increased by 104 per cent year-on-year in 2010-11 (refers to financial year, April 1 to March 31) to around Rs.22.5 billion; the acquisition strengthened Sun Pharma’s position in the US market. CRISIL’s ratings also reflect Sun Pharma strong financial risk profile marked by high operating profit margin of about 34 per cent for 2010-11, limited debt levels, and large cash balance and marketable securities of around Rs.44 billion (as on March 31, 2011). However, Sun Pharma faces intense competition and pricing pressure in the regulated generics markets, such as the US, because of the increasingly aggressive defence tactics of innovator companies through introduction of authorised generics, especially for blockbuster drugs going off patent. Furthermore, generic players are affected by severe price erosions because of the commodity-like market for their products, along with intense competition and significant government pressures to reduce prices, in regulated markets.
Outlook: Stable
CRISIL believes that Sun Pharma will maintain its strong position in the Indian market, sustain growth in its share in the international generics markets, and maintain its high profitability, over the medium term. The outlook may be revised to ‘Negative’ if Sun Pharma undertakes larger-than-expected debt-funded acquisition programme, vitiating its currently healthy capital structure, or if adverse regulatory changes disrupts its US operations.
About the Company
Sun Pharma is one of India’s fast-growing pharmaceutical companies, with a leading position in the high-value cardiovascular and neuro-psychiatry segments. In keeping with its strategy of focusing on speciality segments, the company has undertaken a number of mergers and acquisitions. These have helped broaden its therapeutic coverage into segments such as oncology, gynaecology, ophthalmology, and paediatrics. The company has a limited exposure to the price-sensitive bulk drugs market.
For 2010-11, Sun Pharma reported a net profit of Rs.19.07 billion on net sales of Rs.58.06 billion, against a net profit of Rs.13.47 billion on net sales of Rs.38.86 billion for the previous year, on consolidated basis. For the three months ended June 30, 2011, the company reported a net profit of Rs.5.65 billion on net sales of Rs.16.36 billion, against a net profit of Rs.5.78 billion on net sales of Rs.13.65 billion for the corresponding period of the previous year.
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About CRISIL Limited
CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We are India's leading ratings agency. We are also the foremost provider of high-end research to the world's largest banks and leading corporations.
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Last updated: March 31, 2011
Disclaimer: A CRISIL rating reflects CRISIL's current opinion on the likelihood of timely payment of the obligations under the rated instrument and does not constitute an audit of the rated entity by CRISIL. CRISIL ratings are based on information provided by the issuer or obtained by CRISIL from sources it considers reliable. CRISIL does not guarantee the completeness or accuracy of the information on which the rating is based. A CRISIL rating is not a recommendation to buy, sell, or hold the rated instrument; it does not comment on the market price or suitability for a particular investor. All CRISIL ratings are under surveillance. Ratings are revised as and when circumstances so warrant. CRISIL is not responsible for any errors and especially states that it has no financial liability whatsoever to the subscribers / users / transmitters / distributors of this product. CRISIL Ratings’ rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For the latest rating information on any instrument of any company rated by CRISIL, please contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (+91 22) 3342 3000.
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