Rating Rationale

September 15, 2014

Mumbai

Venus Remedies Limited

Ratings downgraded to 'CRISIL D/CRISIL D'

Total Bank Loan Facilities Rated	Rs.2650 Million
Long Term Rating	CRISIL D (Downgraded from 'CRISIL BB+/Stable')
Short Term Rating	CRISIL D (Downgraded from 'CRISIL A4+')

(Refer to Annexure 1 for Facility-wise details)

CRISIL has downgraded its ratings on the bank facilities of Venus Remedies Ltd (VRL) to 'CRISIL D/CRISIL D' from 'CRISIL BB+/Stable/CRISIL A4+'.

The rating downgrade reflects delays in repayment of term loan by the company driven by a stretched liquidity. VRL's stretched liquidity is on account of the significant increase in total cost of the large debt-funded capital expenditure over the past one year and high working capital requirements. The company is undertaking capex towards setting up marketing office. The total cost of this capex is estimated to have increased by about Rs.100 to 150 million. In addition to the above company's liquidity has also deteriorated on account of the high working capital requirements reflected by inventory of about 131 days as on March 31, 2014.

The ratings continue to reflect VRL's comfortable financial risk profile, marked by a healthy net worth and strong debt protection metrics. The ratings also factor in the company's strong presence in the high-value critical care segment and the healthy growth in its domestic and export sales. These rating strengths are partially offset by VRL's working-capital-intensive and small scale of operations in the overall formulations market.

For arriving at the ratings, CRISIL has combined the business and financial risk profiles of VRL and its wholly owned subsidiary, Venus Pharma GmbH (VP), based in Germany. VP provides out-licensing services of common technical documents, and warehousing and logistical support to VRL. The two entities have together been referred to as VRL.

About the Company

Established in 1991 by Mr. Pawan Chaudhary, VRL has a presence in both branded and generic formulation pharmaceuticals. It has two plants, one in Panchkula (Haryana) and the other in Baddi (Himachal Pradesh), with an aggregate capacity of 0.57 million bottles per day. VRL is mainly present in the critical care segment, manufacturing parenterals such as cephalosporins, carbapenems, and oncology drugs in lyophilised form; infusions; and small volume parenterals used for treating varied ailments such as bacterial infections and cancer.

For 2013-14, VRL reported, on a provisional basis, a standalone profit after tax (PAT) of Rs.609 million on net sales of Rs.5.19 billion; the company reported a standalone PAT of Rs.571.4 million on net sales of Rs.4.61 billion for 2012-13.

Annexure 1 - Details of various bank facilities

Current facilities			Previous facilities
Facility	Amount (Rs.Million)	Rating	Facility	Amount (Rs.Million)	Rating
Bank Guarantee	35	CRISIL D	Bank Guarantee	35	CRISIL A4+
Cash Credit	900	CRISIL D	Cash Credit	900	CRISIL BB+/Stable
Inland/Import Letter of Credit	155	CRISIL D	Inland/Import Letter of Credit	95	CRISIL A4+
Letter of Credit	80	CRISIL D	Inland/Import Letter of Credit	60	CRISIL BB+/Stable
Proposed Long Term Bank Loan Facility	1.2	CRISIL D	Letter of Credit	80	CRISIL A4+
Rupee Term Loan	557.6	CRISIL D	Proposed Long Term Bank Loan Facility	1.2	CRISIL BB+/Stable
Term Loan	921.2	CRISIL D	Rupee Term Loan	557.6	CRISIL BB+/Stable
--	0	--	Term Loan	921.2	CRISIL BB+/Stable
Total	2650	--	Total	2650	--

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Last updated: August, 2014

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September 15, 2014	http://www.crisil.com