| Acme Formulation Private Limited | ||||
| Rating upgraded to 'Crisil BBB+/Stable' | ||||
| Rating Action | ||||
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| Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||
| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale Crisil Ratings has upgraded its rating on the long-term bank facilities of Acme Formulation Private Limited (AFPL; a part of the Acme group) to ‘Crisil BBB+/Stable’ from ‘Crisil BBB/Stable’.
The upgrade factors in sustained improvement in the group’s business risk profile on account of healthy operating efficiency. The operating efficiency has improved as is at nearly 21% in nine months fiscal 2025 and estimated to be around 20-22% in fiscal 2025, as against 14.87% in the previous fiscal, and likely to remain steady at 20-22% going forward as well. Furthermore, Prudent working capital management has reduced dependence on working capital limit and average limit utilisation remain within range of 35%, and with better operating profitability, has led to improvement in return on capital employed (RoCE) (estimated at 16-18% during fiscal 2025) and expected to remain within similar range going forward as well.
The rating upgrade also factors in the Acme group’s robust financial risk profile, supported by sizeable tangible networth of Rs. 580-590 crore projected as on March 31, 2025 (Rs. 509 crores as of Mar 31, 2024), backed with steady accretion to reserve. Despite the sizeable capital expenditure (capex) of Rs. 380-400 crore planned which is expected to be completed by fiscal 2026, the capital structure is expected to remain supported by healthy accretion to reserve, thus, leading to gearing below 0.50 time as on March 31, 2025, and for fiscal 2026 as well. Liquidity stands robust too, evident by healthy net cash accrual vis-a-vis maturing debt, cushion in bank lines and positive cash flow from operations.
The rating continues to reflect the established market position of the group in the pharmaceutical industry and its healthy financial risk profile. These strengths are partially offset by Moderate scale of operations and the large working capital requirement. |
Analytical Approach Crisil Ratings has combined the business and financial risk profiles of AFPL, ACME Generics Pvt Ltd (AGPL) and Immacule Lifesciences Pvt Ltd (ILPL), to arrive at the rating of AFPL. AGPL and ILPL are subsidiaries of AFPL, having business and financial linkages with the parent entity.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Established market position in the pharmaceutical industry: The decade-long experience of the promoters in the pharmaceutical industry, their strong understanding of market dynamics, and healthy relationships with leading players, will continue to support the business risk profile. The group has diversified segments and has a presence in domestic as well as international markets. Furthermore, approvals from regulators such as the US Food and Drug Administration (US FDA), received over the past few years, have led to steady revenue growth, though sales were muted during fiscal 2024 and expected to remain within range of Rs. 610-620 crores due to the strategic decision of the management to cater to the order where margins are higher. However, revenue is expected to grow at a pace of 10-12% going forward supported by increase traction from new customers added over the year in both domestic and export market as the group has also received approvals from Europe and US for female hormonal health products in fiscal 2024 With healthy growth prospects, this segment is likely to aid revenue growth over the medium term.
Healthy financial risk profile: The capital structure is supported by a healthy networth of Rs. 580-590 crore and low total outside liabilities to tangible networth (TOLTNW) ratio of 0.60-0.65 time and gearing at 0.3-0.4 time as on March 31, 2025. The debt protection metrics were comfortable too due to low leverage and healthy profitability. The interest coverage and net cash accrual to adjusted debt ratios were 12-13 times and 0.5-0.6 times, respectively, in fiscal 2025.
While the group is undertaking debt capital expenditure (capex) to to enhance its capacity in ILPL and add an injectable line which is expected to commercialize in fiscal 2026. However, gearing and total outside liabilities to adjusted networth ratios are estimated to be low below 1 time and 0.5 time, respectively for fiscal 2026. The debt protection metrics expected to be comfortable too with the interest coverage and net cash accrual to adjusted debt ratios were 9-9.5 times and 0.5-0.60 times, respectively, in fiscal 2026. Crisil believes higher-than-anticipated debt or cost overruns in the planned capex would be closely monitored.
Weaknesses: Large working capital requirement: The group’s operations are working capital intensive, as indicated by gross current assets (GCAs) in the range of 140-180 days due to 60-90 days of credit extended to customers and inventory holding of 50-70 days. However, the company has not reported any bad debt during the year. The inventory remains sizeable on account of diversified product segments and the group generally maintains stock of around two months to cater to the needs of customers in a timely manner. Working capital requirement is aided by cushion in bank limit and credit support from suppliers of 70-90 days. Crisil Ratings believes the group’s operations will remain working capital intensive, over the medium term, and its efficient management amidst business growth will remain a key monitorable.
Moderate scale of operations: Operating revenue has stagnant over last 3 years through fiscal 2025 and remained within range of Rs. 580-610 crores within minimal growth of 5% expected during fiscal 2025 to Rs. 610-620 crores (For the first nine months of fiscal 2025, the company has booked a turnover of Rs 440 crores). However, revenue is expected to grow at a pace of 10-12% going forward supported by increase traction from new customers added over the year in both domestic and export market as the group has also received approvals from Europe and US for female hormonal health products in fiscal 2024 With healthy growth prospects, this segment is likely to aid revenue growth over the medium term. Going forward, repeated orders from existing customers, along with onboarding of new customers, aiding revenue growth, and sustenance of operating profitability, remains key monitorable, going forward. |
Liquidity: Adequate Bank limit utilisation was low, averaging around 35% for the 12 months ending March 31, 2025. Expected cash accrual of Rs. 110-115 crore should more than suffice to cover the term debt obligation of Rs 15-16 crore over the medium term. The current ratio was healthy at 1.59 times as on March 31, 2024. Low gearing and moderate networth offer financial flexibility to withstand adverse conditions or a downturn in the business. |
Outlook: Stable Crisil Ratings believes any further decline in revenue and/or operating margin could adversely impact the debt protection indicators and hence, will remain a key monitorable. |
Rating sensitivity factors Upward factors
Downward factors
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About the Company AFPL was incorporated in 2004. The company offers contract dosages in the form of capsules and hormonal tablets. It has been promoted by Mr Viral Shah along with PAG India.
AGPL was incorporated in 2014, initially as a partnership firm and later reconstituted as a private limited company.. The company offers contract dosages through capsules and hormonal tablets. It is a fully owned subsidiary of AFPL.
ILPL was incorporated on September 20, 2010, at Nalagarh (Himachal Pradesh). The company is a manufacturer, supplier and exporter of allopathic medicines, including tablets, capsules and injections. It is also a drop trader of antibiotic, antifungal, diuretic and cardiovascular formulations, and a fully owned subsidiary of AFPL. |
Key Financial Indicators
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Status of non cooperation with previous CRA AFPL has not cooperated with ICRA Limited, which published their ratings as ‘issuer not co-operating’ through release dated 20-November-2020. The reason provided by them was non-furnishing of information by AFPL for monitoring the ratings. |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||
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Criteria Details
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