| Acme Formulation Private Limited | ||||
| 'CRISIL BBB-/Stable' assigned to Bank Debt | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL has assigned its ‘CRISIL BBB-/Stable’ rating to the bank facilities of Acme Formulation Private Limited (AFPL).
Business risk profile of the group is marked by healthy scale of operations as indicated by turnover of around Rs 377 Cr in FY20. Revenue is expected to increase at healthy pace over medium term on the back of increase in export business. Though, operating margins moderated to 13.5% in fiscal 20 from 17.7% in fiscal 18, yet it remains healthy. Financial risk profile is marked by strong net-worth of around Rs 217 Cr in FY20, comfortable gearing of 0.47 time and healthy debt protection metrics marked by interest coverage of 6 times for fiscal 2020. However, significant investments in the group companies constrains the financial risk profile. Liquidity remains adequate marked by moderate BLU of around 30%, healthy accruals against repayments and healthy unencumbered cash balance.
The rating action also factors the corporate guarantee worth Rs. 119.7 crore (as on March 31, 2020) extended by AFPL to group companies like ACME Generics LLP (AGL) and Immacule Lifesciences Private Limited (ILPL). As indicated by management, corporate guarantee to ILPL is expected to be withdrawn in near term and management structure is also expected to be simplified between key promoters Viral Shah and JCBL India Private Limited in near to medium term.
The rating also reflects the group's established market position and sound operating efficiencies. These strengths are partially offset by its susceptibility to any adverse impact of regulatory changes and significant investment to group entities. |
Analytical Approach: For arriving at the ratings, CRISIL has combined the business and financial risk profiles of AFPL & ACME Generics LLP (AGL). This is because all these entities, together referred as the Acme group, operate in the same industry and have operational and financial linkages. CRISIL has not combined the financial and business risk profile of Immacule Lifesciences Private Limited as the corporate guarantee extended by AFPL to ILPL is expected to be withdrawn within 1-2 months. |
Key Rating Drivers & Detailed Description Strengths:
The group moderate scale provides it an operating flexibility in an intensely competitive industry. Further, it also benefits from the promoters' experience of over a decade. Their strong understanding of market dynamics, and healthy relations with customers and suppliers will continue to support the business.
The group has healthy financial risk profile marked by healthy networth of Rs 217 Cr in fiscal 2020. Gearing also remained comfortable at around 0.47 time and is expected to improve with stable accretion to reserves and repayment of debt. Debt protection metrics also remained healthy marked by interest coverage of above 6 times in fiscal 2020.
Weaknesses
Changes such as Goods and Service Tax, Demonetization, the ban on 344 fixed-dose combinations in fiscal 2016 and revision in the drug price control order in 2013, which brought more drugs under price control, impacted the pharmaceutical industry adversely. Hence, the operating margin and scale of operations remains susceptible to such regulatory changes in India or in overseas territory.
The group has extended investments of above Rs. 100 crore in group entities and has also extended corporate guarantees of Rs.119.7 crore to its group entities ILPL and AGL which acts as a constraining factor to the overall financial risk profile. |
Liquidity: Adequate Bank limit utilisation is low at around 29 percent for the past twelve months ended September 2020. Cash accrual are expected to be over Rs 48 Cr which are sufficient against term debt obligation of Rs 16 Cr over the medium term. Surplus accruals are expected to aid liquidity further. Current ratio are moderate at 1 times on March 31, 2020. |
Outlook Stable CRISIL believe the Acme group will continue to benefit from the extensive experience of its promoter, and established relationships with clients. |
Rating Sensitivity Factors Upward factor
Downward factor
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About the Company Acme Formulation Pvt Ltd AFPL; part of JCBL Group, was incorporated in 2004. AFPL is engaged in providing contract dosage which includes capsules and hormonal tablets. AFPL is promoted by Mr. Viral Shah.
Acme Generics LLP Acme Generics LLP (AGL) was incorporated in 2014 as a partnership firm. It is also engaged in providing contract dosage which includes capsules and hormonal tablets and is owned by Acme Formulation Pvt Ltd and Mr. Viral Shah. |
About the Group Began in 2005, ACME group is engaged in providing integrated contract manufacturing and development solutions to top Indian and global pharmaceutical companies. The group consist of two companies viz. Acme Formulation Private Limited and ACME Generics LLP. The group has also expanded into niche segments of Oral Hormones, both Sex Hormones and Levothyroxine, along with General Injectables - Liquids and Lyophilized. |
Key Financial Indicators (Conslidated Nos. ; CRISIL Adjusted Nos.)
Key Financial Indicators (AFPL; Standalone Nos.)
Key Financial Indicators - (AGL)
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Status of non cooperation with previous CRA AFPL has not cooperated with ICRA Limited, which led to its classification as ‘issuer not cooperative’ vide release dated Nov 20, 2020. The reason provided by ICRA Limited is non-furnishing of information for monitoring of ratings. |
Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
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 various bank facilities | ||||||||||||||||||||||||||||||||||||
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