| Albert David Limited | ||||||
| Ratings reaffirmed at 'CRISIL A- / CRISIL A1 '; outlook revised to 'Stable' | ||||||
| Rating Action | ||||||
| ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has revised its rating outlook on the long-term bank facilities of Albert David Limited (ADL) to 'Stable' from 'Positive' while reaffirming the rating at 'CRISIL A-‘; the short-term rating is reaffirmed at ‘CRISIL A1'.
The outlook revision follows a decline in revenue and profitability in the first half of fiscal 2021 due to constraints posed by the Covid-19 pandemic. During this period, revenue was Rs 125 crore (Rs 181 crore in the corresponding period of the previous fiscal) and profit after tax (PAT) Rs 8.72 crore (Rs 17.22 crore). The marketing team could not reach out to doctors for marketing of high-profit products. Supply chain constrains led to increase in selling and distribution expenses. Both revenue and profitability are estimated to improve in the fiscal but will not meet the expected growth. Revenue is likely to decline by 10-15% and operating profit by 20-25%. However, from fiscal 2022, the performance is likely to largely revert back to the previous level.
The ratings continue to reflect an adequate financial risk profile with ample liquidity, backed by steady accretion to reserves and no major debt-funded capital expenditure (capex) plan. The ratings also factor in a sound marketing and distribution network. These strengths are partially offset by a limited product profile, exposure to intense competition, and susceptibility to regulatory changes. |
Analytical Approach The ratings are based on a standalone assessment of the company’s credit risk profile. |
Key Rating Drivers & Detailed Description Strengths:
The management’s conservative financial policy and the company’s steady cash accrual have helped maintain strong capital structure and debt protection metrics. The adjusted gearing was 0.01 time as on March 31, 2020, while net cash accrual to adjusted debt ratio and adjusted interest coverage ratios stood at 8.74 times and 35.37 times, respectively, for fiscal 2020. Liquidity is ample due to unencumbered cash and equivalents of around Rs 132 crore as on November 30, 2020.
The company’s placental-based formulation, Placentrex, is the only human placenta-based product in India developed through indigenous research. The company is the market leader in this segment and has a process patent over Placentrex, which mitigates competition risk. It is among the top 100 pharmaceutical companies in India (ranked 57th) as per June 2016 rankings of the All-India Organisation of Chemists and Druggists, with a strong presence in the eastern and northern parts of the country.
Weaknesses:
The product portfolio is largely restricted to acute therapeutic segments such as anti-bacterials, anti-infectives, and placental extracts, where the competition is intense.
Players in the pharmaceutical industry are exposed to regulatory changes. For instance, the ban on 344 fixed-dose combinations in fiscal 2016 and revision in drug price control order in 2013 that brought more drugs under price control, impacted the industry adversely. ADL was also impacted by a ban (which was later lifted) on placental extract-based drugs in February 2011 because of safety concerns. |
Liquidity: Strong Cash accrual was Rs 17.90 crore in fiscal 2020 (Rs 29.87 crore in the previous fiscal) due to higher dividend payout and exceptional loss on investment following the subdued capital market performance. In fiscal 2021, the business has been impacted by the pandemic, but net cash accrual is expected at Rs 20-21 crore (as the company is not likely to declare such high dividend every year and no expected loss on investment) amidst no repayment obligation. Liquidity is also supported by low utilisation of the bank lines of Rs 10 crore, at an average of almost nil during the 12 months through December 2020. Significant liquid investment of around Rs 97 crore in mutual funds as on November 30, 2020, also supports liquidity. The company had an unencumbered cash and bank balance of Rs 35 crore as on November 30, 2020, to take care of any exigencies. The current ratio was healthy at 2.33 times as on March 31, 2020. In the absence of any significant capex plan and expected healthy cash accrual, liquidity is likely to remain strong and even improve over the medium term. The company had not availed covid 19 related bank moratorium. |
Outlook: Stable ADL should maintain its adequate financial risk profile over the medium term, backed by healthy capital structure and debt protection metrics. The business risk profile is likely to remain supported by the established position in the pharmaceutical industry, especially in the anti-inflammatory segment. |
Rating Sensitivity factors Upward factors
Downward factors
|
About the Company ADL was incorporated in 1938. Its present promoter, the Kolkata-based Kothari group, acquired a controlling stake in 1965. The company’s first manufacturing facility was set up in Kolkata to manufacture pharmaceutical formulations in the form of parenteral drugs, tablets and syrups. In 1981, it set up a unit in Ghaziabad, Uttar Pradesh, to manufacture intravenous fluids in glass bottles and in polyethylene bottles based on form-fill-seal technology. Capacity to manufacture capsules, ointments and ophthalmological products was added to this unit later. The company outsources production of traditional medicines (herbal products). Its facilities follow Good Manufacturing Practices guidelines and produce both parenteral and non-parenteral formulations. It has a well-connected distribution network. |
Key Financial Indicators
|
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)
|
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
|