| Albert David Limited | ||||||
| Rating outlook revised to 'Positive'; ratings reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to annexure for Details of Instruments & Bank Facilities | ||||||
| Detailed Rationale |
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CRISIL has revised its rating outlook on the long-term bank facilities of Albert David Limited (ADL) to 'Positive' from 'Stable' while reaffirming its 'CRISIL A-/CRISIL A1' ratings on the bank facilities. |
| Analytical Approach |
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CRISIL's ratings on ADL are based on a standalone assessment of the entity's credit risk profile. |
| Key Rating Drivers & Detailed Description |
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Strengths: * Adequate financial risk profile and liquidity The management's conservative financial policy and the company's steady cash accrual have helped maintain strong capital structure and debt protection metrics. Adjusted gearing was 0.002 time as on March 31, 2019, while net cash accrual to adjusted debt ratio and adjusted interest coverage stood at 67.5 times and 24.2 times, respectively, for fiscal 2019. ADL has ample liquidity with unencumbered cash and equivalent of over Rs 119 crore as on December 31, 2019. * Established market position, particularly in placental extract-based drugs ADL's placental-based formulation, Placentrex, is the only human placenta-based product in the country 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 All-India Organisation of Chemists and Druggists, with a strong presence in the eastern and northern parts of the country. Weaknesses: * Product profile limited to acute therapeutic segments which are intensely competitive ADL's product portfolio is largely restricted to acute therapeutic segments such as anti-bacterials, anti-infectives, and placental extracts. The company faces intense competition in these segments. * Susceptibility to regulatory changes 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, which 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 regarding the product. |
| Liquidity Strong |
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The company generated cash accrual of Rs 29.87 crore in fiscal 2019, up from Rs 14.43 crore in the previous fiscal. Accrual is expected at Rs 30-33 crore annually over the medium term against nil debt obligation. Liquidity is also supported by low utilisation of bank lines of Rs 10 crore, at 2% on average in the 12 months through January 2020. Significant liquid investment of Rs 110.37 crore in mutual funds as on December 31, 2019 (up from Rs 91.55 crore as on March 31, 2019), also supports the liquidity. The company had unencumbered cash and bank balance of Rs 8.68 crore as on December 31, 2019, to take care of any exigencies. Current ratio was healthy at 2.58 times as on March 31, 2019. In the absence of any significant capex plan and expected healthy accrual, the company will maintain strong and improving liquidity. |
| Outlook: Positive |
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CRISIL believes ADL will maintain its adequate financial risk profile over the medium term, backed by healthy capital structure and debt protection metrics. The business risk profile will remain supported by the company's established position in the pharmaceutical industry, especially in the anti-inflammatory segment. |
| Rating Sensitivity factors |
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Upward factors * Increase in revenue to over Rs 400 crore and sustenance in operating profitability, along with continued healthy financial risk profile * Increase in operating efficiency through benefits of newly enacted division II (Marketing) in nine states and other initiatives of the management. Downward factors * Deterioration in the capital structure or liquidity due to large, debt-funded capex or increased exposure to group companies * Decline in operating margin to below 10% and a significant drop in revenue * Unfavourable impact of any regulatory change |
| About the Company |
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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. ADL 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 | ||||||||||||||||||||||||
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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 - 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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