Rating Rationale
December 24, 2019 | Mumbai
Amrutanjan Health Care Limited
Ratings Reaffirmed
 
Rating Action
Total Bank Loan Facilities Rated Rs.20 Crore
Long Term Rating CRISIL A-/Stable (Reaffirmed)
Short Term Rating CRISIL A1 (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its ratings on the bank facilities of Amrutanjan Health Care Limited (AHCL) at 'CRISIL A-/Stable/CRISIL A1'.
 
The ratings reflect strong brand call and established market position in the pain relief segment with a wide distribution network, and a strong financial risk profile. These rating strengths are partially offset by susceptibility of the operating margin to volatility in raw material prices and to intense competition in its other segments.

Key Rating Drivers & Detailed Description
Strengths:
* Strong brand recall in the pain management segment and established distribution network: AHCL has been manufacturing ayurvedic balm for pain management since 1893, and is currently managed by the third-generation of promoters. Because of its long track record in the industry, it has an established market position and strong brand recall in the pain management segment. The established distribution network is being leveraged to expand into new geographies and product categories.

* Healthy financial risk profile: Total outside liability to tangible networth was low at 0.26 time and networth moderate at Rs 145 crore, with no bank borrowing, as on March 31, 2019 Comfortable cash accrual and moderate profitability support debt protection metrics. Liquidity is underpinned by unencumbered cash balances of about Rs 58 crore as on 31 March, 2019, and unutilized bank lines.
 
Weaknesses:
* Vulnerability to fluctuations in raw material prices: The operating margin has been volatile at 12-18.4% in the five fiscals through 2019, mainly on account of fluctuation in the price of key ingredient, menthol.

* Limited pricing flexibility because of intense competition: The scale of operations has remained moderate despite more than 10 decades in the industry. In pain and congestion management, the company continues to face competition from large established brands, limiting its pricing flexibility. Additionally, there are challenges in other segments such as beverages, largely on account of intense competition from local and established brands.
Liquidity Strong

AHCL has strong liquidity, marked by nil utilisation of bank limits and absence of repayment obligations over the medium term. The working capital limits have not been utilized during the last twelve months ended November 2019. Cash accrual of around Rs.25-30 crore is expected to be generated over the medium term, against which the company does not have any repayment obligations. Liquidity is also supported by healthy unencumbered cash and cash equivalents of around 74 crore and absence of debt funded capital expenditure over the medium term. CRISIL believes AHCL's liquidity shall remain healthy over the medium term.

Outlook: Stable

CRISIL believes ACHL's business risk profile will remain supported over the medium term by its established regional market position in pain management products.
 
Rating Sensitivity factors:
Upside factors:
* Improvement in turnover by more than 30 percent while sustaining operating profitability
* Geographical diversification in revenue profile
 
Downward factors:
* Decline in operating profitability to less than 9 percent, adversely impacting cash accrual
* Any large debt funded capex adversely impacting financial risk profile.

About the Company

Set up in 1893 by the late Mr K Nageswara Rao Pantulu, the Chennai-based AHCL produces ayurvedic OTC healthcare products. Operations are managed by chairman and managing director, Mr Sambhu Prasad. The company's products primarily focus on pain relief, congestion management, and personal hygiene under the brands, Kick Out Pain, Relief, and Purity, respectively. AHCL also sells beverages under the brand Fruitnik, and sanitary napkins under the brand, Comfy.
 
AHCL is listed on the Bombay Stock Exchange and National Stock Exchange.

Key Financial Indicators
Particulars Unit 2019 2018
Revenue Rs. Cr. 254 225.60
Profit After Tax Rs. Cr. 32 19.97
Profit After Tax Margin % 97 8.9
Adjusted Debt/Adjusted Net worth Times 0 0
Interest coverage Times 185 230.9
 
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)
ISIN Name of Instrument Date of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs Crore) Rating Assigned with Outlook
NA Secured overdraft against term deposits NA NA NA 2.0 CRISIL A-/Stable
NA Cash credit NA NA NA 8.0 CRISIL A-/Stable
NA Overdraft NA NA NA 2.0 CRISIL A1
NA Proposed long-term bank loan facility NA NA NA 8.0 CRISIL A-/Stable
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  20.00  CRISIL A-/Stable/ CRISIL A1      12-09-18  CRISIL A-/Stable/ CRISIL A1  24-08-17  CRISIL A-/Positive/ CRISIL A1  29-07-16  CRISIL A-/Positive  CRISIL A-/Stable 
Non Fund-based Bank Facilities  LT/ST    --    --    --    --  29-07-16  CRISIL A1  CRISIL A2+ 
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Cash Credit 8 CRISIL A-/Stable Cash Credit 8 CRISIL A-/Stable
Overdraft 2 CRISIL A1 Overdraft 2 CRISIL A1
Proposed Long Term Bank Loan Facility 8 CRISIL A-/Stable Proposed Long Term Bank Loan Facility 8 CRISIL A-/Stable
Secured Overdraft against term deposits 2 CRISIL A-/Stable Secured Overdraft against term deposits 2 CRISIL A-/Stable
Total 20 -- Total 20 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for the Pharmaceutical Industry
CRISILs Criteria for rating short term debt

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