Rating Rationale
January 19, 2022 | Mumbai
Bajaj Healthcare Limited
 
Rating Action
Total Bank Loan Facilities RatedRs.292 Crore
Long Term RatingCRISIL BBB/Positive
Short Term RatingCRISIL A3+
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities
This Rating Rationale is published solely to update the bank-wise facility details as provided by the rated entity; other sections are same as the previous Rating Rationale dated January 13, 2022.

Detailed Rationale

CRISIL Ratings' ratings on the bank loan facilities of Bajaj Healthcare Limited (BHL) continue to reflect BHL’s established market position backed by a strong and diversified clientele and a healthy financial risk profile. These strengths are partially offset by exposure to intense competition in the bulk drugs industry and working capital-intensive operations

 

Revenue grew by around 59% in fiscal 2021 with improved operating margins at 21.6% on the back of healthy demand, better realizations coupled with wider product portfolio through acquisitions and enhanced capacities. Demand for key products of the company such as Ascorbic acid (Active pharmaceutical ingredient for Vitamin C) and CH Base (raw material for manufacturing sanitizer) have exhibited substantial improvement. While the scale of operation is expected to be sustained over the medium term, margins are expected to moderate, however should remain better than previous expectations. BHL has been maintaining higher inventory levels in current fiscal to tackle delays in shipping and any probable supply disruptions, leading to higher bank limit utilization and increase in overall debt levels. The same is expected to moderate over the coming quarters strengthening overall credit profile of the company and remains a key monetorable

Key Rating Drivers & Detailed Description

Strengths

Established market position: The promoters’ experience of over 25 years in the bulk drugs industry has resulted in an established relationship with customers and suppliers. Benefits from the established market position, backed by a strong and diversified customer base, should continue. The company has acquired two plants under distress sale in March 2020 and September 2020. These additional capacities along with higher demand and realizations for the existing key products are expected support revenue growth and profitability over medium term

 

Healthy financial risk profile: The networth (adjusted for revaluation reserves) was Rs 191.3 crore, while the total outside liabilities to adjusted networth ratio were at 1.4 times as on March 31, 2021 despite debt funded capex in fiscal 2021. Despite the large debt funded acquisition, capital structure is likely to remain healthy with TOLAW ratio expected to improve to around 1-1.2 times over the medium term, on the back of healthy accruals and repayment of existing debt.  The debt protection metrics were robust, with interest coverage ratio over 17 times in fiscal 2021. The financial risk profile is expected to remain healthy over the medium term.

 

Weaknesses

Exposure to intense competition in the bulk drugs industry: The industry has a large number of players and fragmented, leading to intense competition. This restricts the ability to bargain for better prices with customers in case of escalation in input prices, thus constraining profitability. 

 

Working capital-intensive operations: Gross current assets were high at around 143 days, driven by inventory and receivables of 69 days and 55 days respectively, as on March 31, 2020. Receivables were around 80-90 days historically and likely to remain so over the medium term. Inventory levels have risen recently to tackle delay in shipments and any probable supply disruption, the same is expected to moderate over coming quarters and remain a key rating sensitivity factor.  Overall GCA is expected to be around 150-160 days over the medium term

Liquidity: Adequate

Net cash accrual is expected at around Rs 70-80 crore per annum against debt obligation of Rs 12-13 crore, per fiscal over the medium term. There are no large capex planned over the medium term. Average bank limit utilization was moderate at 75.5% during the 12 months through September 2021. Expected enhancement in bank lines by around Rs.20 crore would support the incremental working capital requirements over the medium term.

Outlook: Positive

CRISIL Ratings believes that the business and financial risk profile of the company is likely improve over the medium term backed by experience of the promoters, favorable demand for key products and new capacities acquired

Rating Sensitivity Factors

Upward factors

  • Growth in revenue and operating margins sustained above 16% strengthening the business risk profile
  • Improved working capital cycle on the back of better than expected inventory levels, sustained debt levels and healthy financial flexibility strengthens overall credit profile 

 

Downward factors

  • Subdued revenue growth or decline in operating margins, constraining net cash accruals to below Rs.35 crores
  • Stretch in working capital cycle or higher than expected debt funded capex weakens the financial risk profile

About the Company

BHL was incorporated in 1993 as a private limited company by the Bajaj family and was reconstituted as a closely held public limited company in 2005. The company was listed on the SME (small and medium enterprise) segment of the BSE (Bombay Stock Exchange) in May 2016 and later migrated to Main Board of BSE Limited in May 2019. It manufactures active pharmaceutical ingredients and also formulations in the form of tablets, capsules, and powder, and exports bulk drugs to Europe, among other regions

Key Financial Indicators

As on/for the period ended March 31

Unit

2021

2020

Reported income

Rs.Crore

658.3

412.6

Reported profit after tax

Rs.Crore

83.1

25.2

PAT margins

%

12.6

6.1

Adjusted Debt/Adjusted Networth

Times

0.95

0.82

Interest coverage

Times

17.1

8.3

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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 (%)

 

Complexity

level

Maturity Date

Issue

Size

(Rs Cr)

Rating Assigned with Outlook

NA

Letter of Credit

NA

NA

NA

NA

56.55

CRISIL A3+

NA

Post Shipment Credit

NA

NA

NA

NA

5.0

CRISIL A3+

NA

Term Loan

NA

NA

NA

July-2027

90.45

CRISIL BBB/Positive

NA

Working Capital Facility

NA

NA

NA

NA

140

CRISIL BBB/Positive

Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT/ST 235.45 CRISIL A3+ / CRISIL BBB/Positive 13-01-22 CRISIL A3+ / CRISIL BBB/Positive 30-10-21 CRISIL A3+ / CRISIL BBB/Positive 09-07-20 CRISIL A3+ / CRISIL BBB/Positive 10-06-19 CRISIL A3+ / CRISIL BBB/Stable CRISIL A3+ / CRISIL BBB/Stable
      --   --   -- 07-07-20 CRISIL A3+ / CRISIL BBB/Positive   -- --
Non-Fund Based Facilities ST 56.55 CRISIL A3+ 13-01-22 CRISIL A3+ 30-10-21 CRISIL A3+ 09-07-20 CRISIL A3+ 10-06-19 CRISIL A3+ CRISIL A3+
      --   --   -- 07-07-20 CRISIL A3+   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Letter of Credit 56.55 Saraswat Bank CRISIL A3+
Post Shipment Credit 5 Citibank N. A CRISIL A3+
Term Loan 70.15 Saraswat Bank CRISIL BBB/Positive
Term Loan 6.69 SVC Co-Operative Bank Limited CRISIL BBB/Positive
Term Loan 4 Aditya Birla Finance Limited CRISIL BBB/Positive
Term Loan 1.4 Standard Chartered Bank Limited CRISIL BBB/Positive
Term Loan 8.21 Citibank N. A. CRISIL BBB/Positive
Working Capital Facility 70 Citibank N. A. CRISIL BBB/Positive
Working Capital Facility 60 Standard Chartered Bank Limited CRISIL BBB/Positive
Working Capital Facility 10 SVC Co-Operative Bank Limited CRISIL BBB/Positive

This Annexure has been updated on 19-Jan-2022 in line with the lender-wise facility details as on 07-Jul-2020 received from the rated entity.

Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for the Pharmaceutical Industry
CRISILs Criteria for rating short term debt

Media Relations
Analytical Contacts
Customer Service Helpdesk

Pankaj Rawat
Media Relations
CRISIL Limited
B: +91 22 3342 3000
pankaj.rawat@crisil.com

 


Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000
naireen.ahmed@crisil.com


Rahul Subrato Kumar Guha
Director
CRISIL Ratings Limited
D:+91 22 4097 8320
rahul.guha@crisil.com


Jumana Badshah
Associate Director
CRISIL Ratings Limited
D:+91 22 3342 8324
Jumana.Badshah@crisil.com


Athul Unnikrishnan Sreelatha
Manager
CRISIL Ratings Limited
B:+91 22 3342 3000
Athul.Sreelatha@crisil.com
Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com


 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper/magazine/agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL Ratings. However, CRISIL Ratings alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites and portals.


About CRISIL Ratings Limited (A subsidiary of CRISIL Limited)

CRISIL Ratings pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and innovation, we set the standards in the credit rating business. We rate the entire range of debt instruments, such as bank loans, certificates of deposit, commercial paper, non-convertible/convertible/partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 33,000 large and mid-scale corporates and financial institutions. We have also instituted several innovations in India in the rating business, including ratings for municipal bonds, partially guaranteed instruments and infrastructure investment trusts (InvITs).
 
CRISIL Ratings Limited ('CRISIL Ratings') is a wholly-owned subsidiary of CRISIL Limited ('CRISIL'). CRISIL Ratings Limited is registered in India as a credit rating agency with the Securities and Exchange Board of India ("SEBI").
 
For more information, visit www.crisilratings.com 

 



About CRISIL Limited

CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We are India's leading ratings agency. We are also the foremost provider of high-end research to the world's largest banks and leading corporations.

CRISIL is majority owned by S&P Global Inc, a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.


For more information, visit www.crisil.com

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK


CRISIL PRIVACY NOTICE
 
CRISIL respects your privacy. We may use your contact information, such as your name, address and email id to fulfil your request and service your account and to provide you with additional information from CRISIL. For further information on CRISIL’s privacy policy please visit www.crisil.com.



DISCLAIMER

This disclaimer is part of and applies to each credit rating report and/or credit rating rationale (‘report’) that is provided by CRISIL Ratings Limited (‘CRISIL Ratings’). To avoid doubt, the term ‘report’ includes the information, ratings and other content forming part of the report. The report is intended for the jurisdiction of India only. This report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the report is to be construed as CRISIL Ratings providing or intending to provide any services in jurisdictions where CRISIL Ratings does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this report does not create a client relationship between CRISIL Ratings and the user.

We are not aware that any user intends to rely on the report or of the manner in which a user intends to use the report. In preparing our report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the report is not intended to and does not constitute an investment advice. The report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind to enter into any deal or transaction with the entity to which the report pertains. The report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Ratings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold or sell any securities/instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL Ratings assumes no obligation to update its opinions following publication in any form or format although CRISIL Ratings may disseminate its opinions and analysis. The rating contained in the report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the report should rely on their own judgment and take their own professional advice before acting on the report in any way. CRISIL Ratings or its associates may have other commercial transactions with the entity to which the report pertains.

Neither CRISIL Ratings nor its affiliates, third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively, ‘CRISIL Ratings Parties’) guarantee the accuracy, completeness or adequacy of the report, and no CRISIL Ratings Party shall have any liability for any errors, omissions or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the report. EACH CRISIL RATINGS PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Ratings Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. Public ratings and analysis by CRISIL Ratings, as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any), are made available on its website, www.crisilratings.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about ratings by CRISIL Ratings are available here: www.crisilratings.com.

CRISIL Ratings and its affiliates do not act as a fiduciary. While CRISIL Ratings has obtained information from sources it believes to be reliable, CRISIL Ratings does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and/or relies on in its reports. CRISIL Ratings has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL Ratings has in place a ratings code of conduct and policies for managing conflict of interest. For details please refer to:
https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html.

Rating criteria by CRISIL Ratings are generally available without charge to the public on the CRISIL Ratings public website, www.crisilratings.com. For latest rating information on any instrument of any company rated by CRISIL Ratings, you may contact the CRISIL Ratings desk at crisilratingdesk@crisil.com, or at (0091) 1800 267 1301.

This report should not be reproduced or redistributed to any other person or in any form without prior written consent from CRISIL Ratings.

All rights reserved @ CRISIL Ratings Limited. CRISIL Ratings is a wholly owned subsidiary of CRISIL Limited.

 

 

CRISIL Ratings uses the prefix ‘PP-MLD’ for the ratings of principal-protected market-linked debentures (PPMLD) with effect from November 1, 2011, to comply with the SEBI circular, "Guidelines for Issue and Listing of Structured Products/Market Linked Debentures". The revision in rating symbols for PPMLDs should not be construed as a change in the rating of the subject instrument. For details on CRISIL Ratings' use of 'PP-MLD' please refer to the notes to Rating scale for Debt Instruments and Structured Finance Instruments at the following link: https://www.crisil.com/en/home/our-businesses/ratings/credit-ratings-scale.html