| Bal Pharma Limited | ||||||
| Suspension revoked, 'CRISIL BB / Stable / CRISIL A4+ ' 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 Ratings has revoked the suspension of its ratings on the bank facilities of Bal Pharma Limited (BPL) and has assigned its 'CRISIL BB/Stable/CRISIL A4+' ratings on the bank facilities of BPL. CRISIL Ratings had suspended the ratings on September 30, 2010, on account of non-cooperation by BPL with CRISIL's efforts to undertake a review of the ratings. The company has now shared the requisite information, enabling CRISIL to assign its ratings.
The ratings reflect BPL’s established position in the formulations market in India supported by long track record and a diversified product portfolio and moderate scale of operations. These rating strengths are partially offset its working capital intensive nature of operations and average financial risk profile. |
Analytical Approach CRISIL has taken the consolidated approach for BPL and its subsidiaries, Lifezen Healthcare Private Limited, Balance Clinic LLP, Bal Research Foundation and Golden Drugs Private Limited.
Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation |
Key Rating Drivers & Detailed Description Strengths: * Established position in the APIs and formulations market in India: BPL has been in the pharmaceutical industry for a long period, thereby establishing its market presence both in domestic and export markets. With large product portfolio and areas of focus in niche segments, it has been able to consistently add clients. Further, the promoters have extensive experience of more than 3 decades enabling them to understand market dynamics.
* Moderate scale of operations: The scale of operations of the group remains moderate with revenues between Rs 160 - 200 crore in the past 4 fiscals, ending fiscal 2020. Even for the current fiscal, the group is likely to report growth in revenues largely due to better demand leading to higher capacity utilizations. The group has booked revenues of about Rs 117 crore during the first half of this fiscal, as against Rs 94 crore in the corresponding period of last fiscal. Going forward, growth of the group will remain a key monitorable.
Weakness: * Average financial risk profile: The group’s financial risk profile remain average, with leveraged capital structure and below-average debt protection metrics. The group reported total outside liability to tangible networth (TOLTNW) of about 5.5 times as on 31 March, 2020, largely due to losses in fiscal 2020. Even as on 30 Sep 2020, the TOLTNW remained high at 5.4 times. Despite improvement in accretions to reserves, the overall TOLTNW is likely to remain high in fiscal 2021. Further, the debt protection metrics remains subdued, with interest coverage at 0.46 times for fiscal 2020. The interest cover during first half fiscal 2021, was at 2.04 times and CRISIL Ratings believe that this ratio will remain low even in this fiscal. Any improvement in TOLTNW and interest coverage ratio will remain key rating sensitivity factors.
* Intensive working capital cycle: Operations are working capital intensive, as reflected in gross current assets of 335 days as on March 31, 2020, on account of large inventory of up to 150 days and high receivables of 108 days. The group offers high credit to its customers of about 90 – 100 days which gets stretched at times. This is reflected in high debtors outstanding greater than 6 months as on 31 March, 2020. Although there is management’s focus in improving the collection cycle, but it is to be seen for sustenance. Also, due to its nature of operations, the inventory holding remains high resulting in large working capital cycle. This further results in high utilization of bank limits for the group. Ability of the group to reduce its working capital cycle, will remain to be monitored |
Liquidity: Stretched BPL has stretched liquidity with high bank limit utilization, large term loan payments and low current ratio. The group has access to fund based limits of Rs 67 crores, utilized to the tune of 97% over the past 19 months, ended Sep 2020. Further, the term loan obligations remain high at around Rs 5-6 crore over the next few years, along with low current ratio of 1.13 times as on March 31, 2020. Nevertheless, the cash accruals have improved in first half of fiscal 2021 to Rs 4.83 crore, and are likely to increase over the medium term. |
Outlook Stable CRISIL Ratings believes that BPL will continue to maintain its comfortable market position over the medium term, on the back of its long track record in domestic and international markets. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Group BPL incorporated in 1987, is engaged in the business of manufacturing active pharmaceutical intermediates (APIs), pharmaceutical formulations and parenterals. BPL has manufacturing facilities in Bangalore (Karnataka), Pune (Maharashtra) and Uttarakhand. The operations of the company are managed by the Managing Director, Mr. Shailesh Siroya. |
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 – 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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