| Balaxi Pharmaceuticals Limited | ||||
| Rating outlook revised to 'Negative'; Rating Reaffirmed | ||||
| Rating Action | ||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||
| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has revised its outlook on the long-term bank facilities of Balaxi Pharmaceuticals Limited (BPL, part of Balaxi group) to ‘Negative' from ‘Stable’ while reaffirming the rating at 'CRISIL BBB+ ‘.
The outlook revision factors in the net losses reported by the group in Q1 of the ongoing fiscal on account of the sharp depreciation in Angolan currency, Kwanza. Angola being a primary market for the group with contribution of more than 50% of the total revenue, and the creditors to this market has to be settled in USD, the sharp depreciation has resulted in the revaluation of 3.65Bn Kwanza and has impacted the bottomline of the group with reported loss of Rs. 41 crores. The demand due to the economic scenario remain subdued and limited purchasing power of Angola market will result in moderation of business performance in the ongoing fiscal.
The ability of the company to recover these losses in the upcoming quarters will remain a key monitorable.
The rating continues to reflect BPL's established market position in Angola and Latin America, extensive experience of the promoters, and healthy financial profile. These strengths are partially offset by its working capital-intensive operations, revenue concentration risks. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of BPL, along with its wholly owned subsidiary and step-down subsidiaries. This is because all these entities, collectively referred to as Balaxi group, are in the same line of business, have common promoters and strong business and financial linkages.
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 market position in Angola and Latin America: The group has an established market position in the countries like Angola, Dominican Republic, and Guatemala. Benefits from the recognition of products and brand by doctors, pharmacists, and healthcare professionals across these markets should continue over the medium term. Supported by the same, the group has reported revenue of Rs.337 crore in Fiscal 2023. However, the group had reported loss in Q1FY24 of Rs. 41.34 crore on account of sharp depreciation in Kwanza (currency of Angola) due to which company marked the forex loss of Rs. 46 crores for the amount paid to creditors in USD.
Extensive experience of the promoters: The promoter Mr. Ashish Maheshwari has experience of around two decades in the pharmaceuticals industry, his strong understanding of market dynamics and healthy relationships with suppliers and customers should continue to support the business. The company will continue to benefit from the experience and expertise from its management team and leverage its customer relationships.
Healthy financial profile: BPL’s financial risk profile is healthy marked by a comfortable net worth, healthy capital structure and robust debt protection metrics. Capital structure is healthy marked by gearing and total outside liabilities to total tangible net worth (TOL/TNW) of 0.07 time and 0.35 time, respectively, as on 31st March 2023 while net worth is comfortable at Rs.157.62 crore. Debt protection metrics are robust marked by Interest coverage ratio (ICR) of 43.61 times and Net cash accruals to adjusted debt ratio of 4.06 times in Fiscal 2023. Financial risk profile will continue strong with no debt funded capex and infusion of equity in fiscal 2024.
Weakness: Working capital intensive operations: Operations are working capital intensive as reflected in gross current assets (GCA) of above 200 days as of March 2023. Due to the stock and sell model of the business, inventory days will remain higher at around 120-180 days while debtors are expected to be around 2-3 months. This is supported by moderate support from creditors of around 62 days.
Revenue concentration risks: More than 50% of revenue coming from Angola, the company remains vulnerable to economic uncertainties in the region and volatility in currency rates. |
Liquidity: Adequate Group is expected to be cash positive in the ongoing fiscal which is expected to be sufficient against minimal repayment obligations. Bank limits are barely utilized and average utilization stood at around 15% in the past 13 months ended June 2023. Free cash balance of Rs. 29 crores as on June 30, 2023 provides cushion to liquidity. Current ratio is expected to continue healthy in the medium term. Low gearing and comfortable net worth support its financial flexibility and provides the financial cushion available in case of any adverse conditions or downturn in the business. |
Outlook: Negative Outlook is negative on account of the expected moderation of business performance of the group due to the economic situation in their key market, Angola. The impact on the sharp depreciation on Kwanza in first quarter on the full year performance will remain monitorable. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Group Balaxi group is an IPR based pharmaceuticals player supplying to Angola and Latin America market under the brand ‘Balaxi’. The group is also involved in branding and selling to FMCG products and Ancillary products. It is promoted by Mr. Ashish Maheshwari and family.
For the 3 months through June 2023, the group reported consolidated revenue and net loss of Rs 65.96 crore and Rs 41.34 crore, respectively, against Rs 82.78 crore and net profit of Rs 14.15 crore, respectively, in the corresponding period previous fiscal. |
Key Financial Indicators (Consolidated)
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
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 Bank Lenders & Facilities | ||||||||||||
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Criteria Details
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