Detailed Rationale CRISIL Ratings’ ratings on the bank facilities of Bharat Serums and Vaccines Limited (BSVL; part of the BSV group) continues to reflect BSV group’s established market position in bio-pharmaceutical industry backed by strong technical knowhow, a niche product portfolio, integrated operations, and established supply linkages. The ratings also factor in a robust financial risk profile marked by strong networth, healthy capital structure and sound debt protection metrics. These rating strengths are partially offset by working capital-intensive operations, vulnerability of profitability to changes in government regulations, and moderate concentration in the product portfolio.
CRISIL Ratings had on June 21 2022, removed its rating on the long-term bank facilities of BSVL from 'Rating Watch with Developing Implications' and reaffirmed the rating at 'CRISIL A+’ while assigning a 'Positive' outlook. The short term rating had also reaffirmed at ‘CRISIL A1’.
The positive outlook reflects expected improvement in BSV group’s business risk profile backed by increasing scale and higher operating margins. Revenues have grown year-on-year at a CAGR of 13% over the past four years through fiscal 2022 and is expected to further increase over the medium term on the back of continued focus on new launches and increasing penetration into export markets. In addition, the operating margins improved to estimated 23% in fiscal 2022 (compared to 18%, a year ago) driven by implementation of various cost reduction initiatives resulting in improved operational efficiencies. Sustenance of the operating margins while maintaining growth shall be closely monitored. |
For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of BSVL and its four wholly owned subsidiaries, which are strategically important to, and have a significant degree of operational integration with BSVL. These companies are BSV Pharma Pvt Ltd (BSVP), BSV Biosciences Inc, USA (BSVBI), BSV Biosciences Gmbh, Germany (BSVBG), and BSV Biosciences Philippines Inc (BSVBPI). CRISIL Ratings considers these entities as being strategic to the parent in view of their strong integration with BSVL’s operations. All these companies are together referred to herein as the BSV group.
CRISIL Ratings has treated the compulsorily convertible debentures (CCD) of Rs 1520 crores as equity. In addition, goodwill created during the merger with holding company Aksipro Diagnostics Private Limited (ADPL) of Rs 2161 crores has been written off from the networth for analytical purpose
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 the bio-pharmaceutical industry: The group has strong market position in the bio-pharmaceutical industry is driven by a long track record and healthy market share in many products. This is backed by strong technical knowhow and a niche product portfolio. The group has also continuously invested in research and development resulting in development of over 30 products in therapeutic segments; it also holds 15 patents in India, the US, and Europe. Increasing market penetration and better utilisation of enhanced capacities have led to an increase in estimated revenues to Rs. 1240 crores in fiscal 2022 from Rs 749 crore in fiscal 2018.
Established supply linkages and healthy return on capital employed: The group manufactures around half of antibodies/active pharmaceutical ingredients (APIs) required for various vaccines and serums at its facilities in Germany and India, resulting in cost advantage over other players. Operating profitability improved in fiscal 2022 driven by cost saving initiatives implemented by the management and is expected to remain around 24% over the medium term. These initiatives include reduction of redundant costs and better pricing for raw material procurement which is expected to continue to support the business over the medium term.
Robust financial risk profile: The networth is strong at about Rs 872 crore as on March 31, 2021 and is estimated at similar levels for fiscal 2022. Networth increased due to reverse merger with holding entity- Aksipro Diagnostic Pvt Ltd and infusion of compulsorily convertible debentures in BSVL, besides steady accretion to reserves. Increasing networth, repayment of term debt, and controlled external borrowing resulted in a comfortable capital structure, with the total outside liabilities to adjusted networth (TOLANW) ratio at below 1 time for the past three years ended March 31, 2022. Further, management is committed to maintaining gearing below 1 time over the medium term. Debt protection metrics were adequate, with interest coverage ratio of above 3 times and net cash accrual to total debt ratio to remain above 2 times, estimated in fiscal 2022. The financial risk profile should remain robust in the medium term due to strong cash accrual and controlled reliance on external debt.
Weakness: Vulnerability of profitability to changes in government regulations, and moderate concentration in product portfolio: The pharmaceutical industry is highly regulated by state governments and various government agencies, which approve new drugs and clinical trials, control the quality of imported drugs, and set prices for critical drugs. Furthermore, the top ten product groups account for about 50% of the group’s revenue. Also, many of these drugs have application in the critical/emergency care segment and are hence subject to stringent quality and regulatory control. Hence, any adverse changes in regulations or disruption in production because of quality-related issues can adversely impact the business risk profile.
Large working capital requirement: The increasing scale of operations has led to large incremental working capital requirement as reflected in estimated gross current assets of 185 days as on March 31, 2022 and is expected to remain around 180 to 200 days over the medium term. The receivables cycle is around two months, and inventory of around three months is maintained due to lead time on imports and the production process. These requirements are met by letters of credit-backed imports, credit available on domestic procurement, internal cash accrual, and moderate working capital bank borrowing. |
Liquidity: Strong The group has strong liquidity driven by expected cash accruals around Rs 200 to 220 crores annually, against term debt obligations of Rs 6 crores and Rs 9 crore in fiscals 2023 and 2024, respectively. Cash and cash equivalents stood at Rs 125 crore as on March 31, 2022. The working capital limit was utilised at an average of 30% during the 12 months through February 2022. Internal cash accrual, cash and cash equivalents, and unutilised bank lines should be sufficient to meet repayment obligation as well as incremental working capital requirement over the medium term. With a gearing of below 0.5 times, BSVL has sufficient gearing headroom, to raise additional debt to meet its capex requirement. |
Outlook: Positive CRISIL Ratings believes the BSV group will continue to benefit from the strong market position in the biopharmaceutical industry and a healthy financial risk profile. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Group BSVL was incorporated in 1971 by Daftary family and in February 2020 Advent International Corporation acquired a majority stake in BSVL, providing partial exit to Daftary family and full exit to private equity firms Kotak Private Equity and Orbimed Asia. Daftary family was given complete exit in April 2022.
The operations are currently managed by a professional team led by managing director and CEO, Mr. Sanjiv Navangul.
BSVL researches, manufactures, and markets biopharmaceuticals. It is headquartered in Mumbai with manufacturing facilities at Ambernath and Thane in Maharashtra and a horse farm in Hyderabad.
Subsidiaries BSVBG, set up in 2007, manufactures antibodies/APIs for biopharmaceuticals. Its manufacturing facility is in Baesweiler, Germany.
BSVBI researches and develops biopharmaceuticals, especially recombinant proteins and monoclonal antibodies.
BSVBPI, set up in 2016, acts solely as a sales office for the group in the Philippines.
BSVP was set up in 2022 to acquire the human pharma business of TTK Healthcare. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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 | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Letter of Credit | 10 | HDFC Bank Limited | CRISIL A1 |
| Letter of Credit | 18 | IDBI Bank Limited | CRISIL A1 |
| Proposed Fund-Based Bank Limits | 5 | Not Applicable | CRISIL A+/Positive |
| Working Capital Facility | 65 | Axis Bank Limited | CRISIL A+/Positive |
| Working Capital Facility | 10 | DBS Bank Limited | CRISIL A+/Positive |
| Working Capital Facility | 30 | HDFC Bank Limited | CRISIL A+/Positive |
| Working Capital Facility | 85 | ICICI Bank Limited | CRISIL A+/Positive |
| Working Capital Facility | 17 | IDBI Bank Limited | CRISIL A+/Positive |
This Annexure has been updated on 08-Mar-2023 in line with the lender-wise facility details as on 02-Mar-2023 received from the rated entity.
Criteria Details
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