Rating Rationale
November 30, 2021 | Mumbai
Centenial Surgical Suture Limited
Ratings Reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.20 Crore
Long Term RatingCRISIL BBB/Negative (Reaffirmed)
Short Term RatingCRISIL A3+ (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its ratings on the bank loan facilities of Centenial Surgical Suture Limited (CSSL) at 'CRISIL BBB/Negative/CRISIL A3+'.

 

The ratings continue to reflect a moderate business risk profile backed by an established market position in the specialized Coronary Artery Bypass Graft (CABG) surgery segment, and a strong relationship with customers and suppliers. The ratings also factor in a comfortable financial risk profile. These strengths are partially offset by a modest scale, and working capital-intensive nature, of operations.

Key Rating Drivers & Detailed Description

Strengths:

* Established market position: The company has been manufacturing surgical sutures for more than 25 years. It specializes in absorbable and non-absorbable sutures used in CABG, where it has a healthy market share in India. The manufacturing facility is certified by ISO 9001:2015, ISO 13485:2016, WHO-GMP, ISO 45001:2018 and medical devices are in conformity to medical device directives 93/42/EEC, Medical Device Rules, 2017. The company has a strong track record in terms of quality and availability. It has maintained relationships with reputed customers such as Narayana Hospitals, Wockhardt Hospitals and Fortis Hospitals Ltd, among others, for more than 10 years.

 

* Comfortable financial risk profile: The networth was moderate at Rs.29.56 crore and the gearing low at 0.67 time, as on March 31, 2021. Debt protection metrics were above average, with interest coverage and net cash accruals to adjusted debt ratio of 2.45 times and 0.13 time in fiscal 2021. Minimal repayment obligation enhances financial flexibility. The financial risk profile is expected to remain comfortable over the medium term on account of low debt and average profitability.

 

Weaknesses:

* Modest scale of operations: The lockdown and other measures taken by various central and state governments towards containment of COVID-19 resulted in lower demand thereby leading to moderation in operating income to Rs.36.47 crore in fiscal 2021 from Rs.55.61 crore in fiscal 2020. Considering the size of the suture market, an increase in business scale would be limited and depend on the ability to control a larger share in the CABG suture market and compete in other segments. However, the margin has been maintained because of exclusive tie-ups with main suppliers and customers. Operating margin is expected to be around 10.0-10.5% over the medium term.

 

* Working capital-intensive nature of operations: Company has sizeable working capital requirements as reflected by gross current assets of 606 days as on March 31, 2021 on back of increase in inventory to 423 days and elongated debtors' period (debtors of 221 days). The high debtor days are because payments from medical institutions are linked to timely disbursals by medical insurance companies. Receivables’ period has further elongated, on account of slow realization of payments from customer during fiscal 2021. This has moderately improved to 204 days as on Sept 30, 2021. Large inventory needs to be maintained to cater to the immediate demand from surgeons, as quality and timely availability of sutures are critical in maintaining relationships with customers. Further inventory levels increased given subdued demand and slow movement of inventory. Inventory level has come down and improved to 339 days as on Sept 30, 2021, backed by pick-up in demand. Improvement in working capital cycle and revenue while maintaining operating margin to remain monitorable.

Liquidity: Adequate

Liquidity is adequate. Net cash accrual is expected to be Rs.2.5-3.5 crore per fiscal over the medium term against term debt obligations of Rs.0.55-0.65 crore per fiscal. Company has access to cash credit limit of Rs.15 crore, which has been utilized at an average of 82% during the 12 months ended October 2021s. Unsecured loans of Rs.1.2 crore (as on March 31, 2021) further support the liquidity. Net cash accrual and the unutilized bank limit should be sufficient to fund incremental working capital requirement. Company has no major capex plans over the medium term.

Outlook: Negative

CRISIL Ratings believes CSSL's business risk profile will continue to remain under pressure on account of subdued demand and stretched working capital cycle.

Rating Sensitivity Factors

Upward factors

  • Pick-up in demand resulting in recovery in revenue and an operating margin of 10.0-10.5% resulting in much higher net cash accruals
  • Significant improvement in working capital cycle
  • Sustenance of the financial risk profile

 

Downward factors

  • Decline in revenue or operating margin resulting in lower accruals and return on capital employed dropping below 6% over the medium term
  • Stretch in working capital cycle or higher than expected debt funded capex weakens financial risk profile, particularly liquidity.

About the Company

Set up in 1995, CSSL is a publicly listed company that manufactures highly specialised absorbable and non-absorbable sutures (cardio vascular sutures and atraumatic needled sutures) that are primarily used in CABG surgeries, and other medical devices. It sells products under Centisorb, Centicryl, Centisynth, Centicryl Rapid, Centisilk, Centilene, Centibond, Centlon, and Centsteel brands. The company’s manufacturing facility is at Murbad in Thane, Maharashtra. The manufacturing facility is certified by ISO 9001:2015, ISO 13485:2016, WHO-GMP, ISO 45001:2018 and medical devices are in conformity to medical device directives 93/42/EEC, Medical Device Rules, 2017.

Key Financial Indicators

Particulars

Unit

2021

2020

Revenue

Rs crore

36.47

55.61

Profit After Tax (PAT)

Rs crore

0.96

1.30

PAT Margin

%

2.64

2.33

Adjusted debt/adjusted networth

Times

0.67

0.70

Interest coverage

Times

2.45

2.61

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 (%)

Maturity
Date

Issue Size
(Rs.Cr)

Complexity
Levels

Rating Assigned 
with Outlook

NA

Bank Guarantee

NA

NA

NA

0.25

NA

CRISIL A3+

NA

Cash Credit

NA

NA

NA

15.00

NA

CRISIL BBB/Negative

NA

Letter of Credit

NA

NA

NA

4.00

NA

CRISIL A3+

NA

Proposed Fund-Based Bank Limits

NA

NA

NA

0.75

NA

CRISIL BBB/Negative

Annexure - Rating History for last 3 Years
  Current 2021 (History) 2020  2019  2018  Start of 2018
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 15.75 CRISIL BBB/Negative   -- 28-08-20 CRISIL BBB/Negative 30-05-19 CRISIL BBB/Stable 31-10-18 CRISIL BBB/Stable CRISIL BBB/Stable
Non-Fund Based Facilities ST 4.25 CRISIL A3+   -- 28-08-20 CRISIL A3+ 30-05-19 CRISIL A3+ 31-10-18 CRISIL A3+ CRISIL A3+
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Rating
Bank Guarantee 0.25 CRISIL A3+
Cash Credit 15 CRISIL BBB/Negative
Letter of Credit 4 CRISIL A3+
Proposed Fund-Based Bank Limits 0.75 CRISIL BBB/Negative
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
Understanding CRISILs Ratings and Rating Scales
CRISILs Criteria for rating short term debt

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