| Denis Chem Lab Limited | ||||||
| Ratings 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 reaffirmed its ratings on the bank facilities of Denis Chem Lab Limited (DCLL) at 'CRISIL BBB-/Stable/CRISIL A3’.
The rating continues to reflect the extensive experience of the promoters, and DCLL’s established market position and comfortable financial risk profile. These strengths are partially offset by moderate scale of operations, working capital intensive operations, and exposure to stringent regulatory and compliance requirements. |
Key Rating Drivers & Detailed Description Strengths: Extensive experience of the promoters The key promoter, Mr Himanshu Patel, has a PhD from Columbia University and an experience of around four decades. Over the years, company has developed healthy relationships with customers and suppliers.
Established market presence Market position in the intravenous fluids (IVF) segment is healthy, backed by a long track record of operations, compliance with norms, and scale and range of products. DCLL is among the first domestic movers to adopt the latest technologies, including the introduction of Euroheads.
Comfortable financial risk profile DCLL has healthy networth and gearing at Rs 66.12 crore and 0.05 time, respectively, as on March 31, 2022. Capital structure has improved sharply over fiscals 2017 and 2018 because of equity infusion of Rs 34 crore. Supported by moderate margin and low gearing, interest coverage and net cash accrual to total debt ratios were 18.97 times and 3.41 time, respectively, in fiscal 2022. The financial profile is estimated to have strengthened further during fiscal 2023.
Weakness: Moderate scale of operations DCLL has an average scale of operations with turnover of Rs 136 crore in FY22 and Rs 121 crore during 9MFY23. DCLL’s presence being limited within the space of IVFs (certain segments), restricts the scale of company, as also intense competition. Further high logistics costs mean the regional players are cost competitive. With the expansion in production capacity, the company revenues are expected to rise over medium term.
Moderately working capital intensive operations Working capital intensity is high, with gross current assets of 138 days as on March 31, 2022, due to debtors and inventory of around 85 and 30 days, respectively. The operations have remained similarly working capital intensive in current fiscal.
Exposure to stringent regulatory and compliance requirements The industry is highly regulated by the government, both in terms of pricing and quality control. |
Liquidity: Adequate DCLL has adequate liquidity with moderate cash accruals against minimal term debt obligations, moderate bank limit utilization and healthy financial flexibility. Company is expected to generate annual accruals of Rs 11-13 crore against it does not have any significant repayment obligation. Its bank lines are largely unutilised. Further, company’s liquidity is backed by moderate networth and controlled leverage providing financial flexibility. |
Outlook: Stable CRISIL Ratings believes DCLL will continue to benefit from its established market position and the promoters’ extensive experience. Financial risk profile should remain moderate in the absence of any large capital expenditure. |
Rating Sensitivity Factors Upward factors:
Downward factors:
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About the Company DCLL was incorporated in July 1980 as Denis Chem Lab Pvt Ltd (DCLPL) by Mr Himanshu C Patel and his family. In April 1982, DCLPL was converted into a public limited company and renamed DCLL. The company manufactures IVFs bottles under three packaging categories: glass bottles, Euroheads, and plastic bottles (using the blow-fill-seal technology). The manufacturing facility in Gandhinagar is WHO GMP-certified. Installed capacity is 2.3 crore glass bottles, 5 crore plastic bottles, and 4.3 crore Euroheads bottles per annum. |
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)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||
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This Annexure has been updated on 31-May-2023 in line with the lender-wise facility details as on 23-Feb-2023 received from the rated entity.
Criteria Details
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