Rating Rationale
April 26, 2022 | Mumbai
Finecure Pharmaceuticals Limited
Rating Reaffirmed and Withdrawn
 
Rating Action
Total Bank Loan Facilities RatedRs.40 Crore
Long Term RatingCRISIL BBB/Stable (Rating Reaffirmed and Withdrawn)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL BBB/Stable’ rating on the bank facilities of Finecure Pharmaceuticals Limited (FPL) and subsequently withdrawn the rating at the request of the company and on receipt of a no-objection certificate from the banker. The withdrawal is in line with CRISIL Ratings’ policy on withdrawal of bank loan rating.

 

The rating continues to reflect FPL’s healthy financial profile and sound operating efficiency. These strengths are partially offset by moderate scale of operations and susceptibility to any adverse impact of regulatory changes.

Key Rating Drivers & Detailed Description

Strengths:

  • Healthy financial profile

Healthy networth of Rs. 112.50 crore support the capital structure as reflected in gearing and total outside liabilities to tangible networth (TOL/TNW) of 0.13 time and 0.34 time, respectively, as on March 31, 2021. Despite the capital expenditure (capex) to set up new units, the capital structure is likely to remain comfortable as the capex is largely funded by company’s internal accrual. With limited dependence on outside liability and healthy profitability, debt protection measures are also comfortable.

 

  • Sound operating efficiency

FPL has healthy operating efficiencies, marked by healthy return on capital employed (RoCE) of 23% in fiscal 2021. This is driven by experienced management operating the production capacities at optimum level.

 

Weaknesses:

  • Moderate scale of operations

The company has moderate scale as reflected in operating income of Rs 126 crore in fiscal 2021, estimated to be around Rs 159 crore in fiscal 2022. With the commencement of 3 new units in fiscal 2022, topline is expected to improve over medium term and it remains a key rating sensitivity factor.

 

  • Susceptibility to any adverse impact of regulatory changes

Pharmaceuticals is one of the most closely monitored and controlled industry; any breach can have significant business impact. Changes such as Goods and Service Tax, Demonetization, the ban on 344 fixed-dose combinations in fiscal 2016 and revision in the drug price control order in 2013, which brought more drugs under price control, impacted the pharmaceutical industry adversely.

Liquidity: Adequate

Net cash accrual expected to be in range of Rs 22-34 crore per fiscal should be sufficient to meet repayment obligation of Rs 1.8-4.9 crore per fiscal over medium term. 12-month average bank limit utilization was at 57% through March 2022. Healthy cushion in the afore mentioned matrices support the working capital requirement. Current ratio was at 1.78 times as on March 31, 2021. Additionally, the low gearing provides FPL high financial flexibility to raise funds in case of any exigency.

Outlook: Stable

CRISIL Ratings believes FPL will continue to benefit from the extensive experience of its promoter, and established relationships with clients.

Rating Sensitivity factors

Upward Factors:

  • Healthy and sustainable growth in topline of more than 20% with steady capital structure
  • Sharp improvement in profitability and working capital cycle

 

Downward Factors:

  • Decline in profitability by over 300 bps and/or significant increase in dependence on external debt
  • Delay in stabilization of new units leading to slower than expected topline growth with pressure on margin

About the Company

FPL was founded in 2005 by Vikash Rajgarhia, Vivek Rajgarhia, and Vishal Rajgarhia. Presently the company is one of the leading manufacturers and marketers of pharmaceutical formulations in several therapeutic segments in dosage forms of Tablets, Capsules, Oral Liquids, Dry Syrup, Powders, Injections and Sachet.

Key Financial Indicators

As on / for the period ended March 31

 

2021

2020

Operating income

Rs crore

126.72

131.32

Reported profit after tax

Rs crore

16.56

16.34

PAT margins

%

13.07

12.45

Adjusted Debt/Adjusted Net worth

Times

0.13

0.01

Interest coverage

Times

51.46

128.45

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

Cash Credit

NA

NA

NA

15

NA

CRISIL BBB/Stable (Rating Reaffirmed and Withdrawn)

NA

Long Term Loan

NA

NA

May-28

5

NA

CRISIL BBB/Stable (Rating Reaffirmed and Withdrawn)

NA

Long Term Loan

NA

NA

May-26

20

NA

CRISIL BBB/Stable (Rating Reaffirmed and Withdrawn)

Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 40.0 CRISIL BBB/Stable (Rating Reaffirmed and Withdrawn)   -- 26-02-21 CRISIL BBB/Stable   -- 04-11-19 CRISIL BBB/Stable --
      --   --   --   -- 10-05-19 CRISIL BBB/Stable --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Rating
Cash Credit 15 CRISIL BBB/Stable (Rating Reaffirmed and Withdrawn)
Long Term Loan 5 CRISIL BBB/Stable (Rating Reaffirmed and Withdrawn)
Long Term Loan 20 CRISIL BBB/Stable (Rating Reaffirmed and Withdrawn)
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
Mapping global scale ratings onto CRISIL scale
CRISILs Approach to Recognising Default
CRISILs Criteria for rating short term debt

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