| Gennova Biopharmaceuticals Limited | ||||||
| 'CRISIL A/Stable/CRISIL A1' assigned to Bank Debt | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has assigned its ‘CRISIL A/Stable/CRISIL A1’ ratings to the bank facilities of Gennova Biopharmaceuticals Limited (Gennova). The ratings reflect the strong operational, managerial, technical and financial support that the company receives from its parent, Emcure Pharmaceutical Ltd (Emcure; rated ‘CRISIL A/Stable/CRISIL A1’). The ratings also reflect Gennova’s presence in the niche biopharmaceutical segment. These strengths are partially offset by the modest scale of operations, average financial risk profile and exposure to regulatory risks.
Gennova’s scale of operations is modest, despite a 5.5% compound annual growth rate achieved in revenue over the five years ended fiscal 2020. Profitability improved to 32.6% in fiscal 2020 from 24.3% in fiscal 2019, driven by new product launches and sales traction in high margin biopharma business. Revenue growth is expected to remain healthy at 10% in fiscal 2021, coupled with operating profitability above 30% over the medium term. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has applied its parent notch up framework to factor in support from the parent, Emcure. |
Key Rating Drivers & Detailed Description Strengths:
Gennova is strategically important to Emcure, given its presence in the niche biopharmaceutical and vaccine development segment. Gennova in collaboration with HDT Biotech Corporation, Seattle, USA, is developing an mRNA vaccine for Covid-19. The vaccine has successfully completed animal trials and Phase I and II clinical trials are expected to be completed in the next 2-3 months.
Gennova also leverages on the sales and distribution network of Emcure for catering to emerging markets. It benefits from operational, managerial and technical support from the parent. Further, financial support from Emcure is expected to be forthcoming, in case of any exigencies.
Gennova has presence in the niche biosimilar segment catering to domestic and emerging markets. It has a portfolio of seven products- Elaxim, Tenectase, Vintor, Xgrast, Pegex , EmgrastM and Hamysyl launched for treatment of various life threatening in oncology, cardio-vascular, neurology and nephrology. Further, the company has healthy product pipeline, which will support growth over the medium term. .
Operating profitability improved to 32.6% in fiscal 2020 from 24.3% in fiscal 2019, mainly driven by new product launches and sales traction in high margin biopharma business. Revenue growth is expected to remain healthy at 10% in fiscal 2021, coupled with operating profitability above 30% over the medium term.
Weaknesses:
Scale of operations is modest, despite a 5.5% CAGR in revenue over the five years ended fiscal 2020. Financial risk profile is expected to remain average on account of moderate capital expenditure (capex) plans, working capital intensive operations and moderate networth. Networth is expected to Rs 152 crore as on March 31, 2021. A planned capex of Rs 250 crore for facility expansion is expected to be funded by Rs 70 crore government grant, Rs. 135 crore debt and remaining from internal accrual. Operations are working capital intensive, as reflected in expected gross current assets of 190 days as on March 31, 2021 and are likely to remain so over the medium term. Gearing is thus expected to peak to 0.95 time by fiscal 2022. Timely ramp up of new facility and improvement in financial risk profile will remain a monitorable. .
The regulatory risks are manifested by increasing scrutiny and inspections by the regulatory authorities including the US FDA, European Medical Agency and others in the Asian and Latin American markets. Biosimilars require market specific approvals for product launches. Any delay in approval can lead to loss of potential opportunity through delayed launches. In the branded formulation segment, additions to lists under Drug Price Control Order also impacts product pricing and hence the profitability of the India branded formulations business. |
Liquidity: Adequate Cash accrual is expected at above Rs 50 crore per annum over the medium term, which will be adequate to meet annual capex of Rs 7-10 crore. The company has negligible term loans outstanding. Average bank limit utilisation was minimal at about 5% during the 12 months through October 2020. |
Outlook: Stable CRISIL Ratings believes that Gennova will benefit from its presence in the niche biopharma segment and continued strong support from the parent, Emcure. |
Rating Sensitivity Factors Upward Factors
Downward Factors
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About the Company Gennova, headquartered in Pune, Maharashtra, is a biotechnology company dedicated to the development, production and commercialisation of bio-therapeutics to address various life-threatening diseases. It has incorporated recombinant DNA technologies together with innovative bio-manufacturing practicesGennova has created a cutting-edge solution for manufacturing and successfully commercializing bio-therapeutics across cardiovascular, neurology, nephrology and oncology markets. About 87.95% of stake in Gennova is held by Emcure.
For the first nine months for fiscal 2021 on a provisional basis, Gennova recorded a revenue of Rs 173.91 crore, earnings before interest, tax, depreciation and amortisation of Rs 58.80 crore and profit after tax of Rs 38.20 crore. |
Key Financial Indicators
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||||||||||||||
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