| Gennova Biopharmaceuticals Limited | ||||||
| Ratings reaffirmed at 'CRISIL A+ / Stable / CRISIL A1 ' | ||||||
| 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 ‘CRISIL A+/Stable/CRISIL A1’ ratings on the bank facilities of Gennova Biopharmaceutical Ltd (Gennova).
The ratings continue to reflect Gennova’s presence in the niche biopharmaceutical segment and healthy operating performance, and strong operational, managerial, technical, and financial support from its parent, Emcure Pharmaceuticals Ltd (Emcure; ‘CRISIL A+/Stable/CRISIL A1’).
Gennova’s revenue grew by 10% yoy in fiscal 2023 driven by healthy sales growth of biopharmaceutical products in the domestic and emerging markets as well as receipt of grant from the government for developing covid-19 vaccine and other products. Operating profitability has also improved to 26% in fiscal 2023 from a sharp decline at 21% in previous fiscal due to moderation in the research and development (R&D) spend at 23% in fiscal 2023 vis-à-vis 43% in previous fiscal.
These strengths are partially offset by the average financial risk profile and exposure to regulatory risks. |
Analytical Approach CRISIL Ratings has applied its parent notch up criteria to factor in support from Emcure. |
Key Rating Drivers & Detailed Description Strengths: Strong support from the parent, Emcure Gennova is strategically important to Emcure, given its presence in the niche biopharmaceutical and vaccine development segment. Gennova leverages the sales and distribution network of Emcure for catering to emerging markets. It benefits from operational, managerial, and technical support from the parent, and will likely receive financial support from Emcure during exigencies.
Growing scale of operations in niche biopharmaceutical segment Gennova has presence in the niche biosimilar segment catering to domestic and emerging markets. It has a portfolio of 8-9 products for treatment in oncology, cardiovascular, neurology and nephrology therapeutic areas. Its revenue grew by a healthy 10% to Rs 374 crore in fiscal 2023 driven by healthy sales growth of biopharmaceutical products in the domestic and emerging markets as well as receipt of grant from the government for developing covid-19 vaccine and other products.
Weaknesses Average financial risk profile The financial risk profile is expected to remain average on account of working capital intensive-operations (reflected in gross current assets of 282 days as on March 31, 2023) and moderate networth of Rs 215 crore as on March 31, 2023. A gradual correction in the financial profile is expected over the medium term from the healthy cash generation and minimal capex plans.
Exposure to regulatory risks The regulatory risks are manifested in increasing scrutiny and inspections by the regulatory authorities including the US Food and Drug Administration, European Medical Agency, and regulators 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 the Drug Price Control Order list could impact product pricing and hence the profitability of the domestic business.
Moreover, CRISIL Ratings notes that in March 2022, HDT Bio Corp, US-based biopharmaceutical company, filed a lawsuit against Emcure in a US court and an arbitration suit against Gennova in the London Court of International Arbitration. In these suits, HDT has claimed that Emcure and Gennova misappropriated trade secrets related to Covid-19 vaccine development and has sought USD 950 million in damages. The management of Emcure and Gennova have maintained that there is no breach of contractual obligation or provisions of law. CRISIL Ratings notes that the US Court has dismissed this case against Emcure. |
Liquidity: Adequate Cash accrual for fiscal 2023 was Rs 65 crore and comfortably covered the annual debt repayment obligation of Rs 10-15 crore. Cash and equivalent were moderate at Rs 10 crore as on March 31, 2023. The sanctioned working capital limit of Rs 155 crore, was utilised ~85% on average during the 12 months through October 2023. |
Outlook Stable CRISIL Ratings believes Gennova will benefit from its presence in the niche biopharma segment and continued strong support from Emcure. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company Gennova, headquartered in Pune, Maharashtra, is a biotechnology company and is involved in the business of research and development, manufacturing, and marketing in India and abroad of biotechnology-based products, particularly required for human, veterinary and agricultural use and all other forms of genetic engineering. successfully commercialising bio-therapeutics in the cardiovascular, neurology, nephrology, and oncology segments. Emcure holds 87.95% stake in Gennova. |
About Emcure Emcure was incorporated by Mr Satish Mehta in 1981; the company commenced operations in 1983 in Pune, Maharashtra. It manufactures a range of formulations and APIs, and markets them in over 70 countries. It has 13 manufacturing facilities across India and 5 R&D centres. The manufacturing facilities are capable of producing pharmaceutical and biopharmaceutical products across a wide range of dosage forms, including oral solids, oral liquids, injectables, including liposomal and lyophilized injectables, biotherapeutics and complex APIs.
It has presence in domestic, regulated as well as emerging markets. It enjoys the alliance of multinational corporations, and has established front-end presence in several countries through its subsidiaries. It has subsidiaries in UK, Canada, Dubai, Brazil, South Africa, Peru, Nigeria etc. and offices in Russia. It markets formulations in key chronic therapeutic segments such as anti-diabetic, cardiovascular, oncology, etc. Also, it has presence in acute segments such as anti-infectives, gastro-intestinal, pain and analgesics, etc. Key brands such as Orofer, Tenectase, Bevon, Maxtra, Metpure, Asomex and Ferium are well-established in the domestic market.
The promoters own 82.98% stake in Emcure, while Bain Capital holds 13.09% and remaining is held by key employees and directors. |
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
All amounts are in Rs.Cr.
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||
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Criteria Details
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