| J B Chemicals and Pharmaceuticals Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to annexure for Details of Instruments & Bank Facilities | ||||||
| Detailed Rationale |
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CRISIL has reaffirmed its 'CRISIL AA/Stable/CRISIL A1+' ratings on the bank facilities of J B Chemicals and Pharmaceuticals Limited (JB Chemicals; a part of the JB Chemicals group). |
| Analytical Approach |
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For arriving at its ratings, CRISIL has combined the business and financial risk profiles of JB Chemicals and all its wholly owned subsidiaries: Unique Pharmaceuticals Laboratories FZE (Dubai), OOO Unique Pharmaceutical Laboratories (Russia), and its 95.24% subsidiary, Biotech Laboratories (Pty) Ltd (South Africa). This is because these entities, collectively referred to herein as the JB Chemicals group, have common management and business interests. |
| Key Rating Drivers & Detailed Description |
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Strengths: * Healthy financial risk profile Financial risk profile is healthy, driven by a robust capital structure and debt protection metrics. Gearing expected to remain negligible over fiscal 2020 and the medium term. ower reliance on w * Established position in the pharmaceuticals industry The group has an established market position in the pharmaceutical industry, with a diversified revenue profile. In fiscal 2019 and first 9 months of fiscal 2020, about 37% and 45% of the consolidated revenue, respectively was derived from India and the rest from the international market. Its three brands-Rantac (anti-peptic ulcerant), Cilacar (calcium channel blocker), and Metrogyl (amoebicides)-feature among the top 200 brands and account for over 77% of domestic revenue in the first nine months of fiscal 2020. In the international segment, the group has presence in regulated and semi-regulated markets, including Russia and countries of the Commonwealth of Independent States. Weaknesses: * Susceptible to intense competition and fluctuations in forex rates The group mainly caters to therapeutic segments, including gastro, cardiovascular, antibiotic, and pain management. High concentration in the relatively slow-growing acute therapeutic segments (60% of domestic sales) further exposes the group to pricing and competitive pressure in a mature market segment, coupled with 35% sale of from products under price control. Also, in semi-regulated markets, the group remains susceptible to risks related to fluctuations in forex rates. * Susceptibility to regulatory changes The group will remain vulnerable to regulatory changes in domestic and international markets. Addition to lists under Drug Price Control Order impacts product pricing and, thereby, profitability of players, though the extent of the impact may differ. Furthermore, regulatory risks faced by the group are manifested by increasing scrutiny and inspections by authorities such as the US Food and Drugs Administration (US FDA) and Therapeutic Goods Administration, Australia. For instance, in January 2016, JB Chemicals received a notification, along with several other companies, from National Green Tribunal to shut down its active pharmaceutical ingredients (APIs) plant in Panoli (Gujarat). Presently, there is a stay order by the Supreme Court and the matter is sub judice. Sale of Rantac ( JB Chem's second-largest brand)were affected in India during September-October 2019 post concerns raised by US Food and Drug Administration (US FDA) on the cancer-causing properties in ranitidine However, in November 2019, US FDA clarified that the tests indicate that ranitidine contains normal levels of N- Niteosodimethylamine(NDMA) and Rantac's sales resumed, albeit growth remained flattish. While JB Chem does not sell Rantac in the US, any escalation of this issue or regulatory action by US FDA may have impact on JB Chem's the business risk profile. This would remain a key monitorable. |
| Liquidity Superior |
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Liquidity is healthy, driven by cash and cash equivalents of Rs 580 crore as on December 31, 2019. In the absence of any long-term debt, cash accrual is largely paid out in the form of dividend. Total outgo was Rs 211 crore in fiscal 2020, (including buyback), and will be at similar levels, going forward. CRISIL believes the company has sufficient accrual and cash and cash equivalents to finance its capex requirements. Its unutilised bank lines are more than adequate to meet its incremental working capital requirement over the next one year. |
| Outlook: Stable |
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CRISIL believes the JB group will continue to be aided by its established market position in India. Gradual increase in share of regulated markets, should help diversify the revenue profile. |
| Rating Sensitivity factors |
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Upward factors: * Considerable ramp-up in scale with sustenance of revenue growth (over 20% per fiscal), and healthy profitability, with better diversification in revenue profile * Sustenance of healthy financial risk profile Downward factors: * Sustained decline in operating margin to below 15% * Substantial debt-funded capex or acquisitions, weakening the capital structure and debt protection metrics * Adverse impact of the Wuhan issue, leading to shortage in the inventory |
| About the Company |
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JB Chemicals was originally set up as JB Mody Chemicals and Pharmaceuticals Ltd in 1976 by Mr J B Mody and his family for manufacturing APIs and formulations; the name of the company was changed in 1985. The promoters held 55.68% stake as on December 30, 2019. The manufacturing units are in Ankleshwar, Panoli (both in Gujarat), and Daman (Union Territory of Daman and Diu). The company manufactures a wide range of pharmaceutical formulation specialties, radio-diagnostics, APIs, and intermediates. |
| 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) | ||||||||||||||||||||||||||||
@Letter of credit is interchangeable with bank guarantee, cash credit, export packing credit, foreign bill purchase and working capital demand loan facilities #Letter of credit is interchangeable with bank guarantee | ||||||||||||||||||||||||||||
| Annexure - List of entities consolidated | ||||||||||||||||||||||||||||
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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 | ||||||||||||||||||||||||||||||||||||||||||||||||
@Letter of credit is interchangeable with bank guarantee, cash credit, export packing credit, foreign bill purchase and working capital demand loan facilities #Letter of credit is interchangeable with bank guarantee | ||||||||||||||||||||||||||||||||||||||||||||||||
| For further information contact: | ||||||
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