Rating Rationale
March 30, 2019 | Mumbai
Lincoln Pharmaceuticals Limited
Rated amount enhanced
Rating Action
Total Bank Loan Facilities Rated Rs.93.41 Crore (Enhanced from Rs.63.41 Crore)
Long Term Rating CRISIL A-/Stable (Reaffirmed)
Short Term Rating CRISIL A2+ (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL ratings on the bank facilities of Lincoln Pharmaceuticals Ltd (LPL; part of the Lincoln group) reflect the extensive experience of the group's promoters in the pharmaceutical industry, and its established market position and healthy financial risk profile and liquidity. These strengths are partially offset by a working capital intensive operations, exposure to risks related to unfavourable regulations, and intense competitive pressure.

CRISIL had migrated the rating on the bank facilities of LPL to 'CRISIL A-/Stable/CRISIL A2+' from 'CRISIL BBB+/Negative/CRISIL A3+ Issuer Not Cooperating ' through its release dated March 12, 2019.

The migration reflects strengthening of the group's financial risk profile, with networth and gearing improving to Rs 215 crore and 0.32 time, respectively, as on March 31, 2018, from Rs 130 crore and 0.6 time as on March 31, 2016. The improvement has been on back of improved profitability (to 15.4% in fiscal 2018 from 11.3% the previous fiscal) and equity infusion of Rs 30.3 crore (in FY17). Profitability has picked up because of higher revenue contribution from- products manufactured in house, better margin products, increased revenue from higher margin markets. Further, the increasing exports revenue (around 54% in 9MFY19 against 32% in 9MFY18) has led to even better operating margin in current financial year and shall support the margins over medium term. The group's debt protection metrics have been strengthened, with interest coverage and net cash accrual to total debt ratios of 10.4 times and 0.55 time, respectively, in fiscal 2018. Financial risk profile is expected to consolidate further, mainly due to healthy accruals and the absence of any major capital expenditure (capex). Liquidity is comfortable supported by healthy accrual, liquid investments, and moderate bank limit utilisation.
Previously, CRISIL had put the outlook of ratings on Negative through its release dated February 25, 2016, owing to expected pressure on the scale and profitability, on account of ban by Tanzanian Drug Authority, for one of the group's largest selling product. The group has however successfully managed that disruption and continues to supply to Tanzania (~7% of topline). The group's export reach is wider now and it has around 1000 product approvals up by around 50% over last three years. These shall ensure that the dependence on any single product or customer or country remains low and impact of regulatory issues, if any, does not adversely impact the overall performance of group.
Lincoln group's business profile has further consolidated and is underpinned by an established market position, widespread geographic reach, and healthy customer and product base continue to support the group's business risk profile. Group exports its products to more than 50 countries, and none of the export country or customer contributes more than 10% to topline. Also, presence in more than 15 therapeutic segments reduces dependence on individual segments. Although working capital requirement is likely to remain large-driven by exports (requiring longer credit and increased inventory stocking)-it is estimated to moderate from the peak levels of fiscal 2018 and remain steady over the medium term. Any stretch in working capital cycle, or a product ban or large unanticipated capex will remain key rating sensitivity factors.

Analytical Approach

For arriving at the ratings, CRISIL has combined the business and financial risk profiles of LPL, Lincoln Parenteral Ltd (Lincoln Parenteral), and Zullinc Healthcare Ltd (ZHL). This is because the companies, collectively referred to as the Lincoln group, are in the same line of business, and have common promoter and management team. They also support each other in the event of an exigency, and have significant transactions. Furthermore, LPL holds the entire stake in ZHL, and 98.58% stake in Lincoln Parenteral.

Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description
* Extensive experience of the promoters: Benefits from the promoters' experience of more than three decades should continue to support business risk profile.
* Established market position: The group has presence in more than 15 therapeutic segments and exports to more than 50 countries. Revenue was 360 crore as on March 31, 2018.
* Healthy financial risk profile: Financial risk profile is healthy, with networth and gearing of Rs 215 crore and 0.32 time, respectively, as on March 31, 2018. Debt protection metrics are comfortable, too, with interest coverage and net cash accrual to total debt ratios of 10.16 times and 55%, respectively, in fiscal 2018.
* Large working capital requirements: Operations are working capital intensive and should remain so over the medium term, as the group is focusing on exports. Gross current assets were seven months as on March 31, 2018, driven, in turn, by debtors and inventory of 121 and 54 days, respectively. Credit received from suppliers relieves some of the pressure on working capital.
* Exposure to risks related to regulations and intense competitive pressure: Susceptibility to regulatory risk with regards to pharmaceutical formulations, and intense competition persists. The group needs to continuously comply with stringent quality and pricing norms. Also, with increasing export base, regulatory requirements of a wider base of countries need to be met as well.

The group has comfortable liquidity profile backed by healthy accruals, liquid investments, and moderate bank limit utilization. Net cash accrual is expected at Rs 55-60 crore per annum in the medium term, as against yearly maturing debt of less than Rs 5 crore. Further, the group has liquid mutual fund investment of around Rs.12 cr apart from usual cash bank balance of around Rs. 6-7 cr. Current ratio was healthy at 2 times. Utilisation of bank limit of Rs 53 crore averaged a moderate 58% in the 12 months through January 2019. The liquidity shall remain comfortable over medium term backed by healthy accruals and absence of any major capex.

Outlook: Stable

CRISIL believes the Lincoln group will benefit over the medium term from healthy export growth, improving operating margin, comfortable financial risk profile, and the absence of any large capex. The outlook may be revised to Positive if there is sharp and sustainable rise in scale coupled with steady profitability and capital structure. The outlook may be revised to negative if the group's scale of operations and/or profitability declines significantly or stretched working capital cycle or large capex adversely impacts the liquidity profile.

About the Group

LPL was set up as a partnership firm in 1979 and reconstituted as a public limited company in January 1995. It is listed on the Bombay Stock Exchange. LPL manufactures and sells pharmaceutical formulations related to respiratory, genitourinary, and musculoskeletal systems, alimentary tract and metabolism, and anti-infectives among others.
Lincoln Parenteral was incorporated in 1991 and manufactures dry powder, liquid injectibles, and syrup variants at its facilities in Ahmedabad (Gujarat).
ZHL trades in and markets pharmaceutical products.

Key Financial Indicators
As on / for the period ended March 31   2018 2017
Operating income Rs crore 361 360
Reported profit after tax (PAT) Rs crore 35.9 29.6
PAT margins % 9.6 7.8
Adjusted debt/adjusted networth Times 0.32 0.38
Interest coverage Times 10.2 6.9

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)
ISIN Name of instrument Date of allotment Coupon rate Maturity date Issue size (Rs. Crs) Rating assigned with outlook
NA Bank Guarantee NA NA NA 2 CRISIL A2+
NA Cash Credit NA NA NA 45 CRISIL A-/Stable
NA Export Packing Credit NA NA NA 8 CRISIL A-/Stable
NA Letter of Credit NA NA NA 10 CRISIL A2+
NA Letter of credit & Bank Guarantee NA NA NA 5 CRISIL A2+
NA Proposed Long Term Bank Loan Facility NA NA NA 15.71 CRISIL A-/Stable
NA Rupee Term Loan NA NA Mar-2020 7.7 CRISIL A-/Stable
Annexure - List of entities consolidated
Names of Entities Consolidated Extent of Consolidation
LPL Fully consolidated
Lincoln Parenteral Ltd Fully consolidated
Zullinc Healthcare Ltd Fully consolidated
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  76.41  CRISIL A-/Stable  12-03-19  CRISIL A-/Stable  30-08-18  CRISIL BBB+/Negative (Issuer Not Cooperating)*  27-09-17  CRISIL BBB+/Negative (Issuer Not Cooperating)*  25-02-16  CRISIL BBB+/Negative  CRISIL BBB+/Stable 
Non Fund-based Bank Facilities  LT/ST  17.00  CRISIL A2+  12-03-19  CRISIL A-/Stable/ CRISIL A2+  30-08-18  CRISIL BBB+/Negative/ CRISIL A3+ (Issuer Not Cooperating)*  27-09-17  CRISIL BBB+/Negative/ CRISIL A3+ (Issuer Not Cooperating)*  25-02-16  CRISIL BBB+/Negative/ CRISIL A3+  CRISIL BBB+/Stable/ CRISIL A3+ 
All amounts are in Rs.Cr.
*Issuer did not cooperate; based on best-available information
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Bank Guarantee 2 CRISIL A2+ Bank Guarantee 2 CRISIL A2+
Cash Credit 45 CRISIL A-/Stable Cash Credit 32 CRISIL A-/Stable
Export Packing Credit 8 CRISIL A-/Stable Letter of Credit 10 CRISIL A2+
Letter of Credit 10 CRISIL A2+ Proposed Long Term Bank Loan Facility 1.16 CRISIL A-/Stable
Letter of credit & Bank Guarantee 5 CRISIL A2+ Rupee Term Loan 9.58 CRISIL A-/Stable
Proposed Long Term Bank Loan Facility 15.71 CRISIL A-/Stable Standby Letter of Credit 3 CRISIL A-/Stable
Rupee Term Loan 7.7 CRISIL A-/Stable Standby Line of Credit 3.75 CRISIL A-/Stable
-- 0 -- Supplier Line of Credit 1.92 CRISIL A-/Stable
Total 93.41 -- Total 63.41 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Framework for Assessing Information Adequacy Risk
Rating criteria for manufaturing and service sector companies
Rating Criteria for the Pharmaceutical Industry
CRISILs Criteria for Consolidation
CRISILs Criteria for rating short term debt

For further information contact:
Media Relations
Analytical Contacts
Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000

Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000

Vinay Rajani
Media Relations
CRISIL Limited
D: +91 22 3342 1835
M: +91 91 676 42913
B: +91 22 3342 3000

Rahul Guha
Director - CRISIL Ratings
CRISIL Limited
D:+91 22 4097 8320

Neha Sharma
Associate Director - CRISIL Ratings
CRISIL Limited
D:+91 20 4018 1926

Gaurav Gupta
Rating Analyst - CRISIL Ratings
CRISIL Limited
D:+91 79 4024 4504
Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
For Analytical queries:


Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.

About CRISIL Limited

CRISIL is a leading agile and innovative, global analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 1,00,000 customers.
We are majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.
For more information, visit www.crisil.com 


About CRISIL Ratings
CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical rigour and innovation, CRISIL sets the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the accessibility to rating services to a wider market. Over 1,10,000 MSMEs have been rated by us.

CRISIL respects your privacy. We may use your contact information, such as your name, address, and email id to fulfil your request and service your account and to provide you with additional information from CRISIL.For further information on CRISIL’s privacy policy please visit www.crisil.com.


This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of doubt, the term “Report” includes the information, ratings and other content forming part of the Report. The Report is intended for the jurisdiction of India only. This Report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL providing or intending to provide any services in jurisdictions where CRISIL does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this Report does not create a client relationship between CRISIL and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Rating are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its opinions and analysis. CRISIL rating contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional advice before acting on the Report in any way.CRISIL or its associates may have other commercial transactions with the company/entity.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Report. EACH CRISIL PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. CRISIL’s public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL.

All rights reserved @ CRISIL