| Multani 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 ratings on the bank facilities of Multani Pharmaceuticals Limited (MPL) at 'CRISIL BBB-/Stable/CRISIL A3'. |
| Key Rating Drivers & Detailed Description |
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Strengths: * Extensive industry experience of the promoters and established relationships with customers: The decade-long experience of the promoters in the ayurvedic and alternative healthcare segments and healthy relationships with suppliers and customers have helped to build a strong track record of operations and will continue to support the business risk profile. MPL has increased its customer base over the years resulting in moderate growth in revenue profile. CRISIL believes MPL will continue to benefit from its promoter's extensive experience and support. * Strong financial risk profile: Networth was large at Rs 34.72 crore and total outside liabilities to tangible networth (TOLTNW) ratio moderate at 1.50 times, as on March 31, 2019. On account of healthy accretion to reserves, networth is estimated to increase significantly to Rs 46 crore as on March 31, 2020. Moreover, due to major prepayment towards the SIDBI term debt, the TOLTNW ratio is estimated to improve to 1 time. Debt protection metrics were comfortable, with interest coverage and net cash accrual to total debt ratios of 5.99 times and 0.36 time, respectively, for fiscal 2019, and are expected at 12-13 times and 1-1.1 time, respectively, in fiscal 2020. * Healthy operating efficiency: The EBITDA (earnings before interest, tax, depreciation, and amortisation) margin improved to 13% (10.9% in fiscal 2018) and return on capital employed to 21.1% (16.6% in fiscal 2018) in fiscal 2019 on the back of relatively lower material costs and selling expenses. Margin is expected to remain at a similar level in fiscal 2020. Weaknesses: * Large working capital requirement: Gross current assets (GCAs) were 153 days as on March 31, 2019, because of large inventory of 52 days and stretched receivables of 98 days. However, the situation is estimated to improve in fiscal 2020, with GCAs reducing to around 135 days as on March 31, 2020, following decline in inventory to around 17 days. The business was non-operational in March end due to lockdown resulting in low material procurement. Post-lockdown, GCAs is estimated to be in line with fiscal 2019 over the medium term. * Moderate scale of operations: Revenue is estimated to improve to Rs 147 crore in fiscal 2020 from Rs 116.25 crore in fiscal 2019 on account of better sales and price realisations. Moreover, being in the pharmaceutical industry, there were no major halts in business operations amid the COVID-19 pandemic with production resuming in April 2020 itself. In the meantime, MPL has ventured into manufacturing of sanitizers and plans to expand the ambit. CRISIL believes revenue will continue to remain at a similar level over the medium term considering current COVID-19 situation. Also, sustenance of revenue over the medium term will be a key monitorable. |
| Liquidity Adequate |
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Average bank limit utilisation was 52% during the 12 months through May 2020. Net cash accrual is estimated to be Rs 13-14 crore against debt obligation of Rs 2-2.5 crore for fiscal 2020. Moreover, the company prepaid around Rs 4 crore towards the SIDBI term debt last year. Current ratio is, however, estimated to be modest at 1.34 times as on March 31, 2020. |
| Outlook: Stable |
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CRISIL believes MPL will continue to benefit from the extensive experience of its promoters. |
| Rating Sensitivity factors |
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Upward factors * Sustenance of revenue at a similar level over the medium term with operating margin maintained at 11%. * Financial risk profile continues to remain healthy with no major debt funded capex. * GCAs to remain less than 150 days over the medium term. Downward factors * Gross current assets continuing to be high at 180 days over the medium term * Substantial decline in revenue and operating margin post-pandemic * Weakening of financial risk profile. |
| About the Company |
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Established in 1938 in Delhi by Mr Pradeep Multani and his family members (third generation of the promoter family), MPL manufactures ayurvedic, unani, and veterinary medicines, as well as ayurvedic food supplements, healthcare, and personal care products. It has two units, one each in Roorkee (Uttarakhand) and New Delhi. It sells cough syrup under the Kuka brand, and digestive candies and chyawanprash under the Pachmeena and Multani brands, respectively. |
| 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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| For further information contact: | ||||||
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