Rating Rationale
June 20, 2025 | Mumbai
Neuland Laboratories Limited
Ratings reaffirmed at 'Crisil A+/Stable/Crisil A1'; Rated amount enhanced for Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.928 Crore (Enhanced from Rs.540 Crore)
Long Term RatingCrisil A+/Stable (Reaffirmed)
Short Term RatingCrisil A1 (Reaffirmed)
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 loan facilities of Neuland Laboratories Ltd (NLL; part of the Neuland group).

 

The ratings continue to reflect the established market position of NLL in the active pharmaceutical ingredient (API) segment, its established clientele, healthy business performance, product and geographical diversification, and comfortable financial risk profile. These strengths are partially offset by susceptibility to fluctuations in raw material prices, intense competition and regulatory risks, moderate working capital requirement and vulnerability of operating margin to fluctuations in foreign exchange rates.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of NLL and its wholly owned subsidiaries, Neuland Laboratories Inc, USA, and Neuland Laboratories KK, Japan, as the entities have synergistic businesses and the same promoters and management. All the entities are collectively referred to as the Neuland group.

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

Strengths:

  • Established market position: NLL is an established player in the API segment with presence of more than four decades. The promoters' extensive experience in the bulk drugs industry, strong understanding of market dynamics and healthy relationships with customers and suppliers will continue to support the business.

 

  • Healthy business performance: The business performance remained strong in fiscal 2025 despite slight moderation compared with fiscal 2024 on account of lower-than-expected performance in the contract manufacturing services (CMS) segment. Revenue dipped to Rs 1,477 crore in fiscal 2025 from Rs 1,559 crore in fiscal 2024 while operating margin dropped to 23% from 30%. The CMS segment is set to recover in fiscal 2026 with one molecule already commercialised and one more expected to be commercialised during the fiscal. The segmental revenue will improve with more projects expected under development. With the incremental contribution from the CMS segment and healthy continuing demand from the API segment, the operating margin is expected to recover over the medium term.

 

  • Established clientele: The group has three business segments: prime API, niche/specialty API and CMS, and caters to small/mid-sized venture-backed biotech companies. In the prime API segment, the group works on molecules either with a business leadership approach or in partnership with the client for maintaining cost efficiency. In the niche/specialty API segment, the group continues to focus on niche APIs with complex chemistry and on filing IP for non-infringing processes. In the CMS business, the group woks as a virtual extension to the research and development (R&D) team of the developers which has helped build healthy relationships with customers.

 

  • Product and geographical diversification: NLL manufactures APIs for global pharmaceutical companies. The company caters to over 500 customers in more than 80 countries. The API and CMS segments accounted for 51% and 43%, respectively, of sales in fiscal 2025 while the remaining 6% was from others. The CMS product pipeline stood at 97 molecules across pre-clinical to commercial stage in API and intermediates segments.

 

Regulated markets contributed more than 90% to the group’s revenue in fiscal 2025, while semi-regulated market accounted for the rest. Geography-wise, Europe is the largest contributor (45% of sales in fiscal 2025), followed by the US (41%).

 

  • Comfortable financial risk profile despite planned debt-funded capital expenditure (capex): NLL has maintained strong capital structure with low reliance on external debt and robust networth. The company is undertaking sizeable capex in the next couple of years with debt of Rs 190 crore sanctioned for Phase 1 of the capex towards setting up of peptide capacity. Despite the incremental debt and working capital requirement, the capital structure will remain strong with gearing less than 0.25 time over the next three years. Debt protection metrics will remain comfortable with interest coverage more than 15 times over the medium term.

 

Weaknesses:

  • Susceptibility to fluctuations in raw material prices, intense competition and regulatory changes: Intense competition in the bulk drugs industry exerts pricing pressure on entities such as the Neuland group. The group needs to remain cost-competitive to maintain profitability.
     

Regulated markets such as the US and Europe constituted more than 90% of NLL’s total revenue in fiscal 2025 and the company has three US FDA-approved API facilities and a R&D laboratory. Though NLL has a strong regulatory track record, it is susceptible to non-compliance issues in any manufacturing facility or to stricter regulations that might affect new product approvals from several regulatory agencies or could lead to shutdown of the facility.

 

  • Moderate working capital requirement: Working capital requirement continues moderate driven by debtor days and inventory days. Debtor days stood at 78 days in fiscal 2025 (PY: 87 days) and inventory days stood at 122 days in fiscal 2025 (PY: 118 days).

Liquidity: Strong

Bank limit was mostly unutilised in the 12 months through March 2025. Cash accrual, expected over Rs 300 crore per annum, will sufficiently cover yearly term debt obligation of around Rs 40 crore over the medium term and the surplus will cushion liquidity. NLL had cash and fixed deposits of above Rs 250 crore and mutual fund investments of Rs 108 crore as on March 31, 2025, which strengthen liquidity. Low gearing and moderate networth support financial flexibility, which will help withstand adverse conditions or downturns in the business.

Outlook: Stable

Crisil Ratings believes the Neuland group will continue to benefit from its established market position and the extensive experience of the promoters.

Rating sensitivity factors

Upward factors:

  • Improvement in market position with revenue above Rs 1900 crore and operating margin remaining above 23%
  • Sustenance of strong financial risk profile

 

Downward factors

  • Stretch in the working capital cycle weakening the liquidity or the financial risk profile
  • Decline in net cash accrual below Rs 200 crore

About the Group

NLL was incorporated as a private limited company in 1984 by Dr D R Rao and Mr G V K Rama Rao. The company was reconstituted as a public limited company with the current name in 1994. It manufactures APIs for global pharmaceutical companies and provides end-to-end solutions to the pharmaceutical industry for chemistry-related services. It has three manufacturing facilities in Hyderabad, Telangana. The company is listed on the Bombay Stock Exchange and the National Stock Exchange.
 

Neuland Laboratories Inc, USA, and Neuland Laboratories KK, Japan, primarily provide marketing and business support services for NLL.

Key Financial Indicators

As on / for the period ended March 31- Crisil Adjusted

Unit

2025

2024

Operating income

Rs crore

1476.84

1,558.58

Reported profit after tax (PAT)

Rs crore

260.11

300.08

PAT margin

%

17.61

19.25

Adjusted debt/adjusted networth

Times

0.12

0.08

Interest coverage

Times

50.68

33.66

Any other information: Not applicable

Note on complexity levels of the rated instrument:
Crisil Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

Crisil Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the Crisil Ratings` complexity levels please visit www.crisilratings.com. 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. Crore) Complexity Levels Rating Outstanding with Outlook
NA Bank Guarantee NA NA NA 1.00 NA Crisil A1
NA Foreign Exchange Forward NA NA NA 6.40 NA Crisil A1
NA Letter of Credit NA NA NA 124.00 NA Crisil A1
NA Proposed Fund-Based Bank Limits NA NA NA 180.00 NA Crisil A+/Stable
NA Proposed Non Fund based limits NA NA NA 68.60 NA Crisil A1
NA Working Capital Facility NA NA NA 220.00 NA Crisil A+/Stable
NA Foreign Currency Term Loan NA NA 31-Mar-27 19.77 NA Crisil A+/Stable
NA Long Term Loan NA NA 31-Dec-25 2.68 NA Crisil A+/Stable
NA Long Term Loan NA NA 31-Mar-30 92.45 NA Crisil A+/Stable
NA Long Term Loan NA NA 31-Jul-26 10.50 NA Crisil A+/Stable
NA Long Term Loan NA NA 31-Dec-25 4.81 NA Crisil A+/Stable
NA Long Term Loan NA NA 31-Mar-32 190.00 NA Crisil A+/Stable
NA Proposed Long Term Bank Loan Facility NA NA NA 7.79 NA Crisil A+/Stable

Annexure – List of entities consolidated

Names of Entities Consolidated

Extent of Consolidation

Rationale for Consolidation

Neuland Laboratories Inc. USA

Full

Wholly owned subsidiary of NLL

Neuland Laboratories K.K. Japan

Full

Wholly owned subsidiary of NLL

Neuland Laboratories Limited

Full

Parent company
Annexure - Rating History for last 3 Years
  Current 2025 (History) 2024  2023  2022  Start of 2022
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT/ST 734.4 Crisil A1 / Crisil A+/Stable   -- 27-03-24 Crisil A1 / Crisil A+/Stable 25-04-23 Crisil A1 / Crisil A/Stable 21-04-22 Crisil A-/Stable / Crisil A2+ Crisil A-/Stable / Crisil A2+
Non-Fund Based Facilities ST 193.6 Crisil A1   -- 27-03-24 Crisil A1 25-04-23 Crisil A1 21-04-22 Crisil A2+ Crisil A2+
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 0.8 State Bank of India Crisil A1
Bank Guarantee 0.2 Axis Bank Limited Crisil A1
Foreign Currency Term Loan 19.77 Kotak Mahindra Bank Limited Crisil A+/Stable
Foreign Exchange Forward 6.4 State Bank of India Crisil A1
Letter of Credit 70 State Bank of India Crisil A1
Letter of Credit 12 Kotak Mahindra Bank Limited Crisil A1
Letter of Credit 20 IndusInd Bank Limited Crisil A1
Letter of Credit 9 HDFC Bank Limited Crisil A1
Letter of Credit 13 Axis Bank Limited Crisil A1
Long Term Loan 2.68 Kotak Mahindra Bank Limited Crisil A+/Stable
Long Term Loan 92.45 State Bank of India Crisil A+/Stable
Long Term Loan 10.5 HDFC Bank Limited Crisil A+/Stable
Long Term Loan 4.81 IndusInd Bank Limited Crisil A+/Stable
Long Term Loan 190 IndusInd Bank Limited Crisil A+/Stable
Proposed Fund-Based Bank Limits 180 Not Applicable Crisil A+/Stable
Proposed Long Term Bank Loan Facility 7.79 Not Applicable Crisil A+/Stable
Proposed Non Fund based limits 58.39 Not Applicable Crisil A1
Proposed Non Fund based limits 10.21 Not Applicable Crisil A1
Working Capital Facility 40 IndusInd Bank Limited Crisil A+/Stable
Working Capital Facility 20 Kotak Mahindra Bank Limited Crisil A+/Stable
Working Capital Facility 36 HDFC Bank Limited Crisil A+/Stable
Working Capital Facility 33 Axis Bank Limited Crisil A+/Stable
Working Capital Facility 91 State Bank of India Crisil A+/Stable
Criteria Details
Links to related criteria
Basics of Ratings (including default recognition, assessing information adequacy)
Criteria for consolidation
Criteria for manufacturing, trading and corporate services sector (including approach for financial ratios)

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