| Omniactive Health Technologies Limited | ||||
| 'CRISIL A/Positive' assigned to Bank Debt | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has assigned its ‘CRISIL A/Positive’ rating to the long-term bank facilities of Omniactive Health Technologies Limited (OAHL). The rating reflects the established market position of the company in the nutraceuticals segment, and adequate and improving operating profitability and average financial risk profile. These strengths are partially offset by working capital-intensive operations, high geographical and customer concentration in revenue, and susceptibility to fluctuations in raw material availability and prices. |
Analytical Approach For arriving at its rating, CRISIL Ratings has combined the business and financial risk profiles of OAHL, its subsidiaries, because of integrated nature of operations and same business. These entities are collectively referred to as the OAHL group .
Additionally, CRISIL Ratings has amortised goodwill on acquisition of Indfrag over five years. Profit after tax (PAT) and networth have been adjusted accordingly.
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:
OAHL group benefits from its established market position in the nutraceuticals segment, supported by its promoters' extensive experience, strong research and development capabilities, and established product lines. The promoter, Mr Sanjay Mariwala, has experience of more than three decades in the natural foods and supplement ingredients industry which, coupled with strong in-house research and development capabilities, have led to a portfolio of branded, innovative natural products with clinically proven health benefits. OAHL group has complementing products in the speciality and botanical segments that account for about 80% and 20%, respectively, of the overall revenue. OAHL group has speciality products such as Lutemax 2020 and Omnixan, Capsimax, Gingever, Metavive, Curcuwin, Xtenergy and enXtra for therapeutic segments of vision, cognition and mental, metabolic health and weight, active wellness and daily energy. The company has long-standing relationship with its customers through co-development and co-branding of products, which differentiates OAHL in the market.
OAHL group has established its presence in the botanical extracts market through the acquisition of Indfrag in fiscal 2017. It also benefits from its strategic investor, TA OA Associates (TA), which is a global private equity firm with majority stake of 54.39% in the OAHL. This provides operational support in the group’s global expansion plans and financial flexibility for fund infusion to support its inorganic expansion plans.
OAHL group’s business risk profile is healthy backed by its established market position and product portfolio. Consequently, the group reported healthy revenues of Rs. 460 crores in the first nine months of fiscal 2021. Revenue for OAHL is expected to grow by 15-18% over the medium term, supported by healthy demand for nutraceuticals to prevent lifestyle related health conditions specifically post the pandemic, new product launches and its geographic expansion plans.
OAHL group has vertically integrated operations for major products, including direct sourcing of marigold and paprika from the farmers ensuring quality. This is turn helps the group control costs and maintain healthy product margins. The group’s operating margin improved to 31% in the first nine months of fiscal 2021, from ~14-22% in the past few years. This was on account of employee cost rationalisation, lower legal costs, and lower marketing cost amidst the pandemic. The company’s operating profitability is expected to remain adequate at about 23-25% in the near term, supported by vertically integrated operations, focus on high margin speciality products, and continued benefit of cost rationalisation.
The financial risk profile has remained average, as reflected in debt protection metrics, on account of acquisition of Indfrag in 2017 and working capital intensive operations. Besides, volatility in operating profitability has resulted in the group’s Debt to EBITDA(earnings before interest, tax, depreciation and amortisation) ratio and gearing at 2.7 times and 0.9 times respectively on March 31, 2020. Interest cover, too was moderate at 3.35 times in fiscal 2020. The group’s return on capital employed was also modest at 7% in fiscal 2020 (12.3% in fiscal 2019), as the Indfrag acquisition is yet to optimally contribute to operating profits.
The company has moderate organic capital expenditure (capex) plan of Rs 20-45 crore annually over the medium term. Going forward improvement in profitability coupled with judicious funding of capex is likely to improve debt/EBITDA below 1.0 times and gearing below 0.6 times over medium term. Furthermore, debt protection metrics is expected to improve with interest cover above 7 times over the medium term, on account of interest subvention of 5% on packing credit facility and paring down of high interest term loans.
The group has financial flexibility of fund infusion from TA, global private equity firm, which acquired 54.39% stake in January 2021.
CRISIL Ratings is given to understand that TA will remain invested for five years and there is no obligation on OAHL or the promoter family to provide an exit or assured return to TA. Further, TA has financial flexibility to provide additional fund infusion to support OAHL’s growth plans and acquisitions, if any. Any larger than expected debt funded acquisition or capex could adversely impact the group’s financial risk profile and will remain the key monitorable.
Weaknesses:
OAHL has working capital intensive operations, given the seasonality in the raw material availability, being agriculture commodities. The group had gross current assets of 231 days as on March 31, 2020, on account of large inventory of upto 145 days with raw material stocking during the peak procurement season and debtors at 69 days. The group's business risk profile should remain constrained by working capital-intensive operations
OAHL group derives around 80% of revenues from the US market, thereby resulting in high geographic concentration. The company is exposed to fluctuations in forex risk, as majority of revenues are from the US, while raw material procurement is largely domestically. The company does not hedge its forex exposure.
OAHL derives about 50% of revenues from top 10 customers. Any loss of customer or lower demand from top customers could adversely impact the company’s operating performance. However, the group benefits from established relationship with its customers and co-branded products.
OAHL group has a diverse product profile of over 20-25 products, with about 45-47% of the revenues from Lutemax 2020and Lutein family products– key products in vision care. The company’s ability to launch new products and ramp up its product portfolio as well as geographic diversification will remain the key monitorable.
The group’s products are natural and manufactured from flower extract, botanical plants which are sourced from agriculture fields. Raw materials, being agricultural commodities, are subject to risks of availability owing to adverse climatic conditions and resultant volatility in prices. The group’s vertically integrated supply chain for key products like marigold and paprika ensure consistent quality output. While operating profitability should remain healthy over the medium term, any significant volatility in raw material prices and inability to pass on such price increases to end customers immediately could put pressure on operating profitability and cash accrual. |
Liquidity: Adequate OAHL has adequate liquidity driven by healthy cash accruals and moderate usage of bank lines. The group is expected to generate annual cash accruals of over Rs 100 crore over the medium term, against Rs 20 crore of debt repayment obligations and Rs. 20-45 crores of capital expenditure. The bank lines were utilized at an average of 63% for past 12 months through January 21. Cash and cash equivalents as on February 2021 was Rs 80 crore. Any large capital expenditure or acquisition adversely impacting the group’s liquidity position will remain the key monitorable. |
Outlook: Positive CRISIL Ratings believes the OAHL group’s business risk profile will improve backed by its established market position in nutraceutical segment and healthy revenue growth while sustaining its improved operating profitability. Furthermore, financial risk profile is expected to remain adequate with sustained healthy capital structure and steady working capital cycle. |
Rating Sensitivity factors Upward Factors:
Downward Factors:
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About the Company OmniActive Health Technologies, incorporated in 2003, is focussed on manufacturing nutritional innovations and solutions, specialty botanical and extracts. It is engaged in natural API(s) and novel delivery systems for nutrients and active ingredients, and offers a range of quality ingredients which are innovative and scientifically validated for dietary supplementation function/ food/ beverage, colouring, flavor enhancement and personal care applications. The company’s all products are natural and manufactured from flower extract, botanical plants which are sourced from agriculture field or forest.
In January, 2021 TA has acquired 54.39% stake in OmniActive while rest of the stake is held by Mariwala family, OmniActive Employees Stock Trust, and other shareholders.
For first nine months of fiscal 2021, company recorded revenue of Rs 461 crores and EBITDA of Rs 145 crores |
Key Financial Indicators
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Status of non cooperation with previous CRA OAHL has not cooperated with India Ratings & Research (India Ratings), which had marked it non cooperative via RR dated 19 February 2021. The reason provided by India Ratings is non furnishing of information by OAHL. |
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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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 – List of entities consolidated
*business of these entity has been hived off through Slump Sale from 15th December, 2020 **business of these entity has been hived off through Slump Sale from 16th November, 2020 #closed in FY20 |
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Term Loan | 39 | IndusInd Bank Limited | CRISIL A/Positive |
| Term Loan | 14 | Technology Development Board | CRISIL A/Positive |
| Working Capital Facility | 80 | Citibank N. A. | CRISIL A/Positive |
| Working Capital Facility | 75 | HDFC Bank Limited | CRISIL A/Positive |
| Working Capital Facility | 15 | IndusInd Bank Limited | CRISIL A/Positive |
This Annexure has been updated on 29-Dec-2021 in line with the lender-wise facility details as on 09-Dec-2021 received from the rated entity.
Criteria Details
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