| Poly Medicure Limited | ||||||
| Ratings upgraded to 'CRISIL AA- / Stable / CRISIL A1+ ' | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has upgraded its ratings on the bank loan facilities of Poly Medicure Limited (PolyMed; part of PolyMed group) to ‘CRISIL AA-/Stable/CRISIL A1+’ from ‘CRISIL A+/Stable/CRISIL A1’.
The upgrade reflects improvement in both business and financial risk profile post a successful raise of funds worth Rs 400 crore through Qualified Institutional Placement (QIP) route in Q4 FY21. The funds raised are being utilized to enhance capacities at an aggressive pace which will help the group to cater to increased demand across the globe because of Covid-19 pandemic, in particular, and higher expenditure on healthcare, in general.
The group is expected to double its revenue in next 5 fiscals reflecting a very strong market positioning not only domestically, which contributes around 35% of total revenue, but also internationally. With strong operating profitability of around 25% being maintained, group is expected to generate very healthy cash accruals which are expected to cumulatively surpass the capital raised through QIP in next 3 fiscals. This strong liquidity will continue to support both organic and inorganic business expansion plans thus supporting group’s strong business risk profile.
The financial risk profile has further improved after the fund raise as is reflected by total outside liabilities to tangible networth (TOLTNW) of 0.31 times as on March 31, 2021. Debt protection metrics are also strong as reflected by interest coverage of 21.3 times and NCAAD of 0.88 time for fiscal 2021.
The ratings continues to reflect the PolyMed group’s strong market position in the intravenous (IV) cannula product segment, strong operating efficiencies and comfortable financial risk profile. These strengths are partially offset by the exposure to fluctuations in raw material prices and foreign exchange (forex) rates, susceptibility to regulatory changes and exposure to intense competition. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of PolyMed and its wholly-owned subsidiaries, Poly Medicure (Laiyang) Co Ltd (PMLCL; based in China), Poly Medicure BV Netherland (PMBV), Plan1 Health India Pvt Ltd, and Plan1Health SRL (100% subsidiary of PMBV). These entities are collectively referred to herein as the PolyMed group.
Please refer Annexure - Details of Consolidation, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Strong market position Revenue has been steadily increasing at a compound annual growth rate of 15% over the five fiscals through 2021; this trend is likely to continue over the medium term, supported by continuous capacity addition and product innovation and development. The IV cannula segment, sold across more than 100 countries, contributed around 54% in fiscal 2021, compared to 57% in fiscal 2020. The group has over 310 registered patents across the countries. Continuous capacity addition and product innovation and development will support revenue growth over the medium term.
Strong operating efficiencies Strong operating efficiencies are driven by labour-cost advantage over global competitors and in-house tool design and research and development (R&D) facilities. Operating margin is expected around 25% over the medium term, supported by comfortable capacity utilisation, modernisation of existing facilities and cost-cutting initiatives.
Strong financial risk profile Group’s financial risk profile is strong aided by a recent successful fund raise of Rs 400 crore through Qualified Institutional Placement (QIP), higher than its networth of Rs 383 crore as on March 31, 2020. Group’s total outside liabilities to tangible networth ratio was 0.31 time and gearing 0.16 time as on March 31, 2021 compared to 0.89 time and 0.55 time as on March 31, 2020, with networth over Rs 861 crore. Debt protection metrics are strong, indicated by interest coverage and net cash accrual to adjusted debt ratios of 21.3 times and 0.88 time, respectively, in fiscal 2021 compared to 8.7 times and 0.44 time, respectively, in fiscal 2020.
Weaknesses Exposure to fluctuations in raw material prices and forex rates Price of the key material (plastic) is directly linked to the highly volatile crude oil prices. Since cost of procuring plastic accounts for a bulk of production expense, even a slight variation in rate can drastically impact profitability. Further, as exports contribute to around two-third of the sales, the operating margin will remain exposed to any unfavourable fluctuation in forex rates.
Susceptibility to change in regulations The group exports products to highly quality-conscious markets such as Europe. Its Unit-II at Faridabad, Haryana, was audited by the US Food and Drug Authority; all plants received CE certifications, permitting exports to Europe. Any change in the policies in these markets can impact profitability.
Exposure to intense competition Intense competitive pressure, both locally (from unorganised players) and globally (from reputed players such as Baxter, Becton Dickinson, B Braun and Boston Scientific), may continue to constrain scalability, pricing power and profitability. Further, lower expenditure than international players on R&D activities limits the capability to develop new products for global markets. |
Liquidity: Superior Liquidity of the parent entity (PolyMed) is strong as reflected by healthy liquid investment and unencumbered cash and bank balance of Rs 350 crore outstanding as on March 31, 2021 aided by fund raised through QIP route in February, 2021 itself. Bank lines were moderately utilized at 41% for last 12 months ending July, 2021.
At group level, group is expected to generate net cash accrual over Rs 130 crore on an annual basis against debt obligations worth Rs 30 crore on annual basis. The repayment obligations has reduced compared to previous year as the group has pre-paid certain portion of its long-term loans from the funds raised through QIP. |
Outlook: Stable The PolyMed group will continue to benefit from its healthy market position in the medical devices industry, and continuous focus on product development. |
Rating Sensitivity factors Upward Factor * Sustained healthy double-digit growth in revenue, with operating profitability maintained in mid-20% range * Continued maintenance of superior financial risk profile, esp. liquidity
Downward Factor * Moderation of revenue and profitability due to intense competition or impact of any adverse action; for instance, operating profitability declining below 18-20% on sustainable basis * Higher than expected capital spending or large debt funded capital expenditure or acquisition, leading to moderation in credit metrics |
About the Group The PolyMed group is promoted by Mr Himanshu Baid and Mr Rishi Baid. The group’s flagship company, PolyMed was incorporated in 1995; it manufactures disposable medical items, such as IV cannula, blood bags, blood collection tubes, and infusion and transfusion sets. The company is currently listed on the Bombay Stock Exchange and the National Stock Exchange.
PMLCL, started commercial operations in April 2009. PolyMed also has a joint venture, Ultra For Medical Products Co, Egypt, with the El-Agar group, which directly caters to the African and other markets. In fiscal 2019, PolyMed also acquired Plan1Health SRL (100% subsidiary of Poly Medicure B.V., Netherlands), an Italy-based company that manufactures mainly cancer related devices and other critical devices.
The group currently has five manufacturing facilities in India: three in Faridabad (Haryana), one each in Jaipur (Rajasthan), and Haridwar (Uttarakhand), all under PolyMed. |
Key Financial Indicators – (Consolidated)
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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
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| 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) | Rating |
| Foreign Currency Term Loan | 20 | CRISIL AA-/Stable |
| Foreign Currency Term Loan | 46 | CRISIL AA-/Stable |
| Foreign Currency Term Loan | 13.1 | CRISIL AA-/Stable |
| Fund-Based Facilities | 17.5 | CRISIL AA-/Stable |
| Fund-Based Facilities | 45 | CRISIL AA-/Stable |
| Fund-Based Facilities | 10 | CRISIL AA-/Stable |
| Fund-Based Facilities | 10 | CRISIL AA-/Stable |
| Non-Fund Based Limit | 50 | CRISIL A1+ |
| Non-Fund Based Limit | 7.5 | CRISIL A1+ |
| Non-Fund Based Limit | 2.5 | CRISIL A1+ |
| Proposed Working Capital Facility | 28.4 | CRISIL AA-/Stable |
Criteria Details
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