Rating Rationale
June 11, 2018 | Mumbai
Poly Medicure Limited
Ratings Reaffirmed
Rating Action
Total Bank Loan Facilities Rated Rs.220 Crore
Long Term Rating CRISIL A+/Stable (Reaffirmed)
Short Term Rating CRISIL A1 (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its 'CRISIL A+/Stable/CRISIL A1' ratings on the bank facilities of Poly Medicure Limited (PolyMed; a part of the PolyMed group).

The ratings continue to reflect the PolyMed group's strong market position in the intravenous (IV) cannula product segment, strong operating efficiency and healthy financial risk profile. These strengths are partially offset by vulnerability to fluctuations in raw material prices and foreign exchange (forex) rates, susceptibility to change in regulations, exposure to intense competition.

Analytical Approach

For arriving at the ratings, CRISIL has combined the business and financial risk profiles of PolyMed and its wholly owned subsidiaries, Poly Medicure (Laiyang) Co Ltd (PMLCL; based in China) and Poly Medicure BV Netherland (PMBV), together referred as the PolyMed group.

Key Rating Drivers & Detailed Description
* Strong market position
There has been consistent revenue growth in the past five fiscals through 2018 at a compound annual rate of 13%; growth is expected to continue at a moderate pace. The major product, IV cannula, contributes around 26% of total sales, across above 100 countries. Polymed's plans to acquire a company in Italy, through PMBV will result in product diversification and provide an established customer base there. Further, continuous capacity addition and product innovation and development will support revenue growth over the medium term.
* Strong operating efficiency
This is driven by labour-cost advantage over global competitors and in-house tool design and research and development (R&D) facilities. Operating margin is expected at 20'23% over the medium term, supported by improved capacity utilisation and modernisation of existing facilities.
* Healthy financial risk profile
Total outside liabilities to tangible networth ratio was 0.8 time as on March 31, 2018, with networth at around Rs 300 crore. Interest coverage and net cash accrual to adjusted debt ratios were 12.1 times and 0.61 time, respectively, in fiscal 2018.
* Vulnerability to fluctuations in raw material prices and forex rates
Operating margin is susceptible to fluctuation in prices of raw material, plastics; these prices are directly linked to the highly volatile crude oil prices. Furthermore, as exports contribute around 75% of sales, the margin is vulnerable to fluctuations in forex rates.
* Susceptibility to change in regulations
The group mainly exports products to highly quality-conscious markets such as Europe and Latin & South America. Its Unit-II at Faridabad, Haryana, has been audited by the US Food and Drug Authority, and all other plants have CE certifications for exports to Europe. Any change in policies in these markets can impact profitability.
* Exposure to intense competition
There is intense competition from players such as Baxter, Becton Dickinson, B Braun, and Boston Scientific in the global market. Lower expenditure than international players on R&D activities limits the capability to develop new products for global markets. There is intense competition in the domestic market from unorganised players.
Outlook: Stable

CRISIL believes the PolyMed group's business risk profile will remain strong over the medium term, supported by established market position in the medical devices industry, increasing production capacity, and continuous focus on new product development leading to sustained healthy profitability. The outlook may be revised to 'Positive' if significant diversification in the product portfolio, leading to lower dependence on IV cannula and related products, while healthy operating profitability and capital structure are sustained. Conversely, the outlook may be revised to 'Negative' if net cash accrual reduces because of decline in profitability, or if capital structure weakens because of large, debt-funded capital expenditure or substantial increase in working capital requirement.

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 National Stock Exchange. PMLCL, started commercial operations in April 2009. The group has another subsidiary, US Safety Syringes Co, LLC, USA, in which a provision for investment was made in fiscal 2014, though it is yet to be formally wound up. 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.
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
Particulars Unit 2018 2017
Revenue Rs crore 520.4 455.2
Profit after tax (PAT) Rs crore 70.6 52.3
PAT margin % 13.6 11.5
Adjusted debt/adjusted networth Times 0.45 0.46
Interest coverage Times 12.1 10.4

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. Crore)
Rating Assigned
with Outlook
NA Fund based limits NA NA NA 70 CRISIL A+/Stable
NA Non fund based limits NA NA NA 49 CRISIL A1
NA Long Term Loan NA NA Mar-2022 101 CRISIL A+/Stable
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  171.00  CRISIL A+/Stable      29-04-17  CRISIL A+/Stable  25-08-16  CRISIL A+/Stable  03-07-15  CRISIL A+/Stable  CRISIL A/Positive 
            21-04-17  CRISIL A+/Stable  07-07-16  CRISIL A+/Stable/ CRISIL A1  24-04-15  CRISIL A+/Stable   
Non Fund-based Bank Facilities  LT/ST  49.00  CRISIL A1      29-04-17  CRISIL A1  25-08-16  CRISIL A1  03-07-15  CRISIL A1  CRISIL A1 
            21-04-17  CRISIL A1  07-07-16  CRISIL A1  24-04-15  CRISIL A1   
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Fund-Based Facilities 70 CRISIL A+/Stable Cash Credit 60 CRISIL A+/Stable
Long Term Loan 101 CRISIL A+/Stable Letter of credit & Bank Guarantee 40 CRISIL A1
Non-Fund Based Limit 49 CRISIL A1 Long Term Loan 110 CRISIL A+/Stable
-- 0 -- Term Loan 10 CRISIL A+/Stable
Total 220 -- Total 220 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
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

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