| Solara Active Pharma Sciences Limited | ||||||
| Ratings reaffirmed at 'CRISIL A-/CRISIL A2+'; outlook revised to 'Positive'; rated amount enhanced for Bank Debt | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has revised its rating outlook on the long-term bank facilities of Solara Active Pharma Sciences Limited (Solara) to 'Positive' from 'Stable' and reaffirmed the rating at 'CRISIL A-'. The rating on the short-term bank facility has been reaffirmed at 'CRISIL A2+'.
The outlook revision reflects CRISIL’s belief that Solara’s business risk profile will continue to improve over the medium term supported by its established market position in Ibuprofen active pharmaceutical ingredients (API). Revenues have improved 23 percent year on year to Rs.1617 crore for fiscal 2021 supported by ramp up in new capacities which have operationalized in Visakhapatnam (Andhra Pradesh) since October 2020. This is also reflected in revenues of Rs.406 crore in Q1 fiscal 2022, 18% higher than same period of fiscal 2021. Better fixed cost absorptions and increasing contribution from new products resulted in an improvement in operating profitability to 24 percent in fiscal 2021 (from ~20 percent for the previous fiscal) and 23% in Q1 of fiscal 2022. Going forward, operationalization and ramp up in new capacities is likely to support the growth in scale of operations, while resulting in sustenance of margins. The company’s next phase of capital expenditure is expected to commercialize in third quarter of this fiscal. With a moderation in debt funded capital expenditure and increasing accretions to reserves, the financial risk profile is likely to improve over the medium term.
The ratings reflect Solara’s established market position in the key API segment, such as Ibuprofen, Praziquantel among others, with a strong relationship with its customers and suppliers. The ratings also factor in the company’s comfortable financial risk profile. These strengths are partially offset by susceptibility of operations to regulatory changes, working capital intensive operations and exposure to risks related to successful implementation, stabilization and ramp up of the second phase of the expansion project at Vizag. |
Analytical Approach For arriving at the rating CRISIL Ratings has consolidated the business and financial risk profiles of Solara and its subsidiaries Chemsynth Labarotories Private Limited, Sequent Penems Private Limited and Shasun USA INC.
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
Weaknesses
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Liquidity: Strong Solara has healthy liquidity marked by healthy cash accrual and unencumbered cash and bank balances. The company is expected to generate cash accrual in excess of Rs.220-230 crore that shall remain adequate to meet repayment obligations of around Rs.100 crore. Unencumbered cash and bank balances were healthy at around Rs.195 crore as on March 31, 2021. However the bank limits comprising majorly packing credit have been highly utilised at around 88 percent over the last twelve months ended August 2021. Nevertheless, CRISIL Ratings believes that Solara’s liquidity shall remain strong over the medium term. |
Outlook: Positive CRISIL Ratings believes that Solara will continue to benefit from the established market position in key products operating in the niche therapeutic segments. |
Rating Sensitivity Factors Upward Factors
Downward Factors
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About the Company Solara Active Pharma Sciences Ltd, came into effect from October 1, 2017. The company was formed through demerger of API business from Strides Shasun Ltd (currently named as Strides Pharma Sciences Ltd). Subsequently, Solara acquired the human API business from Sequent Scientific Ltd during the same time, which resulted in a pure play API company. The company is listed on Bombay Stock Exchange and National Stock Exchange.
Solara has announced merger with Aurore and its group companies. Aurore is engaged in the manufacturing of a wide range of generic drugs. The effective date for the merger shall be 1st April 2021; however the merger process is expected to be concluded by the fourth quarter of fiscal 2022; subject to stock exchange and shareholder approvals. Post the merger; shareholders of Aurore are expected to hold 27 percent of the stake in the merged entity. |
Key Financial Indicators
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| 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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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This Annexure has been updated on 7-Oct-2021 in line with the lender-wise facility details as on 7-Oct-2021 received from the rated entity
Criteria Details
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