Rating Rationale
July 20, 2022 | Mumbai
Wellness Forever Medicare Limited
Rating reaffirmed at 'CRISIL BBB+/Stable'; rated amount enhanced for Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.224.17 Crore (Enhanced from Rs.137.17 Crore)
Long Term RatingCRISIL BBB+/Stable (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its 'CRISIL BBB+/Stable' ratings on the bank facilities of Wellness Forever Medicare Limited (WFMPL).

 

The ratings continue to reflect WFMPL’s established regional market position and extensive experience of its promoters in the pharmacy segment, wide product range, established supplier relationship and strong financial risk profile. These strengths are partially offset by exposure to intense competition and geographical concentration in revenue and to risks associated with stabilization of new outlets. 

Analytical Approach

For arriving at its ratings, CRISIL Ratings has consolidated the business and financial risk profiles of WFMPL and its two subsidiaries, which are strategically important to, and have a significant degree of operational integration with WFMPL. These subsidiaries are Amore Health Essentials Private Limited (AHEPL) and Wellness Forever Healthtech Private Limited (WFHPL). CRISIL considers these entities as being strategic to WFML in view of their strong integration with WFMPL’s operations.

 

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 and extensive experience of the promoters: Benefits from the promoters' experience of over three decades and the strong market position for the ‘’Wellness Forever’’ brand in Mumbai and nearby regions should continue to support the business risk profile of the company. The company has expanded its stores to other locations in Maharashtra and states such as Karnataka and Goa and currently have 292 outlets (as of June 2022) across these states. Revenue has steadily increased to Rs 1202 crores in fiscal 2022 from Rs 871 crores in fiscal 2020. The company plans to expand by adding 60-80 new stores annually over the medium term.

 

  • Wide product range and established supplier relationship: The product profile is diversified with more than 20000 stock keeping units (SKUs) for pharma products and 10000 SKUs for non-pharma products such as skin care products, nutritional products and other daily need items. This helps in mitigating intensifying competition in the pharmaceutical retail business. Also, the management has established strong relationship with a large number of suppliers and setup a central distribution centre at Bhiwandi, Maharashtra which enables efficient inventory management.

 

  • Strong financial risk profile: Networth is strong at Rs 223 crore and total outside liabilities to adjusted networth comfortable at 2.0 times as on March 31, 2022. The capital structure is moderate supported by capital infusion from investors over the past five fiscals ended fiscal 2022. Debt protection measures were also adequate with interest coverage and net cash accruals to adjusted debt ratios at 2.39 times and 0.31 times, respectively, in fiscal 2022. Financial risk profile is expected to remain strong over the medium term owing to controlled reliance on external debt.

 

Weaknesses:

  • Exposure to risks associated with stabilisation of new outlets: WFMPL plans to reach more than 500 stores by fiscal 2025, and its future performance will be dependent on its ability to leverage on its brand image to maintain growth while sustaining margins. Moreover, the company operates most of its outlets on company owned company operated (COCO) model, wherein growth is gradual and the break-even levels are reached only after the store is able to attract optimal volumes, which will depend on its ability to position itself in the locality and attract loyal clients. Over the medium term, the company is looking to increase its outlets on the franchise-based model.

 

  • Industry competition and geographical concentration in revenue: The pharmacy business has low entry barriers, consequently there are a large number of unorganised players and e-commerce portals in the industry. Therefore, players such as WFMPL have to provide periodic discounts and attractive schemes in order to stave-off competition. Aggressive expansion by existing competitors and emergence of new players may impinge upon the profitability and revenue of WFMPL. The company is also exposed to geographical concentration in revenue, since majority of its stores are in Maharashtra which generates 75% of revenues.

Liquidity: Adequate

WFMPL has adequate liquidity driven by expected cash accruals of more than Rs 65 crore in each of fiscal 2023 and fiscal 2024; against long term repayment obligations of Rs 27 crore fiscal 2023 and Rs 23 crores in fiscal 2024. Unencumbered cash and cash equivalents was of Rs 22 crore as on March 31, 2022. Fund based limits of Rs 163 crore was utilized to the tune of 93% on an average over the past 12 months ended June 2022. Further the company has capex plans to set-up additional outlets and additional warehouses which is to be partially debt funded and partially through internal accruals. CRISIL Ratings expects internal accruals, cash & cash equivalents and unutilized bank lines to be sufficient to meet its repayment obligations as well as incremental working capital requirements.

Outlook: Stable

CRISIL Ratings believes WFMPL will continue to benefit from its established presence in the pharmacy retail distribution segment and strong financial risk profile.

Rating Sensitivity factors

Upward factors

  • Revenue growth and stable margins resulting in cash accruals of more than Rs 80 crore
  • Sustained financial risk profile while maintaining working capital cycle

 

Downward factors

  • Large debt funded capex impacting the gearing to more than 1.5 times
  • Decline in revenues or margins impacting the cash accruals

About the Company

WFMPL, incorporated in 2008, is promoted by Mr Ashraf Biran, Mr Gulshan Bakhtiani, and Mr Mohan Chavan. The promoters are the majority stakeholders in the company, while balance stake is owned by individual investors. The company operates more than 250 pharmacies across Mumbai, Pune, Kolhapur, Satara, and Karad (Maharashtra), Goa, and Belgaum and Bengaluru (Karnataka), under the brand Wellness Forever. It also owns a 1 lakh sq ft distribution centre in Bhiwandi, Maharashtra.

 

AHEPL, incorporated in 2017, is engaged in manufacturing of a wide range of organic dietary supplements. The company sells its products under the brand ‘Forest Treasures’.

 

WFHPL, incorporated in 2021, is engaged in online pharmacy business.

Key Financial Indicators (Consolidated)

As on / for the period ended March 31

 

2022*

2021

Operating income

Rs crore

1,202.79

925.07

Reported profit after tax

Rs crore

-39.9

-34.85

PAT margins

%

-3.31

-3.76

Adjusted Debt/Adjusted Net worth

Times

0.88

0.40

Interest coverage

Times

2.39

2.66

*based on provisional financials

Status of non cooperation with previous CRA:

WFMPL has not cooperated with India Ratings and Research (Ind-Ra) which has classified it as non-cooperative vide release dated 09 July 2019. The reason provided by Ind-Ra is non-furnishing of information for monitoring of ratings.

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)

ISIN

Name of instrument

Date of allotment

Coupon rate (%)

Maturity date

Issue size

(Rs. Cr)

Complexity Levels

Rating assigned

with outlook

NA

Working Capital Facility

NA

NA

NA

24.9

NA

CRISIL BBB+/Stable

NA

Working Capital Demand Loan

NA

NA

NA

80.06

NA

CRISIL BBB+/Stable

NA

Long Term Loan

NA

NA

Dec-26

73.15

NA

CRISIL BBB+/Stable

NA

Proposed Cash Credit Limit

NA

NA

NA

2.44

NA

CRISIL BBB+/Stable

NA

Cash Credit

NA

NA

NA

43.62

NA

CRISIL BBB+/Stable

 

Annexure – List of entities consolidated

Names of Entities Consolidated

Extent of Consolidation

Rationale for Consolidation

Wellness Forever Healthtech Private Limited

Full

Business and financial linkages

Amore Health Essentials Private Limited

Full

 

Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 224.17 CRISIL BBB+/Stable   -- 07-12-21 CRISIL BBB+/Stable 24-12-20 CRISIL BBB+/Stable   -- CRISIL BBB+/Stable / CRISIL A2
      --   --   -- 26-11-20 CRISIL BBB+/Stable   -- --
      --   --   -- 15-01-20 CRISIL BBB+/Stable / CRISIL A2   -- --
      --   --   -- 08-01-20 CRISIL BBB+/Stable / CRISIL A2   -- --
Non-Fund Based Facilities ST   --   -- 07-12-21 CRISIL A2 24-12-20 CRISIL A2   -- --
      --   --   -- 26-11-20 CRISIL A2   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 4.5 ICICI Bank Limited CRISIL BBB+/Stable
Cash Credit 12.44 IDFC FIRST Bank Limited CRISIL BBB+/Stable
Cash Credit 20 Axis Bank Limited CRISIL BBB+/Stable
Cash Credit 6.68 IDFC FIRST Bank Limited CRISIL BBB+/Stable
Long Term Loan 12.5 Axis Bank Limited CRISIL BBB+/Stable
Long Term Loan 11.45 HDFC Bank Limited CRISIL BBB+/Stable
Long Term Loan 8.42 YES Bank Limited CRISIL BBB+/Stable
Long Term Loan 40.78 IDFC FIRST Bank Limited CRISIL BBB+/Stable
Proposed Cash Credit Limit 2.44 Not Applicable CRISIL BBB+/Stable
Working Capital Demand Loan 27.56 IDFC FIRST Bank Limited CRISIL BBB+/Stable
Working Capital Demand Loan 9.5 RBL Bank Limited CRISIL BBB+/Stable
Working Capital Demand Loan 43 YES Bank Limited CRISIL BBB+/Stable
Working Capital Facility 24.9 HDFC Bank Limited CRISIL BBB+/Stable

This Annexure has been updated on 20-Jul-22 in line with the lender-wise facility details as on 19-Jul-22 received from the rated entity.

Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Criteria for rating trading companies
CRISILs Criteria for Consolidation

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