| Win-Medicare Private Limited | ||||||
| Ratings upgraded to 'CRISIL BBB+/Stable/CRISIL A2' | ||||||
| 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 facilities of Win-Medicare Private Limited (WMPL; part of the Win group) to ‘CRISIL BBB+/Stable/CRISIL A2’ from 'CRISIL BBB/Stable/CRISIL A3+’.
The upgrade in rating of WMPL's bank facilities is in line with upgrade in rating of parent entity, Modi-Mundipharma Private Limited (MMPL; part of the Modi Pharma group) to ‘CRISIL BBB+/Stable/CRISIL A2’ from 'CRISIL BBB/Stable/CRISIL A3+'.
The upgrade also reflects better than expected business performance of the Win group. Group’s estimated revenue of Rs 732 crore in fiscal 2021 (Rs 656 crore in fiscal 2020) was significantly higher than CRISIL Ratings’ expectations for the fiscal. The significant positive deviation was largely on account of increase in sales of prescription based pharmaceutical products of the group and also partly because of retail sales of cosmetic division being transferred to Win group effective April 1, 2020. Increase in demand of pharmaceutical products is reflected well by increase in average consumption of Betadine Gargle which went from 3 lakh bottles per month in fiscal 2020 to 11 lakh bottles per month in fiscal 2021. And during 2nd wave of Covid-19, the consumption went up to 30 lakh bottles per month.
The Win group is responsible for selling the entire product range of pharmaceutical division in the prescriptive and over the counter (OTC) markets. Supported by established brands in pharmaceutical division like Betadine, HepaMerz, Diclomol, etc. the group is expected to continue to improve its revenue by at least 10-15% annually while maintaining operating margin in the range of 6-6.5% over the medium term. Any deviation than expectations will be a key monitorable over the medium term.
The ratings continue to reflect strong financial, operational, and management support the group receives from the parent, Modi-Mundipharma Pvt Ltd (MMPL). The ratings also factor in an established brand, a strong distribution network, efficient working capital management, and a comfortable financial risk profile. These strengths are partially offset by susceptibility to regulatory changes and competitive pressures. |
Analytical Approach CRISIL Ratings has applied its parent notch-up framework to factor in the extent of support available from MMPL.
CRISIL Ratings has combined the business and financial risk profiles of WMPL and its subsidiaries: Mundipharma Bangladesh Pvt Ltd (MBPL), Bangladesh Beauty Products Pvt Ltd (BBPPL) and Mundipharma Trading Bangladesh Pvt Ltd (MTB). That's because the three companies, collectively referred to as the Win group, are in the same line of business and have moderate business linkages. Win Healthcare Pvt Ltd (WHPL) has been deconsolidated as it is winding up and is non-operational.
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: * Strong financial, operational and management support from the parent: MMPL has infused equity (outstanding at Rs 30.13 crore as on March 31, 2021) to support the group's operations, and is likely to continue providing need-based assistance. Furthermore, the Win group and MMPL use the same selling and distribution network and have a common management team.
* Established brand owing to tie-ups with reputed international companies: The group has alliances with leading global companies such as Mundipharma (Switzerland; for the Betadine brand), Merz Asia Pacific Pvt Ltd (Singapore; for the HepaMerz brand), Anika Therapeutics (USA), and Bionorica (Germany), among others. Apart from leveraging their technological capabilities, the joint ventures and alliances with pharmaceutical companies in Europe and America have helped diversify the product profile in the cardiac, respiratory, analgesic, pain management, urology and nutrition segments.
* Strong distribution network, leading to a geographically diversified revenue: The group has a pan-India distribution reach through its 4,000 stockists, 30 carrying and forwarding agents, and 1,200 sales representatives and managers.
* Stable working capital cycle: Working capital cycle has remained stable over the years as reflected by gross current assets in the range of 120-140 days in last 4 years ending March 31, 2021. During the same period, debtors and inventory have remained in the period 56 to 61 and 31 to 38 days respectively.
* Comfortable financial risk profile: The gearing remained low and the networth comfortable, estimated at 0.55 time and Rs 211 crore, respectively, as on March 31, 2021. The interest coverage ratio is estimated at a comfortable 4 times for fiscal 2021.
Weakness: * Susceptibility to intense competition in the pharmaceutical industry and to changes in government regulations: Though revenue estimated at Rs 732 crore for fiscal 2021 was moderate, there is intense competition from larger players that have higher volumes and reputed brands in the domestic market. Moreover, the group has to adhere to National Phamaceutical Pricing Authority's price ceiling for essential drugs as all its products currently fall under the drug price control. |
Liquidity: Adequate Bank limit utilization at standalone level for WMPL was at 68% for last 12 months ending June, 2021. The utilization levels have continued to drop as reflected by average utilization of 60% in last 6 months and 47% in last 3 months ending June, 2021. Group is expected to generate healthy cash accruals of over Rs 35 crore on annual basis against annual repayment obligation of Rs 4-5 crore over the next two fiscals ending March 31, 2023. Current ratio of less than 1 times is partly on account of healthy advances and deposits taken from customers and dealers reflecting healthy market position of the group and partly because of excess liquidity used to extend loans to other entities largely within the group. |
Outlook: Stable CRISIL Ratings believes the Win-Medicare group will continue to benefit from its established brands and extensive industry experience of the promoters. |
Rating Sensitivity factors Upward factors * Upgrade of parent’s credit rating by one notch * Significant improvement in revenue while maintaining operating profitability in the range of 6-6.5%
Downward factors * Downgrade in parent’s credit rating by one notch * Decline in revenue or operating margin * Bank limit utilization remaining over 90% at an average |
About the Group WMPL, incorporated in 1982, sells formulations in therapeutic segments including antiseptic, analgesic, gastroenterology, gynaecology, dermatology, neurocare, and protein supplements. MMPL, established in 1990, acquired WMPL (the owner of Betadine brand). WMPL is now a subsidiary of MMPL.
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Key Financial Indicators
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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 various bank facilities | ||||||||||||||||||||||||||||||||||||||||||||||||
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