| Bajaj Healthcare Limited | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
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| This Rating Rationale is published solely to update the bank-wise facility details as provided by the rated entity; other sections are same as the previous Rating Rationale dated January 13, 2022. |
Detailed Rationale CRISIL Ratings' ratings on the bank loan facilities of Bajaj Healthcare Limited (BHL) continue to reflect BHL’s established market position backed by a strong and diversified clientele and a healthy financial risk profile. These strengths are partially offset by exposure to intense competition in the bulk drugs industry and working capital-intensive operations
Revenue grew by around 59% in fiscal 2021 with improved operating margins at 21.6% on the back of healthy demand, better realizations coupled with wider product portfolio through acquisitions and enhanced capacities. Demand for key products of the company such as Ascorbic acid (Active pharmaceutical ingredient for Vitamin C) and CH Base (raw material for manufacturing sanitizer) have exhibited substantial improvement. While the scale of operation is expected to be sustained over the medium term, margins are expected to moderate, however should remain better than previous expectations. BHL has been maintaining higher inventory levels in current fiscal to tackle delays in shipping and any probable supply disruptions, leading to higher bank limit utilization and increase in overall debt levels. The same is expected to moderate over the coming quarters strengthening overall credit profile of the company and remains a key monetorable |
Key Rating Drivers & Detailed Description Strengths Established market position: The promoters’ experience of over 25 years in the bulk drugs industry has resulted in an established relationship with customers and suppliers. Benefits from the established market position, backed by a strong and diversified customer base, should continue. The company has acquired two plants under distress sale in March 2020 and September 2020. These additional capacities along with higher demand and realizations for the existing key products are expected support revenue growth and profitability over medium term
Healthy financial risk profile: The networth (adjusted for revaluation reserves) was Rs 191.3 crore, while the total outside liabilities to adjusted networth ratio were at 1.4 times as on March 31, 2021 despite debt funded capex in fiscal 2021. Despite the large debt funded acquisition, capital structure is likely to remain healthy with TOLAW ratio expected to improve to around 1-1.2 times over the medium term, on the back of healthy accruals and repayment of existing debt. The debt protection metrics were robust, with interest coverage ratio over 17 times in fiscal 2021. The financial risk profile is expected to remain healthy over the medium term.
Weaknesses Exposure to intense competition in the bulk drugs industry: The industry has a large number of players and fragmented, leading to intense competition. This restricts the ability to bargain for better prices with customers in case of escalation in input prices, thus constraining profitability.
Working capital-intensive operations: Gross current assets were high at around 143 days, driven by inventory and receivables of 69 days and 55 days respectively, as on March 31, 2020. Receivables were around 80-90 days historically and likely to remain so over the medium term. Inventory levels have risen recently to tackle delay in shipments and any probable supply disruption, the same is expected to moderate over coming quarters and remain a key rating sensitivity factor. Overall GCA is expected to be around 150-160 days over the medium term |
Liquidity: Adequate Net cash accrual is expected at around Rs 70-80 crore per annum against debt obligation of Rs 12-13 crore, per fiscal over the medium term. There are no large capex planned over the medium term. Average bank limit utilization was moderate at 75.5% during the 12 months through September 2021. Expected enhancement in bank lines by around Rs.20 crore would support the incremental working capital requirements over the medium term. |
Outlook: Positive CRISIL Ratings believes that the business and financial risk profile of the company is likely improve over the medium term backed by experience of the promoters, favorable demand for key products and new capacities acquired |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company BHL was incorporated in 1993 as a private limited company by the Bajaj family and was reconstituted as a closely held public limited company in 2005. The company was listed on the SME (small and medium enterprise) segment of the BSE (Bombay Stock Exchange) in May 2016 and later migrated to Main Board of BSE Limited in May 2019. It manufactures active pharmaceutical ingredients and also formulations in the form of tablets, capsules, and powder, and exports bulk drugs to Europe, among other regions |
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 - 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) | Name of Lender | Rating |
| Letter of Credit | 56.55 | Saraswat Bank | CRISIL A3+ |
| Post Shipment Credit | 5 | Citibank N. A | CRISIL A3+ |
| Term Loan | 70.15 | Saraswat Bank | CRISIL BBB/Positive |
| Term Loan | 6.69 | SVC Co-Operative Bank Limited | CRISIL BBB/Positive |
| Term Loan | 4 | Aditya Birla Finance Limited | CRISIL BBB/Positive |
| Term Loan | 1.4 | Standard Chartered Bank Limited | CRISIL BBB/Positive |
| Term Loan | 8.21 | Citibank N. A. | CRISIL BBB/Positive |
| Working Capital Facility | 70 | Citibank N. A. | CRISIL BBB/Positive |
| Working Capital Facility | 60 | Standard Chartered Bank Limited | CRISIL BBB/Positive |
| Working Capital Facility | 10 | SVC Co-Operative Bank Limited | CRISIL BBB/Positive |
This Annexure has been updated on 19-Jan-2022 in line with the lender-wise facility details as on 07-Jul-2020 received from the rated entity.
Criteria Details
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