| Centaur Pharmaceuticals Private Limited | ||||||
| Rating outlook revised to 'Positive'; Ratings reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed rationale CRISIL Ratings has revised its outlook on the long-term bank facilities of Centaur Pharmaceuticals Pvt Ltd (Centaur) to ‘Positive’ from ‘Stable’, while reaffirming its rating at ‘CRISIL A’. Short term rating has been reaffirmed at ‘CRISIL A1’.
The outlook revision reflects expectation of improvement in the business risk profile, backed by sustained growth in revenue and operating margin supported by improved performance across the domestic formulations, active pharmaceuticals ingredients (APIs) and contract research and manufacturing (CRAMS) divisions. Operating margin was higher than expected and is estimated at 31.5% in fiscal 2021, while the revenue profile was stable. Revenue is expected to grow at 12-15% per annum over the medium term with improved profitability, strengthening the business risk profile. The outlook revision also reflects reduced project risk on account of completion of capital expenditure (capex) in Goa and large accumulated cash reserve to fund the capex in Pune, track record of implementing and maintaining a US Food Drug Administration (USFDA)-compliant facility and products in the pipeline for the regulated market, thus partially mitigating demand-related risks.
The ratings continue to reflect the established market position of the company, supported by strong brands—such as Sinarest in the formulations segment—niche psychotropic API segment and CRAMS division. The ratings also factor in the healthy financial risk profile of Centaur because of strong capital structure and robust debt protection metrics. These strengths are partially offset by susceptibility to regulatory changes and operational risks associated with the API segment along with exposure to project risks associated with capex. |
Analytical approach: Unsecured loan of Rs 23.3 crore provided by the promoters as on March 31, 2020, has been treated as neither debt nor equity, as the loan has lower interest than the market rate. Also, the loan has not been withdrawn in the past three fiscals and is expected to remain in the business over the medium term |
Key Rating Drivers & Detailed Description Strengths Established market position: Centaur has presence across segments'formulations, APIs, CRAMS, and clinical research'and revenue streams are diversified with the domestic and semi-regulated market formulations segment contributing 45.2% of revenue followed by API and CRAMS at 27% each in fiscal 2021. The Company has an established position in the domestic anti-cold and anti-cough formulations segments through brands such as Sinarest, Kofarest, and Occurest. Its leading brand, Sinarest, is among the highest-selling in the anti-cold segment in India. In the API segment, company is one among the leading player in the psychotropic drugs segment and enjoys market reputation as a very reliable supplier. CRAMS segment has been improving its performance over the past many fiscal and added many reputed multinational pharma company’s as its clientele. The company has recently concluded its capex in Goa for formulations and CRAMS. Capex for APIs is underway; these enhanced capacities should support the business risk profile over the medium to long term.
Healthy financial risk profile: Networth and gearing were strong, estimated at Rs 630.7 crore and 0.1 time, respectively, as on March 31, 2021, against Rs 469.7 crore and 0.15 time, respectively, a year earlier. Debt protection metrics were robust, indicated by interest coverage and net cash accrual to adjusted debt ratios estimated at 44.5 times and 3.1 times, respectively, in fiscal 2021. Capex of Rs 220 crore in Goa was recently concluded, funded entirely from internal accrual. Capex of Rs 110 is expected over the medium term, funded through internal sources. The financial risk profile is expected to remain healthy over the medium term despite large capex.
Weaknesses Susceptibility of operations to regulatory changes: The company is susceptible to regulatory changes in the Indian and international markets. These include additions to lists under Drugs Price Control Order, which impacts product pricing, and, hence, profitability of players, though the extent of the impact may differ. In the international market, regulatory risks are manifested by increasing scrutiny and inspections by the USFDA and the European Medicines Agency. However, Centaur has been able to cater to these changes in a timely manner, without operations being affected.
Exposure to operational risks associated with the psychotropic API segment: Centaur manufactures psychotropic APIs used in formulations for the control and treatment of a number of mental ailments. The company is exposed to operational risks associated with the handling of these regulated substances.
Moderate project risk: The company has completed its capex of Rs 220 crore in Goa in March 2020 and process is underway to obtain the required approval from various regulated markets, funded entirely by internal accrual. The company is undertaking expansion project of Rs 110 crore, spread over fiscals 2022 and 2023, for capacity enhancement of its API facility in Pune. Funding and technology risk are low, as the company has substantial liquid funds and healthy accrual and experience for setting up and maintaining facilities compliant with the regulated market. Progress of the capex is as per the schedule. However, Centaur faces moderate risks related to project implementation and stabilisation of operations in a timely manner. |
Liquidity: Strong Net cash accrual, expected at Rs 175-225 crore per annum, will sufficiently cover capex of around Rs 110 crore in the near term and support liquidity in the absence of any debt obligation over the medium term. Liquid investments amounted to Rs 150 crore as on March 31, 2021. Utilisation of working capital limit of Rs 143 crore averaged 30% over the 12 months through June 2021. Surplus accrual and unutilised working capital limit will adequately fund the incremental working capital requirement. Despite capex of Rs 110 crore in the near term, liquidity should remain strong. |
Outlook: Positive The business risk profile of Centaur is expected to improve over the medium term, backed by its established market position, new products under pipeline and enhanced capacities |
Rating sensitivity factors Upward factors
Downward factors
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About the company Incorporated in 1978, Centaur is a diversified pharmaceutical company with presence in the CRAMS, manufacturing and marketing of formulations and API segments. The company caters to regulated and semi-regulated markets. Its flagship brand, Sinarest, is widely prescribed for the treatment of cold, cough, headache, fever and body aches. |
Key Financial Indicators
*2021 figures are provisional and unaudited |
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 various bank facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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