Key Rating Drivers & Detailed Description

Strengths:

Extensive experience of the promoters: The company has been manufacturing surgical sutures for more than 27 years. It specializes in absorbable and non-absorbable sutures used in CABG, where it has a healthy market share in India. The manufacturing facility is certified by ISO 9001:2015, ISO 13485:2016, WHO-GMP, ISO 45001:2018 and medical devices are in conformity to medical device directives 93/42/EEC, Medical Device Rules, 2017. The company has a strong track record in terms of quality and availability. It has maintained relationships with reputed customers such as Narayana Hospitals, Wockhardt Hospitals and Fortis Hospitals Ltd, among others, for more than 10 years.

Comfortable financial risk profile: Company has healthy financial risk profile with comfortable capital structure and robust debt protection metrics. Company has networth base of around Rs 30.19 crore as on March 31, 2022. Comfortable Debt protection metrics with interest coverage and net cash accruals to adjusted debt ratio of 2.35 times and 0.23 time in fiscal 2022. Moderate operating profits of 10.22%. The financial risk profile is expected to remain comfortable over the medium term on account of low debt and average profitability.

Weaknesses:

Modest scale amid dipping operating margin: Company has modest scale of operations indicated by revenue of Rs 44 crore in fiscal 2022. While it is expected to improve during fiscal 2023 it continues to remain modest. Company has done revenue of Rs XX crore for 9 months of fiscal 2023. Considering the size of the suture market, an increase in business scale would be limited and depend on the ability to control a larger share in the CABG suture market and compete in other segments. Further, operating margin has moderated to around 8% during the year on account of increase in raw material prices and limited ability to pass on to customers due to competitive market. Increase in scale while maintaining operating margin remains to be seen.

Working capital-intensive nature of operations: Company has sizeable working capital requirements as reflected by gross current assets of 439 days as on March 31, 2022 on back of increase in inventory to 297 days and elongated debtors' period (debtors of 160 days). The high debtor days are because payments from medical institutions are linked to timely disbursals by medical insurance companies.

Key Financial Indicators

Annexure - Details of Instrument(s)

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