| Centenial Surgical Suture Limited | ||||||
| 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 reaffirmed its ratings on the bank loan facilities of Centenial Surgical Suture Limited (CSSL) at 'CRISIL BBB/Negative/CRISIL A3+'.
The ratings continue to reflect a moderate business risk profile backed by an established market position in the specialized Coronary Artery Bypass Graft (CABG) surgery segment, and a strong relationship with customers and suppliers. The ratings also factor in a comfortable financial risk profile. These strengths are partially offset by a modest scale, and working capital-intensive nature, of operations. |
Key Rating Drivers & Detailed Description Strengths: * Established market position: The company has been manufacturing surgical sutures for more than 25 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: The networth was moderate at Rs.29.56 crore and the gearing low at 0.67 time, as on March 31, 2021. Debt protection metrics were above average, with interest coverage and net cash accruals to adjusted debt ratio of 2.45 times and 0.13 time in fiscal 2021. Minimal repayment obligation enhances financial flexibility. The financial risk profile is expected to remain comfortable over the medium term on account of low debt and average profitability.
Weaknesses: * Modest scale of operations: The lockdown and other measures taken by various central and state governments towards containment of COVID-19 resulted in lower demand thereby leading to moderation in operating income to Rs.36.47 crore in fiscal 2021 from Rs.55.61 crore in fiscal 2020. 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. However, the margin has been maintained because of exclusive tie-ups with main suppliers and customers. Operating margin is expected to be around 10.0-10.5% over the medium term.
* Working capital-intensive nature of operations: Company has sizeable working capital requirements as reflected by gross current assets of 606 days as on March 31, 2021 on back of increase in inventory to 423 days and elongated debtors' period (debtors of 221 days). The high debtor days are because payments from medical institutions are linked to timely disbursals by medical insurance companies. Receivables’ period has further elongated, on account of slow realization of payments from customer during fiscal 2021. This has moderately improved to 204 days as on Sept 30, 2021. Large inventory needs to be maintained to cater to the immediate demand from surgeons, as quality and timely availability of sutures are critical in maintaining relationships with customers. Further inventory levels increased given subdued demand and slow movement of inventory. Inventory level has come down and improved to 339 days as on Sept 30, 2021, backed by pick-up in demand. Improvement in working capital cycle and revenue while maintaining operating margin to remain monitorable. |
Liquidity: Adequate Liquidity is adequate. Net cash accrual is expected to be Rs.2.5-3.5 crore per fiscal over the medium term against term debt obligations of Rs.0.55-0.65 crore per fiscal. Company has access to cash credit limit of Rs.15 crore, which has been utilized at an average of 82% during the 12 months ended October 2021s. Unsecured loans of Rs.1.2 crore (as on March 31, 2021) further support the liquidity. Net cash accrual and the unutilized bank limit should be sufficient to fund incremental working capital requirement. Company has no major capex plans over the medium term. |
Outlook: Negative CRISIL Ratings believes CSSL's business risk profile will continue to remain under pressure on account of subdued demand and stretched working capital cycle. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company Set up in 1995, CSSL is a publicly listed company that manufactures highly specialised absorbable and non-absorbable sutures (cardio vascular sutures and atraumatic needled sutures) that are primarily used in CABG surgeries, and other medical devices. It sells products under Centisorb, Centicryl, Centisynth, Centicryl Rapid, Centisilk, Centilene, Centibond, Centlon, and Centsteel brands. The company’s manufacturing facility is at Murbad in Thane, Maharashtra. 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. |
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 | |||||||||||||||
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Criteria Details
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