| Cian Healthcare Limited | ||||
| Rating Reaffirmed | ||||
| Rating Action | ||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||
| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its rating on the bank facilities Cian Healthcare Limited (CHL) at ‘CRISIL B+/Stable’.
The rating reflects CHL’s below-average financial risk profile, driven by weak debt protection metrics, large working requirement with average scale, and exposure to regulatory risks and volatility in the prices of raw materials. These weaknesses are partially offset by the extensive experience of the promoters in the pharmaceutical industry and CHL's product and geographical diversification in revenue
CRISIL Ratings also notes that one of the trade creditors has filed for initiation of corporate insolvency resolution Process (CIRP) against CHL. The matter is currently listed for hearing. As indicted by CHL’s management, company has partly paid the pending dues and is trying to settle remaining dues in course of time. Management has also indicated that company has adequate funds to pay off the dues. CRISIL Ratings will monitor the development of the settlement /aforementioned arbitration. |
Analytical Approach Unsecured loan of Rs 1.46 crore, as on March 31, 2022, provided by the promoters and their friends and relatives has been treated as neither debt nor equity, as the loan is expected to be retained in the business over the medium term |
Key Rating Drivers & Detailed Description Weaknesses: Below-average financial risk profile: Suppressed profitability and large debt levels have constrained the company’s financial risk profile. CHL’s interest coverage and net cash accrual to total debt (NCATD) ratios were weak at 1.05 times and 0.07 time, respectively, in fiscal 2022. As the company’s profitability continues to remain under pressure, these metrics are expected to remain subdued in the near to medium term. Its capital structure remains moderate, driven by moderately healthy networth.
Average scale and large working capital requirement: Intense competition restricts scalability of operations, as reflected in topline of around Rs 64 crore in fiscal 2022. Also, revenue has remained average at Rs 57-72 crore in the four fiscals through 2022.
Gross current assets were 349-412 days over the three fiscals ended March 31, 2022. Large working capital requirement arises from high debtor and inventory levels. It is required to extend long credit period. The working capital requirement may remain high over the medium term, given the business model.
Exposure to regulatory risks and volatility in prices of raw materials: The pharmaceutical industry is a closely monitored and regulated industry, and hence, inherent risks and liabilities associated with products and their manufacturing persist. Furthermore, prices of key raw materials, active pharmaceuticals ingredients, are volatile. Hence, profitability is susceptible to fluctuations in raw material prices.
Strengths: Extensive industry experience of the promoters: The promoters have experience of more than 15 years in the pharmaceuticals - formulation industry. This has given them a strong understanding of the market dynamics and enabled them to establish healthy relationships with suppliers and customers.
Product and geographical diversification in revenue: CHL has a diversified product portfolio including tablets, capsules, ointments, sachet, liquid, syrups, dry powder, injectables, protein powders, nutraceutical supplements, lotions, creams, medicated soaps, medicated shampoos, among others, which are marketed through 600 different brands. The company has registered over 200+ molecules under its own name. The company caters to diverse segments including gynecology, haematinic, cardio-diabetic, orthopedic, pediatric, derma-cosmetic, antibiotic, central nervous system, and vitamins and nutrient products. Furthermore, the company sells its products across India and also exports to overseas countries thus geographically diversifying its revenue profile. |
Liquidity: Stretched Bank limit utilisation was high at almost full for the 12 months through October 2022. Cash accrual is expected to be Rs 4.5-5 crore over medium term, which is tightly matched against term debt obligation of Rs 4.5 crore. The company has invested Rs 13.89 crore in its subsidiary in the form of equity, loans and advances as on March 31, 2022. The promoters are likely to extend support in the form of unsecured loans in the case of any exigency. Moreover, the proposed enhancement in working capital lines is expected to support liquidity |
Outlook: Stable CRISIL Ratings believes CHL will continue to benefit from the extensive experience of its promoters and established relationships with clients |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company CHL was incorporated in January 2003 and was listed on the Bombay Stock Exchange (BSE: SME) in May 2019. The company manufactures pharmaceutical formulations in the form of tablets, capsules, liquid orals, ointments, creams, lotions, gels and sachets. CHL markets its products under the brand name, CIAN. It has two manufacturing facilities in Roorkee, Uttarakhand. CHL is promoted by Mr Suraj Zanwar and his family members.
CHL has a subsidiary, Dr Smith Biotic Pvt Ltd, which manufactures cosmetics and toiletries that includes pre-shave, shaving or after-shave preparations, personal deodorants and antiperspirants, perfumed bath salts and other bath preparations, beauty or make-up preparations. The subsidiary is ramping up its operations and is not expected to require any funding support from CHL going forward. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
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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This Annexure has been updated on 15-May-23 in line with the lender-wise facility details as on 24-Feb-23 received from the rated entity..
Criteria Details
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