| Divya Pharmacy Unit Of Divya Yog Mandir Trust | ||||
| 'CRISIL BBB/Stable' assigned to Bank Debt | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has assigned its ‘CRISIL BBB/Stable’ rating to the long term bank facilities of Divya Pharmacy Unit of Divya Yog Mandir Trust (DP).
The rating reflects improvement in the business risk profile of DP, supported by revenue registering compound annual growth rate of 6% over the three fiscals through 2021. Revenue is estimated at Rs 950 crore in fiscal 2021 owing to a strong market position and healthy market response for the trust’s Coronil segment amid the Covid-19 pandemic. Operating margin has remained volatile in the past few fiscals because of fluctuations in raw material prices and increase in advertising expense. Resultantly, the margin declined to 9.66% in fiscal 2021 from 34.56% in fiscal 2017. Sustenance of the operating margin will remain a key monitorable over the medium term.
Financial risk profile is healthy, supported by comfortable capital structure and strong debt protection metrics. Though operations are highly working capital-intensive, liquidity remains supported by the absence of debt repayment, unsecured loans from the trustees and cushion in the bank lines.
The rating reflects the trust’s strong presence in the Ayurvedic medicine industry, backed by benefits derived from the Patanjali group brand, well-established distribution network and diversified product profile. The rating also factors in a healthy financial profile, driven by strong networth. These strengths are partially offset by volatility in the operating margin and large working capital requirement. |
Analytical Approach Unsecured loan of Rs 5.89 crore provided by the promoters as on March 31, 2021, has been treated as debt. |
Key Rating Drivers & Detailed Description Strengths: * Strong presence in the Ayurvedic medicine industry DP is a part of Divya Yog Mandir Trust (DYMT), which is operated and managed by Baba Ramdev and Acharya Balkrishna. DP benefits from the strong brand of the Patanjali group. The trust has a strong network comprising more than 250 distributors across India, along with presence in the e-commerce and export verticals through Patanjali Ayurveda Ltd (PAL). Its diversified product portfolio got further strengthened with the addition of Coronil, an Ayurvedic supplement used for managing Covid-19. Resultantly, revenue grew to Rs 950 crore in fiscal 2021 from Rs 725 crore in fiscal 2020 and is expected to further improve by 15-20% in fiscal 2022.
* Healthy financial risk profile Despite sizeable capital withdrawals over the past few fiscals, networth was robust at Rs 434 crore as on March 31, 2021, with gearing low at 0.51 time. Debt primarily comprises working capital borrowings, and the healthy capital structure should sustain in the absence of any debt-funded capital expenditure (capex). Debt protection metrics, though impacted by withdrawals, were comfortable, indicated by interest coverage and net cash accrual to total debt ratios of 4.7 times and 0.08 time, respectively, in fiscal 2021. Absence of debt-funded capex, expected accretion to reserve and stability of business performance will strengthen the financial risk profile over the medium term.
Weaknesses * Volatility in the operating margin Operating margin was highly volatile over the past four fiscals and fell to 9.6% in fiscal 2021 from 34.56% in fiscal 2017 because of increase in raw material prices and incremental amount spent on marketing and promotional activities. Raw material majorly comprises agriculture-related commodities, such as herbs and plant extracts, prices and availability of which are seasonal. Though increased traction from the Coronil segment is expected to aid profitability, the extent of improvement and its sustenance will remain key monitorables.
* Large working capital requirement Operations are highly working capital-intensive, as reflected in gross current assets of 280-290 days as on March 31, 2021, driven by sizeable receivables and large inventory of 142 and 124 days, respectively. Of the total receivables, 50-55% are from PAL. Also, DP procures and stores raw material in bulk because of the seasonality of different herbs. This has led to high bank limit utilisation throughout the year. Though the working capital is partially supported by payables of 45-60 days from the suppliers, it will likely remain stretched and, hence, its efficient management will be closely monitored. |
Liquidity: Adequate Though net cash accrual was negative in fiscals 2019 and 2020, on account of large capital withdrawals (Rs 145 crore and Rs 106 crore in fiscals 2019 and 2020, respectively), the extent of withdrawal has reduced over the three fiscals ended 2021. Cash accrual is expected at Rs 15 crore per annum in the absence of any debt obligation over the medium term. Bank limit utilisation averaged 93% over the 12 months through April 2021. Current ratio was healthy at 2.16 times on March 31, 2021. |
Outlook: Stable DP will continue to benefit from the promoters’ extensive experience and healthy relationships with clients. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Trust DP, a business unit of DYMT, was founded in 1995 by Baba Ramdev. The trust manufactures Ayurvedic medicines. It has two manufacturing facilities and one material procurement division in Haridwar, Uttarakhand.
DYMT is part of the Patanjali group and is engaged in social welfare activities. It manages a charitable hospital in Hardiwar and produces and distributes Ayurvedic medicines. |
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. | |||||||||||||||||||||||||||||||||||||||
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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||
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Criteria Details
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