| Gufic Biosciences Limited | ||||
| 'CRISIL BBB+/Stable' assigned to Bank Debt | ||||
| Rating Action | ||||
| ||||
| 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 Gufic Biosciences Limited (GBL).
The rating reflects GBL’s established market position in pharmaceutical business backed by promoter’s extensive experience, well established customer base and diversified product portfolio, improving operating margins and comfortable financial profile. These strengths are partially offset by vulnerability to adverse changes in government regulations, working capital intensive operations and exposure to risks related to ongoing project. |
Key Rating Drivers & Detailed Description Strengths: Established market position in pharmaceutical industry: GBL’s promoters have over 50 years of experience in the pharmaceutical industry and strong understanding of market dynamics. This has helped GBL obtain various certifications and approvals for its manufacturing facilities and diversify its product portfolio through continuous research and development. The top 10 products contributed to 33% of revenues in fiscal 2021. Hence, GBL registered strong revenue growth from Rs 301 crore in fiscal 2018 to Rs 488 crore in fiscal 2021 and momentum is expected to continue with more than 40% growth expected in current fiscal.
Well established customer base: GBL has long-standing relationships with its customers which include large players like Glenmark Pharmaceuticals Ltd, Lupin Ltd, Abbott Healthcare Pvt Ltd and Zydus Healthcare Ltd, among others. Healthy relationship with reputed pharma players has led to repeat orders contributing to revenue growth over the years. Besides, it has network of 25 carrying & forwarding agents and more than 500 stockists PAN India through which it has access to more than 1 lakh retailers. The top 10 customers contribute 30-35% to the revenues. GBL will continue to benefit from its well-established customer base.
Comfortable financial profile: GBL has a strong networth of Rs 173 crore and its controlled reliance on external debt has led to comfortable gearing and total outside liabilities to adjusted networth (TOLANW) ratios of 0.32 times and 1.26 times, respectively, as on March 31, 2021. Debt protection measures are adequate with interest coverage and net cash accrual to adjusted debt of 6.43 times and 1.09 times, respectively, for fiscal 2021. GBL has large capex plans which are to be funded through internal accruals and as a result despite huge capex, financial risk profile is expected to remain strong over the medium term.
Weaknesses: Vulnerability to adverse changes in government regulations: The pharmaceutical industry is highly regulated by state governments and various government agencies which approve new drugs and clinical trials, control the quality of imported drugs, and set prices for many critical drugs; while state authorities regulate manufacture, sales, and distribution. Hence, GBL’s operating performance remains vulnerable to any adverse impact of such regulations for its products.
Working capital intensive operations: GBLs’ operations are working capital intensive as evident from gross current assets (GCAs) ranging between 190- 250 days over the past four fiscals ended March 31, 2021, with high debtor cycle (90-110 days) and inventory levels (90-130 days). It is required to extend long credit period of 90-120 days to its customers. Furthermore, due to its business need, it holds large raw material and work in process inventory of around 90-120 days. GBL’s operations are expected to remain working capital intensive over the medium term.
Exposure to risks related to ongoing project: GBL has undertaken a greenfield project at Indore (Madhya Pradesh) with view to expand capacities of existing formulations/ injectables as well as incorporate new product lines. It involves capital outlay of around Rs 180 crores (to be fully funded through internal accruals) and is expected to be completed by fiscal 2024 beginning. Timely completion of project with involving any significant time and cost overruns and subsequent ramp-up in its operations will remain a key monitorable. |
Liquidity: Adequate GBL is expected to generate cash accrual of over Rs 80 crore in fiscal 2022 and fiscal 2023 against term debt obligation of Rs 3.6 crore and Rs 7.6 crore respectively. Its fund-based bank limits of Rs 90 crore was 43% utilized on average over the past twelve months ended July 2021. Cash and cash equivalents were of Rs 13.1 crore, as on March 31, 2021. Current ratio is healthy at 1.6 times on March 31, 2021. CRISIL Ratings expects internal accruals, cash and cash equivalents and unutilized bank lines to be sufficient to meet its repayment obligations and incremental working capital requirements. |
Outlook: Stable CRISIL Ratings believe GBL will continue to benefit from the extensive experience of its promoter, and established relationships with clients. |
Rating Sensitivity Factors Upward factor
Downward factor
|
About the Company GBL, incorporated in 1984, by Choksi family, manufactures formulations across various therapeutic segments such as antifungal, anesthetics, immune-suppressants etc. The key business segments are pharma products (75% revenue), bulk drugs (15% revenue) and consumer care products (10% revenue). Its manufacturing facilities are located at Navsari and Baroda in Gujarat and Belgaum in Karnataka. It is managed by Mr. Jayesh P. Choksi (chairman and managing director) and Mr. Pranav J. Choksi (CEO). It is listed on Bombay Stock Exchange and National Stock Exchange. |
Key Financial Indicators
|
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)
|
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||
|
This Annexure has been updated on 25-Oct-2021 in line with the lender-wise facility details as on 21-Oct-2021 received from the rated entity.
Criteria Details
|