| Jubilant Pharmova Limited | ||||
| Long-term rating removed from 'Watch Developing '; Ratings withdrawn | ||||
| Rating Action | ||||
| ||||
| ||||
| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has removed its long term bank facilities and non convertible debentures (NCDs) of Jubilant Pharmova Limited (JPM), (erstwhile Jubilant Lifesciences Ltd (JLL)) from 'Rating Watch with Developing Implications' and a ‘Positive’ outlook has been assigned for the long-term rating. CRISIL Ratings has also withdrawn the rating on the bank facilities on receipt of a 'No objection certificate from the banker and debt instruments of JPM, at the company’s request as the Rs.460 crore bank facilities and debt instruments have been transferred to Jubilant Ingrevia Ltd (JVL), post demerger of the life science business. The rating withdrawal is based on the company’s request and in line with CRISIL Rating’s policy on withdrawal of ratings.
The ratings were placed on ‘Rating Watch with Developing Implications’ on October 31, 2019 following the announcement of the board’s approval for reorganising the businesses of JLL and demerger of the Life Science Ingredients (LSI) business. With effect from February 1, 2021, lifescience business comprising of speciality chemicals, nutrition and health solutions and life sciences chemicals business has been transferred to Jubilant Ingrevia Limited (JVL). Effective this date, all rights, liabilities and obligations therein of life science ingredients business stand fully transferred to JVL. Post demerger, JPM is a pure play pharmaceutical entity, housing specialty pharmaceuticals, contract development and manufacturing (CDMO), Generics, drug discovery and proprietary novel drug businesses.
The ratings reflect JPM’s strong business risk profile backed by diversified revenue, healthy profitability with focus on regulated markets with niche products in the pharmaceuticals segment. The ratings also factor in the company’s adequate financial risk profile, supported by improving capital structure and debt-protection metrics. These strengths are partially offset by product concentration in pharma business, and exposure to regulatory risks and competitive pressures. |
Analytical Approach For arriving at its rating, CRISIL Ratings has combined the business and financial risk profiles of JPM and its subsidiaries, together referred to as JPM, as these companies have considerable operational and financial linkages. Furthermore, CRISIL Ratings has amortised the goodwill arising out of acquisitions over 10 years from the date of the respective acquisition.
Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths:
Revenue is expected to remain flat in fiscal 2021, with slowdown in radiopharmaceutical business growth due to postponement of surgeries, which was partly offset by healthy growth in generics segment due to sales of Remedesivir. Growth from new products and execution of existing contracts in radiopharmaceuticals, and steady growth in allergy therapy products and the contract manufacturing segment are expected to aid the company's speciality pharmaceutical business. Revenue growth is expected to remain healthy over medium term, backed by new product pipeline and good growth in in radiopharmaceuticals and CDMO business.
Weaknesses:
In March 2020, JPM, through one of its wholly owned subsidiaries, received the Establishment Inspection Report (EIR) with Voluntary Action Indicated (VAI) status from the USFDA for its solid dosage facility at Salisbury, Maryland USA in respect of the inspection conducted in February 2020. With the receipt of the EIR, the inspection stands closed. |
Liquidity: Strong Liquidity is supported by strong annual cash generating ability which will be sufficient to cover annual repayment obligation of Rs 370 crores in fiscal 2023. The capital expenditure (capex) of Rs. 1,400 crores over the next three years is expected to be majorly funded from internal accruals. The company has strong cash and cash equivalents of Rs 1432 crore as on December 31, 2020. |
Outlook: Positive JPM’s business risk profile should continue to benefit from its diversified revenue profile and focus on niche molecules in regulated markets leading to sustained healthy profitability. The financial risk profile is expected to improve with strong cash generation, prudent funding of capex and working capital management. |
Rating Sensitivity factors Upward factors:
Downward factors:
|
About the Company JPM is an integrated global pharmaceuticals company having three business segments - Speciality Pharmaceuticals, contract development and manufacturing (CDMO), Generics, drug discovery and proprietary novel drug businesses.
The speciality pharmaceutical business is engaged in manufacturing and supply of Radiopharmaceuticals with a network of 49 Radiopharmacies in the US, Allergy Therapy Products, Contract Manufacturing of Sterile Injectibles and Non-sterile products, Active Pharmaceutical Ingredients and Solid Dosage Formulations through six US Food and Drug Administration approved manufacturing facilities in the US, Canada and India.
Contract development and manufacturing business represented by Jubilant Biosys Ltd provides innovation and collaborative research to global pharmaceutical innovators through two world-class research centers in Bengaluru and Noida in India.
Proprietary novel drug business through Jubilant Therapeutics Inc. is an innovative patient-centric biopharmaceutical company developing breakthrough therapies in the area of oncology and auto-immune disorders.
For the first nine months of fiscal 2021, JPM reported revenue of Rs 4,519 crore and operating profit before interest, tax, depreciation and amortisation (OPBDIT) of Rs. 1,079 crore against revenue of Rs 4,407 crore and OPBDIT of Rs 1,165 crore in the corresponding period of the previous fiscal. |
Key Financial Indicators (prior to demerger)
*Adjusting for goodwill amortization |
Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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 – List of entities consolidated
Above companies are fully consolidated |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||
|
||||||||||||||||||||||||
Criteria Details
|