| Kopran Limited | ||||||
| Ratings reaffirmed at 'CRISIL BBB+/Stable/CRISIL A2' | ||||||
| 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 ‘CRISIL BBB+/Stable/CRISIL A2’ ratings on the bank loan facilities of Kopran Limited (Kopran; part of the Kopran group).
The ratings continue to reflect the extensive experience of promoters in the pharmaceutical industry, and healthy financial risk profile. These strengths are partially offset by the working capital-intensive operations, and susceptibility of operating profitability to volatility in raw material prices. |
Analytical approach For arriving at its ratings, CRISIL Ratings continues to fully consolidate the business and financial risk profiles of Kopran Limited (Kopran) and its wholly-owned subsidiaries, KRLL, Kopran Lifesciences Ltd, and Kopran (HK) Ltd, Hong Kong, and Kopran (UK) Ltd, collectively referred to as the Kopran group, as they are in the similar line of business and have significant operational and financial linkages.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key rating drivers and detailed description Strengths: Extensive experience of the promoters established market position: The four-decade-long experience of the promoters in the pharmaceutical industry, their strong relationships with key suppliers and customers, will continue to support the business risk profile. The group has been working on obtaining certifications and approvals for exports to developed markets and received USFDA approval for their API unit in fiscal 2020. Benefits from the extensive experience of the promoters should continue, as demonstrated by several product launches, especially in the United States (USA) and other developed markets, driving revenue growth and profitability over the medium term, further strengthening the business risk profile.
Revenue growth was lower than expectations in fiscal 2022 due to moderation in demand for some of large products. However, the loss in revenue was partially compensated by scaling up in some of the newly launched products along with existing product portfolio. Further, the group is also in the process of enhancing its capacity across many product segments, which should also support growth over the medium term. While the operating margins are expected to moderate on account of pandemic related disruptions during fist quarter of fiscal and increase in material cost, however likely to improve over the medium term, backed by high margin newly launched products and increase in exports to developed markets.
Healthy financial risk profile: The group has raised equity of Rs 125 crore during fiscal 2022, improving networth to over Rs 400 crore (estimates) as on March 31 2022 from Rs.236 crore a year earlier. The leverage levels have improved backed by the equity infusion, with total outside liability to adjusted networth (TOLANW) ratio estimated to have improved to around 0.3-0.4 times at the end fiscal 2022 compared to 0.8 times a year before. The company has capex plans of over Rs 80-90 crores over the medium term, funded by internal sources. Leverage levels are expected to remain strong over the medium term. Debt protection metrics are healthy, with the interest coverage and net cash accrual to adjusted debt ratios expected to be over 19 and 1.7 times and over medium term.
Weaknesses: Working capital-intensive operations: Gross current assets were high at estimated at 188 days, driven by receivables and inventory of 86 and 90days respectively, as on March 31, 2021. GCA days are expected to moderately increase on account of increase in inventory holding in fiscal 2022. GCAs are expected to be remain high at around 190-200 days. Debtor profile is marked by significant revenue derived from South Africa and other African countries; however, bulk of the sales are backed by letter of credit mitigating credit risk associated with exposure.
Susceptibility of operating profitability to volatility in raw material prices: Operating margin has ranged between 11.9% and 20.2% over the four fiscals through March 2021 (20.2% in fiscal 2021), owing to volatility in raw material prices, product mix and realisation. Though the group has the ability to pass on price fluctuations to customers, it is with a lag, and any sharp volatility impacts profitability. |
Liquidity: Adequate Net cash accrual are expected to be around Rs 60-70 crore per fiscal over the medium term, more than sufficient to cover the maturing debt of 2-3 crore per fiscal. Planned capital expenditure of Rs 80-90 crores over the medium term is expected to be funded by internal sources. Bank limit utilisation was moderate, averaged at 54% over the 12 months through February 2022. The group also currently has around Rs 45 crore of liquid investments. Healthy capital structure, and support from promoter group also support financial flexibility |
Outlook: Stable CRISIL Ratings believes that the business risk profile would continue to benefit from, improved demand from existing clients and higher contribution from regulated markets and from new high margin products. |
Rating sensitivity factor: Upward factors:
Downward factors:
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About the group Kopran was incorporated in 1958, promoted by the Mumbai-based Somani family. The company, which is a part of the Parijat group, is managed by Mr Surendra Somani. It manufactures pharmaceutical formulations such as antibiotics, anti-malarial, analgesics, and cardiovascular and bulk drugs at its facilities in Mahad and Khopoli in Maharashtra. In fiscal 2015, the bulk drugs division was transferred to KRLL through a slump sale. Kopran Lifesciences Ltd and Kopran (HK) Ltd, Hong Kong are small entities and nearly defunct. |
Key Financial Indicators (Consolidated)
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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 – List of entities consolidated
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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 19-May-2022 in line with the lender-wise facility details as on 3-Aug-2021 received from the rated entity.
Criteria Details
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