| Modi-Mundipharma Private Limited | ||||||
| Ratings upgraded to '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 upgraded its ratings on the bank facilities of Modi-Mundipharma Private Limited (MMPL; part of the Modi Pharma group) to ‘CRISIL BBB+/Stable/CRISIL A2’ from 'CRISIL BBB/Stable/CRISIL A3+'.
The upgrade reflects better than expected business performance of the entire group. Group’s estimated revenue of Rs 1000 crore in fiscal 2021 was significantly higher than CRISIL Ratings’ expectations for the fiscal. The significant positive deviation was largely on account of increase in sales of prescription based pharmaceutical products of the group.
Moreover, business performance of group’s nutraceutical and cosmetics division also improved Y-o-Y but continues to perform lower than expectations. Revenue of nutraceuticals division grew only by 5.7% in fiscal 2021 but the growth came despite significant decline in exports on account of the ban imposed on exports of such products owing to the ongoing pandemic. With exports expected to improve in fiscal 2022, the nutraceutical division is expected to perform significantly better. Cosmetic division, however, suffered loss in revenue but the losses reduced at a higher rate than the revenue in fiscal 2021. The decline was because of lower social gatherings hampering the cosmetics industry during the entire fiscal. And with less stringent lockdowns, if any, and better economic activity anticipated in fiscal 2022 compared to previous year, business performance of cosmetics division is also expected to grow over the medium term. The expectation of continuous improvement in revenue and operating margin in both the divisions will be critical for sustainability of group’s business profile and a key rating sensitivity factor.
The ratings continue to reflect the group's established brands due to tie-ups with reputed international companies, diversified product profile, strong distribution network and stable working capital cycle. These strengths are partially offset by moderate financial risk profile and susceptibility to intense competition in the pharmaceutical industry and changes in government regulations. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of MMPL, Win-Medicare Pvt Ltd (WMPL), Modi-Mundipharma Beauty Products Private Limited (MBP), Mundipharma Bangladesh Pvt Ltd (MBPL), Modi-Mundipharma Healthcare Pvt Ltd (MHPL), Mundipharma Trading Bangladesh Pvt Ltd (MTB), Bangadesh Beauty Products Pvt Ltd (BBPPL) and Beauty Products Lanka Pvt Ltd (BPLPL). This is because all these entities, collectively referred to as the Modi Pharma group, have a parent-subsidiary relationship and are in the same business with moderate business linkages. Also, they have extended corporate guarantee and/or funding support for each other's debt.
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: * Established brands due to tie-ups with reputed international companies: The group has established joint ventures (JVs) and alliances with European and American pharmaceutical companies to leverage their technological capabilities. These include Mundipharma, Switzerland (for the Betadine brand); Merz Asia Pacific Pe Ltd, Germany (HepaMerz brand); Anika Therapeutics, USA; Bionorica, Germany; Lavipharm, Greece; Solae, USA (DuPont); Pierre Fabre, France; Sigma Tau, Italy; Zambon, Italy; and Norgine Pharma, UK.
* Diversified product portfolio The group has a diversified product profile with presence in cardiac, respiratory, analgesics, pain management, urological, etc. in its pharmaceuticals division. Alongside, the group also has various products under nutraceuticals and cosmetics division whose acceptance has increased in markets in recent times.
* Strong distribution network The group has pan-India distribution reach through 5500 stockists, 60 carrying and forwarding agents, and 1750 sales representatives and managers.
* Stable working capital cycle Working capital cycle has remained stable over the years as reflected by gross current assets in the range of 182-203 days in last 4 years ending March 31, 2021. During the same period, debtors and inventory have remained in the period 59 to 67 and 44 to 46 days respectively.
Weakness: * Moderate financial risk profile Financial risk profile continues to remain moderate with gearing of 2.4 times as on March 31, 2021. Debt protection metrics were also moderate with interest coverage and net cash accrual to adjusted debt estimated at 2.2 times and 0.1 times for fiscal 2021.
* Susceptibility to intense competition in the pharmaceutical industry and to changes in government regulations: Though revenue estimated at around Rs 1000 crore for fiscal 2021 was moderate, there is intense competition from larger players that have higher volumes and reputed brands in the domestic market. Moreover, the group has to adhere to National Pharmaceutical Pricing Authority's price ceiling for essential drugs as all its products currently fall under the drug price control. |
Liquidity: Adequate Bank limit utilization of the group averaged at 76% for last 12 months ending June, 2021. The utilization levels have continued to drop as reflected by average utilization of 69% in last 6 months and 59% in last 3 months ending June, 2021. Group is expected to generate healthy cash accruals of over Rs 25 crore on annual basis against annual repayment obligation of Rs 4 crore over the next two fiscals ending March 31, 2023. Current ratio of less than 1 times is on account of healthy advances and deposits taken from customers and dealers reflecting healthy market position of the group. |
Outlook: Stable CRISIL Ratings believes the Modi Pharma group will continue to benefit from its established brands and extensive industry experience of the promoters. |
Rating Sensitivity Factors Upward factors * Significant improvement in revenue and operating profitability driven by improvement in nutraceutical and cosmetics division
Downward Factors * Continued losses at group level * Significant debt funded capital expenditure impacting financial risk profile of the group * Bank limit utilization remaining over 90% at an average |
About the Group Incorporated in 1990, MMPL is an equal JV between the Umesh K Modi group, India, and the Mundipharma group, Switzerland. The company sells formulations in various therapeutic segments including respiratory, cardiology, gynaecology, pain, and other chronic therapy segments.
WHPL and BBPPL are 100% subsidiaries of WMPL. WHPL is non-operational.
BPLPL is a 100% subsidiary of MMBPL. |
Key Financial Indicators (Standalone)
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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 various bank facilities | ||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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