| Olon Active Pharmaceutical Ingredients India Private Limited | ||
| Rating upgraded to 'CCR BBB+ / Stable' | ||
| 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 corporate credit rating to 'CCR BBB+/Stable' from 'CCR BBB/Stable' on Olon Active Pharmaceutical Ingredients India Private Limited (OAPIIPL).
Upgrade reflects enhanced business risk profile of the company on back sustenance of healthy operating margin resulting in higher cash accruals and thus better financial risk profile. Company’s operating margin continues to remain healthy at around 26.3% for fiscal 2021 which resulted in net cash accruals to remain healthy at Rs 48 crore and interest coverage ratio of above 13 times. Further, in absence of any debt funded capex plans, and zero reliance on external debt, financial risk profile should continue to remain healthy over the medium term.
The rating continues to reflect OAPIIPLs parents (Olon SPA) established presence in the pharmaceutical industry coupled with healthy operating efficiencies and moderate financial risk profile. These rating strengths are partially offset by working capital intensive nature of operations and moderate scale of operations with concentration in revenue profile. |
Analytical Approach CRISIL Ratings has treated unsecured loan from parent in from of external commercial borrowings (ECB) as debt as it as fixed repayment schedule. |
Key Rating Drivers & Detailed Description Strengths: * Established presence in the industry and healthy operational efficiencies: Extensive industry experience of the parent in the industry and experienced professional setup has helped the company in maintaining its operating performance with steady revenue of around Rs 237-246 crore during fiscal 2020 and 2021 at healthy operating margin of above 26%. Further, Company caters to customers such as Sandoz, Lupin among others. While it’s major contract is expected to end in March 2022, addition of new product to support sales. Major products include Active Pharmaceutical Ingredients (API) for treatment of tuberculosis which see steady demand from international bodies like World Health Organisation. Above parameters has resulted in return on capital employed to remain healthy at above 22%.
* Moderate financial risk profile: The total outside liabilities to adjusted networth ratio improved to 1.47 times as on March 31, 2021 from 2.6 times a year earlier. Further company has healthy networth base of Rs 106 crore as on March 31, 2021. Company has no external debt apart from the ECB from the parent. Debt protection metrics are comfortable with interest coverage ratio at 13.92 times in fiscal 2021. Financial risk profile is expected to continue to remain comfortable in absence of debt funded capex and inorganic acquisition if any to be funded by the parent.
Weaknesses: * Working capital-intensive operations: Gross current assets (net of liquid assets) were high at above 250 days, driven by debtors and inventory of 99 days and 182 days, respectively, as on March 31, 2021. Company currently has to maintain high inventory on account of offtake contract with Sandoz as well as variety of products in the portfolio. Improvement in inventory levels to remain sensitivity.
* Moderate scale of operations with concentration in revenue profile: Company’s scale of operations continues to remain moderate with revenue at Rs 246 crore in fiscal 2021. Further, currently company generates over 30% of the revenue from Rifamycin and related products and around 30% from the single contract. This risk is partly mitigated by expectation of new API addition over the medium term by the parent and other customers. |
Liquidity: Adequate Company has adequate liquidity driven by expected cash accruals of around Rs 45-55 crore in fiscal 2022 and 2023 respectively against repayment obligation of external commercial borrowing from the parent of approx. Rs 13-14 crore each. It also has total unencumbered cash and cash equivalent of Rs 36 crore as on March 31, 2021. Current ratio was moderate at 4.3 times as on March 31, 2021. Company has capex plans of around Rs 5-10 crore per annum over the medium term to be funded from the internal accruals. |
Outlook: Stable CRISIL Ratings believes that company's business risk profile is expected to be benefited established presence, healthy clientele and technical & marketing support from its parent. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company OAPIIPL was established in September 18, 2018 as a wholly owned subsidiary of foreign company (Olon SPA). Olon SPA is Italy based company, engaged in manufacturing of APIs through synthesis and biological process for generic market and CDMO (Contract development and manufacturing organization). OAPIIPL under slump sale purchased manufacturing plant from Sandoz located at Mahad, Maharashtra. Company is engaged in manufacturing of Active Pharmaceutical Ingredients and its intermediates. |
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. | |||||||||||||||||||||||||||||||||||||||
Criteria Details
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