| Poly Medicure Limited | ||||||
| Rated amount enhanced | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL has reaffirmed its ratings on the bank facilities of Poly Medicure Limited (PolyMed; a part of the PolyMed group) at ‘CRISIL A+/Stable/CRISIL A1’.
The reaffirmation factors in the PolyMed group’s strong performance of first half of fiscal 2021 wherein the operating income grew by 10% and cash accruals increased by 23% in the same period on YoY basis. With new capacities being added on regular basis with minimal reliance on debt, CRISIL expects credit profile to remain strong.
For further improving business prospects, the group is expected to raise funds through Qualified Institutional Placement (QIP) route in Q4 FY21. The funds raised are expected to significantly strengthen the business prospects as the group is planning to invest the funds raised in expanding capacities in India. QIP fund raise will remain a key monitorable over the medium term.
The ratings continues to reflect the PolyMed group’s strong market position in the intravenous (IV) cannula product segment, strong operating efficiencies and comfortable financial risk profile. These strengths are partially offset by the exposure to fluctuations in raw material prices and foreign exchange (forex) rates, susceptibility to change in regulations and exposure to intense competition. |
Analytical Approach For arriving at the ratings, CRISIL has combined the business and financial risk profiles of PolyMed and its wholly-owned subsidiaries, Poly Medicure (Laiyang) Co Ltd (PMLCL; based in China), Poly Medicure BV Netherland (PMBV), Plan1 Health India Pvt Ltd, and Plan1Health SRL (100% subsidiary of PMBV) collectively referred to as the PolyMed group.
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 growth— registering a 12% compounded annual rate over the five periods through fiscal 2020—is expected to continue at a moderate pace. The major product, IV cannula, contributed around 25% and 29% of total sales in H1 FY21 and fiscal 2020 (28% in fiscal 2019) respectively, across more than 100 countries. The company also has over 200 registered patents across countries. Continuous capacity addition and product innovation and development will support revenue growth over the medium term.
Strong operating efficiencies are driven by labour-cost advantage over global competitors and in-house tool design and research and development (R&D) facilities. Operating margin is expected at 20–23% over the medium term, supported by comfortable capacity utilisation and modernisation of existing facilities.
Group’s total outside liabilities to tangible networth ratio was 0.8 time and gearing 0.5 time as on March 31, 2020, with networth over Rs 400 crore. Debt protection metrics are strong, indicated by interest coverage and net cash accrual to adjusted debt ratios of 8.9 times and 0.45 time, respectively, in fiscal 2020.
Weakness:
Operating margin is susceptible to fluctuation in the prices of the key raw material, plastics; these prices are directly linked to the highly volatile crude oil prices. Further, as exports contribute to around two-third of the sales, the margin is exposed to fluctuations in forex rates.
The group mainly exports products to highly quality-conscious markets such as Europe. Its Unit-II at Faridabad, Haryana, had been audited by the US Food and Drug Authority in the past, and all plants have CE certifications for exports to Europe. Any change in policies in these markets can impact profitability.
There is intense competition from players such as Baxter, Becton Dickinson, B Braun, and Boston Scientific in the global market. Lower expenditure than international players on R&D activities limits the capability to develop new products for global markets. Moreover, the group is exposed to stiff competition in the domestic market from unorganised players. |
Liquidity Strong Net cash accrual, expected at around Rs 150 crore in fiscal 2021, will sufficiently cover maturing debt of Rs 35 crore. Unencumbered fixed deposits and liquid investments were around Rs 35.78 crore and Rs 36.67 crore respectively as on September 30, 2020. Utilization of fund-based limit averaged at 49.5% over the last 9 months through November 2020. The group does not have any major debt-funded capital expenditure over the medium term. |
Outlook Stable CRISIL believes the PolyMed group’s business risk profile will remain strong over the medium term, supported by its healthy market position in the medical devices industry, and continuous focus on product development. |
Rating Sensitivity factors Upward Factors
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About the Company The PolyMed group is promoted by Mr Himanshu Baid and Mr Rishi Baid. The group’s flagship company, PolyMed was incorporated in 1995; it manufactures disposable medical items, such as IV cannula, blood bags, blood collection tubes, and infusion and transfusion sets. The company is currently listed on the Bombay Stock Exchange and the National Stock Exchange.
PMLCL, started commercial operations in April 2009. PolyMed also has a joint venture, Ultra For Medical Products Co, Egypt, with the El-Agar group, which directly caters to the African and other markets. In fiscal 2019, PolyMed also acquired Plan1Health SRL (100% subsidiary of Poly Medicure B.V., Netherlands), an Italy-based company that manufactures mainly cancer related devices and other critical devices.
The group currently has five manufacturing facilities in India: three in Faridabad (Haryana), one each in Jaipur (Rajasthan), and Haridwar (Uttarakhand), all under PolyMed. |
Key Financial Indicators
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| 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)
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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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