Detailed Rationale

Crisil Ratings has reaffirmed its 'Crisil AA-/Stable/Crisil A1+’ ratings on the bank facilities of Poly Medicure Limited (PolyMed; part of PolyMed group). 

 

The ratings continue to reflect the established market position of the PolyMed group in the intravenous (IV) cannula product segment, its strong operating efficiency and robust financial risk profile. These strengths are partially offset by the high, though reducing, dependence on core products, and exposure to risks posed by intense competition, fluctuations in raw material prices and foreign exchange (forex) rates, and regulatory changes.

Analytical Approach

Crisil Ratings 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, Plan1Health SRL (100% subsidiary of PMBV), Ultra for Medical Products Company (wholly owned subsidiary of PolyMed) and Poly Health Medical Inc. (USA), a step-down subsidiary. These entities are collectively referred to herein 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:

• Strong market position in the medical devices industry: Revenue has grown steadily, recording a compound annual growth rate (CAGR) of 19% over the three fiscals through March 2025; this trend should continue over the medium term, supported by capacity addition, and product innovation and development. Revenue is estimated at Rs 1230 crore during April-Dec in fiscal 2025, improved by ~23% over corresponding period in last fiscal. The group has over 300 registered patents across countries. Continuous capacity addition and product innovation and development will support revenue growth over the medium term as well. Further diversification in product portfolio, lowering dependence on core products, will be a key monitorable.

 

• Strong operating efficiency: Operating efficiency - reflected in the healthy operating margin of 26-28% during the three fiscals through 2025 - is driven by the labour-cost advantage over global competitors and in-house tool design and research and development (R&D) facilities. Operating margin stood at 27% in the first nine months of fiscal 2025 and is expected to remain stable at 26-27% over the medium term. The margin should be supported by better economies of scale, which in turn will be led by steady capacity utilisation,  modernisation of facilities and cost-cutting initiatives.

 

• Robust financial risk profile: Networth is projected to be in the range of Rs 2,600-2,700 crore as on March 31, 2025 (including infusion of Rs 1,100 crore though a qualified institutional placement [QIP] in August 2024). Gearing and total outside liabilities to tangible networth (TOL/TNW) ratios are expected to remain below 0.2 time over the medium term. Networth is likely to improve further, aided by better accretion to reserves over the medium term. Net debt remains negligible, due to the strong liquidity of the group. Debt protection metrics were robust too, as indicated by interest coverage and net cash accrual to adjusted debt ratios projected at 20-22 times and 1.5-1.6 times, respectively, for fiscal 2025. Capex of Rs 250-300 crore, towards regular maintenance and research and development in the coming fiscals, will be largely met through internal accrual.

 

Weaknesses:

• High, though reducing, dependence on core products: The group is highly dependent on core products; infusion therapy products formed ~67% of sales in fiscal 2024. Though new products have been added to the portfolio, they still have a lower revenue contribution and will take time to penetrate the markets. Benefits, likely to accrue over time, should gradually reduce dependence on core categories. Thus, the group is likely to remain exposed to revenue concentration in core product categories over the medium term. These risks are however, mitigated by the strong market position of the group in these segments.

 

• Exposure to fluctuations in raw material prices and forex rates: Price of the key material (plastic) is directly linked to crude oil prices, which are highly volatile. As the cost of procuring plastic accounts forms bulk of production expenses, even a slight variation in rates could have an adverse impact on profitability. Further, as exports accounted for nearly two-thirds of sales, operating margin will remain exposed to any unfavourable fluctuation in forex rates.

 

• Susceptibility to intense competition and changes in regulations: The group exports its products to highly quality-conscious markets such as Europe. Its Unit-II at Faridabad, Haryana, was audited by the US Food and Drug Authority; all plants received CE certifications, permitting exports to Europe. Any change in policies in these markets can impact profitability. Intense competition, both locally (from unorganised players) and globally (from reputed players such as Baxter, Becton Dickinson, B Braun and Boston Scientific), may continue to constrain scalability, pricing power and profitability. Further, lower expenditure on R&D activities, than the international players, limits the capability to develop new products for global markets.

Liquidity: Superior

Bank limit utilisation was moderate, averaging around 58% for the 12 months ended February 28, 2025. Expected cash accrual of Rs 320-330 crore should suffice to cover the term debt obligation of Rs 18-20 crore over the medium term. Current ratio is expected to remain healthy at 4-5 times as on March 31, 2025. The company held cash and bank balance of Rs 900-1000 crore as on March 31, 2025, received through the QIP and liquid investments of around Rs 900 crore in shares, debentures, and mutual funds as on March 31, 2025. Low gearing and moderate networth offer financial flexibility to withstand adverse conditions or downturn in the business.

Outlook: Stable

The PolyMed group will continue to benefit from its healthy market position in the medical devices industry and continuous focus on product development.

Rating sensitivity factors

Upward factors

• Growth in revenue, with increasing contribution from newer products, and steady operating margin maintained at 26-27%, leading to healthy cash accrual
• Sustenance of superior financial risk profile, especially liquidity

 

Downward factors

• Moderation in revenue and profitability due to intense competition or impact of any adverse action; for instance, fall in operating margin below 20% on a sustained basis
• Higher-than-expected capital expenditure or acquisition, leading to moderation in credit metrics

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 Africa 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 has 12 manufacturing facilities across 4 countries. 9 manufacturing facilities in India (6 in Faridabad, 2 in Jaipur and 1 in Haridwar), 3 overseas facilities (one in China through a wholly owned subsidiary, one joint venture in Egypt, and one in Italy).

Any other information: Not Applicable