Rating Rationale
July 25, 2019 | Mumbai
Poly Medicure Limited
Ratings Reaffirmed
 
Rating Action
Total Bank Loan Facilities Rated Rs.220 Crore
Long Term Rating CRISIL A+/Stable (Reaffirmed)
Short Term Rating CRISIL A1 (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its 'CRISIL A+/Stable/CRISIL A1' ratings on the bank facilities of Poly Medicure Limited (PolyMed; a part of the PolyMed group).

The ratings continue 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 vulnerability 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), and Plan1Health SRL (100% Subsidiary of Poly Medicure B.V., Netherlands) 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
* Strong market position
Revenue growth'at 13% compound annual rate in the five fiscals through 2019'is expected to continue at a moderate pace. The major product, IV cannula, contributes around 28% of total sales, across more than 100 countries. 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
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.

* Comfortable financial risk profile
Group's total outside liabilities to tangible networth ratio was 0.76 time and gearing 0.5 time as on March 31, 2019, with networth at Rs 357 crore. Interest coverage and net cash accrual to adjusted debt ratios were 9.7 times and 0.46 time, respectively, in fiscal 2019.

Weaknesses
* Exposure to fluctuations in raw material prices and forex rates
Operating margin is susceptible to fluctuation in the prices of raw material, plastics; these prices are directly linked to the highly volatile crude oil prices. Further, as exports contribute 75% of sales, the margin is vulnerable to fluctuations in forex rates.

* Susceptibility to change in regulations
The group mainly exports products to highly quality-conscious markets such as Europe. Its Unit-II at Faridabad, Haryana, has been audited by the US Food and Drug Authority, and all other plants have CE certifications for exports to Europe. Any change in policies in these markets can impact profitability.

* Exposure to intense competition
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

Liquidity is ample. Net cash accrual is likely to be more than Rs 89 crore in fiscal 2020, as against maturing debt of Rs 25 crore. Cash and cash equivalents and liquid investments were Rs 58.5 crore and Rs 2.5 crore, respectively, as on March 31, 2019. Unencumbered fixed deposits were Rs 60.2 crore as on July 15, 2019. Fund-based limit of Rs 70 crore was utilised 57% in the 12 months through March 2019. The group does not have any major debt-funded capital expenditure plans over the medium term.

Outlook: Stable

CRISIL believes the PolyMed group's business risk profile will remain strong over the medium term, supported by established market position in the medical devices industry, and continuous focus on new product development. The outlook may be revised to 'Positive' if diversification in product portfolio increases and operating profitability and capital structure are stable. The outlook may be revised to 'Negative' if decline in net cash accrual, any large, debt-funded capital expenditure or increase in working capital requirement weakens capital structure.

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 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, it also acquired Plan1Health SRL (100% Subsidiary of Poly Medicure B.V., Netherlands), an Italy based company that manufactures cancer related 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
As on / for the period ended March 31  Units 2019 2018
Operating income Rs crore 610.8 520.42
Reported profit after tax (PAT) Rs crore 64.59 70.05
PAT margin % 10.57 13.46
Adjusted debt/Adjusted networth Times 0.48 0.47
Interest coverage Times 9.7 10.5

Any other information: Not applicable

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)
 ISIN Name of Instrument Date of allotment Coupon rate (%) Maturity date Issue size
(Rs crore)		 Rating assigned
with outlook
NA Fund-Based Facilities NA NA NA 75 CRISIL A+/Stable
NA Non-Fund Based Limit NA NA NA 51 CRISIL A1
NA Long Term Loan NA NA Mar-2022 94 CRISIL A+/Stable

Annexure - List of entities consolidated
Name of the company Extent of consolidaion
 Poly Medicure (Laiyang) Co Ltd  Full
Poly Medicure BV Netherland  Full
Plan1Health SRL  Full
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  169.00  CRISIL A+/Stable      11-06-18  CRISIL A+/Stable  29-04-17  CRISIL A+/Stable  25-08-16  CRISIL A+/Stable  CRISIL A+/Stable 
                21-04-17  CRISIL A+/Stable  07-07-16  CRISIL A+/Stable/ CRISIL A1   
Non Fund-based Bank Facilities  LT/ST  51.00  CRISIL A1      11-06-18  CRISIL A1  29-04-17  CRISIL A1  25-08-16  CRISIL A1  CRISIL A1 
                21-04-17  CRISIL A1  07-07-16  CRISIL A1   
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Fund-Based Facilities 75 CRISIL A+/Stable Fund-Based Facilities 70 CRISIL A+/Stable
Long Term Loan 94 CRISIL A+/Stable Long Term Loan 101 CRISIL A+/Stable
Non-Fund Based Limit 51 CRISIL A1 Non-Fund Based Limit 49 CRISIL A1
Total 220 -- Total 220 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for the Pharmaceutical Industry
CRISILs Criteria for Consolidation
CRISILs Criteria for rating short term debt

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