| Suven Pharmaceuticals Limited | ||||||
| Ratings upgraded to 'CRISIL A+/Stable/CRISIL A1+' | ||||||
| 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 rating on the bank facilities of Suven Pharmaceuticals Limited (SPL; Part of Suven group) to 'CRISIL A+/Stable/CRISIL A1+’ from 'CRISIL A/Stable/CRISIL A1’.
The upgrade reflects the sustained growth in topline and healthy profitability, which is expected to continue over the medium term and should result in higher cash accrual. Revenue is estimated to record a compound annual growth rate (CAGR) of over 15% over the two fiscals ending March 31, 2022 while margin continues to remain healthy at more than 40%. This was led by increased sales contribution from higher margin commercial CRAMS and specialty chemicals. Further, SPL’s acquisition of Casper Pharma Private Limited (CPPL), which deals in formulations is expected to further diversify business risk. Also, capital structure is above average marked by expected net worth and gearing of more than Rs.1500 crore and below 0.1 times respectively in FY22. In the absence of any major debt incremental plans, capital structure is expected to remain above average backed by consistent healthy accruals. Liquidity is adequate backed by healthy liquid funds and cash balance of more than Rs.150 crore. However, the continuation of the same going forward post recent acquisition and previously planned capex will remain key rating sensitivity factor.
The ratings continue to reflect experienced management, established market position and healthy financial profile. These strengths are partially offset by working capital intensive operations and exposure to customer concentration risk. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of SPL with its 100% subsidiary, Suven Pharma Inc. This is because these companies, collectively referred to as the Suven group, have a common management team, are in similar lines of business, and have operational linkages and fungible cash flow.
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: Experienced management and established market position Mr. Venkateshwarlu Jasti is the Chairman and Managing Director of the company. He holds a dual postgraduate degree in pharmacy and specialized in industrial pharmacy. He has an experience of over three decades in contract research industry which helped the company to associate with 70 global companies. Suven group has established market position in the CRAMS segment and is among the top five players in India who supply high-end intermediaries to innovators.
Healthy financial risk profile Financial risk profile is marked by strong networth, healthy capital structure and robust debt protection metrics. Networth remains strong at Rs. 1062.59 crore as on March 31, 2021. With healthy accretion to reserves, networth is expected to be around Rs. 1550 Cr in FY22. Due to strong networth and low reliance on external debt, capital structure remains healthy with gearing and total outside liabilities to tangible networth of 0.13 times and 0.28 times, respectively, as on March 31, 2021. Debt protection metrics remain robust, with interest coverage of 40 times and net cash accrual to total debt of 2.61 times in fiscal 2021.
Weaknesses: Working capital intensive operations: Operations remain moderately working capital intensive with gross current asset (GCA) of 137 days as on March 31, 2021.
Exposure to customer concentration risk: Top ten customers contribute close to substantial share of the revenue exposing the company to customer concentration risk. |
Liquidity: Strong Bank limit utilization is moderate at around 90.81 percent for the past twelve months ended September 2021. Cash accrual are expected to be over Rs.400 crore which are sufficient against term debt obligation of Rs.20 crore over the medium term.
Current ratio are healthy at 2.53 times on March 31, 2021. The promoters are likely to extend support in the form of equity and unsecured loans to meet its working capital requirements and repayment obligations on need basis.
Liquid investments of around Rs.180 crore in shares, debentures, and mutual funds as on March 31, 2021. These are expected to continue to increase over the medium term with significant accretion to reserves. Suven group has invested Rs.245.58 crore in its group companies in the form of equity, loans and advances as on March 31, 2021, which is 23 percent of its current net worth. CRISIL Ratings believes that any further exposure in the group companies, impinging its own cash accrual may impact liquidity and will remain a rating sensitivity factor. Low gearing and moderate net worth support its financial flexibility and provides the financial cushion available in case of any adverse conditions or downturn in the business. |
Outlook: Stable CRISIL Ratings believes that the Suven group will maintain its established market position in the CRAMS business over the medium term, backed by longstanding client relationship and promoters' extensive experience. |
Rating Sensitivity Factors Upward factors:
Downward Factors:
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About the Group Incorporated in November 2018, Suven Pharmaceuticals Limited (SPL), is a biopharmaceutical company specialized in New Chemical Entity (NCE)-based Contract Research and Manufacturing Services (CRAMS) for global life science companies. It is promoted by Mr. Venkateshwarlu Jasti and is based out of Hyderabad, Telangana. SPL is among the top five players in India who supply high-end intermediaries to innovators. SPL got listed on Bombay Stock Exchange and National Stock Exchange on March 09, 2020.
Suven Pharma Inc. is a wholly owned subsidiary of SPL. It is an SPV created to invest in Rising Pharma Holdings Inc. Suven Pharma Inc. has 25 % holding in Rising Pharma Holdings Inc. Rising Pharma Holdings Inc. is a New Jersey, USA based pharmaceutical company focused on developing generic pharmaceuticals products in various therapeutic segments. |
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 – 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 Bank Lenders & Facilities | |||||||||||||||||||||
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Criteria Details
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