| Suven Pharmaceuticals Limited | ||||||
| Ratings continues on 'Watch Developing' | ||||||
| Rating Action | ||||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings’ has continues its ratings on the bank facilities of Suven Pharmaceuticals Limited (SPL; part of the Suven group) on ‘Rating Watch with Developing Implications’.
The ratings of SPL were placed on ‘Watch with Developing Implications’ after the announcement on acquisition of 50.1% stake in SPL by Advent International (Advent) on 26-Dec-2022. Advent will also launch an open offer for an additional 26% of the company from shareholders of SPL. Also, Advent intends to explore the merger of its portfolio company, Cohance Lifesciences (“Cohance”) with SPL, to build a leading end-to-end Contract Development & manufacturing Organization (CDMO) and merchant API player servicing the pharma and specialty chemical markets.
Further, on 13th September 2023, the Cabinet Committee on Economic Affairs (CCEA) approved a Foreign Direct Investment (FDI) of Rs 9589 crore by Advent for acquisition of 76.1% shares of Suven by transfer of shares from existing promoter shareholders and public shareholders through public offer. CRISIL Ratings awaits full clarity on the expected impact of this event on the business and financial risk profiles of SPL and Suven group.
CRISIL Ratings will continue to take updates from the management and will also monitor the developments on the acquisition of controlling stake by Advent and about the potential merger with Cohance. The ratings shall be removed from ‘Watch’ and a final rating action will be taken once there is more clarity on these aspects.
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 & Casper Pharma Pvt Ltd. 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 Managing Director of the company. He holds a dual postgraduate degree in pharmacy with specialisation in industrial pharmacy. He has experience of over three decades in the contract research industry, which has helped the company to associate with 70 global companies. The Suven group has established market position in the contract research and manufacturing services (CRAMS) segment and is among the top five players in India who supply high-end intermediaries to innovators.
Healthy financial risk profile The financial risk profile is characterised by strong networth, healthy capital structure and robust debt protection metrics. Networth remains strong at Rs 1,524.94 crore as on March 31, 2022. Due to strong networth and low reliance on external debt, the capital structure remains healthy with gearing and total outside liabilities to tangible networth ratio of 0.06 time and 0.20 time, respectively, as on March 31, 2022. The debt protection metrics remain robust, with interest coverage ratio of 70.34 times and net cash accrual to total debt ratio of 4.10 times in fiscal 2022. The interest coverage ratio was 144 times in the first half of fiscal 2023.
Weakness: Working capital-intensive operations Operations remain moderately working capital intensive with gross current assets (GCAs) of 178 days as on March 31, 2022.
Exposure to customer concentration risk The top ten customers contribute to a substantial share of the revenue, exposing the company to customer concentration risk. |
Liquidity: Strong Blank limit utilisation was moderate at 74% on average for the 12 ended August 2023. Cash accrual is expected to be over Rs 400 crore, which is sufficient against term debt obligation of Rs 20-22 crore over the medium term.
Liquid investments of around Rs.593.88 crore in Debt Mutual funds and Bonds as on August 31, 2023. These are expected to continue to increase over the medium term with significant accretion to reserves. 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. |
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About the Group Incorporated in November 2018, SPL is a biopharmaceutical company specialising in New Chemical Entity (NCE)-based 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. The company got listed on the 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 for undertaking various business opportunities in the Pharma Industry. Suven Pharma Inc. has 7% stake in Raisin Aggregator LP, which is a New Jersey, USA based pharmaceutical company. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
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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