| USV Private limited | ||||||
| Rated amount enhanced | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL AA+/Stable/CRISIL A1+’ ratings on the bank facilities of USV Private limited (USV).
Business risk profile remains strong, backed by the leadership position in two key therapeutic areas of oral anti-diabetics (OAD) and cardiovascular (CVS). Operating income increased 13% to Rs 3,649 crore in fiscal 2021, led by steady growth in the domestic segment. In fiscal 2021, revenue from domestic formulations grew 9% to Rs 2,902 crore, with OAD growing 4% and CVS 9%. Though market share in OAD declined marginally to 12.3% as per moving average total (MAT) March-21, it improved back to 12.6% as per MAT January-22; the company remains a leading player in this segment. The international segment increased by 34% to Rs 714 crore as sales recovered from the initial impact of the Covid-19 pandemic and is expected to grow 5-8% over the medium term led by traction from new products. In October 2019, the company launched biosimilar pegfilgrastim, which is expected to contribute significantly in the near term.
Operating margin improved to 40% in fiscal 2021 from 32% in fiscal 2020 because of recovery in the international markets and one-off cost savings owing to pandemic-related restrictions. The operating margin corrected back to 43.3% for the first half of fiscal 2022 (47.9% in the corresponding period of fiscal 2021) as marketing spends normalised. The margin should remain healthy at 33-34% over the medium term, supported by steady revenue growth, normalised operating cost and research and development costs.
Debt protection metrics are expected to be comfortable as debt is negligible. Ample liquid balance of over Rs 2,300 crore (largely invested in debt mutual funds) as on March 31, 2021 provides significant financial cushion. However, any major acquisition will remain a key monitorable.
The ratings continue to reflect healthy market position in the fast-growing OAD and CVS therapeutic segments, and strong financial and liquidity risk profiles. These strengths are partially offset by high product concentration in revenue, and susceptibility to any adverse regulatory change and intense competition. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of USV and its subsidiaries, USV North America Inc, USV UK Ltd, Indicus Pharma LLC, Juta Pharma GmbH, and Key Pharma GmbH, because of their significant operational and financial linkages. All the entities are collectively referred to herein as USV.
CRISIL Ratings has also amortised intangible assets of Rs 268 crore as a result of the acquisition of the Jalra brand from Novartis India Ltd, for 10 years starting January 2020.
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 The company has been a leader for over two decades in the OAD and CVS chronic therapeutic segments in India. In the OAD segment, it has a market share of 12.3% (IMS MAT March 2021). The share had declined marginally in fiscal 2021 because of intense competition; however, it recovered back to 12.6% as on January 31, 2022. Nevertheless, the anti-diabetic formulation, Glycomet, continues to be ranked in the top 3 amongst top 100 brands in the domestic pharmaceutical industry. The company acquired the Jalra brand from Novartis India Ltd in December 2019 in the OAD segment, which has contributed significantly to the topline. In the CVS segment, the market share of the company remained steady at about 5.02% (IMS MAT March 2021); USV is ranked fourth in the segment. The operating margin was healthy at 40% in fiscal 2021, led by its top brands.
Strong financial risk profile Consolidated adjusted networth increased to around Rs 3,571 crore as on March 31, 2021, from Rs 2,750 crore as on March 31, 2020, driven by healthy profitability and robust cash accrual. Cash accrual is projected at around Rs 550 crore per fiscal, sufficient for meeting capital expenditure (capex) and incremental working capital requirement. The company is in the process of setting up a formulations plant in Vadodara, Gujarat, entailing total capex of Rs 450 crore, which is likely to get completed by December 2022. The capex is being funded entirely through the healthy liquid surplus.
Weaknesses Around 80% of domestic revenue and 70% of total revenue in fiscal 2021 came from the OAD and CVS therapeutic segments. The proportion has remained high over the years despite entry into new therapeutic areas such as central nervous system and gynaecology. Furthermore, the top 10 products account for almost half of the overall revenue with significant dependence on two main brands, Glycomet and Ecospirin. These factors expose the company to pricing pressure, threat of new advanced products at competitive prices, and the risk of pricing regulations. Share of the international segment remained 15-20%.
In the international market, the company has to comply with regulations and guidelines issued by various regulatory authorities. The company remains exposed to regulatory scrutiny and actions by various authorities. Additionally, pricing pressure persists in the regulated markets owing to competition. In the domestic market, the company remains exposed to price revisions under the Drug Price Control Order, and to intense competition. |
Liquidity: Strong Liquidity should remain supported by healthy cash generation, substantial cash and marketable securities, and no large, debt-funded capex. Cash surplus (including marketable securities) was sizeable at around Rs 2,300 crore as on March 31, 2021, largely invested in debt mutual funds. The company has negligible debt and does not utilise its bank lines. Cash accrual is projected at around Rs 550 crore per fiscal, sufficient to meet capex and incremental working capital requirement. Even as the dividend outgo was around 20% of profit after tax (PAT) in fiscal 2021, outgo owing to dividend/share buyback may remain high going forward and will be closely monitored. |
Outlook: Stable USV will continue to benefit from its healthy position in key high-growth therapeutic segments and will maintain a strong financial risk profile, supported by adequate cash accrual and liquidity. |
Rating Sensitivity Factors Upward Factors
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About the Company USV, incorporated in 1961, is a leading healthcare company with focus on branded generics. It manufactures active pharmaceutical ingredients and biosimilars at its facilities at Ratnagiri and Ambernath in Maharashtra; Daman; and Baddi in Himachal Pradesh. The stepdown subsidiary, US-based Indicus Pharma Llc, files for abbreviated new drug applications and supports marketing and distribution initiatives. |
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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This Annexure has been updated on 16-Mar-2022 in line with the lender-wise facility details as on 16-Mar-2022 received from the rated entity.
Criteria Details
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