| Valiant Laboratories Limited | ||||||
| 'CRISIL A-/Stable/CRISIL A2+' assigned to Bank Debt | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has assigned its ‘CRISIL A-/Stable/CRISIL A2+’ ratings to the bank facilities of Valiant Laboratories Limited (VLL).
The ratings reflect the strong marked position marked by established customer relationship and diversified product basket, experienced management, and strong financial risk profile. These strengths are partially offset by its susceptibility to fluctuations in raw material prices, intense competition and regulatory risks, and its working capital-intensive operations. |
Analytical Approach Unsecured loan of Rs 59.4 crore from the promoters has been treated as debt. |
Key Rating Drivers & Detailed Description Strengths: Established customer relationships and diversified product basket: VLL has established presence in the active pharmaceutical ingredient (API) manufacturing business. It has a diverse product portfolio which includes Acetic Acid, Para Nitro Phenol, Para Amino Phenol, Chlorzoxazone and Paracetamol, which finds application in various drugs. This helps mitigate risks arising from substitutes or decline in demand. VLL has established healthy and long-term relationship with various customers across India. Its top customers contribute to about 36% revenues in fiscal 2022. CRISIL believes that VLL’s established industry presence, diversified product basket and long and established relations with customers, bolsters its business risk profile.
Experienced management: VLL is part of the Valiant group and is step down subsidiary of Valiant Organics Ltd (VOL, rated 'CRISIL A/Stable/CRISIL A1'). VOL is also a major supplier for VLL. Promoters have been engaged in the chemical intermediates business for over three decades which has enabled them to develop strong understanding of market dynamics and establish healthy relations with customers and suppliers. This has helped VLL scale up rapidly post acquisition by VOL in 2019. Revenues have increased steadily for past 3 years to Rs 290 crores in Fiscal 2022 from Rs 91 crores in Fiscal 2020.
Strong financial risk profile: Low reliance on external funds has kept the capital structure healthy, as indicated by gearing of 0.85 time and total outside liabilities to adjusted net worth ratio of 1.44 times as on March 31, 2022, coupled with strong net worth of Rs. 71.5 crores. Debt protection metrics have also been healthy backed by low debt. The interest coverage and net cash accrual to total debt ratio stood at 658 times and 0.48 time, respectively, for fiscal 2022. Low debt and healthy accretion to reserve should keep the financial risk profile healthy over the medium term.
Weaknesses: Susceptibility to fluctuations in raw material prices, intense competition and regulatory risks: The raw material prices are volatile, and their availability is subject to market conditions. The operating margin of VLL has been volatile in range of 7-26% over past three fiscals, on account of fluctuations in raw material prices, which the company can pass on after a lag. Players in the pharmaceutical industry are susceptible to regulatory changes with respect to price controls and approvals. Moreover intense competition in the pharmaceutical industry further restricts the bargaining power.
Working capital-intensive operations: Gross current assets were at 112-161 days over the three fiscals through 2022. The large working capital requirement stem from sizeable receivables of 139 days and moderate inventory of 23 days. The receivables are high at the end of the fiscal due to high year-end sales and it provides extensive credit to longstanding customers. The working capital cycle will remain a key monitorable. |
Liquidity: Strong VLL has strong liquidity driven by expected cash accruals of Rs 24-26 crores per annum in fiscals 2023 and 2024 against nil debt repayments. VLL’s fund-based limits has been unutilized over the 12 months ended June 2022. Cash and cash equivalents were about Rs.20 crores. Current ratio was healthy at 3.56 times as on March 31, 2022. Unsecured loans of Rs 59 crores provides support for prudent working capital management. With a gearing of 0.85 times, VLL has sufficient gearing headroom, to raise additional debt if required. Its cash accruals and bank lines are expected to meet its incremental working capital requirements. |
Outlook: Stable VLL will continue to benefit from the extensive experience of its promoters, established relationships with clients and healthy financial profile of the company. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company VLL was established by Mr Shantilal Vora in 1982 as a partnership firm named Bharat Chemicals and was reconstituted as a closely held public limited with the current name in August 2021. It is 63% owned by Dhanvallabh Ventures LLP, a step-down subsidiary of Valiant Organics Ltd (VOL). VLL manufactures active pharmaceutical ingredients (API) such as para nitro phenol and salt, paracetamol, diluted acetic acid at its facility in Tarapur, Maharashtra. Currently the operations are being managed by Mr Santosh Vora (Son of Mr Shantilal Vora ) who is is the director in the company. |
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 - 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 09-Sep-2022 in line with the lender-wise facility details as on 09-Sep-2022 received from the rated entity.
Criteria Details
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