MUMBAI: CRISIL has assigned ‘AA-/Stable’ rating to Ipca Laboratories Ltd’s Rs 50 crore non-convertible debentures (NCDs); the ratings on the company’s bank facilities and other debt programme have been reaffirmed at ‘AA-/Stable/P1+’.
Rs 1500 million term loan AA-/Stable (Reaffirmed) Rs 3000 million cash credit (enhanced from Rs.2500 Million) AA-/Stable Rs 1500 million Letter of Credit (enhanced from Rs.1000 Million) P1+ Rs 400 million short-term debt programme P1+ (Reaffirmed)
The ratings continue to reflect Ipca’s established position in key formulations segment in the domestic market, growing presence in the international generics market, and its healthy profitability. These rating strengths are partially offset by the working capital-intensive nature of Ipca’s export business, its substantial planned capital expenditure (capex), and the intense competition in the international generics market.
Ipca exports formulations, bulk drugs, and drug intermediates to over 110 countries. Over the years, Ipca has established its distribution network across markets, and has set up subsidiaries in many countries. The company has strong alliances with global players for its operations in international markets. CRISIL believes that these tie-ups will support Ipca’s growth in future. Ipca has a strong presence in the domestic formulations segment. In the six months ended September 30, 2008, the company has achieved a revenue growth of more than 17 per cent over the corresponding period of the previous year. It is the leader in the anti-malarial and rheumatoid arthritis segments in the domestic market, and also has strong research and development, and marketing teams.
However, Ipca’s operations are working capital intensive – it had gross current assets of 201 days as on March 31, 2008, due to high export receivables (150 days) – resulting in a gearing of 0.65 times as on March 31, 2008. Further, Ipca has proposed a substantial capex of Rs.1.4 billion, spread over the next two years to augment its export business. The company’s working capital requirements are also likely to increase as its international operations expand. Moreover, the company is expected to face pricing pressures in the US and Europe because of rising competition from Chinese and Indian players.
Source : The Economic Times