­Experienced Promoters; long track record with presence in multiple therapeutic segments:
LPL is promoted by Mr. A Venkata Reddy, who brings over three decades of experience in the pharmaceutical industry. The company's operations are managed by Mr. A Venkata Reddy, Mr. Raghu Mitra Alla and Ms. A. Ratna Kumari (Director), along with a team of qualified professionals, who have extensive experience in the pharmaceutical industry. LPL has over the years expanded its product portfolio with presence across various therapeutic segments, with a string presence across high-demand areas such as anti-diabetic, anti-ulcerative, anti-pyschotic and anti-histamine. LPL derives around 60 percent of revenue from manufacturing of Active Pharmaceutical Ingredients (APIs) and remaining 40 percent from semi-finished and finished formulations. Promoter’s extensive experience has helped LPL in securing repeated orders and establish strong relation with its key customers and suppliers. This has also aided LPL’s total operating income growth trajectory over the past 3 to 4 years. Acuité believes that the experience of the management in the industry is likely to favourably impact the business risk profile of the company over the near to medium term.

Stable operations in FY2025; improvement anticipated from FY2026 due to operationalization of the capex.
The company registered revenue of Rs.921.50 Cr. in FY2025 compared to Rs.902.05 Cr. in FY2024. This improvement in revenue is due change in product mix. Additionally, during 6MFY2026 the company registered revenue of Rs.502.64 Cr. which is nearly 17 percent higher than revenue of Rs.427.93 Cr. registered during 6MFY2025. This growth in revenue is due to increase in capacity on account of capex operationalization from Q4FY2025 and expected to register revenue in the range of Rs. 1,050-1,100 Cr. for FY2026.

The operating profit margins remained range bound at 14.09 percent in FY2025 against 14.46 percent in FY2024. The marginal decline in margin is due to increase in raw material costs. However, the PAT margin declined to 3.85 percent in FY2025 from 5.03 percent in FY2024 due to higher interest and depreciation. Further during the 5MFY2026 the company registered operating profit margin of ~16 percent owing to the change in product mix and better realizations. Acuite believes, LPL revenue will improve owing to augmentation in production capacity over the medium term.

Moderate financial Risk Profile:
LPL’s financial risk profile remained moderate marked by a healthy networth, moderate gearing levels and below-average debt protection metrics. The tangible net worth of the company stood at Rs.271.44 Cr as on March 31, 2025 as against Rs.256.31Cr as on March 31, 2024. The improvement is due to accretion of profits to reserves, however, there has been drawdown of Rs.6.32Cr during FY2025 utilized towards redemption of preference shares and payment of dividend. The total debt of the company (comprising Rs.122.05Cr term loan, Rs.12.47Cr unsecured loans and Rs.344.50Cr short-term debt) stood at Rs.479.02Cr as on March 31, 2025, increased from Rs.427.20Cr as on March 31, 2024. The gearing level (debt to equity) marginally deteriorated to 1.76 times as on March 31, 2025 as against 1.67 times as on March 31, 2024. TOL/TNW (Total outside liabilities/Total net worth) stood moderate at 3.31 times as on March 31, 2025 against 3.00 times in previous year. Debt protection metrics stood moderate with interest coverage ratio (ICR) and debt service coverage ratio (DSCR) of 2.69 times and 1.06 times as on March 31, 2025, respectively against 3.37 times and 1.54 times as on March 31, 2024. Debt to EBITDA remained moderate at 3.67 times as on March 31, 2025 as against 3.23 times as on March 31, 2024.

The company is planning for additional capex of Rs.70Cr towards establishing additional granulation lines and pellets manufacturing unit. Around 25 percent is expected to be funded from promoters own funds and remaining from debt. This capex is expected to be completed in H1FY2027 and expected to strengthen backward integration and improve efficiency.

Acuite believes, the financial risk profile especially the coverage indicators are expected to improve in near to medium term on the back of augmentationof capacities, backward integration and no major upcoming debt funded capex plans. However, LPL's ability to maintain its financial risk profile over the near to medium term will remain a key rating monitorable.

Working capital intensive operations:
LPL’s working capital operations are intensive in nature as evident from the gross current assets (GCA) of 265 days in FY2025 against 237 days in FY2024. The elongation in GCA days is due to the stretch in inventory days, primarily because of raw materials and work in process.  The company maintains higher inventory due to higher lead-time for the raw materials. Besides, compliance with regulatory requirements for stock maintenance and diversification into multiple products and higher gestation period for orders are also leading to stretch in inventory days to 173 days FY2025 against 142 days in 2024. The company allows 90-120 days credit period to customers resulting in debtor days of 104 days in FY2025 and 100 days in FY2024. The creditor days stood at 181 days in FY2025 against 148 days in FY2024. The intensive working capital operations led to high utilization of consolidated working capital limits at an average of ~93 percent 12 months ending July 2025. Acuité believes that the working capital cycle will continue to appear intensive over the medium term due to nature of pharmaceutical industry.

­Competitive and fragmented industry
The pharmaceutical formulations and chemical compounds industry has a large number of players which makes this industry highly fragmented and intensely competitive. LPL is also a moderate sized player, thereby limiting its bargaining power and susceptibility to pricing pressure is also higher compared to well-established and larger players. However, the company's presence of over 3 decades in the industry has enabled it to partially offset competitive pressures. Further, it undertakes regular research and development to improve its product offerings. This will help the company is improving its competitive position.

Exposure to foreign exchange fluctuations risks:
LPL derives around 55 percent of its revenue from exports over the past two years, exposing it to foreign exchange fluctuation risk. As the company is not hedging its forex exposures, any sharp volatility in currency movements could adversely affect its operating margins.