| Experienced management and established track record of operations
Aaquaries Group, under its flagship company AGIL, commenced operations in the year 2007 reflecting an established track record of operations for more than one decade. The group is managed by Mr. Sameer Talim, who has more than 10 years of experience in the pharmaceuticals business. The Group has 14 registered patents under its name for producing anti-cancer, painkillers and infective API's. The day to day operations of the group are managed by the experienced senior management team who are ably supported by a strong line of mid-level managers. The extensive experience of the promoters has helped the group to establish long and healthy relationships with its customers and suppliers over the years.
Acuité believes that AG will continue to benefit from its experienced management and long track record of operations over the medium term.
Stable operating performance
The Group registered a revenue growth of 53% YOY as its revenues stood at Rs.1281.17 crore in FY2022 as against Rs.839.22 crore in FY2021 and Rs.775.91 crore in FY2020. The increase in the revenue of the group is driven by an overall growth of demand in the industry. As per various industry reports, the Indian API industry is expected to grow at a compounded annual growth rate of 9.6 percent during the calender period 2021-26. The revenue of the group stood at Rs.787 crores till September 2022. The operating profit margin has increased to 14.68 percent in FY2022 compared to 13.60 percent in FY2021 as against 13.23 percent in FY2020. The increase in the operating margin in FY2022 is majorly on account of decrease in material costs as a percentage of sales. The PAT margin has improved to 9.96 percent in FY2022 from 6.17 percent in FY2021 as against 5.88 percent in FY2020.
Acuité believes that the operating performance of the group will continue to improve on account of healthy demand for its products in the industry.
Healthy financial risk profile
AG's financial risk profile is healthy marked by healthy networth, negligible overall debt and above average debt protection metrics. The tangible net worth of group stood at Rs.627.48 crore as on 31 March 2022 as against Rs.499.84 crore as on 31 March 2021 and Rs.429.08 crore as on 31 March 2020. The increase in the net-worth is majorly due to the accretion of profits to reserves. The networth of the Group is expected to improve in the near term on account of infusion of Rs.500 Cr by way of issue of preference share capital on private placement basis. The additional funds will be utilised towards the capital expenditure for new product development and related infrastructure. The Group has a debt averse financial policy, in the last three years ended FY2021, there was no debt in the Group. During the year FY2022, the Group has availed a vehicle loan. Its working capital requirements are largely met through internal accruals. Occasionally, the Group avails bill discounting facility, over which it is charged commission fees. As on March 31,2022 the group’s total debt stood at Rs.0.67 crore. The interest coverage ratio stood at 368 times for FY2022 compared to 195 times for FY21 as against 625 times for FY2020. The total outside liabilities to tangible net worth (TOL/TNW) of the group stood stable at 0.47 times as on 31 March 2022 as well as on 31 March 2021.
Acuité believes that the financial risk profile of the company is likely to remain healthy over the medium term, however, timely completion of its capital expenditure plan pertaining to new product development and related infrastructure will be a key monitorable.
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| Working capital intensive operations
The Group’s working capital operations are intensive as evident from Gross Current Asset (GCA) days of 180 days as on March 31, 2022, as against 187 days as on March 31, 2021 and 147 days as on March 31,2020. The inventory levels stood at 64 days for FY2022 compared to 78 days for FY2021as against 29 days for FY2020. The inventory is stocked up on the basis of the orders received from the customers. The debtor days stood at 93 days for FY2022 as against 117 days for FY2021 as against 120 days in FY2020. The average credit period allowed to the customers is around 120 days. The creditor days of the group stood at 76 days for FY2022 as against 101 days for FY2021 and 92 days for FY2020. The average credit period received is around 90 days. The group does not have any working capital limits, however, it avails bill discounting facility on adhoc basis.
Acuité believes that the working capital management of the company will continue to remain a key rating sensitivity going ahead.
Regulatory risk and Exposure to foreign exchange fluctuation risk
Drug pricing and the policy framework have a bearing on the performance and the strategies of the players operating in the industry. Further, due to high exports, the group is susceptible to foreign exchange fluctuation risks. While the group does not have any foreign exchange hedging policy, this risk is partially offset by the natural hedge created due to equivalent amount of imports of the Group. During the year FY2022, while the export sales stood at around 51 percent of its total sales, its imports stood at 46 percent of its total purchases.
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