Press Release FLAMINGO PHARMACEUTICALS LIMITED December 13, 2022 Rating Reaffirmed & Withdrawn

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	59.50	ACUITE B+ | Reaffirmed & Withdrawn	-
Bank Loan Ratings	60.50	-	ACUITE A4 | Reaffirmed & Withdrawn
Total Outstanding Quantum (Rs. Cr)	0.00	-	-
Total Withdrawn Quantum (Rs. Cr)	120.00	-	-

Rating Rationale

­Acuité has reaffirmed and withdrawn the long term rating of ‘ACUITE B+’ (read as ACUITE B plus) and the short term rating of ‘ACUITE A4’ (read as ACUITE A four) on the Rs.120.00 Cr. bank facilities of Flamingo Pharmaceuticals Limited (FPL). The rating has been withdrawn on account of the request received from the company, and NOC received from the banker, on acuite's policy of withdrawal of ratings.

About the Company

Flamingo Pharmaceuticals Limited (FPL) incorporated in 1985 by Mr. Ashwin Thacker, is an export-oriented entity based in Mumbai. It is engaged in manufacturing and export of pharmaceutical formulations and products under its own brands and also on a contract basis. The company caters to the regulated as well as semi-regulated markets with presence in acute therapies such as antibiotics and antipyretic and also in chronic segment such as anti-diabetic and anti-hypertensive.

Analytical Approach

­Acuité has considered the standalone view of the business and financial risk profile of FPL to arrive at the rating.

Key Rating Drivers

Strengths

Experienced management and presence in multiple segments and products lines FPL, incorporated in 1985 is a Mumbai based export-oriented pharmaceutical player led by Mr. Ashwin Thacker with more than 3 decades of experience. FPL has 3 manufacturing facilities certified by USFDA, UKMHRA & WHO-GMP, located in Nanded, Rabale and Taloja. The company caters to regulated, semiregulated and unregulated markets. The company’s product line includes tablets, capsules, dry syrups and injectable. The Company’ operating income stood at Rs. 171 Cr. till November, 2022. Acuité believes that FPL will continue to benefit from the company’s established presence in multiple markets and multiple product profile, which is also expected to support its business risk profile over the medium term.   Moderate financial risk profile FPL has a moderate financial risk profile marked by moderate networth , moderate gearing and comfortable debt protection metrics. The tangible networth stood at Rs. 144.05 Cr as on March 31, 2022(Prov.) as against Rs. 140.48 Cr as on March 31, 2021. The company’s overall gearing stood at 0.56 times as on March 31, 2022(Prov.) as against 0.52 times as on March 31, 2021. The total debt stood at  Rs. 81.24 Cr as on March 31, 2022(Prov.) as against Rs. 72.46 Cr as on March 31, 2021. The Total Outside Liabilities to Tangible Net worth (TOL/TNW) ratio stood at 1.06 times as on March 31, 2022(Prov.) as against 1.14 times as on March 31, 2021 . The debt protection metrics of the Company is comfortable marked by interest coverage of 6.38 times as on March 31, 2022(Prov.) as against 6.69 times as on March 31, 2021. The NCA to Total Debt (NCA/TD) stood at 0.43 times for as on March 31, 2022(Prov.) as against 0.77 times as on March 31, 2021. The Debt to EBITDA stood at 1.75 times as on March 31, 2022(Prov.) as against 1.10 times as on March 31, 2021.  Acuité believes FPL’s financial risk profile will remain moderate over the medium term   Regulatory approved manufacturing facilities FPL’s manufacturing facilities are certified by multiple major global health authorities such has USFDA, UKMHRA & WHO-GMP. The approvals from these health authorities have global acceptance, whose approvals can help the company to avoid regulatory bottlenecks in major global markets. Acuité believes that continuous approvals from these authorities will be a key rating sensitivity factor.

Weaknesses

Working capital intensive nature of operations  FPL’s operations continue to remain working capital intensive in nature marked by gross current asset (GCA) days of 194 days as on March 31, 2022(Prov.) as against 173 days as on March 31, 2021. The GCA days are driven by high inventory and debtor days. The inventory days stood at 88 days as on March 31, 2022(Prov.) as against 88 days as on March 31, 2021. The debtor days stood at 96 days as on March 31, 2022(Prov.) as against 43 days as on March 31, 2021. However, the company’s reliance on bank lines to fund its working capital requirement continues to remain high, marked by average bank limit utilization of its fund based facility of 85-90 percent during the six months ended October, 2022 . The creditor days stood at 172 days as on March 31, 2022(Prov.) as against 225 days as on March 31, 2021.

Rating Sensitivities

­Improvement in revenue and profitability margins. Any deterioration of its financial risk profile and liquidity position. Any elongation of the working capital cycle leading to deterioration in debt protection metrics. Changes in approval from USFDA, UKMHRA & WHO-GMP, and receipt of observations from these authorities

Material covenants

­None

Liquidity Position

Adequate

The liquidity of the company is adequate marked by comfortable cash accruals as against debt repayment obligations. FPL generated net cash accruals of Rs. 16- 38 Cr in FY21 and FY22 as against repayment obligations of approx. Rs. 11-27 Cr during the same period . The business of FPL is working capital intensive with gross current asset (GCA) days of around 194 days as on March 31, 2022(Prov.). The average bank limit utilization of its fund based facility for the six months ended October, 2022 stood at ~85-90 percent. The unencumbered cash and bank balance stood at Rs. 0.92 Cr as on March 31, 2022(Prov.). The current ratio was 1.34 times as on March 31, 2022(Prov.).

Outlook

Not Applicable

Other Factors affecting Rating

­None

Key Financials

Particulars	Unit	FY 22 (Provisional)	FY 21 (Actual)
Operating Income	Rs. Cr.	227.93	226.59
PAT	Rs. Cr.	16.82	38.18
PAT Margin	(%)	7.38	16.85
Total Debt/Tangible Net Worth	Times	0.56	0.52
PBDIT/Interest	Times	6.38	6.69

Status of non-cooperation with previous CRA (if applicable)

­None

Any other information

­None

Applicable Criteria

• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Entities In Manufacturing Sector:- https://www.acuite.in/view-rating-criteria-59.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm

Note on complexity levels of the rated instrument

­.In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in

Rating History

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook 25 May 2022 Packing Credit Short Term 5.00 ACUITE A4 (Downgraded and Issuer not co-operating*) Term Loan Long Term 10.00 ACUITE B+ (Downgraded and Issuer not co-operating*) Packing Credit Short Term 7.50 ACUITE A4 (Downgraded and Issuer not co-operating*) Proposed Bank Facility Long Term 46.73 ACUITE B+ (Downgraded and Issuer not co-operating*) Term Loan Long Term 1.00 ACUITE B+ (Downgraded and Issuer not co-operating*) Bills Discounting Short Term 10.00 ACUITE A4 (Downgraded and Issuer not co-operating*) Term Loan Long Term 1.77 ACUITE B+ (Downgraded and Issuer not co-operating*) Letter of Credit Short Term 8.00 ACUITE A4 (Downgraded and Issuer not co-operating*) Letter of Credit Short Term 3.00 ACUITE A4 (Downgraded and Issuer not co-operating*) Packing Credit Short Term 27.00 ACUITE A4 (Downgraded and Issuer not co-operating*) 03 Mar 2021 Term Loan Long Term 1.00 ACUITE BB- | Stable (Assigned) Term Loan Long Term 1.77 ACUITE BB- | Stable (Assigned) Bills Discounting Short Term 10.00 ACUITE A4+ (Assigned) Letter of Credit Short Term 8.00 ACUITE A4+ (Assigned) Packing Credit Short Term 7.50 ACUITE A4+ (Assigned) Term Loan Long Term 10.00 ACUITE BB- | Stable (Assigned) Packing Credit Short Term 5.00 ACUITE A4+ (Assigned) Proposed Bank Facility Long term 46.73 ACUITE BB- | Stable (Assigned) Letter of Credit Short Term 3.00 ACUITE A4+ (Assigned) Packing Credit Short Term 27.00 ACUITE A4+ (Assigned)

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Annexure - Details of instruments rated

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating ICICI Bank Ltd Not Applicable FBN/FBP/FBD/PSFC/FBE Not Applicable Not Applicable Not Applicable 10.00 Simple ACUITE A4 | Reaffirmed & Withdrawn Bank of India Not Applicable Letter of Credit Not Applicable Not Applicable Not Applicable 3.00 Simple ACUITE A4 | Reaffirmed & Withdrawn State Bank of India Not Applicable Letter of Credit Not Applicable Not Applicable Not Applicable 8.00 Simple ACUITE A4 | Reaffirmed & Withdrawn Saraswat Bank Not Applicable PC/PCFC Not Applicable Not Applicable Not Applicable 5.00 Simple ACUITE A4 | Reaffirmed & Withdrawn Bank of India Not Applicable PC/PCFC Not Applicable Not Applicable Not Applicable 7.50 Simple ACUITE A4 | Reaffirmed & Withdrawn State Bank of India Not Applicable PC/PCFC Not Applicable Not Applicable Not Applicable 27.00 Simple ACUITE A4 | Reaffirmed & Withdrawn Not Applicable Not Applicable Proposed Long Term Bank Facility Not Applicable Not Applicable Not Applicable 46.73 Simple ACUITE B+ | Reaffirmed & Withdrawn Saraswat Bank Not Applicable Term Loan Not available Not available Not available 1.00 Simple ACUITE B+ | Reaffirmed & Withdrawn ICICI Bank Ltd Not Applicable Term Loan Not available Not available Not available 10.00 Simple ACUITE B+ | Reaffirmed & Withdrawn Hero Fincorp Ltd. Not Applicable Term Loan Not available Not available Not available 1.77 Simple ACUITE B+ | Reaffirmed & Withdrawn

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Contacts

Analytical	Rating Desk
Aditya Gupta Vice President-Rating Operations Tel: 022-49294041 aditya.gupta@acuite.in Simran Kesharwani Analyst-Rating Operations Tel: 022-49294065 simran.kesharwani@acuite.in	Varsha Bist Senior Manager-Rating Operations Tel: 022-49294011 rating.desk@acuite.in

About Acuité Ratings & Research

Acuité is a full-service Credit Rating Agency registered with the Securities & Exchange Board of India (SEBI). The company received RBI Accreditation as an External Credit Assessment Institution (ECAI) for Bank Loan Ratings under BASEL-II norms in the year 2012. Acuité has assigned ratings to various securities, debt instruments and bank facilities of entities spread across the country and across a wide cross section of industries. It has its Registered and Head Office in Kanjurmarg, Mumbai. Disclaimer: An Acuité rating does not constitute an audit of the rated entity and should not be treated as a recommendation or opinion that is intended to substitute for a financial adviser's or investor's independent assessment of whether to buy, sell or hold any security. Ratings assigned by Acuité are based on the data and information provided by the issuer and obtained from other reliable sources. Although reasonable care has been taken to ensure that the data and information is true, Acuité, in particular, makes no representation or warranty, expressed or implied with respect to the adequacy, accuracy or completeness of the information relied upon. Acuité is not responsible for any errors or omissions and especially states that it has no financial liability whatsoever for any direct, indirect or consequential loss of any kind, arising from the use of its ratings. Ratings assigned by Acuité are subject to a process of surveillance which may lead to a revision in ratings as and when the circumstances so warrant. Please visit our website (www.acuite.in) for the latest information on any instrument rated by Acuité.