Press Release

Press Release

August 21, 2024

FORMEL LABS PRIVATE LIMITED
Rating Reaffirmed

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	55.00	ACUITE BB- \| Stable \| Reaffirmed	-
Total Outstanding	55.00	-	-

Rating Rationale

Acuite has reaffirmed its long term rating of 'ACUITE BB-' (read as ACUITE Double B minus) on Rs.55.00 Cr. bank facilities of Formel Labs Private limited (FLPL). The outlook is 'Stable'.

Rationale for reaffirmation:
The rating reaffirmed takes into account experience of the management, locational advantage of the project and progress in the construction of project. The project has experienced a time overrun due to construction related issues, however, the cost over run remain minimal. The project has reported approximately 50 percent incremental progress which mitigates the implementation risk to some extent. Further, the company also secured debt tie up with the lender and has drawn 60 percent of the debt. Going forward, completion of the construction and commencing the operations as per the revised date of commencement of commercial operations (DCCO) will be a key monitorable.

About the Company

Incorporated in June, 2020, Karnataka based Formel Labs Pvt ltd is set up to manufacture key intermediaries for Active Pharmaceutical Ingredients (APIs) ) like GEFITINIB Intermediate, FAMCICLOVIR Intermediate etc. The Company is under process to set up the manufacturing plant (a greenfield project). The plant will have an annual installed capacity of 82000 KL per year and will be located at Kadechur and Badiyal Industrial Area of Yadgir District of Karnataka The project cost is estimated to cost around Rs.91.62 Cr, which will be funded by debt of Rs.55 Cr and balance by promoter funds. The debt tie up for the project is completed. The company is promoted and managed by Mrs. D Anitha and Mr. T Ravi Prasad along with their family members

Unsupported Rating

Not Applicable

Analytical Approach

Acuite has considered the standalone business and financial risk profile of Formel Labs Pvt ltd (FLPL) while arriving at the rating.

Key Rating Drivers

Strengths

Experienced Management
Formel Labs Private Limited (FLPL) is promoted and managed by Mrs. D. Anitha,(Managing Director), Mr. T. Ravi Prasad, (Executive Director) and their family members. Mrs. D Anitha. has a rich experience of 28 years in the areas of procurement of Medicines, Manpower Planning and Human Resource Development.. Mr. T. Ravi Prasad, is a qualified Civil Engineer having an experience of ~27 years in the areas of construction of large Dams and Hospitals and in Roads and Railway Projects. The directors are ably supported by a team of experienced professionals who have an industry experience of almost two decades. Acuite believes FLPL will benefit from the extensive experience of the promoters and key management personnel.

Locational Advantage
The plant will be located in the industrial hub at Kadechur and Badiyal area of Karnataka state. It is also near to Pharma city of India- Hyderabad. The R&D division of the company is established in Hyderabad city. The factory lands are well connected by roads, telecommunication lines and other Infrastructural facilities. Acuite believes that the favourable locational advantage will benefit FLPL’s business profile over the medium term.

Weaknesses

Implementation risk-
The project has reported 59.7 percent physical construction progress till July 31, 2024, with an incremental progress of 50 percent in past 15 months. Due to time over run, the management set the revised COD to April, 2025. As on date the Company has received the necessary approvals to construct the plant, however, there remains a risk of delays in receiving the required regulatory approvals and certifications post completion of construction. Any such delays could further postpone the commencement of production which in turn may lead to cost overruns.

Rating Sensitivities

Completion of the project with in the revised timelines.
Timely receipt of statutory approvals and certifications post construction.

Liquidity : Stretched

FLPL’s liquidity position remained stretched as the project is still under implementation. The project has experienced a time over run, with the revised DCCO set for April, 2025. Consequently, the lender has extended the moratorium period by another year and revised the repayment structure. The repayment of principal will commence from June, 2026, providing decent buffer. Additionally, presence of DSRA conditions to be implemented before the DCCO, provides support to liquidity. FLPL has created a DSRA of Rs.0.75Cr till July 31, 2024 and the remaining portion of Rs.1.10Cr is expected to be created in next 10 days, which covers one quarter’s interest obligations. Additionally, the company has to maintain a DSRA equivalent to 6 months interest and principal repayment before the DCCO. This provides support towards liquidity during the construction period. Acuite believes, the liquidity position of the company is expected to remain stretched until the commencement of commercial operations.

Outlook: Stable

Acuité believes that FLPL will maintain a ‘Stable’ outlook over medium term on account of its experienced management and locational advantage of its plant. The outlook may be revised to ‘Positive’ in case of timely completion of the project as per the revised timelines and registering more than expected turnover. Conversely, the outlook may be revised to ‘Negative’ in case of delays in project execution or cost overruns.

Other Factors affecting Rating

None

Key Financials

Particulars	Unit	FY 24 (Provisional)	FY 23 (Actual)
Operating Income	Rs. Cr.	0.00	0.00
PAT	Rs. Cr.	0.00	0.00
PAT Margin	(%)	0.00	0.00
Total Debt/Tangible Net Worth	Times	1.15	0.69
PBDIT/Interest	Times	0.00	0.00

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

Not Applicable

Any other information

None

Applicable Criteria

• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm
• Rating Process and Timeline: https://www.acuite.in/view-rating-criteria-67.htm
• Manufacturing Entities: 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
24 May 2023	Term Loan	Long Term	50.00	ACUITE BB- \| Stable (Reaffirmed)
24 May 2023	Term Loan	Long Term	5.00	ACUITE BB- \| Stable (Assigned)
16 Feb 2023	Term Loan	Long Term	50.00	ACUITE BB- \| Stable (Assigned)

Annexure - Details of instruments rated

Lender’s Name	ISIN	Facilities	Date Of Issuance	Coupon Rate	Maturity Date	Quantum (Rs. Cr.)	Complexity Level	Rating
State Bank of India	Not avl. / Not appl.	Term Loan	15 Jul 2023	Not avl. / Not appl.	15 Nov 2030	55.00	Simple	ACUITE BB- \| Stable \| Reaffirmed

Contacts

Analytical Details	Contact Details
Mohit Jain Senior Vice President - Rating Operations Tel: 022–49294017 mohit.jain@acuite.in Katta Akhil Analyst - Rating Operations Tel: 022-49294065 akhil.katta@acuite.in	Contact details exclusively for investors and lenders Mob: +91 8591310146 Email ID: analyticalsupport@acuite.in 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. Please visit https://www.acuite.in/faqs.htm to refer FAQs on Credit Rating.