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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Non Convertible Debentures (NCD) | 25.00 | ACUITE D | Reaffirmed | - |
| Total Outstanding Quantum (Rs. Cr) | 25.00 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 0.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed its long term rating ‘ACUITE D’ (read as ACUITE D) on the Rs.25.00 crore Non-convertible Debentures of Genlink Pharma Solutions Private Limited (GPSPL) Rationale for Reaffirmation The rating on GPSPL takes into account the negative cash Accruals, Poor debt protection matrix and NCD status (Default as per NSDL) |
| About Company |
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Mumbai based GPSPL was incorporated in 2016 by Mr. Anand Shah and Mr. Susheel Koul; an associate company of Enaltec Labs Private Limited (ELPL) and has acquired 31.34 percent shareholding in ELPL by raising funds through issue of Non-convertible debentures.
ELPL, incorporated in 2006 by Mr. Anand Shah and Mr. Susheel Koul (Directors), is research driven Active Pharmaceutical Ingredients (API) manufacturer & supplier set up with the specific objective of providing generic formulators across the world. ELPL has its own manufacturing facilities in Ambernath and Indore. The funds infused by Genlink Pharma Solutions Private Limited are used to acquire majority shareholding stake of 31.34 percent in Enaltec Labs Private Limited by Mr. Anand Shah and Mr. Susheel Koul. |
Analytical Approach
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| Acuité has considered the consolidated business and financial risk profiles of GPSPL and Enaltec Labs Private Limited (ELPL), hereinafter referred to as 'Enaltec Group' (EG), to arrive at the rating. The consolidated approach factors in dependence of GPSPL on the cash flows generated by ELPL for redemption of the NCD
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Key Rating Drivers
| Strengths |
| Experienced management
GPPL was incorporated in 2016 and ELPL was incorporated in 2006. Thus, the group has operational track record of over a decade in the pharmaceutical industry. The directors; Mr. Anand Shah and Mr. Susheel Koul have an experience of over two decades in the aforementioned industry. The long track record of operations and experience of management has helped the group develop healthy relationship with its customers and suppliers. Acuité believes that the group will sustain its existing business profile on the back of established track record of operations and experienced management.
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| Weaknesses |
| Financial Risk Profile
Group has poor financial risk profile marked by moderate net worth and poor debt protection metrics. Group’s net worth stood at Rs. 46.28 Cr as on 31st March 2022(Prov.) which includes Compulsory Convertible Preference shares of Rs. 55 Crores as quasi equity which was issued during FY 22. Gearing levels (debt-to-equity) though improved still remains at higher level and stood at 2.21 times as on March 31, 2022 as against 17.02 in FY 2021. Further, the interest coverage ratio declined and remained weak at 0.37 times for FY2022 as against 0.85 times in FY2021 and Debt service coverage ratio moderated and stood at 0.07 times in FY2022 in comparison to 0.50 times in FY2021. Total outside liabilities to total net worth (TOL/TNW) stood at 3.75 times as on FY2022 vis-à-vis 30.15 times as on FY2021. However, Debt-EBITA stood at alarmingly high level of 30.80 times in FY 22 vis-a-vis 10.70 in FY 21 Intensive working capital operations
Group has intensive working capital requirements as evident from gross current assets (GCA) of 370 days in FY2022 as compared to 336 days in FY2021. Debtor days further moderated to 84 days in FY2022 as against 55 days in FY2021. Inventory days further improved to 107 days in FY 22 in comparison to 141 days in FY 21.Further, the current ratio of company stood at 0.90 times as on March 31, 2022.
Delays in debt servicing obligations GPSPL has been facing a severe liquidity crunch in the recent past, since it has not been able to generate adequate cash flows to meet the NCD repayment on the maturity date. The said cash flow mismatches are driven by the company’s sole dependence on ELPL whose operating performance has been deteriorating, led by time & cost overruns in the completion of its capital expenditure plans in the recent past, thereby leading to delay in transition to in-house manufacturing from third-party manufacturing. The default is still being reflected in the public domain as per the NSDL status. |
| ESG Factors Relevant for Rating |
| Not applicable |
| Rating Sensitivities |
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| Material Covenants |
| None |
| Liquidity Position |
| Poor |
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Group has poor liquidity marked by negative net cash accruals to its maturing debt obligations. Group was unable to generate cash accruals and due to heavy losses resulted net cash accruals (5.67) crore for FY2022 (Prov.) as against Rs. 38.20 crore of repayment obligations for the same period. Current Ratio stood at 0.90 times as on 31 March 2022(Prov.) as against 0.66 times in the previous year. Therefore, Company has poor liquidity to meets its requirements.
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| Outlook |
| Not Applicable |
| Other Factors affecting Rating |
| Not Applicable |
| Particulars | Unit | FY 22 (Provisional) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 128.47 | 115.87 |
| PAT | Rs. Cr. | (15.52) | (11.68) |
| PAT Margin | (%) | (12.08) | (10.08) |
| Total Debt/Tangible Net Worth | Times | 2.21 | 17.02 |
| PBDIT/Interest | Times | 0.37 | 0.85 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any Other Information |
| None |
| Applicable Criteria |
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• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Manufacturing Entities: https://www.acuite.in/view-rating-criteria-59.htm |
| Note on Complexity Levels of the Rated Instrument |
| https://www.acuite.in/view-rating-criteria-55.htm |
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