| Experienced management and established track record of operations
The Inchem Group has an operational track record of nearly 2 decades and is engaged in the manufacturing of APIs, pharmaceutical intermediates, and a diverse range of products across the pharmaceuticals, nutraceuticals, and veterinary segments. The group is promoted by Mr. K. Srinivas Reddy, who brings over two decades of experience in the chemical and pharmaceutical industry. The promoters’ extensive industry experience has enabled the group to build strong relationships with both customers and suppliers. Acuité believes that the group’s experienced leadership and long-standing operational history will continue to support and strengthen its business risk profile.
Recovery in revenue and normalization of profitability:
The group’s revenue rebounded to Rs.126.93 Cr. during FY2025 (Prov.), recovering from a decline of Rs.84.05 Cr. in FY2024, which was primarily due to temporary halt in production caused by refurbishment of existing machinery. During the Q1FY2026, the group registered revenue of Rs.37.11 Cr, which is approximately 12 percent higher than Q1FY2025 revenue of Rs.33.17 Cr. With the new plant becoming operational in the current year, the group is expected to close FY2026 with revenue in the range of Rs.135-140 Cr. The operating profit margin normalized to historical levels at 14.19 percent in FY2025 (Prov.), compared to 20.03 percent in FY2024, which had benefitted from higher intercompany transactions due to change in product mix. Consequently, the PAT margin also normalized to historical levels at 9.92 percent in FY2025 (Prov.) from 12.71 percent in FY2024. Acuite believes that, the group’s revenue will improve over the medium, supported by operationalization of the ongoing capex which is expected to contribute around 30 percent incremental revenue, while profitability is expected to remain stable.
Above average financial risk profile
Inchem group’s financial risk profile is above-average, marked by moderate capital structure and healthy coverage indicators. The group’s net worth stood at Rs.43.57 Cr. as on March 31, 2025 (Prov.) as against Rs.35.65 Cr. as on March 31, 2024, backed by accretion to reserves. Further, there were drawings from the capital of Rs.~4.67 Cr. by the partners during the year. The total debt level of the group remained at Rs.30.46 Cr. as on March 31, 2025 (Prov.). from Rs.30.93Cr as on March 31, 2024. The capital structure remained comfortable with gearing of 0.70 times and Total outside Liabilities to Tangible Net Worth (TOL/ TNW) at 1.29 times as on March 31, 2025 (Prov.) compared to gearing of 0.87 times and Total outside Liabilities to Tangible Net Worth (TOL/ TNW) of 1.63 times as on March 31, 2024. The group's coverage indicators are comfortable indicated by interest coverage ratio (ICR) of 6.66 times and debt service coverage ratio (DSCR) of 4.74 times for FY2025 (Prov.) vis-à-vis 5.64 times and 3.60 times in FY2024. Debt to EBITDA stood at 1.63 times as on March 31, 2025 (Prov.) against 1.81 times of previous year. Acuité believes that financial risk profile is likely to improve over the medium term, supported by the absence of any major capex plans.
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| Moderate intensive nature of working capital operations
The group's working capital operations are moderately intensive in nature as reflected by its Gross Current Asset (GCA) days of 160 days in FY2025 (Prov.) against 234 days in FY2024. The elongation in GCA days is due to high inventory days of 100 days in FY2025 (Prov.) compared to 162 days in FY2024. The group 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 are also leading to higher inventory days. The debtor days stood at 35 days in FY2025 (Prov.) against 37 days in FY2024. The creditor days stood at 78 days in FY2025 (Prov.) against 109 days in FY2024. The reliance on the fund based limits remained high at 97 percent over the past 6 months ending June 2025. Acuité believes that working capital operations of the group will remain moderate over the medium term on account of high inventory days.
Competitive and fragmented industry
The pharmaceutical formulations industry has a large number of players which makes this industry highly fragmented and intensely competitive. Inchem Group 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 group's presence of over one and half decade 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 group is improving its competitive position.
Inherent risk of capital withdrawal
Leeds enterprise remains inherently exposed to the risk of capital withdrawals by its partners, given its constitution as a partnership firm. Any substantial withdrawals from partners capital will have a negative impact on the group's financial risk profile and can constrain the firm's ability to maintain adequate liquidity.
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