- Experienced Management and established track record of operations
Inchem Group, is engaged in the business of manufacturing of APIs, intermediates and offers a wide range of products in pharmaceuticals, nutraceuticals and veterinary segments. It has an established operational track record of around one and half decades. It is promoted by, Mr. K Srinivas Reddy, who possesses more than two decades of experience in the chemical and pharmaceutical industry. He is supported by team of qualified professionals in managing operations of Inchem Group. The extensive experience of the promoters has enabled Inchem Group to establish a healthy relationship with its customers and suppliers. Acuité believes that Inchem Group will continue to benefit from its experienced management and established track record of operations.
- Ability to manufacture rare and exclusive API products
Inchem Group is into manufacturing of Active pharmaceutical ingredients (API) and, intermediates in pharmaceuticals, nutraceuticals and veterinary segments for global and domestic markets. The company manufactures highly complex and niche API’s for both domestic and export markets like Latin America, south east Asian countries, middle east and china. The company has a manufacturing unit at Kondapalli, Ibrahimpatnam, Krishna district AP and planning to expand its current unit with increased capacity. The current production capacities range from 500 litres SS-316 reactors to 5000 litres SS-316 reactors and also has 1000 litres GLR to 3000 litres GLRs, in addition plant is equipped with supporting equipment to handle all types of reactions. The group is undergoing a capex just besides it existing plant at Kondapally with expected outlay of Rs.16.00 Cr and it is expected to complete by March 2023. This is expected to be funded by Rs.9.00 Cr of term loan and balance by way of internal accruals and promoter funds.
- Strong Research and Development
Inchem Group’s R & D Laboratory is built up with modern and well equipped testing equipment bound to be a qualitative research. About 20 highly qualified and experienced scientists are working in R & D Centre, Inchem Research& Development provides services like process Improvements for existing product range, CRAMS & CDMO from grams to Kilo scale and Develop Advanced Intermediates based on customer demand. Acuité believes that Inchem group’s business risk profile will continue to benefit from its strong research and development over the medium and long run.
- Modern Plant and Equipment to meet needs of API Industry
Inchem group has designed and developed pilot plant and kilo lab to meet the needs of API industry. They are operated as per GMP standards. Facilities are designed to develop the product from pilot scale to production scale.
Pilot Plant: Pilot plant is ISO 9001-(2008) certified with reaction capacities from100-500 Ltrs with Glass line SS reactors and hydro generator.
Kilo lab: Kilo lab is to bridge the gap in capacity between laboratory and Pilot Plant and to provide the means for offering manufacture of smaller volume high-value added product.
Acuité believes that group will continue to meet the needs of API industry with the help of its modern plant and equipment in medium and long run.
- Low customer and geographical concentration risk
Group’s revenue is not dependent on certain geographical segments which renders to low geographical concentration risk. None of the customer contributes more than 5% of total revenue in over the last 3 years ending FY2022, thereby depicting lower customer and geographical concentration risk to revenue profile.
- Moderate financial risk profile
The financial risk profile of the group is moderate marked by moderate net worth, low gearing and comfortable debt protection metrics. The net worth of the group stood at Rs.23.08 Cr as on March 31, 2022 as compared to Rs.16.89 Cr as on March 31, 2021. The gearing of the group stood at 1.00 times as on March 31, 2022 as compared to 1.22 times as on March 31, 2021. The group has a high reliance on working capital limit because of high working capital requirement. Total Outside Liabilities/Total Net Worth stood at 2.46 times as on March 31, 2022 as against 3.04 times as on March 31, 2021. Interest coverage ratio (ICR) stood comfortable at 7.02 times as on March 31, 2022 as against 4.95 times in FY 2021. The debt service coverage ratio (DSCR) stood at 3.18 times as on March 31, 2022 as against 4.36 times as on March 31, 2021.The net cash accruals against total debt (NCA/TD) stood at 0.45 times as on March 31, 2022 as compared to 0.29 times as on March 31, 2021. Acuité believes that the financial risk profile of the will continues to remain moderate in medium term despite the debt funded capex plans in FY2023.
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- Working capital intensive nature of operations
Inchem Group’s operations are working capital intensive marked by Gross Current Assets (GCA) days of 131 days as on March 31, 2022 as against 109 days as on March 31, 2021. Group’s debtor days are between 10 to 25 days, creditor days are between 45 to 85 days and inventory days are between 80 to 110 days over the last three years ending FY2022. The group utilized 93.96% of working capital limits during past 16 months ending July 2022. The group is expected to avail additional working capitals limits, which will support the operations carried in API plant. Acuite believes that working capital management of the company will remain moderate intensive over the medium term.
- 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’s 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.
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