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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 65.25 | ACUITE B+ | Stable | Upgraded | - |
| Bank Loan Ratings | 12.50 | - | ACUITE A4 | Upgraded |
| Total Outstanding | 77.75 | - | - |
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Rating Rationale |
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Acuité has upgraded its long-term rating to 'ACUITE B+ (read as ACUITE B plus) from 'ACUITE C' (read as Acuite C) and ‘ACUITE D’ (read as ACUITE D) and upgraded its short-term rating to 'ACUITE A4' (read as Acuite A four) from ‘ACUITE D’ (read as ACUITE D) on the Rs.77.75 crore bank facilities of Lakshanya Ventures Private Limited ( Erstwhile Encarta Pharma Private Limited) (LVPL). The outlook is ‘Stable’. Rationale for rating upgrade The rating is upgraded basis timely repayment of debt obligations by the company over the last three months. The rating is constrained due to the declined scale of operations and stretched working capital cycle in 11MFY2024. The company’s operating income stood at Rs. 269.02 Cr. in FY2023 as against Rs. 413.27 Cr. in FY2022 and Rs. 213.29 Cr. in FY2021. In 11MFY2024, revenue stood at Rs.79.43 Cr. In FY24 due to elections and formation of new government in Karnataka, issue of tenders and orders were delayed from government entities. LVPL only caters to government hospitals and medical colleges and receives orders vide government tendering process. In terms of profitability, the company has reported an improving trend till FY2023, as it recorded operating margin of 11.48 percent in FY2023 as against 10.13 percent in FY2022 and 6.12 percent in FY2021. In 11MFY2024, the margin stood at 12.24 percent. However, the elongated working capital cycle and consequent high reliance on working capital borrowings impinge a negative bias to the rating. The gross current asset days are primarily driven by debtor days which stood at 146 days in FY2023 as against 117 days in FY2022. The debtor days stood at >365 days in 11MFY2024. Going forward, the company's ability to scale up its operations while maintaining its working capital cycle and capital structure will remain a key rating monitorable. |
| About the Company |
| Lakshanya Ventures Private Limited (LVPL), a Bangalore-based company was incorporated in 2001. Founded by Mr. Keerthan P, Mr. Ganesh R. Nayak and Mr. Girish M, the company is engaged in primarily four segments - Cardiac & Endovascular Implants, ICU & OT Equipment’s, Setting up of Medical Gas Pipeline and Construction of Modular Operation Theatres. The present directors of the company are Mr. Ganesh R. Nayak, Mr. Girissh Maheswarappa, Mr. Sharath S. Shetty and Mr. Pichamutal K. Premsagar. |
| Unsupported Rating |
| Not applicable |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profile of LVPL to arrive at the rating |
| Key Rating Drivers |
| Strengths |
| Experienced management and diversified product portfolio LVPL promoters possess over two decades of experience in the medical equipment trading business. The company benefits from established relationships with Hospital and Medical equipment OEMs. The product portfolio contains Cardiac & Endovascular Implants, ICU & OT Equipment’s, Setting up of Medical Gas Pipeline and Construction of Modular Operation Theatres. Acuité believes that the market potential, healthy and reputed client base and diversified product portfolio of LVPL are expected to support in improvement of business risk profile over the medium term. Moderate financial risk profile The company has a moderate financial risk profile marked by comfortable gearing, debt protection metrics and moderate net worth. The company recorded gearing of 0.85 times as on March 31, 2023 as against 0.47 times as on March 31, 2022. The net worth which stood at Rs. 59.76 Cr. as on March 31, 2022 rose to Rs.78.92 Cr. as on March 31, 2023 on primarily account of accrual of profits to reserves. The total debt stood at Rs.67.47 Cr as on March 31, 2023 as against Rs. 28.29 Cr. as on March 31, 2022. The total debt rose primarily on account of term loan of Rs. 36.25 Cr. to purchase an office. The interest coverage ratio stood at 5.13 times in FY2023 as against 11.46 times in FY2022. The Debt to EBITDA ratio stood at 2.08 times in FY2023 as against 0.67 times in FY2022. Acuite believes the financial risk profile of the company will continue to remain moderate in the absence of any major debt funded capex plan. |
| Weaknesses |
| Declining scale of operations The company’s operating income stood at Rs. 269.02 Cr. in FY2023 as against Rs. 413.27 Cr. in FY2022 and Rs. 213.29 Cr. in FY2021. In 11MFY2024, revenue stood at Rs.79.43 Cr. In FY24 due to elections and formation of new government in Karnataka, issue of tenders and orders were delayed from government entities. LVPL only caters to government hospitals and medical colleges and receives orders vide government tendering process. In terms of profitability, the company has reported an improving trend till FY2023, as it recorded operating margin of 11.48 percent in FY2023 as against 10.13 percent in FY2022 and 6.12 percent in FY2021. In 11MFY2024, the margin stood at 12.24 percent. The margins are improving primarily due to increasing focus of the company on higher value adding segments i.e. construction of modular operation theatres (OT) and medical equipment. Acuite believes the company's ability to improve its scale of operations in the near to medium term while maintaining its profitability margins will remain a key rating monitorable. Elongated working capital cycle: The company has an elongated working capital cycle marked by gross current asset days of 156 days in FY2023 as against 136 days in FY2022. The gross current asset days are primarily driven by debtor days which stood at 146 days in FY2023 as against 117 days in FY2022. The clientele of the company includes only government entities and due to procedural aspects, the debtor days tend to get elongated. The debtor days stood at >365 days in 11MFY2024. It is primarily due to a delay in receipt of a bill amount of Rs. 78 Cr. The bill is pending since FY2022 and was delayed as the PO from the government entity was issued without following proper procedure during Covid emergency. A part of this bill (Rs. 36 Cr.) is received in beginning of March, 2024 and balance is expected to be received by month end. This is expected to bring down the total debtor days in the near to medium term. The average six month bank limit utilization stood at 99.89 percent for fund based facilities and 84.50 percent of non-fund based facilities for the period ended January, 2024. The company ability to restrict further elongation of working capital cycle will remain a key rating monitorable. |
| Rating Sensitivities |
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Improvement in scale of operation while maintaining its profitability and capital structure Further elongation of working capital cycle |
| Liquidity Position |
| Stretched |
| The liquidity position is stretched marked by elongated receivable collection period and significant reliance on working capital borrowings. The company is expected to earn cash accruals in the range of Rs. 5-25 Cr. in the period FY24-25 against repayment obligations of Rs. 3.65 Cr. However, the gross current asset days which stand at 156 days in FY2023 driven by debtor days which stood at 146 days have elongated further in FY2024. The average six month bank limit utilization stood at 99.89 percent for fund based facilities and 84.50 percent of non-fund based facilities for the period ended January, 2024. |
| Outlook: Stable |
| Acuite believes that the outlook on LVPL will remain ‘Stable’ over the medium term on the back of experience of management, diversified portfolio and moderate financial risk profile. The outlook maybe revised to ‘Positive’ in case of sustainable improvement in operating income and reduction in working capital cycle. Conversely, the outlook maybe revised to ‘Negative’ in case of any further stretch in its working capital cycle or less than expected improvement in scale of operations and profitability marigns. |
| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 269.02 | 413.27 |
| PAT | Rs. Cr. | 18.92 | 28.42 |
| PAT Margin | (%) | 7.03 | 6.88 |
| Total Debt/Tangible Net Worth | Times | 0.85 | 0.47 |
| PBDIT/Interest | Times | 5.13 | 11.46 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not applicable |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Trading Entitie: https://www.acuite.in/view-rating-criteria-61.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. |
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