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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 55.85 | ACUITE BBB | Stable | Reaffirmed | - |
| Bank Loan Ratings | 73.25 | - | ACUITE A3+ | Reaffirmed |
| Total Outstanding | 129.10 | - | - |
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Rating Rationale |
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Acuité has reaffirmed the long-term rating of ‘ACUITE BBB’ (read as ACUITE triple B) and the short-term rating of ‘ACUITE A3+’ (read as ACUITE A three plus) on the Rs.129.10 crore bank facilities of Themis Medicare Limited (TML). The outlook is ‘Stable’.
Rationale for rating reaffirmation The rating reaffirmation continues to draw comfort from the company’s experienced management having an established track record of operations in the pharmaceutical industry, strong liquidity position and the financial risk profile which continues to remain healthy marked by healthy net-worth, low gearing and comfortable debt protection metrics despite the increase in the overall debt levels during the year. The rating is however constrained on account of moderation recorded in TML’s operating performance in FY2023 marked by decline in the operating income and profitability margins. The revenue declined by ~10 percent in FY2023 and stood at Rs.358 Cr as against Rs.396 Cr in FY2022. The moderation is mainly due to decrease in the export sales which have reduced to Rs.141 Cr (41 percent) in FY2023 as against Rs.193 Cr (49 percent) in FY2022. However, the company’s revenue stood at Rs.284 Cr. in 9MFY2024 against Rs.274 Cr. in 9MFY2023 because the company has registered new products with volume growth in East Africa and Chile within Hospital Business. The operating profitability moderated to Rs.42.21 Cr in 9MFY2024 against Rs.56.97 Cr. in 9MFY2023. The moderation is due to muted topline growth, incremental investment into building teams for hospital segment, and increase in other expenses due to incremental travel and marketing costs. Going ahead, TML’s ability to improve its operating performance while avoiding further elongations in working capital cycle and conserving the capital structure will remain key monitorable. |
| About the Company |
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Themis Medicare Limited (TML) was founded in the year 1969 by Dr. Shantilal D. Patel as a joint venture with Gedeon Richter Plc. Hungary. It is based out of Mumbai and is engaged in manufacturing, marketing and distribution of APIs, Bulk Drugs and Formulations. TML has manufacturing facilities at Haridwar, Hyderabad and Vapi. Along with manufacturing, TML’s research & development facility (R&D) at Vapi focuses on development of new chemicals and processes for both API & intermediates and fermentation technology whereas their Haridwar R&D facility concentrates on new drug delivery systems (NDDS). It caters to both exports as well as domestic markets. It exports primarily to European and African countries. TML is a leader in Anti-Malarial, Anesthesia, Pain Management and anti-biotic range of formulations.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profiles of TML for arriving at the rating. |
| Key Rating Drivers |
| Strengths |
| Established track record of operations and extensive experience of management in the pharmaceutical industry
TML incorporated in the year 1969 is engaged in manufacturing, marketing and distribution of APIs, Bulk Drug and Formulations. It has an established operational track record of more than five decades. TML is a leader in Anti-Malarial, Anesthesia, Pain management and anti-biotic range of formulations. It was founded by Dr. Shantilal D. Patel as a joint venture with Gedeon Richter Plc. Hungary, and is currently managed by Dr. Sachin Patel who holds a Doctorate in Biological Chemistry from Christ’s College, University of Cambridge, UK. He has a rich experience of two decades in the pharmaceutical industry and is supported by a qualified team of senior management in the organization. Acuité believes that the company will continue to benefit from its experienced management and established track record of operations. Healthy financial risk profile Financial risk profile of TML is healthy marked by healthy net worth, low gearing and comfortable debt protection metrics. The tangible net-worth of the company stood improved at Rs.281 Cr as on 31 March, 2023 as against Rs.242 Cr as on 31 March, 2022 due to healthy accretion of profits to reserves. The gearing (debt-equity) stood lower at 0.33 times as on 31 March, 2023 as against 0.32 times as on 31 March, 2022 despite of increase in the company’s overall debt of Rs.92 Cr in FY2023 as against Rs.79 Cr in FY2022. The increase in the company’s debt profile is towards completion of the ongoing capex of capacity expansion and upgradation of existing manufacturing facilities across all the three plants i.e. Hyderabad, Haridwar and Vapi. The total debt of Rs.92 Cr as on March 31, 2023 comprises of long-term bank borrowings of Rs.33 Cr and short term bank borrowings of Rs.49 Cr and unsecured loans from directors of Rs.10 Cr. The gearing is expected to remain low over the medium-term despite of expected increase in the overall debt on account of availing the undisbursed portion of the term loan which is already tied up towards completion of the ongoing capex. The interest coverage ratio and DSCR though moderated, it remained comfortable at 8.26 times and 2.04 times for FY2023 as against 11.65 times and 2.71 times for FY2022. The Net Cash Accruals to Total debt stood at 0.58 times for FY2023 as against 0.90 times for FY2022. The Total outside liabilities to Tangible net worth stood at 0.62 times for FY2023 as against 0.58 times for FY2022. The Debt-EBITDA ratio stood increased at 1.16 times for FY2023 as against 0.77 times for FY2022. Acuité believes that the financial risk profile of TML will remain healthy in near to medium term despite the expected increase in the debt levels vis-à-vis strong tangible net worth and healthy cash accruals. |
| Weaknesses |
| Subdued operating performance
The operating performance of TML remained subdued in FY2023 as against FY2022 with decline in revenue and profitability margins. The company’s revenue stood decline at Rs.358 Cr for FY2023 as against Rs.396 Cr for FY2022, mainly on account of decrease in the export sales which have reduced to Rs.141 Cr (41 percent) in FY2023 as against Rs.193 Cr (49 percent) in FY2022. The export sales remained high earlier due to high demand of company’s certain range of critical care products which were essential during the phase of covid pandemic. However, with the reduced effect of pandemic further, the demand of these products had ultimately reduced, which has led to decrease in the company’s overall revenue during the year. The operating margin of the company stood decline at 20.73 percent in FY2023 as against 24.87 percent in FY2022 due to high input cost in the API business segment as well as significant increase in the employee cost during the year for the purpose of hiring more staff as the company has focused towards growing in the hospital segment and launched new range of its products. On the other hand, the net profit margin of the company also stood decline at 12.10 percent in FY2023 as against 15.55 percent in FY2022 due to an increase in the interest cost and depreciation charge during the year. Further, the company has reported moderation in bottom line in 9MFY24, impacted mainly due to muted topline growth, incremental investment into building teams for hospital segment, and increase in other expenses due to incremental travel and marketing costs. The company’s revenue stood at Rs.284 Cr in 9MFY2024 against Rs.274 Cr in 9MFY2023 because the company has registered new products with volume growth in East Africa and Chile within Hospital Business. The operating profitability moderated to Rs.42.21 Cr in 9MFY2024 against Rs.56.97 Cr in 9MFY2023. Acuité believes that the ability of TML to improve its operating performance will remain a key rating sensitivity factor. Working capital intensive operations The working capital operations of TML are highly intensive marked by its Gross Current Assets (GCA) of 265 days for FY2023 which stood increased as against 193 days for FY2022. This is on account of its inventory and receivables cycle which stood elongated at 89 days and 150 days for FY2023 as against 75 days and 93 days for FY2022. The increase in the company’s receivable cycle is marked by high credit period offered to its certain customers and other export orders which are backed by LCs. On the other hand, the creditors cycle of the company also stood increased at 121 days for FY2023 as against 77 days for FY2022. The average bank limit utilization for 6 months’ period ended November 2023 stood at ~60 percent. Acuité believes that the ability of TML to improve and maintain an efficient working capital cycle over the medium term will remain a key rating sensitivity factor. Highly competitive and fragmented industry The pharmaceutical formulations industry has a large number of players which makes this industry highly fragmented and intensely competitive. TML 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 company's presence of over five decades 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 company in improving its competitive position. |
| Rating Sensitivities |
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| Liquidity Position |
| Strong |
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TML has strong liquidity position marked by healthy net cash accruals (NCA) to its maturing debt obligations. The company generated cash accruals in the range of Rs.35 Cr to Rs.54 Cr during FY2021 to FY2023 against its debt repayment obligation in the range of Rs.6 Cr to Rs.15 Cr during the same period. Going forward, the NCA are expected in the range of Rs.57 Cr to Rs.65 Cr for the period FY2024-FY2025 against its debt repayment obligation of ~Rs.15 Cr during the same period. The working capital operations of the company are highly intensive marked by its gross current asset (GCA) days of 265 days for FY2023. The average bank limit utilization for 6 months’ period ended November 2023 stood at ~60 percent. Current ratio stands at 2.00 times as on 31 March 2023. The company has maintained cash & bank balance of Rs.13 Cr in FY2023. Acuité believes that the liquidity of TML is likely to remain strong over the medium term on account of healthy cash accruals against its maturing debt obligations. |
| Outlook: Stable |
| Acuité believes that TML will maintain 'Stable' outlook over the medium term on account of its experienced management with an established track record of operations and healthy financial risk profile. The outlook may be revised to 'Positive' in case of higher-than-expected growth in revenue and profitability while effectively managing its working capital cycle and keeping the debt levels moderate. Conversely, the outlook may be revised to 'Negative' in case of lower-than-expected growth in revenue or deterioration in the financial and liquidity profile most likely as a result of higher than envisaged working capital requirements. |
| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 357.80 | 395.88 |
| PAT | Rs. Cr. | 43.29 | 61.56 |
| PAT Margin | (%) | 12.10 | 15.55 |
| Total Debt/Tangible Net Worth | Times | 0.33 | 0.32 |
| PBDIT/Interest | Times | 8.26 | 11.65 |
| 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 • Entities In Manufacturing Sector:- 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 |
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