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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 its long-term rating of ‘ACUITE BBB’ (read as ACUITE triple B) and its 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 remains ‘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 modest revenue growth in FY2024 along with decline in the operating and profitability margins of the company. The company generated a revenue of Rs. 381.76 crore in FY2024 as against Rs. 357.80 crore in FY2023. The operating margin of the company declined to 13.50 percent in FY2024 as against 20.73 percent in FY2024 due to high input cost in the API business segment as well as significant increase in the employee cost during the year. 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.
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| 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 Gujarat 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. |
| 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 was incorporated in the year 1969 and 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.
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.300.72 Cr. as on 31 March, 2024 as against Rs.281.06 Cr. as on 31 March, 2023 due to healthy accretion of profits to reserves. The gearing (debt-equity) stood lower at 0.32 times as on 31 March, 2024 as against 0.33 times as on 31 March, 2023 despite of increase in the company’s overall debt of Rs.95.79 Cr. in FY2024 as against Rs.91.79 Cr. in FY2023. 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 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 Total outside liabilities to Tangible net worth stood at 0.63 times for FY2024 as against 0.62 times for FY2023. Further, the debt protection metrics stood comfortable with the interest coverage ratio and DSCR standing at 6.00 times and 1.36 times for FY2024 as against 8.26 times and 2.04 times for FY2023. The Net Cash Accruals to Total debt stood at 0.39 times for FY2024 as against 0.58 times for FY2023. The Debt-EBITDA ratio increased but remained above average and stood at 1.70 times for FY2024 as against 1.16 times for FY2023. |
| Weaknesses |
| Subdued operating performance
The operating performance of TML remained subdued in FY2024 as against FY2023 with decline in the profitability margins. The company’s revenue stood at Rs. 381.76 Cr. for FY2024 as against Rs. 357.80 Cr. for FY2023.
The operating margin of the company stood decline at 13.50 percent in FY2024 as against 20.73 percent in FY2023 due to incremental investment into building teams for hospital segment, and increase in other expenses due to incremental travel and marketing costs. On the other hand, the net profit margin of the company also stood decline at 6.48 percent in FY2024 as against 12.10 percent in FY2023.
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 282 days for FY2024 which stood increased as against 265 days for FY2023. This is on account of its inventory and receivables cycle which stood at 78 days and 170 days for FY2024 as against 89 days and 150 days for FY2023. 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 126 days for FY2024 as against 121 days for FY2023.
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.
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| 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 repay its maturing debt obligations. The company generated cash accruals in the range of Rs.36.99 Cr. in FY2024 as against its debt repayment obligation in the range of Rs.14.60 Cr. during the same period. However, the working capital operations of the company are highly intensive marked by its gross current asset (GCA) days of 282 days for FY2024. Current ratio stands at 1.91 times as on 31 March 2024. The company has maintained cash & bank balance of Rs.19.20 Cr in FY2024. The average bank limit utilization for 6 months’ period ended November 2023 stood at ~60 percent.
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 |
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None |
| Particulars | Unit | FY 24 (Actual) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 381.76 | 357.80 |
| PAT | Rs. Cr. | 24.75 | 43.29 |
| PAT Margin | (%) | 6.48 | 12.10 |
| Total Debt/Tangible Net Worth | Times | 0.32 | 0.33 |
| PBDIT/Interest | Times | 6.00 | 8.26 |
| Status of non-cooperation with previous CRA (if applicable) |
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Not Applicable |
| Any other information |
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None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Manufacturing Entities: 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 |
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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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