ICRA Reaffirms AAA Rating to Sun Pharma Lab Ltd | CORPORATE ETHOS

ICRA Reaffirms AAA Rating to Sun Pharma Lab Ltd

By: | December 18, 2017
sun pharma

Dec 18: Ratings agency ICRA has reaffirmed the long-term rating of AAA for the Rs 1000 cr non-convertible debenture programme of Sun Pharma Laboratories Ltd. The short term rating of A1+ assigned to the Rs 3000 cr commercial paper programme and the Rs 200.00 cr short-term, fund-based bank facilities of Sun Pharma Lab. The outlook on the long-term is ‘stable’.

The rating re-affirmation takes into consideration the status as a wholly-owned subsidiary ofSun Pharmaceutical Industries Ltd (SPIL) and its strong operational and financial linkages with the parent company, given its business profile, that includes part of the domestic formulations business of SIL.

The Sun Pharma Labs credit profile has remained robust, as characterised by strong operating profit margins, which further improved to 48.5% in FY 2017 (44.9% in FY2016) due to improved product mix. The total debt of Sun Pharma Lab increased to Rs 1,434.3 cr as on March 2017 as against 1,039.6 cr on March 2016 due to increase in working capital requirements.

Despite the increase in debt  levels,  the  capital  structure  and  coverage  indicators  of  the  company  remain  healthy. `Furthermore, the company’s liquidity profile, though moderated, remains strong with investments in  liquid  instruments and  cash balance of Rs. 239.0crore as on March 31, 2017, as against Rs. 692.4 crore as on March 31, 2016.

ICRA believes the company’s business risk profile is likely to remain strong despite some moderation in revenue growth in FY2018 due to the impact  of  the  implementation  of  the goods  and  service stax (GST) during H1  FY2018.The  outlook  may  be revised  to  ‘Negative’  if the  company undertakes any  large  inorganic  investments or  incurs higher  than  expected  capital expenditure, weakening the liquidity  profile  of  the company. Moreover, any unfavourable regulatory changes in  the domestic pharmaceutical market, impacting its revenues and profitability, may impact ratings.