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.