Adroit Pharmaceuticals Pvt. Ltd.

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.46.50 Crs. of Adroit Pharmaceuticals Pvt. Ltd.

Particulars

Facility**	Amount (Rs.Crs)	Tenure	Rating*
Fund Based
Cash Credit - Sanctioned	04.50	Long Term	BWR BB (Stable)
Sub Total	04.50
Non-Fund Based
Bank Guarantee - Sanctioned Letter of Credit - Sanctioned Letter of Credit - Proposed	05.00 02.00 35.00	Short Term	BWR A4
Sub Total	42.00
Grand Total	46.50	(Rupees Forty Six Crores and Fifty lakhs Only)

*Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Stable

BWR assigns the Long Term Rating to Adroit Pharmaceuticals Pvt. Ltd. as BWR BB with Stable Outlook and the Short Term Rating as BWR A4. 

The rating draws strength from the extensive experience of the management of the firm in the same line of business, consistent growth in the pharmaceutical industry and company's future expansion plans. The rating of the firm is constrained by High regulatory issues pertaining to the industry norms and moderate Financial Risk Profile. 

BWR believes that Adroit Pharmaceuticals Pvt. Ltd. business risk profile will be maintained over the medium term. The 'Stable' outlook indicates a low likelihood of rating change over the medium term. The rating outlook may be revised to 'Positive' in case the revenues and profit show sustained improvement. The rating outlook may be revised to 'Negative' if there is deterioration in financial risk profile of the company. 

KEY RATING DRIVERS

Credit Strengths:

• Company Existence and Management Experience :

  The company is in existence since 1977 and the directors of the firm have about three to four decades of experience in the same line of business.

• Industry growth and future propects of the company :

  The company operates in a high revenue generating industry i.e Pharmaceutical Industry. Indian pharmaceutical industry has a prominent and rapidly growing presence in global pharmaceuticals too. Also, the firm is acquiring additional manufacturing facilities to enhance its manufacturing capacity in order to improve their topline; the ongoing scenario of Covid-19, has also boosted the sales of the firm as large scale orders of sanitizers and face masks have been received by the firm through Govt. Deptts. The operating revenue of the firm in FY20 (based on management certified provisionals as on 20th March 2020) has gone up which is at INR 59.93 Crores as against INR 56.10 Crores in FY19. The profits of the firm have also improved in FY20 which is at INR 1.68 Crores as against INR 0.90 Crores in FY19.

Credit Risks:

• Highly Regulated Industry :

  The company has to maintain high compliance standards due to stringent regulations and licencing processes in the Pharmaceutical Industry.

• Trading of pulses :

  The company also indulges in trading of pulses such chana dal, exposing the company to seasonal availability and competitive pricing of the goods, impacting the topline from time to time.

• Moderate Financial Risk profile :

  The tangible networth of the firm is at moderate level at INR 5.11 Crores for FY19. The conversion cycle of the company has risen to 148 Days in FY19 citing the increase in Days receivables. The profit margins are also at a lower level, Net profit margin being 1.61% and operating profit margin being at 4.93% in FY19.

ANALYTICAL APPROACH AND APPLICABLE RATING CRITERIA

For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Going forward, the ability of the Firm to improve its revenue and profit margins would be the key rating sensitivities.

Positive: Rating may be upgraded in case of substantial improvement in Revenues and Profit margins of the firm.

Negative: Rating may be downgraded in case of deterioration in financial risk profile. 

LIQUIDITY POSITION

ADEQUATE

The company has cash and cash equivalents of INR 0.96 Crores in FY19. The Cash Credit Utilisation of last six months was around 73.13%.The current ratio is at 1.34 times in FY19. ISCR and DSCR is at 1.91X and 1.13X in FY19. The conversion cycle is at 148 days in FY19. Long Term Borrowings of INR 5.98 Crores in FY19 includes Unsecured loans from Directors of INR 1.93 Crores, Loans from Friends/Family of INR 3.78 Crores, Deferred Sales Tax Loan of INR 0.22 Crores and Loans from Others of INR 0.05 Crores.

Holding/Subsidiary: 1) RK Sales: No Operational Linkage; 2) Mukund & Company: Purchases of INR 0.26 Crores in FY19; 3) Kukreja Agencies: Sales of INR 22,266 in FY19; 4) Household Pharmaceuticals: Sales of INR 0.13 Crores in FY19.

PROFILE

Adroit Pharmaceuticals Pvt. Ltd. (APPL), incorporated in 1977, is currently managed by the Kukreja family headed by Shri Abhimanyu Hassanand Kukreja, Shri Cheturam Hassanand Kukreja and Shri Ghanshyamdas Hassanand Kukreja. The company is incorporated in Nagpur, Maharashtra, engaging in manufacturing of pharmaceuticals products with installed capacity of manufacturing 300 Lacs tablets, 22.5 Lacs capsules, 1.2 Lacs litres oral liquid, 30000 litres ointment and 1 metric tons of medicines per month. The manufacturing facility of the company is situated at Plot No. 46, Garoba Maidan, Near Ambedkar Square, Wardhaman Nagar, Nagpur – 440008 (MH). The Company supply Paracetamol Syrup to various Government health care departments & hospitals in the state of Uttar Pradesh, Andhra Pradesh, Telangana, Tamilnadu & Defense. Also, company trades in grains and Chana Dal. Adroit is acquiring the existing plant/building/machinery of Leela ventures India Private Limited. The plant is situated in land of 16440 sq mtrs. The said company became NPA with Union Bank of India and Adroit is acquiring it at Rs.12.5 crore under the OTS scheme (as per deed dated 2nd August 2019). The said proposal is under the consideration of Bank of Maharashtra. Management expects this plant to become operational by Aug 2020 with total installed capacity of 16000 KG per day of paracetamol powder. Management plant to utilise 50% of the capacity towards existing sales. The company belongs to the group which is involved in the business of Wholesale & Retail Trading of Pharmaceutical Products via their Firm named M/s. Kukreja Agencies, M/s. Kukreja Brothers, and M/s. Mukund & Company all of which firms are incorporated in Nagpur, Maharashtra. In 2005, the group also acquired the manufacturing unit of M/s. Household Pharmaceuticals, based at Dehradun in order to enhance the manufacturing capacity of the firm.

KEY FINANCIAL INDICATORS

Key Parameters	Units	FY 18-19 (Audited)	FY 17-18 (Audited)
Operating Revenue	Rs.Crs.	56.10	61.61
EBITDA	Rs.Crs.	2.77	2.31
PAT	Rs.Crs.	0.90	0.81
Tangible Net Worth	Rs.Crs.	5.11	4.20
Total Debt/Tangible Net Worth	Times	2.11	1.94
Current Ratio	Times	1.34	1.32

RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)

S.No	Current Rating (2020)				Rating History
	Facilities	Tenure	Amount (Rs.Crs)	Rating	2019	2018	2017
Fund Based
1	Cash Credit - Sanctioned	Long Term	04.50	BWR BB (Stable)	NA	NA	NA
Non-Fund Based
2	Bank Guarantee - Sanctioned Letter of Credit - Sanctioned Letter of Credit - Proposed	Short Term	05.00 02.00 35.00	BWR A4	NA	NA	NA
Total			46.50	(Rupees Forty Six Crores and Fifty lakhs Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS

BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.

For More Information Contact:

Analytical Contacts	Investor Contacts
Arushi Jain Ratings Analyst B : +91 11 2341 2232 Ext : 111 arushi.j@brickworkratings.com	Liena Thakur Assistant Vice President - Corporate Communications M : +91 84339 94686 liena.t@brickworkratings.com
V.K.Kukreja Associate Director - Ratings B : +91 11 2341 2232 kukreja.vk@brickworkratings.com
1-860-425-2742

SL.No.	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Cash Credit - Sanctioned	4.50	_	4.50
2	Bank Guarantee - Sanctioned	_	5.00	5.00
3	Letter of Credit - Sanctioned	_	2.00	2.00
4	Letter of Credit - Proposed	_	35.00	35.00
Total				46.50
TOTAL (Rupees Forty Six Crores and Fifty lakhs Only)