RATING RATIONALE
11 Apr 2022
Sudarshan Pharma Industries Ltd.
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.50.00 Crs. of Sudarshan Pharma Industries Ltd.
Particulars| Facility** | Amount (Rs.Crs) | Tenure | Rating* |
|---|---|---|---|
| Fund Based | |||
|
Cash Credit
Sanctioned
Cash Credit Proposed Cash Credit Sanctioned Cash Credit Proposed |
17.00
08.00 05.00 10.00 |
Long Term | BWR BBB - (Stable) |
| Sub Total | 40.00 | ||
| Non-Fund Based | |||
|
Letter of Credit
Sanctioned
Letter of Credit Proposed |
05.00
05.00 |
Short Term | BWR A3 |
| Sub Total | 10.00 | ||
| Grand Total | 50.00 | (Rupees Fifty Crores Only) | |
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Stable
Brickwork Ratings assigns the long term rating of BWR BBB- (Stable) and short term rating of BWR A3 for Bank Loan Facilities amounting to Rs. 50.00 Crs. of Sudarshan Pharma Industries Limited.BWR believes that Sudarshan Pharma Industries 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 the revenues go down and profit margins show lower than expected figures.
KEY RATING DRIVERS
Brickwork Ratings assigns the long term rating of BWR BBB- (Stable) and short term rating of BWR A3 for Bank Loan Facilities amounting to Rs. 50.00 Crs. of Sudarshan Pharma Industries Limited. BWR has essentially relied upon the audited financial statements of Sudarshan Pharma Industries Ltd. of FY19,FY20,FY21 and projected financial statements of FY22,FY23, publicly available information and information / clarifications provided by the entity’s management. The rating draws strength from the vast business experience of the director/s, established track of operations and above average financial risk profile. However, the rating is constrained by the scale of operations, constitution of the company and high competition from other established players in the market.
Going forward, the ability of the entity to achieve projected revenue & profitability margins and manage liquidity would be key rating sensitivities
Credit Strengths:
- Experienced Management :
The promoters, Mr. Hemal V.Mehta and Mr. Sachin V.Mehta have experience of more than 15 years in the pharmaceutical industry.Mr. Hemal Mehta a diploma holder in chemistry from Pune university manages promotion and ethical marketing of branded and generic items. Mr. Sachin V. Mehta holds a Diploma in Exports & Import Management from Indian Merchant Chambers in Mumbai and works towards Business Excellence programs.
- Financial Risk Profile and Debt Protection Metrics :
The longstanding experience of the promoters has helped them to build good relations with its customers reflected through a healthy revenue growth rate. The company recorded revenues of Rs.193.35 crs in FY21 as compared to Rs.147.98 crs in FY2020 . Further, the company has booked revenue of Rs 308.69 crs from till 28th Feb 2022.DSCR and ISCR of the company stand at 1.57x and 2.37x respectively in FY21 indicating company’s adequacy to meet its debt obligations. This continues to improve further in the FY22.Operating Profit Margins stands at 3.94% in FY21 is which is at moderate level as compared to 3.29% in FY20. It is projected to be at 4.00% in FY22. Net Profit Margin has improved from 1.38% in FY21 as compared to 0.86% in FY20. The company projects to close FY22 at 1.88%.
- Well diversified and reputed client base :
The company has well diversified customers, since top 3 customers contribute only 9.91 % of sales.SPIL customer base includes elite customers like SRF Limited , Bayer India , Reliance Industries Limited , Huntsman , L&T and L&T Defense to name a few.In the Pharma segment we have our reputed clients like Sandoz Ltd, Teva Pharma, Sun Pharma, Lupin and Jubilant Life sciences. For the chemical segment theyare the sole distributor in Western Maharashtra & Goa for a Water disinfectant of a well-known international brand “Oxystrong Platinum” by Solvay Peroxyhai (Thailand).The company's long term relations with its customers and suppliers will help in generating a steady growth in revenues.Client has added more than 15 new customers from various locations Pan India.
Credit Risks:
- Regulatory risks :
SPIL is exposed to regulatory risk in the domestic market. However, the same is mitigated to an extent since it has been dealing with these countries for more than 25 years..
- Gearing Position :
The gearing is on the higher side at 3.44x in FY21 as compared to 1.96x in FY20.The same continues to remain at similar levels .Though the company plans to infuse USL , which will improve the gearing position in FY22
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
The ability of the company to successfully scale up its operations, while maintaining a comfortable financial risk profile and adequate liquidity would be its key rating sensitivities.
Positive: The rating may be upgraded if the scale of operations, profitability and overall financial risk profile of the company shows significant improvement.
Negative: The rating may be downgraded if there is a significant deterioration in the scale of operations and financial risk profile affecting the debt servicing capacity of the company.
PROFILESudarshan Pharma Industries Ltd was originally incorporated as ‘Sudarshan Specialty Chemsolve Private Limited’ in 2008 at Mumbai, the company was subsequently named ‘Sudarshan Pharma Industries Private Limited’. In 2019 the company applied for IPO but later withdrew it and currently it is ‘Sudarshan Pharma Industries Limited’ (SPIL). The Company’s promoters, Mr. Hemal. V Mehta & Mr. Sachin V Mehta have a combined experience of over 25 years in the Special Chemical, Bulk drug and overall Pharmaceutical Industry. In terms of geographies and therapeutic areas, SPIL has diversified business in the pharmaceutical and specialIty chemicals industries.Specialty chemicals and intermediates have a wide-range of applications in pharma, paint, food and adhesive Industry. The company has marked its presence in India and also developing in international markets. Its products have been exported to the UK, Australia, Uzbekistan, Syria, Oman, Taiwan and MENA regions. Company is also involved in contract manufacturing, outsourcing and supply of generic pharma formulation and medicines to healthcare institution, NGOs and Hospitals. The major products of the company include Acetonitrile, Tetrahydrofuran (THF), DMF/DMSO, Hydrogen Hydride, Diethyl ether, N-Hepthane, Chlorahexanone and Bisoprolol Expoxide, Acetic Acid,Butanol, Toluene, Xylene, Phenol, Butyl Acetate, Benzene, Dimethyl Carbonate, Sodium Methylate Solution, Propnol, Alpha Methyl Styrene etc. The comprehensive team of sales and in-house logistics & operations caters to customer needs on a just in time basis thereby assisting its customers in reducing their inventory carrying cost by offering a regular supply of quality product on a consistent basis. The long track record of trading and distribution of chemicals, promoters experience in trading business, diversified product portfolio, comfortable financial profile and healthy growth in revenue on account increase in trading volumes. The company is mostly into trading and has a small scale set up for manufacturing .The exports also constitute 2% of the total turnover .Earlier company was majorly focused on chemicals and API but now are moving towards pharma business and expect to grow their revenue in this line. Vision : Company is focussing to add new product line in Intermediates, API and Speciality Chemicals. Also, company plans to increase its footprints in other states of India and also explore, Open Branch Offices outside India like UAE, Kenya, and few parts of East Africa. Company has provided NDS for the last 12 months .
KEY FINANCIAL INDICATORS| Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 193.59 | 147.99 |
| EBITDA | Rs.Crs. | 7.63 | 4.87 |
| PAT | Rs.Crs. | 2.67 | 1.28 |
| Tangible Net Worth | Rs.Crs. | 22.28 | 19.48 |
| Total Debt/Tangible Net Worth | Times | 1.34 | 1.07 |
| Current Ratio | Times | 1.28 | 1.50 |
NON-COOPERATION WITH PREVIOUS RATING AGENCY ,IF ANY
| CRA Name | Date | Amount | Rating |
|---|---|---|---|
| ACUITE | 05 Nov 2019 | 10.00 | B+ (Withdrawn) |
| S.No | Current Rating (2022) | Rating History | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Facilities | Tenure | Amount (Rs.Crs) | Rating | 2021 | 2020 | 2019 | ||||
| Fund Based | ||||||||||
| 1 | Cash Credit - SanctionedCash Credit - ProposedCash Credit - SanctionedCash Credit - Proposed | Long Term | 17.0008.0005.0010.00 | BWR BBB-(Stable) | NA | NA | NA | |||
| Non-Fund Based | ||||||||||
| 2 | Letter of Credit - SanctionedLetter of Credit - Proposed | Short Term | 05.0005.00 | BWR A3 | NA | NA | NA | |||
| Total | 50.00 | (Rupees Fifty Crores Only) | ||||||||
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.
Hyperlink/Reference to applicable Criteria : For More Information Contact:| Analytical Contacts | |
|---|---|
|
Enakshi Makhija Lead Analyst enakshi.m@brickworkratings.com |
Sushil Kumar Chitkara Director - Ratings B : +91 22 2831 1426, +91 22 2831 1439 sushilkumar.c@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Name of the Bank/Lender | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) |
|---|---|---|---|---|---|
| 1 | Axis Bank Ltd. | Cash CreditSanctioned | 5.00 | _ | 5.00 |
| 2 | Axis Bank Ltd. | Cash CreditProposed | 10.00 | _ | 10.00 |
| 3 | Axis Bank Ltd. | Letter of CreditSanctioned | _ | 5.00 | 5.00 |
| 4 | Axis Bank Ltd. | Letter of CreditProposed | _ | 5.00 | 5.00 |
| 5 | Union Bank of India | Cash CreditSanctioned | 17.00 | _ | 17.00 |
| 6 | Union Bank of India | Cash CreditProposed | 8.00 | _ | 8.00 |
| Total | 40.00 | 10.00 | 50.00 | ||
| TOTAL (Rupees Fifty Crores Only) | |||||
| Instrument | Issue Date | Amount (Rs.Crs) | Coupon Rate | Maturity Date | ISIN Particulars |
|---|---|---|---|---|---|
| NA | NA | NA | NA | NA | NA |
| Name of Entity | % Ownership | Extent of consolidation | Rationale for consolidation |
|---|---|---|---|
| NA | NA | NA | NA |
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