Rating Rationale

Brickwork Ratings has assigned the long-term rating of BWR BBB-/Stable and short-term rating of BWR A3 for the bank loan facilities aggregating to Rs. 62.87 Crs of Sunil Healthcare Ltd.

For assigning the ratings, BWR has relied on the audited financials of the company up to FY26, projected financials for FY27-FY28, clarification provided by the company, and publicly available information. 

The rating derives strength from experienced management. The company’s established operating track record, diversified customer base and improving financial performance also support the rating. The company has also demonstrated healthy operating performance and an established presence in the healthcare products segment. 

The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. BWR believes Sunil Healthcare Ltd.’s business and financial risk profile will be maintained over the medium term. The outlook may be revised to Positive if a sustained increase in the scale of operations and higher-than-envisaged profitability result in an improved financial risk profile, leading to stronger cash accruals and improved leverage. The outlook may be revised to Negative if lower-than-expected revenue or profitability, deterioration in leverage indicators, or any stress in servicing debt obligations occur.

There are standard covenants as per sanction letter

• Established presence in the capsule manufacturing segment :

  Sunil Healthcare has been operating in the capsule manufacturing business for several decades and has developed an established position in the domestic and export markets. The company offers a diversified range of hard gelatin, HPMC/vegetable, and other specialised capsules, which supports its ability to cater to different customer requirements.

• Established customer base and product acceptance :

  The company supplies capsules to several established pharmaceutical companies, providing it with an experienced customer base and supporting the continuity of business operations. Its long operating history and established product portfolio provide some stability to the business profile.

• Improvement in operating profitability :

  The company has demonstrated an improvement in operating profitability, supported by cost-control measures, better production efficiency, and optimisation of its product mix. This indicates some improvement in its ability to absorb operating and input-cost pressures.

• Diversified product portfolio and manufacturing capabilities :

  The company manufactures multiple types of capsules, including hard gelatin, HPMC, pullulan, flavoured, and customised capsules. Its manufacturing capabilities and product variety provide flexibility to cater to pharmaceutical and food-supplement customers.

• Modest scale of operations :

  The company continues to operate at a relatively modest scale compared with larger players in the pharmaceutical-supporting manufacturing segment. The relatively limited revenue base restricts the company's ability to absorb adverse movements in input costs and other operating expenses.

• Exposure to raw-material and foreign-exchange movements :

  The company's profitability remains exposed to fluctuations in raw-material prices and foreign-exchange rates. Higher input costs or adverse currency movements could put pressure on margins, particularly when the company is unable to immediately pass on the increase to customers. Management has also highlighted higher input costs and currency-related pressures as challenges to earnings.

• The competitive and regulatory nature of the industry :

  The capsule manufacturing industry is competitive and requires continuous investment in product quality, technology, and regulatory compliance. The company's ability to maintain customer relationships and protect margins will therefore remain important for sustaining its financial performance.

Going forward, the ability of the company to improve its scale of operations, profitability margins, overall credit risk profile and efficiently manage its working capital requirement would be the key rating sensitivity.

Positive Triggers:

• A significant improvement in the scale of operations TOI above Rs. 105 Cr, operating margins of over 18%, and net margin of over 4.8% on a sustained basis.

Negative Triggers:

• The rating may be downgraded if there is further deterioration in the financial risk profile, a significant decline in revenue, with operating margins dropping below 12%, and net margin below 3.5%.
• Any increase in leverage, with TOL/TNW deteriorating above 1.5x, indicating weakening of capital structure.
• If receivable days exceed 180 days, it will be treated as a negative rating factor.

Key Monitorable:

• Any significant recurrence of subsidiaries' loss issues, impacting the consolidated credit profile, will be a key Monitorable.

Bank limit utilization averaged 72.29% during the past 12 months ended August 2026. Gross cash accruals are Rs. 10.45 crores annually, which is more than adequate against the yearly repayment obligations of Rs. 6.87  Crores in FY 26. In addition, the company does not have any major capex plans in the next 2-3 years, which will act as a cushion for liquidity. The current ratio is around 1.11 times, ISCR and DSCR ratio of the company stands at 2.07 times and 1.29 times as of March 31, 2026. 

The company demonstrates an adequate ESG profile based on its environmental, social, and governance practices.

Environmental: Sunil Healthcare Limited has demonstrated a focus on energy conservation and environmental compliance as part of its manufacturing operations. The company states that energy conservation is systematically monitored and awareness regarding efficient energy consumption is promoted across its operations. It continues to explore measures for reducing energy consumption through monitoring of consumption and improvement in operational methods. The company has also stated that it continues to make investments towards the treatment of effluents with the objective of minimising the impact of its operations on the environment and ensuring compliance with applicable standards.

Social: The company emphasizes employee health, safety and welfare. It has stated that the physical and emotional wellbeing of employees remains a priority and that prescribed health and safety guidelines are followed at the manufacturing plant in compliance with applicable laws. The company also maintains a policy for the prevention of sexual harassment at the workplace and has constituted an Internal Complaints Committee. During FY2024-25, no sexual harassment complaints were reported, while one awareness/training programme was conducted during the year.
The company also has a CSR policy aimed at supporting sustainable development and improving the quality of living conditions and opportunities for underprivileged and differently abled persons. Its CSR framework covers activities falling under the prescribed focus areas of Schedule VII of the Companies Act, 2013.

Governance: Sunil Healthcare has established governance mechanisms comprising an independent Board, Audit Committee, Internal Audit function and a voluntarily constituted Risk Management Committee. The company has stated that its corporate governance philosophy emphasises transparency, professionalism, integrity, accountability, social responsibility, fairness and business ethics. During FY2024-25, the statutory auditors did not report any qualifications, reservations, adverse remarks, disclaimers, or emphasis of matter in respect of the financial statements. The company also has a whistle-blower/vigil mechanism and reported no frauds to the Audit Committee, Board or Central Government during the year.

Sunil Healthcare Limited (SHL), incorporated in 1973 as Sunil Synchem Limited (renamed in June 2005), is a listed company manufacturing Empty Hard Gelatin Capsule (EHGC) shells and Hydroxypropyl Methylcellulose (HPMC) capsules, a vegetarian alternative to gelatin shells. The company has a state-of-the-art manufacturing facility in Alwar, Rajasthan, with an installed capacity of 15 billion capsules per annum. Under its flagship brand SUNLOC, active for over four decades, SHL is the second-largest EHG capsule manufacturer in India, with a strong presence in domestic and export markets. It pioneered double-lock and triple-lock capsule technology in India.

The Complexity Indicator refers to the ease with which the returns associated with the rated instrument could be estimated. It does not indicate the risk related to the timely payments on the instrument, which is rather indicated by the instrument's credit rating. It also does not indicate the complexity associated with analysing an entity's financial, business, industry risks or complexity related to the structural,transactional or legal aspects. Details on the complexity levels of the instruments are available on BWR's website Complexity Levels.

Not Applicable

Sunil Healthcare Limited has two overseas subsidiaries, namely Sunil Healthcare North America LLC in the USA and Sunil Healthcare Mexico S.A. de C.V. in Mexico. The US entity is wholly owned, while the Mexico entity is held at 99.97%. Both subsidiaries are primarily engaged in the trading of capsules and support the company's international marketing and distribution network.

BWR Board of Directors have no influence over rating decisions, nor do they sit on the rating committee or review, discuss or evaluate any credit rating during the Board meetings.

Brickwork Ratings (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by Reserve Bank of India [RBI]. BWR is the 5th agency to get a credit rating registration in India in 2009 and its corporate office in Bengaluru. It has a country-wide presence with representatives in 150+ locations. Canara bank is an institutional investor in Brickwork.

Brickwork offers credit ratings of Bank Loan, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitisation Products, Municipal Bonds, etc. BWR has also rated NGOs, Educational Institutions, Hospitals, Urban Local Bodies and Municipal Corporations.

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