Press Release

JCR-VIS Assigns Initial Entity Ratings to Saakh Pharma (Private) Limited

Karachi, October 25, 2018: JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned initial long term entity rating of ‘BBB+’ (Triple B Plus) and short term rating of ‘A-2’ (A-Two) to Saakh Pharma Private Limited (SPPL). Long term rating of BBB+ signifies adequate credit quality with protection factors being reasonable and sufficient while risk factors are considered variable. Short term rating of A-2 signifies good certainty of timely payment and sound liquidity factors. Outlook on the assigned ratings is ‘Stable’.

SPPL is engaged in the manufacture and sale of active pharmaceutical ingredients (APIs) to cater to raw material demand of local formulation firms. The Company aims to be a one stop solution of APIs for pharmaceutical companies. SPPL is currently involved in manufacturing of 2 major APIs product categories; Semi Synthetic Penicillin (SSP) (Amoxicillin, Ampicillin & Cloxacillin) and Semi Synthetic Cephalosporin (SSC) (Cefixime). Both SSP and SSC facilities are operating at high capacity utilization levels. Going forward, SPPL is in the process of expanding its product portfolio by adding new API variants including Paracetamol, Sitaglipton in addition to provision of Taste masking and Pelletization services. Further diversification in the organic/herbal segment through investment in a joint venture is also planned.

The assigned ratings incorporate SPPL’s healthy growth outlook, adequate business risk profile and conservative financial policy as reflected by existing low leverage capital structure and funding of planned capital investments through equity injection. Going forward, ratings are dependent on reducing product & therapeutic area concentration, as planned, maintaining leverage indicators around current levels and improving corporate governance infrastructure.
As per industry estimates, around 90% of the country’s API requirement is fulfilled through imports. Currently, there are around half a dozen prominent API manufacturers in the country. While capital requirements and entry barriers are considered low, extensive time for licensing requirements and increasing working capital requirements may act as entry barriers. Assessment of business risk profile incorporates strong and growing demand for APIs, advantage enjoyed by local API manufacturers’ vis-à-vis imports and low client concentration risk. Regulatory & reputation risk along with rupee depreciation and low current product and therapeutic area diversity are key business risk factors.

Financial profile is supported by growing revenues and improving margins. After having doubled in FY17, net sales increased by 105% during FY18. Going forward, given the addition of new products in portfolio and anticipated increase in sales volumes, gross margin are projected to continue to improve in FY19. Volatility in raw material prices and fluctuation in exchange rates are key risk factors in achieving projected gross margins. Given the strong demand and limited local supply, management has projected to pass on any increase in manufacturing cost to clients. Liquidity profile is expected to witness improvement in the ongoing year due to growth expected in cash flows.

For further information on this rating announcement, please contact Mr. Talha Iqbal (Ext: 213) or the undersigned (Ext: 201) at 021-35311861-71 or fax to 021-35311872-3.

Javed Callea
Applicable Rating Criteria: Industrial Corporates (May 2016)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited VIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2018 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.

JCR-VIS Credit Rating Company Limited