By Nikita Jaiswal

India Ratings and Research (Ind-Ra) has assigned Axxelent Pharma Science Private Limited (APSPL) a Long-Term Issuer Rating of ‘IND BB+’. The Outlook is Stable. The instrument-wise rating action is as follows:

Instrument Type

Date of Issuance

Coupon Rate

Maturity Date

Size of Issue (million)

Rating/Outlook

Rating Action

Term loan

-

-

October 2029

INR670

IND BB+/Stable

Assigned

KEY RATING DRIVERS

The ratings reflect the time and cost overrun risks associated with APSPL's under-construction manufacturing facility. The total capex envisaged for the project is INR2,424 million, including funding for abbreviated new drug applications. The project is being funded through a promoter’s equity contribution of INR884 million and the remaining INR1,540 million through term loans from banks, where the company has already received a sanction for an INR1,020 million term loan and equity of INR432.70 million as of December 2021. APSPL will complete the construction in two phases. The company is constructing the first phase which comprises an oral dosage manufacturing facility; this will entail a cost of around INR1,134 million and is scheduled to be completed by September 2022. The second phase would involve constructing an injectables manufacturing facility which will entail a cost of INR640 million and is scheduled to be completed by December 2022. Both the facilities will be located at Sricity Tada. The management expects to commercialise operations at the facilities from FY23. The company has already completed the construction of a research and development department (part of phase one) in January 2021 where contracts have come from customers located in Hungary, china, United Kingdom Australia and the US. 

Liquidity Indicator – Stretched: The firm has already received the sanction of INR1,020 million term loans, out of which INR351 million has already been disbursed as of December 2021 and the rest will be disbursed as the construction proceeds will come in. As per the management, if in any case there is an instance of project cost overrun, then the promoters will infuse capital through equity. The debt repayment will start from November 2023, and the moratorium period is three years where interest is
serviced by the promoter. 

Moreover, Ind-Ra expects that the debt service coverage ratio and overall credit metrics to be weak during the initial years of commencement of operations, before an improvement could be seen in the ratios in line with the improvement in the scale of operations.  

The ratings however are supported by the minimal off-take risk in view of the promoter’s diverse experience of over three decades in the pharmaceutical industry. The company is leveraging the promoter's operating track record to establish strong relationships with its customers and thus
 obtain contracts. The company booked revenue of INR5.29 million as of September 2021. The management expects to book top line of INR15 million in FY22 and INR151 million in FY23, based on an order book of INR87.03 million as of as of September 2021.



RATING SENSITIVITIES

Positive: Timely and successful project completion along with substantial orders from the contract development business leading to the visibility of a profitable business in FY23 as per the Ind-Ra's expectations will lead to a positive rating action. 

Negative:
Substantial time and cost overruns in project completion and lower-than-expected revenue visibility leading to lower-than-expected in overall credit metrics or a continued stress in the liquidity position will be negative for the ratings.


COMPANY PROFILE

Incorporated in October 2019 and headquartered in Chennai, APSPL is engaged in the development and creating intellectual property, and manufacturing of oral solid dosage, injectables, oral liquids, otic solutions, ophthalmic and topicals. 

FINANCIAL SUMMARY

Financial summary is not viable and not meaningful as the manufacturing facilities are under construction. 



COMPLEXITY LEVEL OF INSTRUMENTS

Instrument Type

Complexity Indicator

Term loans

Low

 

For details on the complexity levels of the instruments, please visit https://www.indiaratings.co.in/complexity-indicators.

SOLICITATION DISCLOSURES

Additional information is available at www.indiaratings.co.in. The ratings above were solicited by, or on behalf of, the issuer, and therefore, India Ratings has been compensated for the provision of the ratings. 

Ratings are not a recommendation or suggestion, directly or indirectly, to you or any other person, to buy, sell, make or hold any investment, loan or security or to undertake any investment strategy with respect to any investment, loan or security or any issuer.

ABOUT INDIA RATINGS AND RESEARCH

About India Ratings and Research: India Ratings and Research (Ind-Ra) is India's most respected credit rating agency committed to providing India's credit markets accurate, timely and prospective credit opinions. Built on a foundation of independent thinking, rigorous analytics, and an open and balanced approach towards credit research, Ind-Ra has grown rapidly during the past decade, gaining significant market presence in India's fixed income market. 

Ind-Ra currently maintains coverage of corporate issuers, financial institutions (including banks and insurance companies), finance and leasing companies, managed funds, urban local bodies and project finance companies. 

Headquartered in Mumbai, Ind-Ra has seven branch offices located in Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata and Pune. Ind-Ra is recognised by the Securities and Exchange Board of India, the Reserve Bank of India and National Housing Bank. 

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For more information, visit www.indiaratings.co.in.

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Applicable Criteria

Analyst Names

  • Primary Analyst

    Nikita Jaiswal

    Analyst
    India Ratings and Research Pvt Ltd Room no - 1201, 12th Floor, OM Towers, 32 Chowringhee Road, Kolkata-700071, India
    +91 33 40302506

    Media Relation

    Ankur Dahiya

    Manager – Corporate Communication
    +91 22 40356121