 "CARE Ratings upgrades Wockhardt's long term loans")
CARE Ratings has upgraded Wockhardt Ltd’s long term loans from “AA-“ to ‘AA” on partial resolution of regulatory issues and improvement in revenues from contract manufacturing.
The revision factors in partial resolution of regulatory issues along with expectation of these issues being fully resolved in the near term. It also takes into account partial commercialisation of the pharma company’s upcoming new facility.
Improvement in revenues in Q3 FY15 as against subdued performance in April-September 2014 owing to significant contribution from contract manufacturing segment also helped the company's case.
"Furthermore, the ratings continue to derive strength from WL’s long track record and rich experience of the promoters, its well-established presence in the global pharmaceutical industry," CARE said in a statement.
The company has a diversified product portfolio with brands catering to therapeutic segments in generic formulations, accredited manufacturing facilities supported with well-equipped R&D facilities.
It also has favourable capital structure on a net debt basis along with comfortable liquidity/debt coverage indicators in the nine months ended December 2014, CARE said.
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The rating, however, is constrained by WL’s higher dependence on regulated markets, adverse impact of import alerts on revenues and profitability margins in FY14 and 9MFY15.
Expected deterioration in gearing levels owing to WL’s plan to undertake debt funded capital expenditure and acquisitions is also a negative, it said.
The exposure to foreign exchange fluctuations, increasing pricing pressures and prevailing intense competition in the global generics market also work as constraints on rating, CARE said.
The key rating sensitivities include ability to resolve the various pending regulatory issues, achieve improvement in revenues and profitability margins.
The agency would also track capital structure on net debt basis affecting the credit profile.
The company posted net profit of Rs 379.66 crore in April-December 2014 as against Rs 767.09 crore in nine months ended December 2013. The total income was Rs 3,297.07 crore in nine months of Fy15 as against Rs 3,854.97 crore in FY14.