Credit Rating Report [Surveillance]

The ACME Laboratories Limited

Particulars Ratings Remarks

The ACME Laboratories Ltd. AA2 Entity

BDT 803.1 million Long Term Outstanding AA2 (Lr) Please see

Pharmaceuticals
Appendix-1 for
BDT 820.0 million Cash Credit* Limit AA2 (Lr)
details
BDT 5,150.0 million aggregate fund based limit ST-1
BDT 2,250.0 million aggregate non fund based limit ST-1
Outlook Positive
Previous Rating Summary
The ACME Laboratories Ltd. AA2 Entity

BDT 459.88 million Long Term Outstanding AA2 (Lr)

BDT 300.00 million Cash Credit* Limit AA2 (Lr)
BDT 1,583.00million aggregate fund based limit ST-1
BDT 1,390.00 million aggregate non fund based limit ST-1
Lr- Loan rating; ST-Short Term
*Due to its revolving nature, CRAB views Cash Credit (CC) as long-term facility.

Date of Rating: 04 October 2012

Validity: The Entity and Long Term ratings are valid up to 30 June 2013 and the Short Term ratings are valid up to
limit expiry date of respective credit facilities or 30 June 2013 whichever is earlier.

Rating Based on: Audited financial statement of 31 December 2011, bank liability position as on 30 June 2012 and
other relevant quantitative as well as qualitative information up to the date of rating declaration.
Methodology: CRABs Corporate Rating Methodology (www.crab.com.bd
Analysts: BRIEF PROFILE
Md Asraf Ali The ACME Laboratories Limited ( hereinafter referred
asraf@crabrating.com as TALL or the Company) is one of the largest
Anand Reza pharmaceuticals product manufacturer and
anandreza@crabrating.com marketer. The Company makes drugs for both
Financial Highlights human and animal health. TALL also has a herbal
(in million BDT) 2011 2010 unit to supplement traditional therapies. The
Sales 6,962.7 5,762.0 Company is still owned by members of Sinha family
since its inception.
Sales Growth 20.8% 21.5%
Gross Profit Margin 43.9% 44% RATIONALE
EBITDA Margin 21.9% 19% Credit Rating Agency of Bangladesh Limited (CRAB)
CRAB Rating Report

has affirmed AA2 (pronounced double A two) rating

Net Profit After Tax 9.1% 7.9%
to The ACME Laboratories Limited in long term.
Margin
CRAB assigns AA2 (Lr) rating to BDT 803.1 million
Equity 3,166.2 2586.1
long term outstanding and BDT 820.0 million cash
Debt 3,354.0 2214.5 credit in long term loan category. CRAB also assigns
EBITDA 1,523.2 1110.6 ST-1 rating to BDT 5,150.0 million fund based limit

Borrowed fund to 1.06 0.86 and BDT 2,250.0 million non fund based limit in
Equity short term loan category.

Borrowed fund to 2.20 1.99 Assigned rating and outlook reflect TALL's steady
EBITDA progress in retaining its market share, consistent
Interest Coverage 3.45 3.63 growth, retained level of profitability with reasonable
CFO / Debt 0.23 0.19 growth in borrowed fund to support this
progression. The Company's unaltered front
FCF /Debt -0.05 (0.10)
management having cumulative experience, family

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 The ACME Laboratories Ltd.

oriented ownership, growth centric progression and brand familiarity made TALL a major player in pharma sector of
Bangladesh that in coming days would help the company remain competitive at its peer level.

The growth of pharmaceutical sector is dominated by large and established companies having major share of the
market. TALL being one of the major players would also share its pie of the sectoral growth. The Company's large
product portfolio base gives it a diverse growth which need to less rely on some selected products which alongside
new product introduction would support the growth in coming years.

The pharmaceuticals sector of Bangladesh is blessed with relaxed TRIPS, competitive sourcing of raw materials from
some cheap locations including China and comparatively cheap and available human resources which can produce
drugs for this heavy domestic demand oriented market. Although being regulated from pricing and production
aspects the marketing practice of pharmaceutical products remains very outside of regulatory purview and lets the
companies spend heavily on selling mechanism and thus large companies remain advantageous with heavy
spending capacity and rich products list which, rating views, were applicable for TALL as well.

Rating expects TALL to retain its level of profitability with its current products and marketing strengths. The
Company has been below its peers in bottom line profit margins as it has to spend more on operating expenditures
(25%) highly contributed by field force (10%), distribution (7%) and other marketing (4%) expenses. Financing
expenses in proportion to net sales slightly increased in 2011 to 5.7% from earlier years' average 4.9% owing to
increased short term loan support given to its sister concern ACME Specialized Pharmaceuticals Limited.

TALL has shown a sign of growth in the first half of 2012. The Company earned BDT 4,682.0 million sales revenue
against BDT 3,748.0 million in first half of 2011.

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 The ACME Laboratories Ltd.

CRAB RATING SCALES AND DEFINITIONS Long Term (Corporate)

Long Term Rating Definition

Companies rated in this category have extremely strong capacity to meet financial
AAA
commitments. These companies are judged to be of the highest quality, with minimal
Triple A
credit risk.
Companies rated in this category have very strong capacity to meet financial
AA1, AA2, AA3*
commitments. These companies are judged to be of very high quality, subject to very low
Double A
credit risk.

Companies rated in this category have strong capacity to meet financial commitments,
A1, A2, A3
but are susceptible to the adverse effects of changes in circumstances and economic
Single A
conditions. These companies are judged to be of high quality, subject to low credit risk.

Companies rated in this category have adequate capacity to meet financial commitments
BBB1, BBB2, BBB3 but more susceptible to adverse economic conditions or changing circumstances. These
Triple B companies are subject to moderate credit risk. Such companies possess certain
speculative characteristics.
Companies rated in this category have inadequate capacity to meet financial
BB1, BB2, BB3 commitments. Have major ongoing uncertainties and exposure to adverse business,
Double B financial, or economic conditions. These companies have speculative elements, subject to
substantial credit risk.
B1, B2, B3 Companies rated in this category have weak capacity to meet financial commitments.
Single B These companies have speculative elements, subject to high credit risk.

CCC1, CCC2, CCC3 Companies rated in this category have very weak capacity to meet financial obligations.
Triple C These companies have very weak standing and are subject to very high credit risk.

Companies rated in this category have extremely weak capacity to meet financial
CC
obligations. These companies are highly speculative and are likely in, or very near,
Double C
default, with some prospect of recovery of principal and interest.

Companies rated in this category are highly vulnerable to non-payment, have payment
arrearages allowed by the terms of the documents, or subject of bankruptcy petition, but
C
have not experienced a payment default. Payments may have been suspended in
Single C
accordance with the instrument's terms. These companies are typically in default, with
little prospect for recovery of principal or interest.

D D rating will also be used upon the filing of a bankruptcy petition or similar action if
(Default) payments on an obligation are jeopardized.

*Note: CRAB appends numerical modifiers 1, 2, and 3 to each generic rating classification from AA through CCC.
The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating
category.

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 The ACME Laboratories Ltd.

CRAB RATING SCALES AND DEFINITIONS

LONG-TERM RATING: LOANS/FACILITIES FROM BANKS/FIS
(All loans/facilities with original maturity exceeding one year)
RATINGS DEFINITION
Loans/facilities rated AAA (Lr) are judged to offer the highest degree of safety, with
AAA (Lr)
regard to timely payment of financial obligations. Any adverse changes in circumstances
(Triple A) Highest
are unlikely to affect the payments on the loan facility.
Safety

Loans/facilities rated AA (Lr) are judged to offer a high degree of safety, with regard to
AA (Lr)*
timely payment of financial obligations. They differ only marginally in safety from AAA
(Double A) High
(Lr) rated facilities.
Safety

Loan/facilities rated A (Lr) are judged to offer an adequate degree of safety, with regard
A (Lr) to timely payment of financial obligations. However, changes in circumstances can
Adequate Safety adversely affect such issues more than those in the higher rating categories.

Loans/facilities rated BBB (Lr) are judged to offer moderate safety, with regard to timely
BBB (Lr) payment of financial obligations for the present; however, changing circumstances are
(Triple B) Moderate more likely to lead to a weakened capacity to pay interest and repay principal than for
Safety issues in higher rating categories.

Loans/facilities rated BB (Lr) are judged to carry inadequate safety, with regard to timely
BB (Lr) payment of financial obligations; they are less likely to default in the immediate future
(Double B) Inadequate than instruments in lower rating categories, but an adverse change in circumstances
Safety could lead to inadequate capacity to make payment on financial obligations.

Loans/facilities rated B (Lr) are judged to have high risk of default; while currently
B (Lr) financial obligations are met, adverse business or economic conditions would lead to lack
High Risk of ability or willingness to pay interest or principal.

Loans/facilities rated CCC (Lr) are judged to have factors present that make them very
CCC (Lr) highly vulnerable to default; timely payment of financial obligations is possible only if
Very High Risk favorable circumstances continue.

Loans/facilities rated CC (Lr) are judged to be extremely vulnerable to default; timely

CC (Lr)
payment of financial obligations is possible only through external support.
Extremely High Risk

Loans/facilities rated C (Lr) are currently highly vulnerable to non-payment, having

obligations with payment arrearages allowed by the terms of the documents, or
obligations that are subject of a bankruptcy petition or similar action but have not
C (Lr)
experienced a payment default. C is typically in default, with little prospect for recovery of
Near to Default
principal or interest. C (Lr) are typically in default, with little prospect for recovery of
principal or interest.

Loans/facilities rated D (Lr) are in default or are expected to default on scheduled

D (Lr)
payment dates.
Default

*Note: CRAB appends numerical modifiers 1, 2, and 3 to each generic rating classification from AA through CCC.
The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating
category.

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SHORT-TERM CREDIT RATING: LOANS/FACILITIES OF BANKS/FIS

(All loans/facilities with original maturity within one year)

RATING DEFINITION

ST-1 This rating indicates that the degree of safety regarding timely payment on the
loans/facilities is very strong.
Highest Grade

ST-2 This rating indicates that the degree of safety regarding timely payment on the
loans/facilities is strong; however, the relative degree of safety is lower than that for issues
High Grade
rated higher.

ST-3 This rating indicates that the degree of safety regarding timely payment on the
loans/facilities is adequate; however, the issues are more vulnerable to the adverse effects
Adequate Grade
of changing circumstances than issues rated in the two higher categories.

ST-4 This rating indicates that the degree of safety regarding timely payment on the
loans/facilities is marginal; and the issues are quite vulnerable to the adverse effects of
Marginal
changing circumstances.

ST-5 This rating indicates that the degree of safety regarding timely payment on the
loans/facilities is minimal, and it is likely to be adversely affected by short-term adversity
Inadequate Grade
or less favorable conditions.

ST-6 This rating indicates that the loans/facilities are expected to be in default on maturity or is
in default.
Lowest Grade

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