Rating Rationale

Nectar Lifesciences Limited

5 Sep 2018

Brickwork Ratings reaffirms the long term rating of BWR A (Stable Outlook) and short
term rating of BWR A2+ for the bank loan facilities aggregating Rs. 1484.65 Crores of
Nectar Lifesciences Limited (NLL or ‘the Company’).

Particulars
Amount
Facility Rated Tenure Rating *
(Rs. Crs)
Previous Presentˆ Previous Present
Fund Based BWR A (Pronounced as
Term Loans 214.95 321.75 BWR A (Pronounced
Long BWR Single A)
Cash Credit/Packing as BWR Single A)
Term (Outlook Stable)
(Outlook Stable)
Credit 667.50 667.50 (Reaffirmed)
BWR A2+
BWR A2+
Non Fund Based 495.40 Short (Pronounced as BWR A
(Pronounced as BWR
BG/LC 495.40 Term Two Plus)
A Two Plus)
(Reaffirmed)
1377.85 Rs. 1484.65 Crores (INR One Thousand Four Hundred Eighty Four
Total
Crores and Sixty Five Lakhs Only.)
*Please refer to BWR website ​www.brickworkratings.com​/​ for definition of the ratings
Long Term and Short term ratings reaffirmed.
Rationale/Description of Key Rating Drivers/Rating sensitivities:
BWR has essentially relied upon the Company’s audited financial results upto FY18, projected
financials for FY19, publicly available information and clarifications provided by the Company.
The ratings, continue to factor in the established track record of operations coupled with strong
market position in API segment, comfortable financial risk profile marked by adequate tangible
net worth against its total outstanding debt position and ​approvals received from various
international regulatory agencies for marketing its products in international markets such as
Portugal, Brazil, Korea, Japan, USA amongst others. BWR also takes note of the final claim of
Rs. 12.32 Cr which has been received during FY18 against a fire accident in June 2016.

1 5 Sep 2018
The ratings are, however, constrained by working capital intensive nature of operations,
continuing to report moderate coverage ratios over past three years and highly competitive nature
of industry with increasing regulatory requirements.
Key Rating Drivers
Credit Strengths
Established track record of operations with strong market position: The Company benefits from
the established track record of operations in API segment. It is a leading player in this segment,
having brand presence in 20 states across India and 55 countries across five continents, and has a
global leadership position in 3 oral molecules and 2 sterile molecules. The Company also
increased its capacity utilization for menthol segment which is further adding up to its turnover
and profitability margins.
Comfortable financial risk profile: The Company continues to report a comfortable financial risk
profile marked by adequate tangible net worth against its outstanding total debt position during
FY18. Gearing ratio stood at 0.94x in FY18. NLL incurs routine capex every year which are
majorly funded from its own internal cash accruals.
Approvals received from various international regulatory agencies: The Company has a strong
manufacturing capabilities to develop molecules for regulated international markets. US-FDA
approved 5 out of 8 ANDA’s during FY17 and remaining are expected to get approved in the
current financial year. NLL is awaiting facility approval which is expected by mid of 2019,
which will significantly improve its turnover and profitability levels over the medium term.
Final insurance claim received against fire accident occurred: A fire accident occurred at
Barwala (Derabassi) plant in June 2016. NLL filed the claim for a total amount of Rs.15.91 Cr
against which it has received a final claim of Rs. 12.32 Cr during FY18 (Rs. 8 Cr on 11.04.2017
and Rs. 4.32 Cr on 12.10.2017).
Credit Weaknesses
Working capital intensive nature of operations: The Company continues to report high inventory
and receivables against its turnover level of 1875.98 Cr during FY18. The Company needs to
maintain a certain level of inventory to optimise its production schedule. Company’s liquidity
position was also temporarily impacted due to LOU’s/LOC’s being discontinued by RBI in
FY18, leading to immediate stoppage of credit available through buyers credit. This lead to
higher cash outflow and lesser utilization of its Non-fund based limits. However, the Company
had an exposure of around Rs. 200 Cr in Buyer’s Credit which it has already been cleared
through short term loans availed from lenders and delaying some of its suppliers payments.
Competitive nature of industry: The Company faces competition from the larger players in US
generic market. In India NLL faces competition from one major competitor which is purely price
driven. Pricing pressure and intense competition in US generic market plays an important role in
turnover and margin trajectory of the Company. However, despite intense competition, the

2 5 Sep 2018
Company has emerged as major player in the rest of the world (ROW) countries & Europe and
going forward, management expects to penetrate in other high end regulated markets such as
Korea, Japan and then ultimately USA.
Analytical Approach
BWR has considered the standalone business and financial risk profile of the Company, as
detailed in the Rating Criteria (hyperlinks provided at the end of this rationale).
Rating Outlook: Stable
BWR believes ​Nectar Lifesciences Limited’s ​business risk profile will be maintained over the
medium term. The ‘Stable’ outlook indicates a low likelihood of rating change over the medium
term. The rating outlook may be revised to ‘Positive’ in case the company manages its working
capital efficiently, significantly improves its coverage ratios along with reducing its total interest
cost obligations and improves operational efficiencies level over the medium term. Also, timing
of approval from US-FDA for remaining molecules will play a key role in both revenue and
profits of the Company going forward. The rating outlook may be revised to ‘Negative’ if the
turnover goes down and profit margins show lower than expected figures.
About the Company
Nectar Lifesciences Ltd (NLL), a public listed company based in Chandigarh, is engaged in the
manufacture of specialized pharmaceutical intermediates, active pharmaceutical ingredients
(API’s), Phyto-Chemicals (Menthol) & finished dosage formulations (FDF). NLL was
incorporated in 1995 and presently is one of the largest manufacturers of Cephalosprin range of
products. NLL has 11 State of the art manufacturing units, 8 units in Derabassi, Punjab (API &
Menthol units), 2 units in Baddi, Himachal Pradesh (FDF & Empty Hard Gelatin Capsules units)
& one in Jammu (Menthol unit). NLL is promoted by Mr. Sanjiv Goyal, who has over 3 decades
of experience in the pharma business.
Company Financial Performance
Nectar Lifesciences Limited has reported a total operating income of Rs. 1875.98 Cr in FY18 as
against Rs. 1643.63 Crs in FY17. It has reported a net profit of Rs. 52.16 Crs during FY18 as
against Rs. 55.13 Cr during FY17. As on 31​st March 2018, it has reported a tangible net worth of
Rs. 1012.70 Cr against Rs. 949.28 Cr as on 31​st​ March 2017.
Key financial indicators are summarized in Annexure I below.
Status of non-cooperation with previous CRA: ​Not Applicable
Any other information: ​Not Applicable

3 5 Sep 2018
 Rating History for the last three years (including withdrawn/suspended ratings)

Facility Current Rating (Year 2018) Rating History

Type Amount
Rating 24 Aug 2017 22 Aug 2016 28 July 2015
(Rs. Crs)
Fund Based
BWR A BWR A BWR A BWR A
] Term Loans Long
321.75 (Stable) (Stable) (Stable) (Stable)
Cash Credit/Packing Term
667.50 (Reaffirmation) (Reaffirmation) (Reaffirmation) (Reaffirmation)
Credit
Short BWR A2+ BWR A2+ BWR A2+ BWR A2+
Non Fund Based
495.40 (Stable) (Stable) (Stable) (Stable)
BG/LC Term
(Reaffirmation) (Reaffirmation) (Reaffirmation) (Reaffirmation)
Hyperlink/Reference to applicable Criteria

● General Criteria

● Approach to Financial Ratios

● Manufacturing Companies
For any other criteria obtain hyperlinks from website

Analytical Contacts Media

Ashwini Mital media@brickworkratings.com

Senior General Manager - Ratings Relationship Contact
analyst@brickworkratings.com bd@brickworkratings.com
Phone: 1-860-425-2742

Annexure I – Key Financial Indicators of Nectar Lifesciences Limited

Particulars FY17 (A) FY18 (A)

Total Operating Income (Rs. Crs) 1643.63 1875.98
EBITDA (Rs. Crs) 224.50 236.15
PAT (Rs. Crs) 55.13 52.16
Total Tangible Net worth (Rs. Crs) 949.28 1012.70
Total Debt to Equity Ratio (times) 0.93 0.94
ISCR (times) 1.91 2.05

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For print and digital media
The Rating Rationale is sent to you for the sole purpose of dissemination through your print, digital or electronic
media. While it may be used by you acknowledging credit to BWR, please do not change the wordings in the
rationale to avoid conveying a meaning different from what was intended by BWR. BWR alone has the sole right of
sharing (both direct and indirect) its rationales for consideration or otherwise through any print or electronic or
digital media.

Note on complexity levels of the rated instrument:

BWR complexity levels are ​meant for educating investors. T ​ he BWR complexity levels are available
at​ ​www.brickworkratings.com/download/ComplexityLevels.pdf ​ Investors queries can be sent ​to
info@brickworkratings.com​.

About Brickwork Ratings

Brickwork Ratings (BWR), a SEBI registered Credit Rating Agency, accredited by RBI and empaneled by NSIC,
offers Bank Loan, NCD, Commercial Paper, MSME ratings and grading services. NABARD has empaneled
Brickwork for MFI and NGO grading. BWR is accredited by IREDA & the Ministry of New and Renewable Energy
(MNRE), Government of India. Brickwork Ratings has Canara Bank, a leading public sector bank, as its promoter
and strategic partner.
BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh,
Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations. BWR has rated
debt instruments/bonds/bank loans, securitized paper of over ₹ 11,99,663 Cr. In addition, BWR has rated over 6819
MSMEs. Also, Fixed Deposits and Commercial Papers etc. worth over ₹48,803 Cr have been rated.

BWR has rated over 30 PSUs/Public Sector banks, as well as many major private players. BWR has a major
presence in ULB rating of nearly 102 cities

DISCLAIMER
Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other
reliable sources, which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion;
however, it does not examine the precision or completeness of the information obtained. And hence, the information
in this report is presented “as is” without any express or implied warranty of any kind. BWR does not make any
representation in respect to the truth or accuracy of any such information. The rating assigned by BWR should be
treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be
liable for any losses incurred by users from any use of this report or its contents. BWR has the right to change,
suspend or withdraw the ratings at any time for any reasons.

5 5 Sep 2018