Liquidity is supported by the company’s ability to generate healthy annual cash of over Rs 1,000 crore and moderate utilisation of bank lines — around 64% for six months through September 2019.
Rating agency CRISIL on Thursday put Jubilant Life Sciences’ (JLL) Rs 350-crore non-convertible debenture (NCD) programme on credit watch with developing implications. The rating action follows the company’s board approving a plan to reorganise its businesses and demerge the life science ingredients (LSI) business.
Crisil reaffirmed its A1+ rating on JLL’s Rs 400-crore commercial paper (CP) programme. It stated in the rating rationale that it is in discussion with JLL’s management to understand the division of debt under the reorganisation plan and remove the company from rating watch thereafter.
“Crisil notes that the credit risk profile of JLL post demerger will continue to be supported by the pharmaceuticals business which currently accounts for 58% of consolidated revenue and 75% of operating profit (earnings before interest, depreciation, tax and unallocated expenses) given the healthy portfolio of products and presence in niche segments such as radiopharmaceuticals, allergy therapy products and contract manufacturing for global pharmaceutical companies,” the rating firm wrote in the rationale, adding, “Crisil is in discussion with JLL management to better understand the division of assets and liabilities (including debt), and will remove the ratings from watch, and announce its final action once key regulatory approvals are obtained.”
Liquidity is supported by the company’s ability to generate healthy annual cash of over Rs 1,000 crore and moderate utilisation of bank lines — around 64% for six months through September 2019. Large capital expenditure of about Rs 600-700 crore annually is expected to be funded prudently with low reliance on debt. “Term debt obligations are negligible at Rs 100 crore in fiscal 2020, and `250 crore in fiscal 2021 for both business segments, as of today, and can be easily met through accruals. Cash and cash equivalents, including other bank balance, were at Rs 1,363 crore as on September 30, 2019, and may decline by about Rs 700 crore in fiscal 2020, as existing bonds in Jubilant Pharma may be partially redeemed,” Crisil said.