The agency has also affirmed the company’s short term rating at ‘CARE A1+’.
CARE Ratings stated that the ratings assigned to bank facilities of Divi’s Laboratories continue to derive strength from the extensive experience of promoters and management team in the pharmaceutical industry, the company’s established track record in Contract Research and Manufacturing Services (CRAMS) segment with reputed clientele, its strong research and development (R&D) capabilities and favourable industry outlook.
Ratings factor in strong credit metrics characterised by sound capital structure, robust debt coverage indicators, and healthy liquidity maintained by the company.
However, ratings are tempered by product and customer concentration risk despite reduced in FY24 as against FY23, working capital intensive operations, though funded entirely through internal accruals, exposure to the regulatory risk and forex fluctuation risk considering majority of the revenue being derived from exports.
Stabilisation of total operating income (TOI) and attenuation in profitability margins in FY24 is primarily attributed to change in product mix, pricing pressure in generics segment, rise in raw material prices and freight costs.
CARE Ratings expects improvement in TOI and margins in FY25 considering launch of new products, broadening of customer base, ease of raw material prices, improving demand, addition of capacity with operationalisation of Kakinada plant in second half of FY25, and increase in overall capacity utilisation.
Divi's Laboratories is a pharmaceutical company engaged in generic API, custom synthesis, and nutraceuticals. The company is catering to therapeutic segments such as cardiovascular, anti-inflammatory, anti-cancer, central nervous system drugs among others. Divi’s currently has seven manufacturing units (one in Kakinada under construction) and three R&D centres spread across Telangana and Andhra Pradesh.
The scrip rose 0.42% to currently trade at Rs 5518.80 on the BSE.