Rating agency Crisil today said that Glenmark Pharmaceuticals' rising debts have strained its financial health and downgraded the working capital loan and cash credit ratings of the drug maker.

"The downgrade reflects Glenmark's strained financial risk profile due to a sharp increase in debt levels as a result of a sizeable increase in working capital requirements in both Glenmark and its subsidiaries," the rating agency said in a release.

Also Read   Related Stories News Now - Infrastructure sector rebounds in April - Exports dip for seventh month - Fitch retains highest short-term rating for Tulip Telecom - Fitch Ratings withdraws 'F1+(ind)' rating on Hyundai India - Lower production of sugar, wheat hits IIP growth - Fitch lowers ING Vysya Bank's ratings

Also Read   Related Stories News Now - Markets end flat - Turbulence ahead for airlines despite oil price drop - Weak rupee may bring cheer to NRIs, expats - LIC buys PSU stocks, sells pvt sector blue-chips in Q4 - Banks may lower deposit rates as inflation eases: Report More

Further it said that the rating revision also reflects the refinancing risk posed by high reliance on short-term borrowings to fund the increase in working capital requirements.

The working capital demand loan and cash credit ratings for Glenmark have been downgraded to A+/Negative, which is a lower investment-grade rating but with a negative outlook.

Earlier, Crisil had assigned AA-/Stable ratings on both the debt facilities, which meant relatively better investment grade with a stable outlook. These ratings are for a Rs 145 crore working capital demand loan and a Rs 25 crore cash credit. Crisil has also assigned an A+/Negative rating to Glenmark's Rs 400 crore long-term loans.

The rating agency has also downgraded its ratings on Glenmark's Rs 400 crore short-term loans.     

Crisil said that Glenmark's financial risk profile was strained because of an increase in net working capital requirements following delayed receivables from Latin American, Russian, and Commonwealth of Independent States (CIS) markets, as well as expansion of operations of its global subsidiaries.     

The company has invested around Rs 700 crore for setting up manufacturing facilities and acquiring brands in Poland in 2008-09, which has led to a sharp increase in the debt levels to an estimated Rs 1,900 crore as on March 31, 2009, from about Rs 1,000 crore a year ago.     

"More than 50 per cent of the overall debt is short-term, posing a significant refinancing risk for the company. The company has arranged refinancing for a part of the short term loans with loans having tenure between 18 to 24 months to address this risk," Crisil said.

New Ipad Application :Business Standard's all new IPad App Click here to download for free Other Stories      - Markets end flat - Turbulence ahead for airlines despite oil price drop - Weak rupee may bring cheer to NRIs, expats - LIC buys PSU stocks, sells pvt sector blue-chips in Q4 - Banks may lower deposit rates as inflation eases: Report

Tags : Crisil | rating agency | Glenmark Pharmaceutical   Read Business news in  Advertisements -  Journey on, We are by Your Side. Click here to know more -  2 Lac Apartments, 1 Lac House / Plots. Click here -  Benefits Upto Rs. 2.36 Lakhs on the Fully Loaded TJet Petrol. -  The Best Seller is Also the No. 1 in Mileage. Click here -  Watch The Film Here. Click here to know more.. -  Leader in Passenger Car & Automobile Tyres. Click here -  1 billion in saving for Unilever without any tangles. -  A Brand New Server at a Price That Fits Your Budget. Click here -  Learn How One City is Running on FOOD SCRAPS. -  One Partnership Endless Possibilities. Click here to know more -  Helping doctors detect diseases earlier, saving costs & extending lives. -  36 Lakhs can get you a pool of Luxuries. Click here -  Which is the best plan for your daughter -  Check out the TRUE COLOURS of your Stocks, Now for FREE! -  One of the leading business schools in the world.Know More