Torrent Pharma gains after ICRA revises credit outlook to 'positive'

Torrent Pharmaceuticals rose 1.07% to Rs 3123.85 after the credit ratings agency ICRA has re-affirmed its credit rating on various credit instruments of the company and has revised the outlook on the same to 'positive' from 'stable'.

The ratings agency has reaffirmed the company's non-convertible debentures rating at 'ICRA AA', commercial papers rating at 'ICRA A1+' and banking facility rating at 'ICRA AA'.

ICRA said that the change in outlook on the long-term rating to positive factors in Torrent Pharmaceuticals' (TPL's) ongoing deleveraging exercise, supported by its healthy operating profit margins (OPM) and cash generation, thereby leading to healthy credit metrics.

The ratings consider TPL's established presence in the domestic market (51.2% share of its Q1 FY2022 revenues) and its diversified international business operations in key markets of the US (12.5%), Germany (12.2%), Brazil (7.2%) and other countries (10.2%). The ratings also consider TPL's established position as the eighth largest domestic player in the Indian pharmaceutical market (IPM) and its presence amongst the top five players in key therapeutic areas of cardiovascular (CVS), central nervous system (CNS), vitamins, minerals and nutrients (VMN), and gastrointestinal (GI).

The company's operations remain exposed to regulatory risks, arising out of the greater scrutiny by regulatory agencies as well as pricing controls in the domestic market.

The company also remains vulnerable to litigations or regulatory changes impacting TPL or the industry. Its operations also remain exposed to foreign currency fluctuations (due to exports, imports and foreign currency borrowings), mitigated by company's comprehensive 100% hedging policy.

TPL has debt repayment obligations of approximately Rs 1,000- 1,200 crore in FY2022 and FY2023 each. However, ICRA derives comfort from its unencumbered cash and cash equivalents of Rs. 764 crore (consolidated basis) and undrawn working capital lines of Rs 1,464 crore (at standalone level) as on 31 March 2021. The surplus funds in its overseas subsidiaries can be utilised, when required.

Torrent Pharmaceuticals (TPL) is the eighth largest player in the domestic pharmaceutical market with a presence in therapeutic segments like CVS, GI, CNS and VMN. The company has an arrangement with Novo Nordisk for manufacturing and supplying insulin for the Indian market. The exports business of TPL is carried out both by its foreign subsidiaries as well as directly by the parent company. TPL markets both branded generics and generic generics, and participates in the institutional segment of export markets.

The company posted a 2.8% rise in consolidated net profit to Rs 330 crore on a 5.3% rise in net sales to Rs 2,120 crore in Q1 FY22 over Q1 FY21.

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