RPG Life edges higher after ICRA upgrades LT rating to 'A+'

RPG Life Sciences added 3.84% to Rs 1529.60 after ICRA upgraded the company's long-term (LT) rating to '[ICRA] A+' from '[ICRA] A' with 'stable' outlook.

The credit rating agency has reaffirmed the companys short-term rating at ICRA] A1.

ICRA stated that the rating action on the bank lines of RPG Life Sciences (RPGLS) considers the steady improvement initsfinancial performance marked by stable growth in its scale of operations (five-year revenue growth (CAGR) of nearly 12%for the period ending FY2024e), sustained improvement in operatingmargins (five-year OPBIDTA growth of approximately 29%) driven by measures taken by the management to optimise operating costs as well as through change in productmix.

The stability in revenues and earnings is expected to continue over the medium term driven by new product development as well as capacity enhancements, with limited reliance on debt and no major debt-funded capital expenditure (capex) plans, leading to robust debt protection metrics.

The ratings, however, remains constrained by its growing, though relatively moderate,scale of operations with the company deriving most of its revenues from a few top brands in its domestic formulations business, resulting in product concentration risks.

The ratings also remain exposed to regulatory scrutiny and timely renewal of approvals from respective regulatory bodies. ICRA will continue to monitor the developments regarding the approval of manufacturing facilities by various health regulators and its likely impact on RPGLS.

The ratings also factor in the relatively high share of acute therapies in the companys portfolio, coupled with the Drugs Prices Control Order (DPCO) segment, which itislooking to diversify to provide better stability to cash flows and insulation against input price fluctuations,to an extent.

RPG Life Sciences Limited, a part of RPG Enterprises, is an integrated pharmaceutical company operating across domestic and international markets in the branded formulations, global generics and API space. With manufacturing facilities in Ankleshwar (Gujarat) and Navi Mumbai (Maharashtra), RPGLS has a presence in therapeutic areas such as nephrology, cardiovascular, gastro-intestinal and pain management, with strong domestic brands such as Lomotil, Azoran, Aldactone and Tricaine.

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