The agency has affirmed the company’s short-term rating at 'IND A2+’.
India Ratings and Research stated that the outlook revision reflects strong growth in BHL’s revenue and profitability in 9MFY25, coupled with the equity infusions during FY25-FY26 through preferential equity share allotment and share warrants, leading to the repayment of debt and funding for capex requirements.
India Ratings notes the equity infusions have led to a significant improvement in the company’s credit metrics, with its leverage remaining below 2x over the near to medium term.
The ratings reflect BHL’s improving business mix, led by diversification in higher margin business formulations coupled with revenue emanating from contract development and manufacturing organisation (CDMO) business which has a long term visibility of supplies and profitability.
The agency notes although active pharmaceutical ingredient (API) pricing has stabilised, competition from China in its key products will continue to remain a monitorable.
As per the management, BHL has backward integration in its large molecules which will offset any further pricing challenges. The agency will monitor the improvement in the working capital cycle and its impact on the credit metrics in the near term.
India Ratings further said that a significant increase in the scale of operations and the profitability while improving the gross working capital cycle, resulting in the net leverage reducing below 2.0x, on a sustained basis, could lead to a positive rating action.
However, a significant decline in the scale of operations and the EBITDA margins, along with deterioration in the gross working capital cycle, liquidity position and overall credit metrics, with the net leverage remaining above 3.0x, all on a sustained basis, will be negative for the ratings.
Bajaj Healthcare manufactures APIs and branded and generic formulations. It has five API manufacturing plants, located in Tarapur, Maharashtra, and Vadodara in Gujarat: one manufacturing plant of finished formulations in Vadodara, Gujarat and one manufacturing plants of intermediates in Tarapur, Maharashtra.
The scrip shed 0.86% to currently trade at Rs 553.60 on the BSE.