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-CRISIL assigns BBB-/P3 to Saraca Laboratories' bank facilities.

BANKING AND CREDIT NEWS-October 20, 2010--CRISIL assigns BBB-/P3 to Saraca Laboratories' bank facilities(C)2010 M2 COMMUNICATIONS

20 October 2010 - India's rating agency CRISIL yesterday gave BBB-/stable/P3 ratings to the bank facilities of Saraca Laboratories Ltd.

The agency issued the following press release:

Rs.66.00 Million Cash Credit^ BBB-/Stable (Assigned)

Rs.100.00 Million Long-Term Bank Loan BBB-/Stable (Assigned)

Rs.97.50 Million Proposed Long-Term Bank Loan Facility BBB-/Stable (Assigned)

Rs.50.00 Million Packing Credit^ P3 (Assigned)

Rs.49.00 Million Bill Discounting^ P3 (Assigned)

Rs.35.00 Million Standby Line of Credit^ P3 (Assigned)

Rs.130.00 Million Letter of Credit P3 (Assigned)

Rs.5.00 Million Bank Guarantee P3 (Assigned)

^Fund based limits are completely interchangeable

CRISIL has assigned its 'BBB-/Stable/P3' ratings to the bank facilities of Saraca Laboratories Ltd (Saraca). The ratings reflect Saraca's healthy market position in manufacturing of ranitidine, with a sound customer profile. The company also has a healthy financial risk profile, marked by low gearing and healthy debt protection measures. These rating strengths are partially offset by Saraca's exposure to risks of product substitution, increasing competition, and fluctuations in raw material prices.

Outlook: Stable

CRISIL expects Saraca to maintain its financial risk profile over the medium term backed by moderate cash accruals and low debt repayment obligations. An improvement in the company's business risk profile, backed by product diversification, may lead to a revision in outlook to 'Positive'. Conversely, the outlook could be revised to 'Negative' if Saraca is unable to maintain its competitive position, or it undertakes a large, debt-funded capital expenditure programme.

About the Company

Saraca was incorporated in 1988 by Mr. Subba Reddy and Mr. P S Reddy, to manufacture active pharmaceutical ingredients (APIs). The company is largely into manufacturing a single API, ranitidine, which contributed around 98 per cent of its revenues in 2009-10 (refers to financial year, April 1 to March 31). In March 2010, however, Saraca added another product, gabapentin. Saraca has a presence in both the domestic and international markets, with each of them contributing equally to its revenues.

Saraca reported a provisional profit after tax of Rs.71 million on net sales of Rs.1.06 billion for 2009-10, against Rs.15 million and Rs.0.94 billion, respectively, for 2008-09.

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Publication:M2 Banking & Credit News (BCN)
Geographic Code:9INDI
Date:Oct 20, 2010
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