Update on recent fire incident on newly expanded capacities
On June 27, 2018, NGL Fine Chem Limited (NGL) announced that there was fire accident at the company’s plant located at F-11, Tarapur and that the assessment of damage is under process. At the aforesaid plant, NGL was carrying out expansion of their production capacity and was undertaking trial production when accident happened. However, the company has adequate insurance cover for losses caused by damage fixed assets and loss of profit. CRISIL believes the incident will not have a major impact on the company’s business and financial risk profiles.
Last Ratings provided : Sep 06, 2017 Link
Key Rating Drivers & Detailed Description
Healthy financial risk profile
The financial risk profile is supported by comfortable networth and gearing of Rs 58.3 crore and 0.39 time, respectively, as on March 31, 2017. Debt protection metrics are strong due to healthy profitability and controlled reliance on debt.
Experience of the promoters in the pharmaceuticals industry
NFC manufactures bulk drugs and intermediates for human and veterinary diseases. It primarily manufactures active pharmaceutical ingredient (APIs) under the antiprotozoal therapeutic category. The promoters, Mr Rahul Nachane and Mr Rajesh Lawande, have experience of over a decade in the pharmaceuticals industry. Their expertise and experience have helped NFC establish its presence in the highly fragmented bulk drugs industry and establish relationships with clients, which will support the company’s business risk profile over the medium term.
- Modest scale and working capital-intensive operations
NFC’s scale of operations is modest, compared with that of established players in the domestic pharmaceuticals industry. Also, operations are moderately working capital intensive. The company extends credit of 90-120 days to its clients. It has to maintain raw material inventory of 30-60 days to cater to urgent demand and remain competitive. Ability to scale up operations in the coming quarters, improvement in the margins and management of its working capital cycle will be a key determinant of its credit risk profile over the medium term.
CRISIL believes NFC will continue to benefit from its promoters’ industry experience and established customer relationships. The outlook may be revised to ‘Positive’ if revenue and profitability improve on a sustained basis while financial risk profile remains healthy. The outlook may be revised to ‘Negative’ if the business performance weakens considerably, and if capital structure and key debt protection metrics are hit by larger-than-expected, debt-funded capital expenditure or acquisition, or if working capital cycle lengthens.
About the Company
Incorporated in 1981, NFC is managed by Mr Rahul Nachane and Mr Rajesh Lawande. The company manufactures human and veterinary bulk drugs, intermediates, and formulations. It primarily deals in animal healthcare products such as antiprotozoal, anthelmintics, and growth promoters. Its administrative office is in Mumbai and manufacturing facilities are in Tarapur and Navi Mumbai in Maharashtra.