Karachi, December 22, 2020 (PPI-OT): VIS Credit Rating Company Ltd. (VIS) has reaffirmed the entity ratings of The Searle Company Limited (SCL) at ‘AA-/A-1’ (Double A Minus/A-One). Outlook on the assigned ratings is ‘Stable’. Long Term Rating of ‘AA-’ reflects high credit quality, strong protection factors, and moderate risk but may vary slightly because of economic conditions. Short Term Rating of ‘A-1’ indicates high certainty of timely payment, excellent liquidity factors supported by good fundamental protection factors and minor risk factors. The previous rating action was announced on December 09, 2019.
Ratings assigned to SCL incorporate the Company’s strong market position and franchise, diversified product portfolio and therapeutic area coverage and high relative market share of top 10 products vis-a-vis competing brands. Ratings also reflect low business risk profile of the pharmaceutical industry where revenues of the sector will continue to be supported by growing population and increasing life expectancy (implying increase in elderly population), continuous emergence of diseases and recent roll-out of the health card in Punjab and KPK. SCL’s established distribution network along with extensive doctor and pharmacy coverage supports revenue growth. Product portfolio is geared towards treatment of chronic diseases which has positively contributed to sustainability of customer base and repeat business despite the impact of Covid-19.
Recent completion of acquisition of OBS Pakistan in August 2020 has further enhanced and diversified product and therapeutic area coverage. Therapeutic area coverage of OBS Pakistan includes cardiology, neuropsychiatry, gynecology, ophthalmology, endocrinology, vaccines and bone disorders. VIS expects revenue and profitability contribution from OBS Pakistan to be a key driver for revenue and profitability growth over the rating horizon.
Ratings also reflect sound financial profile of SCL. Healthy cash flow generation has resulted in strong liquidity profile. While remaining within manageable levels, cash flow coverages and leverage indicators have weakened as additional debt drawdown has been undertaken to fund OBS Pakistan acquisition in addition to increasing working capital requirements.
However, VIS expects healthy internal capital generation over the rating horizon to result in gradual reduction in leverage indicators and improvement in cash flow coverages. Completion of recently announced right issuance process will also facilitate in this regard; a sizeable portion of the same will be utilized for payment of deferred acquisition cost for OBS Pakistan. Ratings remain dependent on reduction in leverage indicators over the rating horizon, maintaining healthy cash flow coverages and sound debt servicing ability.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: bilal@jcrvis.com.pk
Website: https://www.vis.com.pk/
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