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June 28, 2024
Innovassynth Technologies (I) Limited: Ratings reaffirmed
Summary of rating action
Instrument*
Previous Rated Amount
(Rs. crore)
Current Rated Amount
(Rs. crore)
Rating Action
Long-term – Fund-based limit –
Term Loan
4.64
4.64
[ICRA]BBB+ (Stable); reaffirmed
Long-term – Fund-based limit –
Export Credit
15.00
15.00
[ICRA]BBB+ (Stable); reaffirmed
Long-term – Fund-based limit –
Cash Credit**
(15.00)
(15.00)
[ICRA]BBB+ (Stable); reaffirmed
Short-term – Non-fund based
limit – Letter of Credit
12.50
12.50
[ICRA]A2; reaffirmed
Short-term – Interchangeable
Limit – Bank Guarantee^
(12.50)
(12.50)
[ICRA]A2; reaffirmed
Total
32.14
32.14
*Instrument details are provided in Annexure-I; **Sub-limit of EC; ^Sub-limit of LC
Rationale
The reaffirmation of ratings for Innovassynth Technologies (I) Limited (ITIL) factors in the strong financial flexibility enjoyed by
the company for being a part of the Rajan Raheja Group (a well-diversified business group) and ITIL’s established operational
track record in the contract research and manufacturing services (CRAMS) industry, which is supported by its research and
development (R&D) infrastructure. Leveraging on the same, ITIL has developed a wide client base, which includes some
reputed global companies from the pharmaceutical and chemical industries. ICRA has noted that the company’s financial
performance has moderated in FY2024 with lower-than-expected revenue growth and accrual generation, resulting in some
weakening in its debt protection metrics. This was on the back of relatively lower offtake by some global clients, expenses
incurred towards strategic initiatives to enhance client base/business diversification and R&D capabilities. There was some
impact on production also due to partial utilisation of facilities for trial runs of new products. Given its healthy order book
position, recent addition to its customer base and commercialisation of newly developed products, ICRA expects ITIL to report
a healthy revenue growth and improve its operating margins in the current fiscal, and the same would remain a key rating
sensitivity.
The ratings, however, remain constrained by the company’s moderate scale of operations and intense competition in the
industry, marked by presence of several large and established players, resulting in limited economies of scale. Also, ITIL’s
profitability remains exposed to volatility in raw material prices and foreign exchange (forex) rates. Further, the company is
exposed to customer concentration risk with more than 50% of its revenues derived from a single customer. However, ITIL’s
long relationship with the customer and diversification of product portfolio for the customer in the recent months provide
some comfort.
The Stable outlook on the long-term rating reflects ICRA's expectation ITIL’s credit profile will be supported by higher internal
accrual generation, a comfortable capital structure and strong financial flexibility.
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Key rating drivers and their description
Credit strengths
Established operational track record in the industry – Incorporated in 2001, ITIL has an extensive operational track record in
the CRAMS industry. Over the years, the company has established healthy relationships with its key customers and suppliers,
supported by a strong R&D infrastructure, and an experienced and qualified workforce at its plant in Maharashtra.
Strong promoter group enhances financial flexibility – ITIL is a part of the Rajan Raheja Group of companies, a well-diversified
business group with interests across batteries, software, cement, etc. The strong promoter group enhances the company’s
financial flexibility. Further, ITIL also benefits from the extensive experience of the promoters in the speciality chemical
business.
Reputed customer base – Operating in the CRAMS industry for over two decades, the company has established strong
relationships with its clientele that includes reputed players in the speciality chemicals and pharmaceuticals business. ITIL is
set to provide two new products to one of its key customers, which provides revenue visibility in the near term. In addition,
ITIL’s customer base also includes reputed global pharmaceutical companies.
Comfortable capital structure and debt coverage indicators – Notwithstanding some increase in debt level in FY2024, ITIL’s
capital structure and gearing level (0.4 times as on March 31, 2024) have remained comfortable, supported by its adequate
net worth base of Rs. 101.2 crore as on March 31, 2024. Its operating margins contracted in the past two fiscals due to one-
time expenses/fees paid to a leading consultancy firm as a part of ITIL’s strategic initiative to widen its customer base, higher
employee expenses on the back of addition to its staff base to support business growth and R&D activities and some impact
on production in FY2024 due to partial utilisation of facilities for development of new products. While these led to some
moderation in its coverage metrics, the same are expected to strengthen in FY2025, aided by higher cash accruals and no
material increase in debt levels, supporting the company’s credit profile.
Credit challenges
Moderate scale of operations in competitive CRAMS sector with large and established players exerting pricing pressure –
ITIL’s scale of operations remains moderate with an operating income of Rs. 160-200 crore in FY2023 and FY2024, which marks
it as a mid-sized player in the industry. Moreover, ITIL faces stiff competition from other large pharmaceutical and chemical
manufacturing companies in the domestic as well as export markets, which exerts pricing pressure and limits its bargaining
power to an extent. However, the company benefits to an extent from its established relationships with its key customers.
Exposed to customer concentration risk – In the recent years, ITIL has derived 50-60% of its revenues from one of its key
customers, exposing it to high customer concentration risk. However, the company has a long relationship with the customers
and has also increased its wallet share with them. Moreover, its recent and ongoing efforts to diversify its customer base by
expanding its product base and market presence are expected to aid its business profile further.
Profitability exposed to volatility in raw material prices and forex rates – ITIL’s key raw materials are speciality chemicals and
key starting materials (KSMs) which are mainly petroleum derivatives and, hence, their prices are exposed to variations in
crude oil prices in international markets. The company imports more than half of its raw material requirement. Further, the
company is working towards producing certain KSMs in-house, which is likely to lower its dependence on imports to some
extent.
Liquidity position: Adequate
ITIL's liquidity profile remains adequate supported by steady internal accrual generation, cash balances of ~Rs. 4 crore and a
buffer of ~Rs. 21 crore in the form of undrawn bank lines as of May 2024. Further, the company does not have any significant
term loan repayment liability or debt-funded capex over the near term, which supports its liquidity position.
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Rating sensitivities
Positive factors – ICRA could upgrade the ratings if there is a sustained improvement in ITIL’s operating income, profitability
and debt protection metrics, along with strengthening of its liquidity profile. Increased level of business diversification will also
be key for ratings upgrade.
Negative factors – Negative pressure would arise if there is significant decline in revenue or profitability, or adverse changes
in contract terms with its top customer, resulting in cash flow pressure, or if a stretch in the working capital cycle or higher-
than-anticipated debt-funded capex weakens its liquidity and debt coverage indicators. Specific metrics that could lead to
ratings downgrade include Total debt (including lease liabilities)/OPBDITA of more than 2.5 times on a sustained basis.
Analytical approach
Analytical Approach
Comments
Applicable rating methodologies
Corporate Credit Rating Methodology
Rating Methodology for Pharmaceuticals
Parent/Group support
Not Applicable
Consolidation/Standalone
Standalone
About the company
ITIL was incorporated in December 2001 and acquired the chemical division of Indian Organics Chemicals Limited. ITIL provides
custom research and manufacturing services along with R&D support programs from lead generation to clinical supplies. The
company is involved in developing, scaling up and manufacturing specialty chemicals and pharmaceutical intermediates. Its
key business areas are customs synthesis, contract research and manufacturing specialty chemicals, toll manufacturing of
chemicals and similar businesses.
Key financial indicators (audited)
ITIL - Standalone
FY2023
FY2024
Operating income (OI)
203.1
160.0
PAT
-2.9
-0.5
OPBDIT/OI
2.8%
7.0%
PAT/OI
-1.4%
-0.3%
Total outside liabilities/Tangible net worth (times)
0.8
0.7
Total debt/OPBDIT (times)
5.4
3.9
Interest coverage (times)
1.9
2.4
Source: Company, ICRA Research; All ratios as per ICRA’s calculations; Amount in Rs. Crore; PAT: Profit after tax; OPBDIT: Operating profit before depreciation,
interest, taxes and amortisation
Status of non-cooperation with previous CRA: ITIL did not provide the requisite information needed to conduct its
surveillance rating process and did not pay the surveillance fees for the rating exercise as agreed to in its Rating Agreement
with CARE Ratings Ltd. It was therefore classified as ‘Issuer not-cooperating’ and based on the best available information with
the credit rating agency, the rating continues to remain at ‘CARE BB-/A4 (Issuer Not Cooperating) for Rs. 39.99 crore bank
facilities of ITIL as on January 16, 2024.
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Any other information: None
Rating history for past three years
Instrument
Current rating (FY2025)
Chronology of rating history
for the past 3 years
Type
Amount
rated
(Rs. crore)
Amount
outstanding
as of Mar 31,
2024
(Rs. crore)
Date & rating in
FY2025
Date & rating in
FY2024
Date & rating in
FY2023
Date & rating in
FY2022
Jun 28, 2024
-
Mar 28, 2023
Dec 20, 2021
1
Term loans
Long-term
4.64
4.64
[ICRA]BBB+
(Stable)
-
[ICRA]BBB+
(Stable)
[ICRA]BBB+
(Stable)
2
Export Credit
(EC)
Long-term
15.00
-
[ICRA]BBB+
(Stable)
-
[ICRA]BBB+
(Stable)
[ICRA]BBB+
(Stable)
3
Cash Credit*
Long-term
(15.00)
-
[ICRA]BBB+
(Stable)
-
[ICRA]BBB+
(Stable)
[ICRA]BBB+
(Stable)
4
Letter of
Credit (LC)
Short-
term
12.50
-
[ICRA]A2
-
[ICRA]A2
[ICRA]A2
5
Bank
Guarantee^
Short-
term
(12.50)
-
[ICRA]A2
-
[ICRA]A2
[ICRA]A2
*Sub-limit of EC, ^Sub-limit of LC
Complexity level of the rated instruments
Instrument
Complexity Indicator
Long-term – Fund-based limit –Term Loan
Simple
Long-term – Fund-based limit – Export Credit
Simple
Long-term – Fund-based limit – Cash Credit
Simple
Short-term – Non-fund based limit – Letter of Credit
Very Simple
Short-term – Interchangeable Limit – Bank Guarantee
Very Simple
The Complexity Indicator refers to the ease with which the returns associated with the rated instrument could be estimated.
It does not indicate the risk related to the timely payments on the instrument, which is rather indicated by the instrument's
credit rating. It also does not indicate the complexity associated with analysing an entity's financial, business, industry risks or
complexity related to the structural, transactional or legal aspects. Details on the complexity levels of the instruments are
available on ICRA’s website: Click Here
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Annexure I: Instrument details
ISIN
Instrument Name
Date of Issuance
Coupon
Rate
Maturity
Amount Rated
(Rs. crore)
Current Rating and Outlook
NA
Term loans
FY2020
8.5-
9.0%
FY2028
4.64
[ICRA]BBB+ (Stable)
NA
Export Credit (EC)
NA
NA
NA
15.00
[ICRA]BBB+ (Stable)
NA
Cash Credit*
NA
NA
NA
(15.00)
[ICRA]BBB+ (Stable)
NA
Letter of Credit (LC)
NA
NA
NA
12.50
[ICRA]A2
NA
Bank Guarantee^
NA
NA
NA
(12.50)
[ICRA]A2
Source: Company; *Sub-limit of EC; ^Sub-limit of LC
Please click here to view details of lender-wise facilities rated by ICRA
Annexure II: List of entities considered for consolidated analysis – Not applicable
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ANALYST CONTACTS
Kinjal Shah
+91 022 61143400
kinjal.shah@icraindia.com
Deepak Jotwani
+91 124 4545870
deepak.jotwani@icraindia.com
Charvi Sagar
+91 124 4545 373
charvi.sagar@icraindia.com
RELATIONSHIP CONTACT
L. Shivakumar
+91 22 6114 3406
shivakumar@icraindia.com
MEDIA AND PUBLIC RELATIONS CONTACT
Ms. Naznin Prodhani
Tel: +91 124 4545 860
Helpline for business queries
+91-9354738909 (open Monday to Friday, from 9:30 am to 6 pm)
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