Press Release

VIS Maintains Entity Ratings of The Searle Company Limited

Karachi, July 10, 2024: VIS Credit Rating Company Limited (‘VIS’) has maintained the entity ratings of The Searle Company Limited (TSCL) at 'AA-/A-1' (Double A Minus/A-One). The long-term rating of 'AA-' reflects high credit quality. Protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. The short-term rating of 'A-1' indicates high certainty of timely payment, excellent liquidity factors supported by good fundamental protection factors. Risk factors are minor. Outlook on the assigned ratings has been revised from ‘Negative’ to ‘Stable’. Previous Rating action was announced on May 19,2023.

The assigned ratings reflect the Company's strong market position and its low business risk profile, supported by the non-cyclical nature of the industry and favorable demand prospects. The Company is ranked in the top five pharmaceutical companies in the country in terms of revenues and holds a diversified portfolio of pharmaceutical products. With the recent deregulation of non-essential drug prices by Drug Regulatory Authority of Pakistan (DRAP), whereby pharmaceutical companies are allowed to adjust prices at their discretion, TSCL is expected to benefit from it given a large non-essential drug portfolio of the Company.

A substantial part of the asset base of the Company remains vested in investment portfolio, which further increased in FY24 with acquisition of new subsidiaries namely Stellar ventures and Searle IV Solutions (Pvt) Ltd. Searle IV Solutions (Pvt) Ltd, has been acquired to set up intravenous manufacturing facility, for the purposes of the product line extension. Company also expanding their portfolio in GCC markets and registered it’s Pakistan’s manufacturing facility in UAE, which presents significant growth opportunities for the Company.

Assessment of financial profile reflects an increase in topline was supported by price adjustment granted during the year, however, inflationary pressures continued to suppress margins. In addition, net margins remained under stress due to debt servicing, resulting in a drag on profitability, which was significantly impacted in FY23. Consequently, debt servicing was constrained, however the gap in debt servicing was adequately met through dividends received from subsidiary, Searle Pakistan. Nevertheless, operating cash flow continue to remain under pressure. To address the same, recently, the Company has approved the disposal of 100% shareholding and control of its subsidiary Searle Pakistan Limited. This strategic decision is aimed at deleveraging balance sheet, reducing debt servicing and improving profitability of the Company. Going forward, ratings remain underpinned on materialization of this strategic plan and planned reduction in debt. Liquidity metrics while depicting a decline remain adequate, albeit rising payables remains a concern. Improving liquidity profile will remain important for ratings.

For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.

Applicable Rating Criteria:
Corporates Rating Methodology
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .