Press Release

VIS Assigns Initial Ratings to Renacon Pharma Limited

Karachi, November 16, 2020: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘BBB+/A-2’ (Triple B-Plus /A-Two) to Renacon Pharma Limited (RPL). The medium to long-term rating of ‘BBB+’ denotes adequate credit quality coupled with reasonable protection factors. Moreover, risk factors are considered variable if changes occur in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments. Liquidity factors and company fundamentals are considered sound. Outlook on the assigned rating is ‘Stable’.

RPL is mainly engaged in manufacturing and sale of various types of Hemodialysis Concentrates in solution and powder forms for the local and international markets. The company also supplies imported dialyzers, bloodlines and AVF needles as there is no manufacturing unit in Pakistan. The assigned ratings take into account sponsor profile as controlling stake is owned by Treet Corporation Limited and a leadership position in the hemodialysis concentrates market. RPL has been able to capture around two-third market share since its dialysate products are considerably cheaper than foreign products while local players have also been unable to compete due to their small size and low quality products.

RPL has exhibited healthy growth in revenue over the past three years, driven by both increasing number of sessions sold and higher selling price in the local market. Exports contribution in overall revenue mix has remained less than 10% due to production capacity constraints. The ratings also factor in the expansion plan whereby the company is increasing its production capacity from existing 2.1m sessions to 15.3m sessions of dialysate per annum in view of increasing local market requirements along with sizeable export potential. In line with the growth in revenue and margins, profitability and cash flows generation has also improved over the review period. While RPL currently has low leveraged capital structure, gearing is projected to increase by end-FY21 owing to mobilization of debt financing for expansion project. Going forward, the ratings are dependent on timely completion of expansion project, maintenance of adequate debt service coverage and prudent levels of leverage indicators.

For further information on this rating announcement, please contact Syed Fahim Haider at 042-35723411-13 (Ext: 8006) or the undersigned at 021-35311861-70 (Ext. 201) or email at info@vis.com.pk



Javed Callea
Advisor

VIS Entity Rating Criteria: Corporates (May 2019)
https://www.vis.com.pk/kc-meth.aspx

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