Press Release

VIS Assigns Initial Ratings to Noventa Pharma (Private) Limited

Karachi, November 13, 2024: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘A/A2’ (Single A/A Two) to Noventa Pharma (Private) Limited (‘NPL’ or the ‘Company’). Medium to long term rating of ‘A’ indicates good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. Short term rating of ‘A2’ indicates good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned ratings remains ‘Stable.’

NPL was incorporated on August 30, 2024, to acquire the operations of Searle Pakistan Limited (SPL) through a leveraged buyout. The Share Purchase Agreement for this acquisition was signed on October 29, 2024. The Company is owned by IJARA Capital Partners Limited (ICPL) led consortium. Established in 2000, IJARA Group specializes in Private Equity, Venture Capital, and REITs, along with expertise in investments, and M&A, particularly in sectors such as FMCG, Healthcare, and Real Estate. Other sponsors include Opal Laboratories (Private) Limited (Opal), which has over 65 years of experience in pharmaceutical manufacturing, with operations in Pakistan and exports to the Philippines and Afghanistan.

The assigned ratings incorporate the low business risk of the pharmaceutical sector, supported by stable demand and low economic sensitivity, which underpin consistent revenue and profitability. Demand is further reinforced by factors such as population growth, disease prevalence, and hygiene challenges. However, profitability remains constrained due to price caps on essential drugs set by the Drug Regulatory Authority of Pakistan (DRAP) and exposure to exchange rate fluctuations, given the sector’s reliance on imported raw materials. Nonetheless, recent deregulation allowing price increases for non-essential medicines enhances prospects, particularly within the non-essential product category.

The ratings reflect the support from IJARA Group, which has a strong track record in healthcare investments and extensive management experience in turning around distressed companies. Key management’s prior oversight of the target company’s operations has also equipped them with valuable operational insights. The rating is supported by NPL’s competitive positioning in chronic therapeutic segments, with top brands like Venofer contributing significantly to revenue, reflecting its brand strength. Moreover, the Company’s strategic alliances with reputable international firms—MSD, Vifor Pharma, Santen Pharma, and Organon—enhance NPL’s leverage in introducing new products to the market.

The Company’s reliance on imports exposes it to substantial foreign exchange risk, which has historically compressed margins relative to peers. However, price deregulation within the sector is expected to relieve margin pressures from adverse currency movements, as evidenced in the Company’s 1QFY25 performance. Additionally, recent exchange rate stability and NPL’s plans to gradually shift toward local production are anticipated to enhance margins in the future. Due to the leveraged buyout, capitalization metrics are expected to remain elevated, underscoring the need to enhance margins and generate sufficient cash flows, as projected, to service debt while ensuring operational liquidity. The ratings remain underpinned on achievement of the projected revenue growth, margin improvement along with effective working capital management, and profit retention.

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

Applicable Rating Criteria: Corporates:
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 .