ICRA has assigned ICRA]BB+ ( to enhanced Rs. 149 crores Fund based limits (enhanced from Rs. 70.0 crores), Rs. 197.1 crore Term loans (enhanced from Rs. 144.6 crores) and US$32 million term loans (enhanced from US$. 25.5 million). The outlook on the long term rating is stable.

ICRA has also assigned [ICRA]A4+ to the enhanced Rs. 105 crores (earlier Rs. 125 crores) fund based limits and Rs. 55 crore (enhanced from Rs. 45 crore) non fund based limits. Though a part of the long term loans of HIKAL are denominated in foreign currency, ICRA?s ratings for the same are on national rating scale, as distinct from an international rating scale. The rating derives strength from Hikal?s strong product profile, entrenched relationship with leading Pharma and Agro chemicals companies in the world and strong market position for Gabapentin business.

The company is estimated to have close to ~60% market share for Gabapentin global API business. Further in the longer term, its contract research business which is in gestation phase is likely to help Hikal acquire new clients by providing end to end services. The company?s revenues have declined during FY11 due to inventory rationalisation exercise by MNCs in the wake of weak economic outlook. Notwithstanding the decline in revenues, the medium term prospects remain healthy with good order flow expected in the near term. However, the financial profile of the company remains stretched due to debt funded capex plans and net worth erosion on account of write-off pertaining to loss making international subsidiary in FY09 and derivative losses in the past.

As a result of that the gearing is high and coverage indicators remain weak. The liquidity position also remains tight on account of on-going capex and debt repayment of existing term loans. In the near term, the company may face refinancing risk for its existing debt repayment, however as accruals from past investments flow in, the liquidity position is expected to ease in the medium term.