Press Release

VIS Reaffirms Entity and Sukuk Ratings of Aspin Pharma (Private) Limited

Karachi, October 03, 2019: VIS Credit Rating Company Ltd. (VIS) has reaffirmed the entity ratings of Aspin Pharma (Private) Limited (APL) at ‘A/A-2’ (Single A/A-Two). Rating of APL’s secured Sukuk issue of Rs. 1,500m has also been reaffirmed at ‘A’ (Single A). Outlook on the assigned ratings is ‘Stable’. Long term rating of ‘A’ signifies good credit quality with adequate protection factors. Risk may vary slightly from time to time because of economic conditions. Short term rating of ‘A-2’ depicts good certainty of timely payment where liquidity factors are sound and good access to capital markets. The previous rating action was announced on December 14, 2018.

Ratings assigned to APL take into account the inelastic demand nature of prescription drugs in the pharma sector along high relative market share and brand value enjoyed by major products. Ratings also incorporate projected improvement in profitability and liquidity profile on the back of significantly higher turnover and improving margins. Ratings remain dependent on realization of projected sales and cash flow growth in order to ensure sound debt servicing ability while maintenance of adequate liquidity buffer is considered important. Material deviation of actual capital expenditure incurred beyond projected levels may exert pressure on ratings.

Ratings factor in concentration in product portfolio and therapeutic area coverage. Business strategy has been aligned to focus on expanding and diversifying product portfolio. In this regard, management envisages launch of drugs within diverse chronic therapeutic category (diabetes, hepatitis-C, gynecology and cardiovascular diseases) and line extension within existing product lines.

Assessment of financial risk profile incorporates improving profitability, adequate liquidity and elevated leverage indicators. Profitability is projected to depict healthy increase over the rating horizon due to strong double digit growth in sales (strong new product pipeline along with organic growth from existing products) and improving margins due to lower API prices. In the backdrop of increasing debt repayments, achieving projected turnover and cash flows is important for maintaining sound debt servicing ability. Comfort is drawn from liquidity buffer carried on the balance sheet. Leverage indicators have declined on a timeline basis but continue to remain elevated. Given net debt repayments and enhanced internal capital generation, leverage indicators should reduce over the next few years. Ratings remain dependent on timeline reduction in leverage indicators.

APL is a wholly owned subsidiary of Aitken Stuart Pakistan (Private) Limited with shareholding previously held by OBS Pakistan (Private) Limited (OBS)); although the sponsor remains the same. Recently, OBS sold off a sizeable portion of the Company’s product portfolio to another pharmaceutical company while manufacturing of remaining products will be transferred to APL post regulatory approval; this is projected to translate into a Rs. 700million increase in annual turnover for APL.

For further information on this rating announcement, please contact the undersigned (Ext. 207) or Mr. Talha Iqbal (Ext: 213) at 021-35311861-70 or fax to 021-35311873.

Jamal Abbas Zaidi

Applicable Rating Criteria: Industrial Corporates (May 2016)

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 2019 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited