(The following statement was released by the ratings agency)
March 10 - Fitch Rating has assigned Fresenius Kabi India Private Limited (FKIPL) a National Long term rating of ‘BB+(ind)'. The Outlook is Stable. The agency has also assigned the following ratings to FKIPL’s bank facilities.
- INR451m umbrella working capital limit guaranteed by Fresenius Kabi: ‘A(ind)(SO)'/‘F1(ind)(SO)';
- INR15m fund based working capital limit: ‘BB+(ind)'; and
- INR5m non-fund based working capital limit: ‘F4(ind)'.
The rating assigned to FKIPL reflects its legal and strategic linkages with its parent - Fresenius Kabi (FK), whose credit profile is directly linked to its ultimate parent Fresenius SE FREG_p.DE (‘BB’/Stable). The ratings assigned to FKIPL’s guaranteed bank instruments are based solely on the unconditional and irrevocable corporate guarantee of FK; however, Fitch notes that as a consequence of the linkage between FK and the ultimate parent, any movements on Freseneuis SE’s ratings would affect FKIPL’s ratings. That said, a consistent improvement in FKIPL’s profitability and liquidity profile which translates into the strengthening of linkages with FK, could be positive for its ratings.
The fact that a major portion (95% of total debt) of FKIPL’s debt is fully guaranteed by FK lends evidence to the legal linkage between the two entities. The strategic linkage emanates from the timely and tangible support provided by FK to FKIPL.
During FY04 to FY09, on the back of the robust growth in FKIPL’s clinical nutrition segment, revenues grew from INR773m to INR1,301m, translating into a cumulative average growth rate of 11%. However, due to higher operating costs brought on by tight competition in the domestic infusion therapy market, and the costs related to developing clinical nutrition therapies and medical device businesses, FKIPL’s EBITDA as well as EBITDA margins were low with consistent net losses. Lower profitability coupled with capex led to a severe impact on FKIPL’s credit and liquidity profile. However, the regular support FKIPL receives from its parent has mitigated its debt servicing risk. With a growing awareness of clinical nutrition, Fitch expects FKIPL’s profitability to pick up in the long-term, though liquidity would likely remain stretched in the near-term.
FK, a subsidiary of Fresenius SE (‘BB’/Stable) (a global health care group), is focused on providing both inpatient and outpatient therapy and care for critically and chronically ill patients. FKIPL operates FK;s operations in India and its infusion therapy products are manufactured at its plant in Pune (the only World Health Organization - Good Manufacturing Practices certified factory in Asia). The infusion products are sold domestically as well as internationally, while the clinical therapy products and medical devices are imported for domestic consumption from FK’s global product portfolio manufactured at its overseas plants.
Applicable Criteria is available on Fitch’s website at www.fitchratings.com: “Corporate Rating Methodology”, dated 24 November 2009.