CARE assigns ‘AA’ rating to Emami’s NCD issue
CARE has assigned AA rating to the Rs.100 crore long-term loan/non-convertible debenture programme of Emami Ltd.
By ET Online |
MUMBAI: CARE has assigned AA rating to the Rs.100 crore long-term loan/non-convertible debenture programme of Emami Ltd, which indicates that the instruments offer high safety for timely servicing of debt obligations and carry very low credit risk. The long-term loan/NCD is proposed to have tenure of five years and shall be repaid in three equal annual instalments at the end of the third, fourth and fifth year.
The rating draws strength from Emami���s long and satisfactory track record, considerable experience of its promoters, established brands, significant market share in some of its products, consistent growth, successful launching of new products, large distribution network, satisfactory financial position, insulation from the intense competition in the price sensitive FMCG sector by virtue of manufacturing ayurvedic products and stable outlook of the FMCG industry.
The rating also factors in the impact of recent acquisition of Zandu Pharmaceutical Works Ltd involving significant amount of investment, increasing level of borrowings, company���s announcement for divestment of its entire stake in Emami Realty Ltd, increasing presence of the unorganised sector players in the FMCG industry and low entry barrier. Company���s ability to maintain profitability in the context of intense competition in FMCG sector and to reap the benefits of acquiring controlling stake in Zandu Pharma will be the key rating sensitivities.
Emami is engaged in manufacturing of Ayurvedic, cosmetic and health care products. The company has six manufacturing facilities and it also outsources from other units to access various regional markets. The company invests heavily in advertising and publicity and runs high-profile ad campaigns with leading film and other celebrities.
Over the last few months, Emami gradually acquired stake in Zandu Pharma through strategic purchase of equity from two promoter groups and open public offer to have a controlling interest in the company. Zandu Pharma is a 100 years old company engaged in manufacturing of a wide range of products, specializing in rheumatology, gynaecology and CNS (central nervous system).
Currently, Emami (along with its associate companies) holds 70.4% stake in Zandu Pharma and, going forward, Emami plan to merge Zandu Pharma with itself. While this acquisition has been entailing a significant amount of investment on the group, the rationale behind the acquisition is to unlock the brand heritage of Zandu, utilise it as a platform for launching Emami���s new ayurvedic products, become market leader in the pain balm segment, utilise substantial real estate property at Mumbai and create a niche for itself in the ayurvedic segment.
The rating draws strength from Emami���s long and satisfactory track record, considerable experience of its promoters, established brands, significant market share in some of its products, consistent growth, successful launching of new products, large distribution network, satisfactory financial position, insulation from the intense competition in the price sensitive FMCG sector by virtue of manufacturing ayurvedic products and stable outlook of the FMCG industry.
The rating also factors in the impact of recent acquisition of Zandu Pharmaceutical Works Ltd involving significant amount of investment, increasing level of borrowings, company���s announcement for divestment of its entire stake in Emami Realty Ltd, increasing presence of the unorganised sector players in the FMCG industry and low entry barrier. Company���s ability to maintain profitability in the context of intense competition in FMCG sector and to reap the benefits of acquiring controlling stake in Zandu Pharma will be the key rating sensitivities.
Emami is engaged in manufacturing of Ayurvedic, cosmetic and health care products. The company has six manufacturing facilities and it also outsources from other units to access various regional markets. The company invests heavily in advertising and publicity and runs high-profile ad campaigns with leading film and other celebrities.
Over the last few months, Emami gradually acquired stake in Zandu Pharma through strategic purchase of equity from two promoter groups and open public offer to have a controlling interest in the company. Zandu Pharma is a 100 years old company engaged in manufacturing of a wide range of products, specializing in rheumatology, gynaecology and CNS (central nervous system).
Currently, Emami (along with its associate companies) holds 70.4% stake in Zandu Pharma and, going forward, Emami plan to merge Zandu Pharma with itself. While this acquisition has been entailing a significant amount of investment on the group, the rationale behind the acquisition is to unlock the brand heritage of Zandu, utilise it as a platform for launching Emami���s new ayurvedic products, become market leader in the pain balm segment, utilise substantial real estate property at Mumbai and create a niche for itself in the ayurvedic segment.
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