BackFitch affirms Glenmark Pharmaceuticals rating at 'BB'; outlook stable
Fitch Ratings affirms the Long-Term Issuer Default Rating (IDR) of 'BB' for Glenmark Pharmaceuticals Ltd.
PremiumFitch Ratings affirmed Glenmark Pharmaceuticals Ltd's Long-Term Issuer Default Rating (IDR) at 'BB' following the disclosure of its intention to sell a 75% ownership in its active pharmaceutical ingredient (API) business, held under subsidiary Glenmark Life Sciences Ltd. The outlook is 'Stable', according to the international credit rating agency release today.
"Exciting news! Mint is now on WhatsApp Channels 🚀 Subscribe today by clicking the link and stay updated with the latest financial insights!" Click here!
Glenmark Pharmaceuticals stated on September 21 that it would sell Nirma a 75% ownership in Glenmark Life Sciencesfor Rs615 per share, or a total value of Rs5,651.75 crore. Despite the drop in stakethe drugmaker will still hold a 7.84% stake in Glenmark Life Sciences.
"We believe Glenmark will use most of the net proceeds to repay debt. This and Glenmark's prudent approach to growth investments and shareholder returns will help it maintain negative net debt to EBITDA, which is significantly below the positive rating sensitivity level of 1.5x. Nonetheless, Glenmark's revenue scale and EBITDA margins, which are key metrics Fitch uses to measure the company's business profile, are unlikely to improve to levels commensurate with a higher rating," said Fitch in a release today.
Furthermore, despite significant margin compression, the credit rating agency stated that the expected sale is unlikely to have an impact on its evaluation of Glenmark's cost competitiveness and market position.
"The Stable Outlook reflects Glenmark's comfortable leverage headroom and our expectation of positive free cash flow before litigation settlement payments,"added Fitch.
Fitch Ratings in its release highlighted several key rating drivers, one of which was the stake sale, which is anticipated to be completed by March 2024 and will generate nearly ₹50 billion in proceeds net of taxes, exceeding net debt of ₹31.9 billion at the end of March 2023, excluding Glenmark Life Sciences Ltd.
Given that Glenmark isn't planning on making sizable growth investments in the next years, Fitch believes that Glenmark can maintain a negative net debt position. The credit rating agency is not expecting a significant increase in shareholder returns.
"We forecast Glenmark's consolidated net debt to EBITDA, excluding Glenmark Life Sciences, to remain at around -1.0x, despite litigation settlement payments exceeding USD90 million in FY24-FY25.
Glenmark Pharma share price today has been trading in red for the second consecutive session. Glenmark Pharma share price opened at ₹840.90 apiece on BSE . At 11:33 IST, Glenmark Pharma shares were trading at ₹817.50, down 3%.
Also Read: Glenmark Life Sciences share price falls 2% as Nirma readies to buy 75% stake in it
Milestone Alert!Livemint tops charts as the fastest growing news website in the world 🌏 Click here to know more.
