S&P has upgraded Jubilant Pharma to BB from BB- with a stable outlook on expectations of stronger financial position. The rating action comes close on the heels of a similar upgrade by Fitch on February 18. After the demerger of the company’s parent Jubilant Lifesciences, Jubilant Pharmova is the parent of Jubilant Pharma and the lifescience business has been placed under Jubilant Ingrevia. This has led to an improvement in the credit profile of the company as the life science business is the relatively low profit business. Post demerger, the EBITDA margins of Jubilant Pharma are expected to improve to ~25% vs the previous expectation of ~20-21%. The debt of the company is also likely to reduce by ~INR 14bn ($193.3mn) in FY21 YoY. The revenues of the company are forecasted to be stable despite the pandemic slowdown and the operating cash flows are forecasted to be ~INR 8-10bn ($110.5-138.1bn) in fiscals 2021 and 2022 against its annual capex of ~INR 5bn ($69mn) and other spending of INR 1-3bn ($13.8mn-$41.4mn). The company had raised ~$150mn through unsecured loans from banks to refinance its $200mn senior notes due in October and has already redeemed $100mn in January with plans to redeem the remaining amount in March. The company is likely to use the cash surplus to pay its debt and it’s debt to EBITDA is likely to improve to 1.5x in fiscal 2022. The next debt due for the company is its $300mn 6% due 2024. The rating agency said, “Jubilant Pharma’s good market position; limited competition, given high regulatory barriers and infrastructure requirements for handling radioactive ingredients; and healthy profitability will remain supportive of its credit profile. Yet, a significant improvement in the scale of the company’s operations will remain critical to achieve a higher rating.”
JPL’s 4.875% 2021s were up 0.87 to trade at 102.18 while its 6% 2024s were down 0.25 to trade at 106.