Rationale

 The reaffirmation of ratings with a continuation of a positive outlook for Jagsonpal Pharmaceuticals Limited (JPL) considers the expected growth in revenue in FY2025, supported by new product launches and an increase in top line from the acquisition of brands from Yash Pharma Private Limited (YPPL) in Q1 FY2025. ICRA notes that the entity witnessed a decline in revenue in FY2024 owing to intense competition in key products such as Divatrone, Maintane and J.P. Tone, as well as counterfeit issues with one key product Indocap. The operating profit margin (OPM) also declined due to lower absorption of fixed costs resulting from decreased revenue, coupled with employee stock ownership plan (ESOP) expenses. However, ICRA expects the top line and OPM to rebound, supported by new product launches, new brand acquisitions and recovery in sales of Indocap, where the loss of sales due to counterfeit issues is expected to be temporary. ICRA will continue to monitor the recovery process related to top line and margin expansion, which will remain a key rating factor in the near term. The ratings continue to factor in JPL’s long track record of operations, strong brand presence and extensive pan India distribution network as well as its robust financial risk profile, aided by nil debt on books and strong liquidity position. The ratings are, however, constrained by JPL’s moderate scale of operations, as it remains a mid-sized player in the pharmaceutical formulation space. This position exposes it to stiff competition from many generic drug manufacturers in the domestic branded generic segment, as reflected in its average margin levels. The ratings also factor in the dependence on a few key products, which exposes JPL to product concentration risk. ICRA notes JPL’s complete dependence on third-party manufacturers through a loan-licensing model, requiring the company to rely solely on third-party suppliers to ensure quality and an uninterrupted supply of manufactured products.