CARE Ratings Limited has updated its ratings for Orchid Pharma Limited to CARE A- for long-term bank facilities. Chennai-based Orchid Pharma Ltd. is a vertically integrated pharmaceutical company that is into research, manufacturing, and marketing.

The rating adjustment also reflects the consistent enhancement in operational performance, characterised by improved capacity utilisation, resulting in increased scale and profitability, says CARE Ratings.

“The ratings continue to draw comfort from the promoter’s experience in the pharmaceutical industry and the internationally accredited manufacturing facility of the company,” it says.

Recently, Dhanuka Laboratories, the promoter of Orchid Pharma, divested 2.56 percent of the company’s equity by selling 13 lakh shares through an open market transaction at an average price of ₹571.28 per share.

In 2020, the Dhanuka Group assumed control of Orchid Pharma, which was grappling with financial liabilities, as part of a restructuring initiative. “Post the takeover by Dhanuka, the company has shown significant improvement in production levels and capacity utilisation, especially in its sterile unit,” says the ratings agency.

The company has also been selected through a global tender for the manufacture of Cefidorocol. Cefidorocol is employed in the treatment of complex urinary tract infections (including pyelonephritis) in patients with restricted or no alternative treatment alternatives.

The company also released its Q2 results recently for FY24. The company’s Q2 turnover was ₹199 crore, up from ₹165.2 crore in the same quarter last year.

The quarterly net profit in September 2023 surged to ₹20.24 crore, up from ₹3.32 crore in September 2022.

However, certain hindrances might affect the company’s performance, including a concentrated product portfolio.

Despite having a diverse product portfolio, the majority of revenue, approximately 68 per cent in FY23, is generated from the top three products—Cefixime, Cefuroxime, and Ceftriaxone.

The company’s vulnerability to potential pricing pressures or reduced demand for these key products in critical markets underscores the importance of its capacity to successfully introduce new products and expand sales in shaping the company’s future prospects.

Further, the pharmaceutical sector operates under stringent regulations, necessitating multiple approvals, licences, registrations, and permissions to carry out business operations, CARE says in its report.

The intricate and costly process of obtaining approval for new product registration is time-consuming, ranging from a minimum of six months to several years, which can affect the company, it adds.