Press Release
Axis Clinicals Limited
March 31, 2025
Facilities/Instruments Amount (₹ crore) Rating1 Rating Action
276.12
Long-term bank facilities CARE BBB+; Stable Downgraded from CARE A-; Stable
(Enhanced from 106.03)
Long-term bank facilities - - Withdrawn
Details of instruments/facilities in Annexure-1.
Rationale and key rating drivers
Revision in the rating assigned to bank facilities of Axis Clinicals Limited (ACL) reflects moderation in its overall performance and
credit metrics in FY24 with the trend expected to continue in FY25 and considerable increase in exposure to group companies.
The rating derives its strength from ACL being a part of the RPR group founded and promoted by P. V. Ramprasad Reddy, of
which Aurobindo Pharma Limited (APL) is the flagship company. The rating is underpinned by established and long track record
of operations, and well-equipped and accredited facilities with global presence. The rating is further underpinned by healthy profit
before interest, lease rentals, depreciation and taxation (PBILDT) margin, successful track record of regulatory inspections, and
comfortable capital structure.
However, the rating is constrained by exposure in the form of investments and loans/advances to group companies, regulatory
risk, and increasing competition in the Clinical Research Organisation (CRO) industry. Going forward, the exposure to group
companies will remain key monitorable.
CARE Ratings Limited (CARE Ratings) has withdrawn the long-term rating on external commercial borrowings considering its full
repayment and the proposed working capital facilities at the request of the company, as the company has not used the same.
Rating sensitivities: Factors likely to lead to rating actions
Positive factors
• Improvement in total operating income (TOI) over 10% and maintaining PBILDT margin over 25% on a sustainable basis.
• Total debt to PBILDT below 2.50x on sustained basis.
• Exposure to group companies in the form of loans/advances and investments remaining below ₹300 crore on a sustained
basis.
Negative factors
• Delcine in TOI by over 10%-15% on a sustained basis and fall in PBILDT margin below 25%.
• Total debt to PBILDT going above 3.50x on a sustained basis.
• Any deterioration in ACL’s linkages with Aurobindo Pharma Limited or RPR group.
• Exposure to group companies in the form of loans/advances and investments going above ₹550 crore on a sustained
basis.
Analytical approach: Consolidated
CARE Ratings has adopted a consolidated approach for arriving at the rating of ACL given the strong operational linkages among
its subsidiaries and being a part of the RPR Group whose flagship company is APL. The list of companies considered for
consolidation is given as a part of Annexure-6 below.
Outlook: Stable
The stable outlook reflects the rated entity likely to maintain its established position in the CRO segment and will continue to
maintain healthy operating margins in the medium term.
1
Complete definition of ratings assigned are available at www.careedge.in and other CARE Ratings Limited’s publications.
1 CARE Ratings Ltd.
Press Release
Detailed description of key rating drivers:
Key strengths
Established track record
ACL is a full-service global CRO with over 17 years of established track record. Its services include specialised services such as
Bio-equivalence and Bio-availability (BE&BA) studies, and a full suite of clinical trials, including phase II-IV trails, Pharmacokinetic-
Pharmacodynamic (PKPD) studies, feasibility studies, project management, site monitoring, and site management, among others.
The company has successfully completed over 95 regulatory audits both by Indian and International regulatory agencies. It has
also completed over 170 national and international sponsor audits and over 4000 clinical studies.
Well-equipped facilities with global accreditation
In India, ACL has a total nine study areas (four in Hyderabad and five in Ahmedabad) with an overall capacity of 330 beds.
Additionally, in the US and Mexico, the company has 328 bed facilities. The bio-analytical lab at head office (Hyderabad) is
equipped with 26 liquid chromatography-mass spectrometry (LC-MS/MS), two inductively coupled plasma optical emission
spectroscopy (ICP-OES), and one inductively coupled plasma mass spectrometry (ICP-MS) to support bioanalytical services.
Clinical research and clinical data management departments support phase trails in hospitals and data management by using
oracle clinical. The company’s laboratory is approved by NABL per ISO 15189:2012. ACL also has independent quality assurance
team and common management system across all facilities to have uniform data, documentation, conduct of studies, and final
report preparation. The company’s facilities are accredited by regulatory authorities such as US FDA, UK-MHRA, AEMPS-Spain,
INFARMED-Portugal, and ANSM-France, among others.
India-centric business with global presence
The company derives its revenue primarily through BE/BA studies and clinical trials. For BE/BA studies, which contributed ~50%
of its total revenue for FY24 on a consolidated basis, the company has its own facilities in Hyderabad and Ahmedabad in India
and in the US and Mexico. The company collaborates with various hospitals in India and abroad to conduct clinical trials. At a
consolidated level, in FY24, the company derived ~50% (PY: 61%) of its revenue from Indian market followed by US -28%
(PY:23%), and the balance from Mexico and rest of the world. The company derives ~50-55% of its revenue from APL.
Fluctuating revenue with healthy PBILDT margin
The revenue of the company has witnessed a steady growth trend from FY19-FY22 where the revenue had grown from ₹233
crore in FY19 to ₹483 crore in FY22, compounded annual growth rate (CAGR) ~28%. However, in FY23 and FY24, the company
has witnessed de-growth in revenue. In FY24, the company has reported revenue of ~₹372 crore, a fall by over 15% from the
revenue of FY23, where it reported revenue of ₹438 crore. The fall in revenue in FY24 was considering slowdown in India business,
which historically constituted ~60% of its overall business at consolidated level. The slowdown in India business was due to delay
in getting the approval from Drug Control General of India (DCGI) for conducting studies (Bio Studies and Clinicals Trials) for all
clinical research companies. Although the company had orders in hand; however, delay in receiving approval impacted the
revenue. The company generates ~55%-60% of its revenue from group companies. In the past, there were several projects
focused on biosimilars, but these projects during FY24 were at final stages of completion and hence contributed lower revenue,
leading to lower overall revenue. However, going forward, given the pipeline of the bio-similars projects, the company expects
revenue to improve. The company has reported a reduction in PBILDT margin, falling from ~32% in FY23 to ~23% in FY24,
driven by declining revenue and the impact of fixed costs. In 9MFY25, on consolidated basis, the company reported revenue of
~₹248 crore with PBILDT margin of ~21%. CARE Ratings expects that the company’s TOI will grow at ~6-8% y-o-y and it will
continue to maintain its PBILDT margin above 25%.
Key weaknesses
Exposure to group companies
ACL belongs to the RPR Group. The group’s flagship company is APL. Over the years, the group has evolved and diversified its
business interests, including pharmaceutical, packaging solutions for pharma industry, manufacturing chloromethane and caustic
soda, mining, real estate, port management, and EPC construction contract. Due to presence of other businesses, the exposure
to group companies, though done at arm’s length basis, remained high. In FY24, the exposure in the form of investments and
loans and advances have remained at ~₹360 crore with an expected increase to ~₹520 crore in FY25. The surge in the exposure
to group companies was mainly considering a one-off transaction (with back-to-back repayment arrangement) which is expected
to be closed by March 2026 bringing down the exposure of ACL towards the group companies. CARE Ratings expects that going
forward, exposure to group companies in the form of loans and advances is expected to be ~₹350 crore.
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Press Release
Comfortable capital structure; expected to moderate
As on March 31, 2024, the company’s capital structure remained comfortable. Overall gearing of the company improved from
0.96x as on March 31, 2023, to 0.47x as on March 31, 2024. The adjusted overall gearing (net worth adjusted for investments
and loans & advances extended to group companies) as on March 31, 2024, has also improved moderately from 2.33x as on
March 31, 2023 to 1.92x as on March 31, 2024. Other credit metrics such as total debt to gross cash accruals (GCA) and interest
coverage deteriorated in FY24 and stood at 4.19x (FY22: 4.00x) and 2.15x (PY: 5.11x), respectively. In FY25, the company has
availed debt to the tune of ₹205 crore for extending it to group companies which is expected to moderate its overall capital
structure. Per CARE Ratings’ estimates, overall gearing of the company in FY25 will moderate to 0.73x (PY: 0.47x) with adjusted
overall gearing at 2.76x (PY: 1.92x). Other credit metrics such as total debt/GCA and total debt/PBILDT are expected to be at
4.65x (PY: 4.19x) and 3.74x (PY: 2.50x) in FY25.
Deviation between provisional and audited financials for FY24
There is deviation in the provisional financials provided by the company earlier and the audited financials for FY24. While the
deviation in total income was not significant (Provisional: ~₹410 crore against Audited: ~₹372 crore); however, at PAT level, the
deviation was over 80% (Provisional: ~₹57 crore against Audited: ~₹10 crore). The deviation was primarily considering losses
reported in the US subsidiary and the exceptional loss of ~₹14 crore, which the company created a provision for.
Increasing competition in the CRO industry and challenging environment
The growth of the Indian CRO industry would be driven by increased outsourcing from international pharmaceutical companies.
Cost pressures faced by international companies are creating the need for pharmaceutical companies to implement cost cutting
measures across operations, including drug development costs. However, considering the recent regulations on patient
compensation and delay in approvals, pharmaceutical companies might shift their Phase-I research out of India, particularly to
the regions such as United Kingdom, Netherlands, and Malaysia, where it is easier to conduct clinical research which could mean
a potential loss of business for domestic CROs. The growth in outsourcing clinical trials will be closely paralleled with the growth
in R&D spending of pharmaceutical companies in regulated markets. Moreover, large pharmaceutical players have their own
CROs, further intensifying the competition.
Liquidity: Adequate
The liquidity position of the company is adequate. Historically company has been generating cash accruals in the range of ₹100
crore - ₹130 crore against the debt repayment obligation of ~₹27 crore to ~₹35 crore. However, in FY24 considering dip in India
business company generated cash accruals of ~₹50 crore against the repayment obligation of ~₹80 crore. The short fall was met
through the available cash and bank balance. The average working capital utilisation of the company for the last 12 months
ending in January 2025 stood at ~37% providing cushion to the liquidity position. As on March 31, 2024, company has cash and
liquid investments to the tune of ~₹14 crore. CARE Ratings expects that going forward, the company will be generating cash
accruals in the range of ₹80-₹100 crore every year against the debt repayment obligation of ~₹68 crore in FY25 and ~₹75 crore
in FY26. Till January 2025, the company has paid ₹54.75 crore of its total debt obligation for FY25.
Assumptions/Covenants: Not applicable
Environment, social, and governance (ESG) risks: Not applicable
Applicable criteria
Definition of Default
Liquidity Analysis of Non-financial sector entities
Rating Outlook and Rating Watch
Manufacturing Companies
Pharmaceuticals
Financial Ratios – Non financial Sector
Withdrawal Policy
Consolidation & combined approach
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Press Release
About the company and industry
Industry classification
Macroeconomic indicator Sector Industry Basic industry
Healthcare Healthcare Pharmaceuticals & biotechnology Pharmaceuticals
Incorporated in 2007, ACL is a contract research organisation headquartered in Hyderabad. ACL is a full service clinical/
biopharmaceutical development provider with a team of over 700 professionals. It provides services in PKPD studies, clinical
research, clinical data management, biostatistics, and medical writing. ACL belongs to the RPR Group. APL is the group’s flagship
company, which is engaged in manufacturing pharmaceutical formulations and active pharmaceutical ingredients.
Brief Consolidated
March 31, 2023 (A) March 31, 2024 (A) 9MFY25 (UA)
Financials (₹ crore)
Total operating income 438.10 371.82 248.49
PBILDT 138.81 85.43 51.45
PAT 60.40 9.62 11.14
Overall gearing (times) 0.96 0.47 -
Interest coverage (times) 5.11 2.15 1.52
A: Audited UA: Unaudited; Note: these are latest available financial results
Status of non-cooperation with previous CRA: Not applicable
Any other information: Not applicable
Rating history for last three years: Annexure-2
Detailed explanation of covenants of rated instrument / facility: Annexure-3
Complexity level of instruments rated: Annexure-4
Lender details: Annexure-5
Annexure-1: Details of instruments/facilities
Date of Rating
Maturity Size of the
Name of the Issuance Coupon Assigned and
ISIN Date (DD- Issue
Instrument (DD-MM- Rate (%) Rating
MM-YYYY) (₹ crore)
YYYY) Outlook
Fund-based -
- - - - 0.00 Withdrawn
LT-Cash Credit
Fund-based - -
LT-External
- - 24/06/2024* 0.00 Withdrawn
Commercial
Borrowings
Fund-based - - CARE BBB+;
- - 31/03/2029 276.12
LT-Term Loan Stable
*Pre-payment
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Annexure-2: Rating history for last three years
Current Ratings Rating History
Date(s) Date(s) Date(s) Date(s)
Name of the
and and and and
Sr. No. Instrument/Bank Amount
Rating(s) Rating(s) Rating(s) Rating(s)
Facilities Type Outstanding Rating
assigned assigned assigned assigned
(₹ crore)
in 2024- in 2023- in 2022- in 2021-
2025 2024 2023 2022
1)CARE A-
Fund-based - LT- ; Stable
1 LT - - - - -
Cash Credit (11-Jun-
24)
1)CARE A-
CARE
Fund-based - LT- ; Stable
2 LT 276.12 BBB+; - - -
Term Loan (11-Jun-
Stable
24)
Fund-based - LT- 1)CARE A-
External ; Stable
3 LT - - - - -
Commercial (11-Jun-
Borrowings 24)
LT: Long term
Annexure-3: Detailed explanation of covenants of rated instruments/facilities: Not applicable
Annexure-4: Complexity level of instruments rated
Sr. No. Name of the Instrument Complexity Level
1 Fund-based - LT-Cash Credit Simple
2 Fund-based - LT-External Commercial Borrowings Simple
3 Fund-based - LT-Term Loan Simple
Annexure-5: Lender details
To view lender-wise details of bank facilities please click here
Annexure-6: List of entities consolidated
Sr No Name of the entity Extent of consolidation Rationale for consolidation
1 Axis Clinical Latina SA DE CV Full Subsidiary
2 Steps Therapeutics Co. Ltd Full Subsidiary
3 Axis Clinicals LLC, USA Full Subsidiary
4 Sanhoc labs Limited Full Subsidiary
5 Auryun Labs Moderate Associate
Note on complexity levels of rated instruments: CARE Ratings has classified instruments rated by it based on complexity.
Investors/market intermediaries/regulators or others are welcome to write to care@careedge.in for clarifications.
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sanction, renew, disburse, or recall the concerned bank facilities or to buy, sell, or hold any security. These ratings do not convey suitability or price for the investor.
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