Press Release

Meher Distributors Private Limited (Revised)

February 04, 2022

Ratings
Rating
Facilities Amount (Rs. crore) Rating1
Action
Long Term Bank CARE BBB-; Stable
2.93 Assigned
Facilities (Triple B Minus; Outlook: Stable)
CARE A (CE); Stable
Long Term Bank
2.95 [Single A (Credit Enhancement); Assigned
Facilities*
Outlook: Stable]
CARE A (CE); Stable
Long Term Bank 45.00
[Single A (Credit Enhancement); Reaffirmed
Facilities* (Enhanced from 40.00)
Outlook: Stable]
50.88
Total Bank Facilities (Rs. Fifty Crore and Eighty-Eight
Lakhs Only)
Details of instruments/facilities in Annexure-1
* Backed by unconditional and irrevocable corporate guarantee extended by Keimed Private Limited (Keimed, rated CARE A;
Stable)

Un Supported Rating2 CARE BBB- (Triple B Minus) [Reaffirmed]

Note: Unsupported Rating does not factor in the explicit credit enhancement

Detailed Rationale & Key Rating Drivers for the credit enhanced debt
The rating assigned to the bank facilities of Meher Distributors Private Limited (MDPL) is based on credit enhancement in the
form of unconditional and irrevocable corporate guarantee provided by Keimed Private Limited.

Detailed Rationale & Key Rating Drivers of Keimed Private Limited

The reaffirmation of the ratings assigned to the bank facilities of Keimed considers the stable financial performance at
consolidated level during FY21 (refers to the period April 01 to March 31) and adequate liquidity position. The rating continues
to draw strength from experienced promoters and management team, established track record in wholesale pharmaceutical
distribution segment, first mover advantage in consolidation of pharmaceutical distribution network through acquisition of large
regional players, supply arrangements with Apollo Hospitals Enterprise Hospitals (AEHL), satisfactory operating cycle and stable
industry outlook.
The rating however continues to remain constrained by the leveraged capital structure with increasing debt level, growing
exposure to subsidiaries / step-down subsidiaries on a standalone basis in the form of corporate guarantee being extended for
debt and low profitability margins on account of trading nature of operations.

Key Rating Drivers of MDPL

The rating assigned to the bank facilities of MDPL considers the strong parentage of Keimed, experienced promoter group and
strong management team, long track record of operations. The ratings continue to draw strength from the satisfactory
operating cycle and stable industry outlook. The rating however is constrained by moderately leveraged capital structure, low
profitability margins on account of trading nature of operations and high competition from organized and unorganized players.

Rating Sensitivities
Positive Factors - Factors that could lead to positive rating action/upgrade:
• Improvement in PBILDT margins over 4% on a sustainable basis
• Improvement in capital structure with overall gearing remaining below 0.9x on a sustainable basis
• Reduced reliance on working capital limits and moderate utilization levels of about 65% providing sufficient liquidity
cushion

1
Complete definition of the ratings assigned are available at www.careedge.in and other CARE Ratings Ltd.’s publications
2 As stipulated vide SEBI circular no SEBI/ HO/ MIRSD/ DOS3/ CIR/ P/ 2019/ 70 dated June 13, 2019. As per this circular, the suffix ‘CE’ (Credit Enhancement) is
assigned to the ratings with explicit external credit enhancement, against the earlier used suffix ‘SO’ (Structured Obligation).

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Negative Factors- Factors that could lead to negative rating action/downgrade:

• Overall gearing beyond 1.5x
• Any un-envisaged aggressive debt funded acquisition/capex with subsequent impact on the financial and liquidity profile

Detailed description of the key rating drivers (Keimed)

Key Rating Strengths
Strong track record of Keimed
Existence of strong national and regional trade lobbies like Indian Retail Druggists and Chemists Association and other Regional
Distributors’ Association makes it difficult for pharma manufacturers to sell directly to customers/small retailers. At the same
time, it makes it difficult for a new distributor to scale up rapidly without opting for acquisition of existing regional players. In
this regard, the company’s first-mover advantage in acquiring large regional players to scale up nationally has enhanced its
bargaining power with drug manufacturers. The company distributes products of many well-known companies which include
Sun Pharma Industries Ltd, Cipla Pharmaceuticals Ltd, Abbott Healthcare Private Ltd, Aventis Pharma Ltd, Dr. Reddy’s
Laboratories, Intas Pharmaceutical Ltd, GlaxoSmithKline Pharmaceuticals Ltd, etc. The same has enabled the company to
continuously expand the size and scale of operation over the years.
First mover advantage in consolidation of pharma distribution network through acquisition of large regional
players
Incorporated in 2000, Keimed is engaged in distribution of medical, surgical and other hospital related materials such as drugs,
chemicals, surgical disposables, instruments and equipment to government & private hospitals and retail pharmacies for nearly
two decades. Over the years, Keimed has significantly increased its scale of operations by acquiring majority stake in many
regional players and expanded its presence across the country. During FY20, two companies were acquired by Keimed and its
subsidiaries; with Excelsior Softwares Private Limited being acquired by Keimed and ATC Pharma Private Limited being acquired
by Dhruvi Pharma Private Limited. Further in FY21, the company acquired 2 more companies with 70% stake in Singla medicos
Pharma Private Limited for Rs. 7.70 Cr and 51% stake in Shree Datta Agencies Private Limited for Rs. 1.55 Cr, thus continuing
the trend of consolidation of smaller players in the pharma distribution space. During FY22, the company has obtained term
loan Rs. 95 Cr to acquire 9% additional stake in 8 existing subsidiaries and 4 potential acquisitions with 51% shareholding in
each.
Sale arrangement with Apollo Hospitals albeit moderate customer concentration risk: Keimed has a sale
arrangement with Apollo Hospitals Enterprise Ltd (AHEL) as Keimed’s promoter, Ms. Shobana Kamineni, also serves as the
Executive Director of AHEL. This has resulted in AHEL being the major client for Keimed over the last few years and contributing
about 52.74% to the company’s revenues in FY21 (about 50.62% in FY20) at consolidated level, thereby having moderate
concentration risk for the company. While there is no agreement in place with AHEL, Keimed gets business from AHEL by virtue
of common management team.
Stable financial performance during FY21 despite impact of Covid-19
On a consolidated basis, Keimed registered a y-o-y growth of 0.20% in total operating income during FY21 to Rs.5938.28 crore
as against Rs.5926.03 crore during FY20 indicating stable level of operations despite Covid-19 impact. This modest increase in
operations is primarily backed by 2 factors. First, the increase in revenues from Apollo Hospitals whose share of total revenues
on a consolidated basis has increased from 51% to 63%, which has resulted in off-setting of decline in revenues from third-
parties. Second, the revenues of newly acquired subsidiaries have also been consolidated, accounting for Rs. 40.41 Cr. The
PBILDT has remained stable at Rs. 211.39 Cr in FY21 against 210.45 Cr in FY20. On accoutn of stable revenues, the PBILDT
margin has also remained stable at 3.56% for FY21 against 3.55% for FY20. GCA has also remained stable at Rs. 118.04 Cr in
FY21 against 115.87 Cr in FY20.
Satisfactory operating cycle
Keimed has a satisfactory operating cycle despite its operation in working capital intensive business. Given the company’s
presence in wholesale industry, the company has to maintain relatively large stock of pharmaceutical products to cater to
various retail businesses. Nevertheless, the operating cycle has been around 52 days in FY21, which has increased by 7 days
from FY20 & FY19 levels on account of increased debtor collection period, with receivables increasing from Rs.563.73 Cr for
FY20 to Rs.690.59 Cr in FY21 at same level of revenues. The inventory holding period has remained satisfactory at below 30
days over the last 3-year period.
Industry Risk – Stable industry outlook with negligible impact of Covid-19 on the operations of the business
The operations of pharma industry being considered Essential, came under the ambit of essential manufacturing during the
lockdown induced by Covid-19. This had kept production activities at many pharma companies largely unaffected. Also easing
of restrictions in different phases of lockdown is believed to have supported the operations of pharma companies. During this
period, while the domestic market for antibiotics, cold and cough gained traction, demand from segments like women
healthcare and orthopaedic were impacted as the treatment for such ailments were believed to be kept on hold. Also, inbound

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logistics constraints restricted the movement in exports to an extent during lockdown. With relief in various restrictions, the
industry is expected to see pent up demand for treatments that were postponed which will support the demand for drugs.
Moreover, the demand for medicines will increase during the monsoon season as the distributors and retailers normally stock
drugs for the season. These parameters will augur well for pharma industry. In addition to this, the industry will continue to see
demand from the domestic as well as international markets for some of the antivirals, antimalarials and antibiotics given the
spread of Covid-19. Apart from this, the huge population of the India combined with rise in medical problems, greater insurance
coverage, enhanced medical treatment facilities to treat both acute and chronic diseases and government raising the health
care spending automatically provides further significant growth opportunities for retail chain pharmacies. Apart from above
increase in health care spending, change in consumer attitude, etc., has significantly contributed in rapid growth of this
segment.

Key Rating Weaknesses

Moderately leveraged capital structure
The capital structure of the company at consolidated level has remained stable as on March 31, 2021 on account of as
compared to March 31, 2020. The overall gearing remained stable at 1.34x as on March 31, 2020 and 1.33x in March 31, 2021.
This was despite the increase in total debt from Rs. 596.25 Cr in FY20 to 695.77 Cr in FY21 on account of accretion of profits
resulting in net-worth increasing from Rs.269.47 Cr in FY20 to Rs.352.03 Cr in FY21. During FY21, Keimed and its subsidiary
has acquired assets of two subsidiaries at a total purchase consideration of Rs. 9.25 crore and the same was funded through
unsecured loans infused by promoters to the extent of Rs.8.26 crore. The other debt coverage indicators viz. interest coverage
represented by PBILDT/interest improved from 3.71x in FY20 to 4.08 in FY21 on account of lower interest cost during the year.
Low profitability margins
Owing to the trading nature of operations, PBILDT margins remain low. At a consolidated level, the PBILDT has remained stable
at Rs. 211.39 Cr in FY21 against 210.45 Cr in FY20, primarily on account of similar revenue level for FY20 & FY21. The PBILDT
margin has remained stable at 3.56% for FY21 against 3.55% for FY20. GCA has also remained stable at Rs. 118.04 Cr in FY21
against 115.87 Cr in FY20.

Liquidity: Adequate
The adequate liquidity position of the Keimed is characterized by availability of Rs.168.59 Cr unutilized working capital facilities
at consolidated level for August-2021, together with a comfortable average of monthly maximum utilization levels of 71%
during the last 12-month period. Further, the group is expected to generate GCA of Rs.162.86 Cr in FY22 against a debt
servicing obligation of Rs. 18.49 Cr.

Analytical approach:
CARE in its analysis has considered the consolidated business and financial risk profiles of Keimed Private Limited and its
seventeen subsidiaries along with twelve step-down subsidiaries, which are all engaged in the same business activity -
distribution of pharmaceutical products across India and thus have management & financial linkages. The list of subsidiaries
and step-down subsidiaries is provided in Annexure-6.
Unsupported rating is based on standalone financials of Meher Distributors Private Limited while factoring the linkages
and corporate guarantee extended by Keimed Private Limited.

Applicable Criteria
Policy on default recognition
Consolidation
Factoring Linkages Parent Sub JV Group
Financial Ratios – Non-financial Sector
Liquidity Analysis of Non-financial sector entities
Rating Credit Enhanced Debt
Rating Outlook and Credit Watch
Wholesale Trading

About the Company (Keimed)

Keimed Private Limited, promoted by Kamineni family was incorporated in March 2000 in Hyderabad, Telangana. The company
was incorporated as ‘Keimed.com Limited’ to carry on trading in pharma and hospital consumables with offices across India.
Subsequently, the name of the company was changed to ‘Keimed Limited’ in May 2001 and was again changed to ‘Keimed
Private Limited’ in July 2012. The company is currently engaged in the business of wholesale trading of pharmaceutical products
for a wide range of medical goods, consumables, drugs, surgical, health and personal care products, through its branches

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across India. The company has seventeen subsidiaries and twelve step-down subsidiaries as on March 31, 2021. The promoter
group (Kamineni family) holds equity shareholding of 61.38% followed by Family health Plan Insurance TPA Ltd, which is an
associate company of Apollo Hospitals Enterprise Limited having shareholding of 18.62% and balance 20% of shareholding is
held by Mitsui & Co. (Asia Pacific) Pte Limited. Keimed derives about 63% of the total revenue at consolidated level from Apollo
Hospital Group for FY21.

Brief Financials (Rs. crore) – Keimed (Consolidated) FY20 (A) FY21 (A) 9MFY22
Total operating income 5,926.03 5,938.28 NA
PBILDT 210.45 211.39 NA
PAT 87.80 87.41 NA
Overall gearing (times) 1.34 1.33 NA
Interest coverage (times) 3.71 4.08 NA
A: Audited; NA: Not Available

About the Company (MDPL)

Meher Distributors Private Limited (MDPL), incorporated in January 2001 in Mumbai, is engaged in wholesale distribution of
pharmaceutical products for a wide range of specialty drugs to hospitals, retail pharmacies, Government and other private
organizations. During FY18, MDPL acquired two regional players viz. Sorabji Hormusji Distributors P. Ltd and Kamal Distributors
P. Ltd. MDPL is a closely held company with 51% stake being held by Keimed Private Ltd, 49% shareholding by Ferzandi family
and their relatives

Brief Financials (Rs. crore) – MDPL (Standalone) 31-03-2020 (A) 31-03-2021 (A) 9MFY22
Total operating income 446.30 472.85 NA
PBILDT 7.30 6.44 NA
PAT 1.00 0.05 NA
Overall gearing (times) 11.17 10.06 NA
Interest coverage (times) 1.59 1.34 NA
A: Audited; NA: Not Available

Status of non-cooperation with previous CRA: Not Applicable

Any other information: Not Applicable
Rating History for last three years: Please refer Annexure-2

Covenants of rated instrument / facility: Detailed explanation of covenants of the rated instruments/facilities is given in
Annexure-3

Complexity level of various instruments rated for this company: Annexure 4

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Annexure-1: Details of Instruments / Facilities

Size
of the Rating assigned
Name of the Date of Coupon Maturity
ISIN Issue along with Rating
Instrument Issuance Rate Date
(Rs. Outlook
crore)
Fund-based - LT-Cash
- - - 45.00 CARE A (CE); Stable
Credit
Un Supported Rating-Un
Supported Rating (Long - - - 0.00 CARE BBB-
Term)
TL 1 – 36 monthly instalments
Fund-based - LT-Term till March, 2023
- - 2.95 CARE A (CE); Stable
Loan TL 2 – 36 monthly instalments
till April, 2024
TL 1 – To be repaid in monthly
Fund-based - LT-Term instalments till February, 2023
- - 2.93 CARE BBB-; Stable
Loan TL 2 - To be repaid in monthly
instalments till March, 2026

Annexure-2: Rating History of last three years

Current Ratings Rating history
Name of the Date(s) & Date(s) & Date(s) & Date(s) &
Sr. Amount
Instrument/Bank Rating(s) Rating(s) Rating(s) Rating(s)
No. Type Outstanding Rating
Facilities assigned in assigned in assigned in assigned in
(Rs. crore)
2021-2022 2020-2021 2019-2020 2018-2019
CARE A 1)CARE A 1)CARE A 1)CARE A 1)CARE A-
Fund-based - LT-Cash
1 LT 45.00 (CE); (CE); Stable (CE); Stable (CE); Stable (SO); Stable
Credit
Stable (05-Oct-21) (01-Oct-20) (27-Sep-19) (05-Oct-18)
Un Supported Rating- 1)CARE 1)CARE
CARE
2 Un Supported Rating LT 0.00 BBB- BBB- - -
BBB-
(Long Term) (05-Oct-21) (01-Oct-20)
CARE A
Fund-based - LT-
3 LT 2.95 (CE);
Term Loan
Stable
CARE
Fund-based - LT-
4 LT 2.93 BBB-;
Term Loan
Stable
* Long Term / Short Term

Annexure-3: Detailed explanation of covenants of the rated instrument / facilities – Not Applicable

Annexure 4: Complexity level of various instruments rated for this company

Sr. No Name of instrument Complexity level
1 Fund-based - LT-Cash Credit Simple
2 Fund-based - LT-Term Loan Simple
3 Un Supported Rating-Un Supported Rating (Long Term) Simple

Annexure 5: Bank Lender Details for this Company

To view the lender wise details of bank facilities please click here

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Annexure-6: List of subsidiaries and step-down subsidiaries used for consolidation

S. No Name of the company Relationship with Keimed Private Limited
1 Palepu Pharma Private Limited Subsidiary
2 Sanjeevani Pharma Distributors P. Ltd Subsidiary
3 Medihauxe Pharma P. Ltd Subsidiary
4 Dhruvi Pharma P. Ltd Subsidiary
5 Lucky Pharmaceuticals P. Ltd Subsidiary
6 Adeline Pharma P. Ltd Subsidiary
7 Meher Distributors P. Ltd Subsidiary
8 Lifeline Pharmaceuticals P. Ltd Subsidiary
9 Shri Datta Agencies P. Ltd Subsidiary
10 Singla Medicos Pharma P. Ltd Subsidiary
11 Neelkanth Drugs P. Ltd Subsidiary
12 Vardhman Pharma Distributors P. Ltd Subsidiary
13 Vasu Agencies Hyd P. Ltd. Subsidiary
14 Vasu Pharma Distributors Hyd P. Ltd. Subsidiary
15 Vasu Vaccines & Specialty Drugs P. Ltd. Subsidiary
16 Venkata Sai Agencies Hyd P. Ltd. Subsidiary
17 Excelsior Softwares P. Ltd. Subsidiary
18 Srinivasa Medisales P. Ltd Step-down subsidiary
19 Focus Medisales P. Ltd Step-down subsidiary
20 Medihauxe Healthcare P. Ltd Step-down subsidiary
21 LPH Pharma P. Ltd Step-down subsidiary
22 Medihauxe International P. Ltd Step-down subsidiary
23 Dhanvanthri Pharma Distributors P. Ltd Step-down subsidiary
24 Shanbalaji Pharma P. Ltd. Step-down subsidiary
25 Shree Amman Pharma Private Limited Step-down subsidiary
26 Kamal Distributors P. Ltd Step-down subsidiary
27 SSND Medimart P. Ltd Step-down subsidiary
28 ATC Pharma P. Ltd. Step-down subsidiary
29 Yashvi Pharma Private Limited Step-down subsidiary

Note on complexity levels of the rated instrument: CARE Ratings Ltd. has classified instruments rated by it on the basis
of complexity. Investors/market intermediaries/regulators or others are welcome to write to care@careedge.in for any
clarifications.

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Contact no.: +91-22-6754 3573
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Contact no.: 040-67937421
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About CARE Ratings Limited:

Established in 1993, CARE Ratings Ltd. is one of the leading credit rating agencies in India. Registered under the Securities and
Exchange Board of India (SEBI), it has also been acknowledged as an External Credit Assessment Institution (ECAI) by the
Reserve Bank of India (RBI). With an equitable position in the Indian capital market, CARE Ratings Limited provides a wide
array of credit rating services that help corporates to raise capital and enable investors to make informed decisions backed by
knowledge and assessment provided by the company.
With an established track record of rating companies over almost three decades, we follow a robust and transparent rating
process that leverages our domain and analytical expertise backed by the methodologies congruent with the international best
practices. CARE Ratings Limited has had a pivotal role to play in developing bank debt and capital market instruments including
CPs, corporate bonds and debentures, and structured credit.

Disclaimer
The ratings issued by CARE Ratings Limited are opinions on the likelihood of timely payment of the obligations under the rated instrument and are not
recommendations to 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. The agency does not constitute an audit on the rated entity. CARE Ratings Limited has based its ratings/outlooks based on information
obtained from reliable and credible sources. CARE Ratings Limited does not, however, guarantee the accuracy, adequacy or completeness of any information and is
not responsible for any errors or omissions and the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by
CARE Ratings Limited have paid a credit rating fee, based on the amount and type of bank facilities/instruments. CARE Ratings Limited or its subsidiaries/associates
may also be involved with other commercial transactions with the entity. In case of partnership/proprietary concerns, the rating /outlook assigned by CARE Ratings
Limited is, inter-alia, based on the capital deployed by the partners/proprietor and the current financial strength of the firm. The rating/outlook may undergo a
change in case of withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial performance and other relevant
factors. CARE Ratings Limited is not responsible for any errors and states that it has no financial liability whatsoever to the users of CARE Ratings Limited’s rating.

Our ratings do not factor in any rating related trigger clauses as per the terms of the facility/instrument, which may involve acceleration of payments in case of
rating downgrades. However, if any such clauses are introduced and if triggered, the ratings may see volatility and sharp downgrades.

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