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"The downgrade reflects Glenmark's strained financial risk profile due to a sharp increase in debt levels as a result of a sizeable increase in working capital requirements in both Glenmark and its subsidiaries," the rating agency said in a release.
The downgrade also reflects the company's higher-than-expected capital expenditure (capex) and outlays on brand acquisitions, Crisil added.
Further it said that the rating revision also reflects the refinancing risk posed by high reliance on short-term borrowings to fund the increase in working capital requirements.
The working capital demand loan and cash credit ratings for Glenmark have been downgraded to A+/Negative, which is a lower investment-grade rating but with a negative outlook.
Earlier, Crisil had assigned AA-/Stable ratings on both the debt facilities, which meant relatively better investment grade with a stable outlook. These ratings are for a Rs 145 crore working capital demand loan and a Rs 25 crore cash credit. Crisil has also assigned an A+/Negative rating to Glenmark's Rs 400 crore long-term loans.
(PTI)
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