ICRA places Biocon's credit ratings on watch; Stock sheds ~2%

14 Mar 2022 , 11:40 AM

Biocon Ltd has informed that the company has received a rating letter from ICRA on March 10, 2022, wherein ICRA has placed its ICRA AA+ and ICRA A1+ ratings on the long term and short-term banking facilities of the Company on ‘Watch with Developing Implications’.

At around 11:42 AM, Biocon was trading at Rs326.25 apiece down by Rs5.8 or 1.75% on the BSE.

According to the rationale report released by ICRA, on February 28, 2022, Biocon Limited (Biocon) announced that its subsidiary, Biocon Biologics Limited (‘BBL’), has approved the proposed acquisition of biosimilars assets of Viatris Inc. (Viatris) for a consideration of up to $3.335 billion in stock and cash, subject to necessary regulatory and other approvals.

Through the acquisition, BBL will acquire Viatris’ global biosimilars business with estimated revenues and OPBDITA of $875 million and $200 million respectively for CY2022 and $1.1 billion and $250 million respectively for CY2023, along with its portfolio of in-licensed biosimilar assets.

ICRA takes note of the development and has placed the ratings on watch with developing implications, pending complete clarity on the acquisition’s funding plan, in terms of the debt to be raised and the impact of the same on Biocon’s consolidated debt and coverage indicators post the transaction.

ICRA will continue to monitor the developments on the transaction, especially on the incremental net debt, and take appropriate rating action as and when more clarity emerges. Pressure on ratings could emerge if the borrowings increase significantly from the current levels at Biocon consolidated level, in the absence of adequate equity infusion and management’s deleveraging plans.

Downward pressure on ratings could also arise from any delay in integration or margin contraction owing to delays or lower than expected revenue potential of product launches in the merged entity.