S&P Global Ratings said on Tuesday that Jubilant Pharma Ltd will remain integral to the broader group even after its proposed reorganisation.
Although the demerger of its active pharmaceutical ingredients (API) business will reduce Jubilant Pharma's revenues by about 10 per cent, the company still has sizable cash flows for debt servicing.
Moreover, said S&P, the assessment of Jubilant Pharma is based on a consolidated view of its parent Jubilant Pharmova Ltd where the API business will reside post the reorganisation.
While the scale of the transaction is small, frequent corporate reorganisations could raise questions around consistency of management strategy.
S&P said Jubilant Pharma will remain highly integrated with the group. It shares management, name, branding and treasury operations and has the long-term committed support of the group.
Even post-reorganisation, the rated entity will continue to represent a significant share of the group's earnings and cash flows through the ownership of the niche specialty pharmaceuticals (radiopharma and allergy therapy products), generics manufacturing and contract development and manufacturing of sterile injectables and non-sterile products and solid dosage manufacturing.
These segments together contribute about 90 per cent of the group's revenues.
S&P said the realignment of the API and related research and development business with the contract research organisation at the Jubilant Pharmova level will help address some gaps in the group's product offerings.
However, it is unlikely to alter the view of its business position materially given its relatively small scale in the highly competitive generic pharmaceutical industry.