About the Company

Veeda Clinical Research Limited, along with its subsidiary Bioneeds India Private Limited and joint venture Ingenuity Biosciences Private Limited (collectively referred to as the “Veeda Group”), provides a comprehensive range of clinical, preclinical, and bio/analytical services. Their focus is to support the development programs of innovator, biosimilar, and generic drugs for our global clientele.

As an independent contract research group, they are owned by institutional investors, governed by a Board, and professionally managed. They bring scientific expertise, global quality management systems, and ensure long-term operational and financial stability through continuous investments in their people, processes, systems, infrastructure, and technology. Their unwavering commitment to quality sets them apart.

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Their services cater to clients across various industries, including:

• Pharmaceutical and Biopharmaceutical
• Agrochemical and Industrial Chemicals
• Herbal/Nutraceuticals
• Medical Devices

By serving these industries globally, Veeda Clinical Research aim to contribute significantly to the advancement of drug development and related fields, adhering to the highest standards of quality and professionalism.

Founder

Apurva Shah, Founder & Director. He has an MBA in International Finance & Entrepreneurship from Babson College in Boston USA. With his strong entrepreneurial and organizational skills, he has been able to grow Veeda to become one of the premier CROs in the country.

Rationale and Key Rating Drivers:

The ratings for Veeda Clinical Research Limited are influenced by several key factors:

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Positive Factors:

1. Experienced Management Team: Veeda benefits from a well-qualified and experienced management team, including professionals appointed by its private equity shareholders.
2. Established Track Record: Veeda has a proven track record of operations supported by well-equipped facilities and a diversified customer base.
3. Diversification and Acquisition: The acquisition of the majority equity stake in Bioneeds India Private Limited (BIPL) contributes to the diversification of Veeda’s revenue profile, enhancing its presence in the clinical research value chain.
4. Financial Strength: The company exhibits healthy but fluctuating profitability, a comfortable capital structure, and robust debt coverage indicators.
5. Liquidity: Veeda maintains adequate liquidity with expected cash accruals sufficient to cover debt obligations and capex requirements.

Negative Factors:

1. Scale of Operation: Veeda operates on a moderate scale, and any significant decline in total operating income (TOI) below ₹200 crore with a sustained decrease in profit margins may impact its ratings negatively.
2. Contingent Liabilities: The company faces high contingent liabilities, particularly a compensation claim of ₹101.88 crore related to clinical trials. The resolution and impact on liquidity are crucial considerations.
3. Regulatory Risk: The clinical research industry is subject to high regulatory risk, and any adverse events during trials could lead to regulatory actions affecting the company’s operations.
4. High Competition: The growth of the Indian Clinical Research Organization (CRO) industry is challenged by increasing competition, requiring companies like Veeda to navigate challenges related to subject availability and trial conduct.
5. Forex Volatility: Veeda’s profitability is susceptible to volatility associated with forex rates, as a significant portion of its total operating income is derived from exports.

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Rating Sensitivities:

Factors likely to lead to rating actions:

Positive:

• Diversification leading to sustained growth in TOI beyond ₹500 crore with a PBILDT margin of around 25%.

Negative:

• Significant decline in combined TOI below ₹200 crore with PBILDT margin less than 20% on a sustained basis.
• Any significant outgo due to contingent liabilities impacting liquidity.
• Large debt-funded capex or acquisition leading to an overall gearing beyond 0.60x.

Analytical Approach:

CARE Ratings Limited considered consolidated financials, reflecting Veeda’s financials along with its subsidiaries and joint venture.

Outlook: Stable

The outlook for Veeda’s long-term rating is deemed “Stable,” considering its established track record, strong presence in the clinical research value-chain, and healthy liquidity.

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Key Strengths:

1. Experienced Management: Led by Apurva Shah and Binoy Gardi, Veeda boasts over 15 years of experience in clinical research.
2. Operational Track Record: Veeda has a well-established operational track record, inspected by regulatory authorities globally.
3. Diversified Customer Base: The company caters to a diversified customer base with a significant presence in both domestic and overseas markets.
4. Acquisition of BIPL: The acquisition of BIPL strengthens Veeda’s position in the CRO industry, offering operational synergy and revenue diversification.
5. Profitability: Veeda demonstrates healthy, albeit fluctuating, profitability on both standalone and consolidated levels.
6. Capital Structure: The company maintains a comfortable capital structure with strong debt coverage indicators.

Key Weaknesses:

1. Scale of Operation: Veeda operates on a moderate scale, and revenue concentration in the BA/BE segment poses a risk.
2. Contingent Liability: High contingent liabilities, particularly a substantial compensation claim, impact the company’s financial risk profile.
3. Regulatory Risk: The clinical research industry exposes Veeda to high regulatory risk, with potential impacts on operations.
4. Competition: Increasing competition in the Indian CRO industry may pose challenges in subject availability and trial conduct.
5. Forex Volatility: The company’s profitability is susceptible to forex fluctuations, given its significant dependence on export earnings.

Liquidity: Adequate

Veeda maintains adequate liquidity with a comfortable current ratio, quick ratio, and positive cash flow from operations.

• Expected GCA during FY23 is around ₹65-70 crore against debt repayment obligations of ₹21 crore.
• Cash and bank balance of ₹111.93 crore as of December 31, 2022, provides a cushion for potential acquisitions.
• Operating cycle remains elongated at 72 days during FY22, mainly due to high debtors’ days.

On a standalone basis, Veeda’s liquidity remains robust with negligible fund-based working capital utilization.

• No term debt on a standalone basis, with low lease payment obligations compared to cash accruals.
• Liquid investments and cash and bank balance of ₹111.93 crore provide flexibility for potential acquisitions.
• Comfortable current ratio and quick ratio of 2.06x and 2x, respectively, as of March 31, 2022.

List of subsidiaries/JV of Veeda getting consolidated

*step-down subsidiary of Veeda.

Financials

₹in Crores

Conclusion

In conclusion, Veeda Clinical Research Limited, a prominent Contract Research Organization (CRO) in the clinical, preclinical, and bio/analytical services sector, exhibits a mix of strengths and challenges. Led by an experienced management team and boasting a proven operational track record, Veeda has diversified its revenue profile through strategic acquisitions, such as Bioneeds India Private Limited (BIPL). Financially, the company demonstrates healthy but fluctuating profitability, supported by a comfortable capital structure and adequate liquidity.

Key strengths include Veeda’s experienced leadership, operational track record validated by global regulatory authorities, a diversified customer base, and strategic acquisitions contributing to revenue diversification. Additionally, the company maintains a comfortable capital structure and robust debt coverage.

However, challenges include the moderate scale of operations, concentration risk in the bioequivalence segment, high contingent liabilities, regulatory risks inherent in the clinical research industry, and the impact of increasing competition in the Indian CRO sector. Forex volatility poses a further challenge, given the significant portion of total operating income derived from exports.

The liquidity position of Veeda is deemed adequate, supported by a healthy current ratio, quick ratio, and positive cash flow from operations. The company’s financial outlook is considered stable, reflecting its established track record and strong presence in the clinical research value chain.

Moving forward, sustained diversification leading to growth in total operating income beyond ₹500 crore, coupled with prudent financial management, could positively influence the company’s ratings. Conversely, a significant decline in total operating income, persistent profit margin compression, substantial contingent liabilities impacting liquidity, or high debt-funded expansions may lead to negative rating actions.

In summary, Veeda Clinical Research Limited appears well-positioned in the CRO industry, but continuous attention to operational diversification, risk management, and financial stability will be crucial for sustained success and favourable credit ratings.

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