CRISIL has reaffirmed its ratings on the bank facilities of Sun Pharmaceutical Industries (Sun Pharma) at 'AAA/Stable/A1+'. The reaffirmation follows Sun Pharma's announcement to acquire 100% stake in Ranbaxy Laboratories (Ranbaxy; rated 'A1+') subject to obtaining regulatory approvals. The deal is valued at an enterprise value of USD 4 billion on an all-stock transaction. Under the agreement, Ranbaxy shareholders will receive 0.8 share of Sun Pharma for each share of Ranbaxy.

The reaffirmation reflects CRISIL's belief that Sun Pharma's financial risk profile will remain robust over the medium term even after the acquisition of Ranbaxy as the transaction will not require any cash outflow. Sun Pharma will maintain a strong financial risk profile, marked by strong cash flows, healthy gearing, strong debt protection metrics, and sound financial flexibility. As on Dec. 31, 2013, Sun Pharma reported a gearing of 0.12 times and liquid surplus of Rs 100 billion.

The ratings continue to reflect Sun Pharma's established position in the fast-growing chronic therapeutic segments in India, and strong presence in the international generics market. These rating strengths are partially offset by the intensifying pricing pressure and legal and regulatory risks that Sun Pharma faces in the regulated generics market.

CRISIL believes that Sun Pharma will maintain its healthy revenue growth in the Indian formulations and international generics markets over the medium term, driven by its strong market position and diversified geographical base. Healthy growth and strong profitability will ensure that the company's financial risk profile remains strong, supported by robust cash accruals, negligible debt, and substantial cash surplus. The outlook may be revised to 'Negative' in case of an adverse impact of any action by the US Food and Drug Administration on the revenue and profitability of Sun Pharma's US operations, or if its position deteriorates in the domestic or international markets.

Shares of the company gained Rs 40.55, or 6.91%, to settle at Rs 627.80. The total volume of shares traded was 1,131,719 at the BSE (Wednesday).