ICRA has reaffirmed 'AA' to the enhanced Rs 307.5 million fund based and Rs 135 million non-fund based bank limits of Merck. The outlook on the long-term rating is stable. 
 
The existing rating takes into account Merck’s parentage, strong presence in Vitamin Therapeutic area and product portfolio, robust brand image, increasing presence of chemical business bringing diversity to revenues, strong financial profile characterised by profitable operations and moderately high return on capital employed and strong liquidity in the form of cash reserves.

Merck is debt free with cash/investment surplus of Rs 2.12 billion as on December 2013. There has been some downward pressure on profitability in the last few years due to increase in input cost on account of foreign exchange volatility and investment in new launches, though Merck continues to enjoy healthy profitability.

The rating is constrained by modest scale of operations, high product concentration and price control on large portion of pharma portfolio generating margin pressure and affecting sales growth. Going forward, the key sensitivity would be larger than expected dividend payout that needs to be evaluated on case to case basis. 

Shares of the company declined Rs 0.35, or 0.06%, to settle at Rs 632.95. The total volume of shares traded was 7,260 at the BSE (Tuesday).