Brooks Laboratories Limited (BLL) has received a significant boost in its credit profile, as CARE Ratings Limited upgraded the company's long-term bank facilities rating while reaffirming its short-term rating. This upgrade reflects the expected improvement in BLL's financial performance and the potential benefits from a recently announced merger involving its associate company.

Credit Rating Upgrade

CARE Ratings has upgraded BLL's long-term bank facilities rating to 'CARE BB; Stable' from 'CARE BB-; Stable'. Simultaneously, the rating agency reaffirmed the short-term bank facilities rating at 'CARE A4'. The upgrade is based on the anticipated enhancement in BLL's financial performance in the fiscal year 2026 (FY26).

Financial Performance and Projections

BLL's financial metrics show signs of improvement:

A: Audited, UA: Unaudited

The company is expected to achieve a total operating income of approximately ₹100 crore in FY26, with improved profit margins driven by lower purchase costs due to stronger supplier negotiations.

Merger Announcement and Its Impact

A key development influencing the rating upgrade is the recently announced merger of BLL's associate company, Brooks Steriscience Limited (BSL), into OneSource Speciality Pharma Limited (OSPL). Key points of the merger include:

• BLL will receive a 1.50% equity stake in OSPL in exchange for its 49% stake in BSL.
• The merger is expected to be completed by December 2026.
• This strategic move is anticipated to enhance BLL's liquidity position by converting its investment in an unlisted joint venture into listed OSPL shares.
• The merger will lead to the discontinuation of the corporate guarantee extended for BSL's borrowings of ₹68.62 crore, potentially improving BLL's financial risk profile.

Strengths and Challenges

CARE Ratings highlighted several strengths and challenges for Brooks Laboratories:

Strengths:

• Experienced management with nearly two decades of industry presence
• Established relationships with customers and suppliers
• Diverse product range including liquid injections, tablets, and dry syrups

Challenges:

• Moderate capital structure due to high guaranteed debt of the associate company
• Small scale of operations with low profitability margins
• Highly regulated and competitive nature of the pharmaceutical industry

Liquidity and Future Outlook

While BLL's liquidity profile remains stretched, as evidenced by high utilization of working capital limits (~80% in the last 12 months ending September 2025), the company is not planning any major capital expenditure in the near-to-medium term. Regular maintenance and upgradation capex of approximately ₹1.0 crore in FY26 is expected to be financed through internal accruals.

The 'Stable' outlook assigned by CARE Ratings reflects the expectation that BLL will continue to benefit from its experienced promoters and established track record of operations.

As Brooks Laboratories navigates through these developments, the credit rating upgrade serves as a positive indicator of the company's improving financial health and future prospects in the pharmaceutical industry.

Brooks Laboratories has announced that its subsidiary, Brooks Steriscience Limited (BSL), has approved a significant corporate restructuring initiative. The plan involves a composite scheme of arrangement and amalgamation encompassing five pharmaceutical entities, aiming to consolidate sterile injectable manufacturing operations under OneSource Specialty Pharma Limited.

Key Merger Details

The approved scheme involves the merger of:

1. Steriscience Specialties Private Limited (SSPL)
2. Brooks Steriscience Limited (BSL)
3. Steriscience Pte Limited (Steriscience SG)
4. Strides Pharma Services Private Limited (SPSPL)
5. OneSource Specialty Pharma Limited (OneSource)

Financial Metrics of Key Entities

Share Exchange Ratios

The merger will be executed through share exchanges:

• 48 Brooks Steriscience shares for every 10 Steriscience Specialties shares
• 137 OneSource shares for every 10 Brooks Steriscience shares

Impact on Shareholding

Post-merger, OneSource's promoter shareholding is expected to increase from 29.77% to 36.17%, while public shareholding will decrease from 70.23% to 63.83%.

Strategic Rationale

The consolidation is designed to:

1. Strengthen business capabilities in the contract development and manufacturing operations (CDMO) sector
2. Create operational synergies and enhance shareholder value
3. Offer a broader product and service portfolio
4. Leverage unified talent pools and diversified technical expertise
5. Improve operational efficiency and cost savings
6. Expand geographical footprint, including the addition of a European Union site

Regulatory Approvals

The scheme requires approvals from:

• Shareholders and creditors of the involved entities
• Stock exchanges (BSE Limited and National Stock Exchange of India Limited)
• Securities and Exchange Board of India (SEBI)
• National Company Law Tribunal
• Singapore High Court
• Other relevant regulatory authorities

Additional Corporate Actions

In a separate announcement, Brooks Laboratories Limited, the parent company of Brooks Steriscience, held its 23rd Annual General Meeting (AGM). Key resolutions passed include:

• Adoption of annual financial statements
• Reappointment of Mr. Bhushan Singh Rana as a director
• Appointment of Sharma Sarin & Associates as Secretarial Auditors for a five-year term
• Approval for entering into arrangements including sale, merger, demerger, or other forms of restructuring
• Approval for the disposal/transfer of investment held in Brooks Steriscience Limited under any restructuring scheme

The merger scheme and additional corporate actions signal a significant strategic shift for Brooks Steriscience and its associated entities, aiming to create a more integrated and competitive pharmaceutical manufacturing operation in the sterile injectables space.