Lanka Rating Assigns Initial Entity Rating to George Steuart Health (Private) Limited.

George Steuart Health (Pvt.) Limited (“GSHPL” or “the Company”) operates in the pharmaceutical industry in Sri Lanka, primarily engaged in import and distribution of pharmaceutical products and equipment. The Company is part of George Steuart Group, which was founded in 1835 during the British colonial era. The rating reflects the Company's reputable brand and established legacy spanning over 180+ years. GSHPL enjoys sustained growth in revenues, healthy margins and steady profitability, although its market share in the industry remains modest. The rating incorporates the Company's very strong financial profile characterized by low leveraging and robust coverage ratios. GSHPL has a diverse presence in various pharma verticals namely, (i) Pharmaceuticals (ii) Medical devices (iii) Neutraceutical (iv) Cosmetic (v) Veterinary Medicine & Diagnostics (vi) Optometry (vii) Sports and fitness (viii) 3PL operations. The pharmaceutical industry in Sri Lanka operates through a regulatory framework overseen by the Government for price control of essential drugs by the National Medicines Regulatory Authority (NMRA). All imported and distributed healthcare products should be registered with NMRA. The industry relies on imports, mainly from India, USA, China, Thailand, Korea, Pakistan, Bangladesh, and remains susceptible to supply chain risk and currency fluctuation as seen during recent crisis. However, Company continued to show great resilience and continued to grow during times of external volatilities faced by the Country. GSHPL Sales operations encompass direct sales and sales through exclusive distributors to private hospitals, modern trade outlets (supermarkets), per-stocking doctors, and government hospitals. Most of the customers in top 10 are their own distributors, they supply to approximately ~2000 outlets throughout the country. GSHPL has acquired a manufacturing plant through a joint venture (JV) agreement. The project's objective is to reduce reliance on imported medicines by manufacturing them locally.
GSHPL intends to issue a corporate guarantee in favor of George Steuart & Company (Pvt.) Limited (GSCPL), the parent company of GSHPL and group holding company. GSCPL has a diverse portfolio of entities in Sri Lanka engaged in a range of businesses including tea exports, healthcare, travel, leisure, financial services, FMCG, and industrial solutions.
The rating depends on the Company's ability to maintain and further strengthen its market position in the pharmaceutical distribution sector. Sound financial management, including adhering to agreed leveraging and coverage parameters remain critical. Any adverse regulatory or economic change, significantly impacting pharmaceutical industry prospects, could have negative rating implications.

About the Entity
GSHPL is a limited liability company incorporated in Sri Lanka in 1975 and reregistered under the Companies Act no. 7 of 2007. Formerly, the Company was known as George Steuart Agencies (Pvt.) Limited. GSHPL is a subsidiary of George Steuart & Company (Pvt.) Limited (“GSCPL”), which was founded in 1835 during the British colonial era. GSCPL’s principal activities are providing strategic management, centralized support services, research and planning and renting out premises. GSCPL holds a majority ownership stake of 99.58% in GSHPL. GSCPL is 93.95% owned by Divasa Equity (Pvt.) Limited, 5% is owned by key management personals (KMPs), and the remaining 1.05% stake is with the Employee Share Trust. The ownership of Divasa Equity (Pvt.) Limited is with 8 shareholders, Ms. Varuni Amunugama 35.19%, Mr. Dilith Jayaweera 35.19%, and Mr. S. A. Ameresekere 17.17% and others have 12.44%.