RHC Holding Private Limited

Transcription

1 Ratings Facilities Non- Debenture Non- issue Debenture Commercial Paper (CP) issue/ Short-term Non- Debenture (NCDs) RHC Holding Private Limited Amount (Rs. crore) 500 (Rupees Five Hundred crore only) 25 (Rupees Twenty Five crore only) 1,400 (Rupees One Thousand Four Hundred crore only) January 24, 2016 Rating 1 CARE A(SO) [Single A (Structured Obligation)] Credit Watch with negative implication CARE A [Single A] (Credit Watch with negative CARE A1 (A One) (Credit Watch with negative implications) Rating Action Continues on Credit Watch with negative implications Continues on credit watch with negative implications Placed on credit watch with negative implications Details of instruments/facilities in * backed by the guarantee/security of first and exclusive pledge of unencumbered shares of Fortis Healthcare (India) Limited (FHL) and Religare Enterprises Limited (REL) to provide an aggregate collateral cover of two times the outstanding amount of the NCD (provided that the aggregate number of pledged FHL shares provide a collateral cover of at least 1.25 times and the aggregate number of pledged REL shares provide a collateral cover of at least 0.75 times). Detailed Rationale The ratings of RHC Holding Private Limited (RHC) continue to derive strength from the strong promoter group, its importance as the holding company of the key companies of the Religare and Fortis group (which have a strong presence in the healthcare and financial services space). However, the ratings are constrained by the volatility of income, limited revenue streams and weak financial risk profile of the group companies in non-core sectors to which RHC has exposure, increased overall gearing and predominance of short-term borrowings in the overall debt profile of the company. Going forward, timely refinancing of short-term borrowings into long term, monetization of real estate assets and investment in group companies in which RHC has exposure and consequent reduction in debt level of RHC, reduction of pledged shares of REL and FHL would remain crucial. Outlook: Under Watch with Negative Implications The ratings are however placed under Credit Watch with negative implications. The International Court of Arbitration of the International Chamber of Commerce (Singapore), has announced in its Judgment dated April 29, 2016, an order against the stake sellers of Ranbaxy including RHC stipulating payment of damages of around Rs.3500 crore to Daiichi. However, RHC has contested the enforceability of the arbitration award in courts in India and Singapore. RHC has further announced amalgamation of RanchemPvt Ltd and demerger of retail business division of RWL Healthworld Limited into RHC. CARE has noted that the company would be withdrawing its application with Reserve Bank of India (RBI) for conversion into Core Investment Company (CIC) and would cease to be an NBFC. CARE also notes that there is delay in the monetization of its assets upon which debt levels were expected to reduce and also delay in expected conversion of short-term debt into long-term debt.care is monitoring further developments with respect to these events and would take up review of rating when more clarity emerges in these matters. Detailed description of the key rating drivers RHC is backed by a strong promoter group in Malav Holdings Pvt. Ltd. (held by Mr Malvinder Singh), and Shivi Holdings Pvt. Ltd. (held by Mr Shivinder Singh), Ms Japna Malvinder Singh and Ms Aditi Shivinder Singh. The promoters have rich experience in healthcare, financial services and insurance segments through Religare Enterprises Ltd (REL) and Fortis Healthcare Ltd (FHL). RHC is the holding company of Fortis Healthcare Holdings Ltd (FHHL; holding company of FHL), Religare Enterprises Ltd (REL) and RHC Finance Pvt. Ltd (RFPL) which has major investments in REL. The monetization of 1 Complete definition of the ratings assigned are available at and other CARE publications 1 Credit Analysis & Research Limited

2 REL with splitting of the business into three separate companies viz. lending, health insurance and capital markets/securities and splitting of the diagnostics business from FHL and its monetization is expected to unlock significant value for RHC and the promoter group. RHC, however, also has high exposure in the form of loans and advances which are primarily extended to group entities engaged in non-core activities with weak financial risk profile or have long term debt exposure and are thus dependent on RHC for rollover of their loans, servicing of their debt and interest obligations. Increasing exposure to group entities using external borrowings has resulted in increase in leverage levels over the period FY13-16 (refers to the period April 1 to March 31). The debt levels of the company further increased from Rs.3,405 crore as on March 31, 2015 to Rs.4,217 crore as on March 31, The overall borrowings stood at Rs.4,060crore as on November 30, Furthermore, the company has also given corporate guarantees, shortfall undertakings, put options for repayment of debt taken by the group companies from external sources besides pledging of shares. The increase in the shares pledged of REL and FHL shares has also limited the ability of group to raise further funding. Also, predominance of short term borrowings in the overall funding mix of RHC (69% of the overall borrowings as on November 30,, implies high reliance on ability of the company to refinance its loans. RHC Group has however announced various measures to address the same viz. monetization of certain non-core entities, restructuring and unlocking value from REL and FHL along with sale of certain real estate investments in the medium term consequent to which the cash flows will be up-streamed to RHC resulting in reduction of debt. In the interim period the management intends to manage the asset liability mismatch and reduce its reliance on refinancing by converting the short-term debt into long term which would be crucial in addressing the liquidity issues. RHC has signed a deal for conversion of some part of its short-term debt in November The ability of the company to convert its intended level of short-term debt into long-term debt would be crucial not only for reducing the short-term borrowings in the funding mix but also help in reducing the share pledged position. Analytical approach: Standalone financials of RHC Applicable Criteria Criteria on assigning Outlook to Credit Ratings CARE s Policy on Default Recognition Criteria for Short Term Instruments Rating Methodology-Non-banking Financial Companies Financial Sector Ratios About the Company RHC (formerly, Solaris Finance Private Limited), incorporated in April 2007, is a Non-Banking Financial Company (NBFC) managed and controlled by the family members of Mr Malvinder Singh and Mr Shivinder Singh, promoters of Fortis Healthcare Limited (rated CARE A+/CARE A1+ ) and Religare Enterprises Limited. RHC has exposure in group companies in the form of investments (62%) and loan and advances (29%) of total assets as on March 31, Major investments of RHC are in Fortis Healthcare Holding Ltd (FHHL, holding company of Fortis Healthcare Ltd, rated CARE A+/ CARE A1+), Religare Enterprises Ltd (REL, holding company of Religare Finvest Ltd rated CARE AA-;Negative) and RHC Finance Pvt Ltd (RFPL, which has major investments in REL) constituting 68% of the overall non-current investments of Rs.6712 crore as on March 31, Its loan portfolio, increased to Rs.3245 crore as on March 31, 2016 (as against Rs.3148 crore as on March 31, 2015) while borrowings increased to Rs.4217 crore as on March 31, 2016 (as against Rs.3405 crore as on March 31, 2015). RHCs investments, loan portfolio and borrowings stood at Rs.6610 crore, Rs.3217 crore, Rs.4060crore as on November 30, The promoters and promoters group held 5.25 crore (16.12% of total promoter holding) and 1.46 crore (16.03% of total promoter holding) of unencumbered shares of FHL and REL respectively as on August 31, Credit Analysis & Research Limited

3 For FY16 (refers to the period April 1 to March 31), RHC earned PAT of Rs crore on a total income of Rs crore as against PAT of Rs crore on a total income of Rs crore during FY15. During H1FY17 (refers to the period April 1 to September 30), the company has reported a PAT of Rs crore on a total operating income of Rs crore. Status of non-cooperation with previous CRA: Not Applicable Any other information: Not Applicable Rating History for last three years: Please refer Annexure-2 Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. This classification is available at Investors/market intermediaries/regulators or others are welcome to write to care@careratings.com for any clarifications. Analyst Contact Name: Ms Ankita Sehgal Tel: Mobile: ankita.sehgal@careratings.com About CARE Ratings: **For detailed Rationale Report and subscription information, please contact us at CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading credit rating agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an External Credit Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of its rightful place in the Indian capital market built around investor confidence. CARE Ratings provides the entire spectrum of credit rating that helps the corporates to raise capital for their various requirements and assists the investors to form an informed investment decision based on the credit risk and their own risk-return expectations. Our rating and grading service offerings leverage our domain and analytical expertise backed by the methodologies congruent with the international best practices. Disclaimer CARE s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. CARE has based its ratings/outlooks on information obtained from sources believed by it to be accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/instruments. In case of partnership/proprietary concerns, the rating /outlook assigned by CARE is based on the capital deployed by the partners/proprietor and the financial strength of the firm at present. The rating/outlook may undergo change in case of withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial performance and other relevant factors. 3 Credit Analysis & Research Limited

4 Annexure-1: Details of Instruments/Facilities Name of the Instrument -Non Date of Issuance Coupon Rate Maturity Date Size of the Issue (Rs. crore) Rating assigned along with Rating Outlook 04-Feb % 03-Feb CARE A (Under Credit watch with Negative -Non 12-Nov % 12-Nov CARE A (SO) (Under Credit watch with Negative Short-term Instruments-CP/NCD (7-364 days) CARE A1 (Under Credit watch with Negative Annexure-2: Rating History of last three years Sr. No. Name of the Instrument/Bank Facilities Current Ratings ( ) Type Amount Rating Outstanding (Rs. crore) Chronology of Rating history for past three years assigned in assigned in assigned in assigned in Non 2. -Non 3. Short-term Instruments-CP/NCD 4. -Non ST Withdrawn ST Withdrawn ST Withdrawn ( ) (SO) ( ) 5. -Non 6. -Non 7. -Non ST Withdrawn 1)Withdrawn ( ) (SO) ( ) ( ) (SO) (In Principle) ( ) 8. -Non ( ) (SO) ( ) (SO) (In Principle) 4 Credit Analysis & Research Limited

5 9. Commercial Paper 10. -Non 11. -Non ST Withdrawn 1)Withdrawn ( ) LT CARE A (Under 1)CARE A Credit watch (Under with Negative Credit Watch) ( )CARE A (Under Credit Watch) ( )CARE A ( )CARE A ( ) 2)CARE A 3)CARE A ( ) 4)CARE A ( ) 12. -Non LT CARE A (SO) (Under Credit watch with Negative 1)CARE A (SO) (Under Credit Watch) ( )CARE A (SO) (Under Credit Watch) ( )CARE A (SO) ( )CARE A (SO) (In Principle) ( ) 2)CARE A (SO) (In Principle) ( ) 13. Short-term Instruments-CP/NCD ST 1, CARE A1 (Under Credit watch with Negative ( ( ( ( ) 3)CARE A1 ( ) ( ) 5 Credit Analysis & Research Limited

6 CONTACT Head Office Mumbai Mr. AmodKhanorkar Mr. Saikat Roy Mobile: Mobile: amod.khanorkar@careratings.com saikat.roy@careratings.com CREDIT ANALYSIS & RESEARCH LIMITED Corporate Office: 4th Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway, Sion (East), Mumbai Tel: Fax: care@careratings.com AHMEDABAD Mr. MehulPandya 32, Titanium, Prahaladnagar Corporate Road, Satellite, Ahmedabad Cell: Tel: mehul.pandya@careratings.com BENGALURU Mr. Deepak Prajapati Unit No , 11th Floor, Prestige Meridian II, No. 30, M.G. Road, Bangalore Cell: Tel: , deepak.prajapati@careratings.com CHANDIGARH Mr. SajanGoyal SCF No , First Floor, Phase 11, Sector 65, Mohali Chandigarh Cell: Tel: / 09 sajan.goyal@careratings.com CHENNAI Mr. V Pradeep Kumar Unit No. O-509/C, Spencer Plaza, 5th Floor, No. 769, Anna Salai, Chennai Cell: Tel: / pradeep.kumar@careratings.com COIMBATORE Mr. V Pradeep Kumar T-3, 3rd Floor, Manchester Square Puliakulam Road, Coimbatore Tel: / pradeep.kumar@careratings.com Madho Singh Road, Near Collectorate Circle, Bani Park, Jaipur Cell: Tel: / 14 nikhil.soni@careratings.com KOLKATA Ms. Priti Agarwal 3rd Floor, Prasad Chambers, (Shagun Mall Bldg.) 10A, Shakespeare Sarani, Kolkata Cell: Tel: priti.agarwal@careratings.com NEW DELHI Ms. Swati Agrawal 13th Floor, E-1 Block, Videocon Tower, Jhandewalan Extension, New Delhi Cell: Tel: swati.agrawal@careratings.com PUNE Mr.Pratim Banerjee 9th Floor, Pride KumarSenate, Plot No. 970, Bhamburda, Senapati Bapat Road, Shivaji Nagar, Pune Cell: Tel: pratim.banerjee@careratings.com CIN - L67190MH1993PLC HYDERABAD Mr. Ramesh Bob 401, Ashoka Scintilla, , Himayat Nagar, Hyderabad Cell : Tel: ramesh.bob@careratings.com JAIPUR Mr. Nikhil Soni 304, Pashupati Akshat Heights, Plot No. D-91, 6 Credit Analysis & Research Limited