Rating Rationale Heritage Hospitals Limited 8 th Jan 2018

Transcription

1 Rating Rationale Heritage Hospitals Limited Brickwork Ratings assigns rating for the Bank Loan Facilities amounting to Rs Crs of Heritage Hospitals Limited Particulars: *Please refer to BWR website for definition of the ratings Rationale/Rating Sensitivities: BWR has principally relied upon the audited financial results of the company up to FY17, projections up to FY20, publicly available information and information/clarifications provided by the Company. The rating assigned to the bank facilities of Heritage Hospitals limited derives comfort from experienced promoters and management team, established track record of operations with wide medical

2 facilities which helps in addressing wider customer market in the region of Varanasi and near-by, approval from MCI for admissions in MBBS course with intake capacity of 150 students for 3rd year (AY ) and growing scale of operations with comfortable cash accruals. The rating, however, is constrained on account of moderately leveraged capital structure and presence in the highly competitive and regulated industry. The ability of the company to maintain its surplus margins while increasing its scale of operations and improve its capital structure would be the key rating sensitivities. About The Company: HHL was incorporated on 22nd October, 1991 by Dr. Siddhartha Rai and Mr. Anshuman Rai, the promoters of the Company. Initially, the Company established a 150 bed hospital at Lanka region in Varanasi. The Hospital came into operation in the year Later, Company planned to expand in the domain of Education Sector ( Medical College) in a phased manner. Under Phase- I, T he company completed and created a facility of 266-bed super specialty hospital, a 300-bed hospital and partly developed a Medical College at Bhadwar Region in Varanasi Under Phase-II, The company has completed the development of Medical college ( 750 Seats with 4 Lecture theater, Auditorium, Museum, Laboratory in each department, with one floor fully dedicated to Central Library with Digital Library), Nursing college (40 seats), Paramedical college (40 seats) Non Teaching Tower Staff Quarters, tower for Male Students Hostel, Building for Female Student Hostel and Building for Nurses Students Hostel. Under Phase III: In order to comply with Medical Council of India (MCI) norms the Company had to expand its facilities by way of additional construction of: Interns boys hostel, Residential staff quarter, Married girl hostel and guest house. Also, Company has also proposed certain new Equipment for its existing 150 bed hospital at Lanka in Varanasi. The project cost for the proposed expansion (Phase III) at Bhadwar & Lanka is estimated at Rs Crores. The project is proposed to be funded by a term loan of Rs. 53 Crores and internal accruals. Key Rating Drivers Experienced promoters and professional team: HHL is promoted by Dr Siddharth Rai (MBBS) and Mr Anshuman Rai (brother of Dr Sidhartha Rai) who have an experience of more than two decades in running a hospital. Dr Sidhartha Rai looks after the day-to-day operation and has extensive experience of more than 20 years in hospital management. Existing hospital has been in operation since 1994 and is one of the prime hospitals in Varanasi.

3 Strong catchment area: The existing hospital has a wide catchment area and receives patients not only from neighbouring cities but also from adjacent state of Bihar, Madhya Pradesh and Jharkhand on account of lack of good healthcare infrastructure in those States. Revenue Growth: The rating reflects HHL s strong revenue growth of 33%. HHL reported INR Crores of Operating income in FY17. Consequently, cash accruals are increased to Rs Crs as compared to Rs Crs in FY16 Sound Market Demand: HHL has received an approval from MCI for admissions in MBBS course with intake capacity of 150 students for 3rd year as well (AY ). HIMS Benefits on account of Demand-Supply Gap Of Medical colleges. Company will also benefit on account of government tie-ups under Public Private Partnership (PPP) as company has received tenders from government to execute various projects in Health-Care field. Upward Trend in Students Enrollments: We also Take into account HIMS s ongoing expansion plan, the continued demand of medical institutes and availability of infrastructure facilities and increase in cumulative headcount during FY18-FY19. Aggressive Capex: Capex for Medical college has increased the gearing level. Although it will be stable once all 5 years of medical college are functional. Highly competitive and regulated Industry: The company is exposed to intense competition from other Hospitals in Varanasi and it is exposed to risks related to unfavourable changes in government policies from time to time Rating Outlook: Stable BWR believes that HHL s business risk profile will be maintained over the medium term. The Stable outlook indicates a low likelihood of rating change over the medium term. The rating outlook may be revised to 'Positive' in case the Company is able to increase its margin and capital base. The rating outlook may be revised to 'Negative' if the gearing position deteriorates any further.

4 Company s Financial Performance: Rating History for the last three years: Hyperlink/Reference to Applicable Criteria: General Criteria Approach to Financial Ratios Service Sector Analytical Contacts Satvinder Gakhar DGM - Ratings analyst@brickworkratings.com Phone: Media media@brickworkratings.com Relationship Contact bd@brickworkratings.com

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