CRISIL has assigned its ‘BBB+/Stable’ rating to the term loan facility of Banashankari Medical and Oncology Research Centre Ltd (Banashankari), part of the HCG group. The rating reflects the credit risk profile of Banashankari’s parent, HealthCare Global Enterprises Ltd (HCG). This is because HCG is the majority owner of Banashankari, with a shareholding of 97.89 per cent; HCG also operates and manages Banashankari and other subsidiaries including HCG Medi-Surge Hospitals Pvt Ltd (MediSurge), together referred to as the HCG group. HCG extends financial, operational, and managerial support to its subsidiaries. CRISIL has, therefore, combined the business and financial risk profiles of HCG and its seven subsidiaries for arriving at the ratings.

The ratings reflect the extensive experience of HCG’s promoters in oncology, and the HCG group’s state-of-the-art infrastructure for oncology. These strengths are partially offset by the HCG group’s exposure to risks related to project implementation/stabilisation, below-average financial risk profile marked by moderate debt protection metrics, and concentration of revenues in its flagship venture, Banashankari.

Outlook: Stable
CRISIL expects the HCG group to maintain its credit risk profile over the medium term supported by its comfortable capital structure, experienced promoters, state-of-the-art hospital infrastructure, and expected improvement in profitability. The outlook may be revised to ‘Positive’ on timely commencement of operations at the HCG group’s new facilities, coupled with significant improvement in hospital infrastructure utilisation, and therefore, in cash accruals. Conversely, the outlook may be revised to ‘Negative’ in the event of time and cost overruns in the expansion project, reduced profitability, any unexpected debt-funded capital expenditure (capex), or non-infusion of equity.

About the Group
Incorporated in 1998 by Dr. B S Ajai Kumar, HCG (formerly, Curie Centre of Oncology Pvt Ltd) sets up centres for cancer treatment, imaging and diagnostics services, and clinical research organisations. The HCG group runs 17 units across India, with a few running on joint venture basis with regional partners. The group undertook a capex programme of about Rs.2.4 billion in the past four years, for setting up new facilities across India.

Banashankari, established in 1986 is engaged in setting up and managing cancer hospitals, cancer centres, and medical diagnostic services. At present, Banashankari operates four units in Bengaluru – Bangalore Institute of Oncology, which offers surgery, radiation therapy, and medical oncology; Bangalore Institute of Oncology Specialty Centre; and Centre for Robotic Radio surgery, a tertiary care intensive care unit, a bone-marrow transplant unit, and an imaging and diagnostics centre. It has set up India’s first US Food & Drug Administration-compliant molecular imaging centre in Bengaluru. The company has set up Cyber-Knife Centre in April 2009, and is also setting up a surgical centre, to be operational by May 2010.

Established in 2000, MediSurge runs a 100-bed multi-specialty hospital in Ahmedabad. At present, MediSurge is running units for consultation, treatment, surgery, diagnostic services, clinical trails, and pharmacy. HCG, as part of its vision to provide oncology services, is also in the process of setting up an oncology department.

For 2008-09 (refers to financial year, April 1 to March 31), the HCG group reported a net loss of Rs.116 million on net sales of Rs.1.04 billion, against a net loss of Rs.52 million on net sales of Rs.0.61 billion for 2007-08.