Rating Rationale
April 01, 2020 | Mumbai
All India Society For Health Aid Education And Research (A.S.H.A.)
Rated amount enhanced
 
Rating Action
Total Bank Loan Facilities Rated Rs.280 Crore (Enhanced from Rs.250 Crore)
Long Term Rating CRISIL BBB/Stable (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its rating on the long-term bank facilities of All India Society For Health Aid Education And Research (A.S.H.A.) [ASHA] at 'CRISIL BBB/Stable'.
 
The rating continues to reflect healthy ramp up in operations, and an established market position supported by diversified service offerings and locational advantage. These strengths are partially offset by stretched working capital cycle, a moderate financial risk profile and geographic concentration in revenue with exposure to intense competition in the healthcare sector.

Analytical Approach

Unsecured loans of Rs 33.08 crore as on March 31, 2019, from the society members have been treated as 75% equity and 25% debt, as these loans will remain in the business over the medium term and are subordinate to bank debt

Key Rating Drivers & Detailed Description
Strengths
* Healthy ramp up in the scale of operations
Despite operations commencing only from October 2016, there has been a steady increase in occupancy backed by expansion internal and outside patient departments. The number of beds has also gone up to 320 in December 2019 from 102 beds in October 2016. Furthermore, occupancy was over 85% during the nine months through December 2019. Additionally, the society has locked in the empanelment with various reputed organisations in public and private sectors, and is now also on the panel of Delhi Government Employees Health Scheme (DGHS), Ex-Servicemen Contributory Health Scheme (ESCH), and Central Government Health Scheme (CGHS).
 
* Established market position, supported by diversified service offerings
Within 12 months of commencement of operations, the society started offering a wide range of medical facilities under the Venkateshwar Hospital, including medical oncology, radiation oncology, surgical oncology, interventional cardiology, cardio thoracic and vascular surgery, urology and nephrology, orthopaedics and joint replacement, neurology and paediatric neurology, and gastroenterology. The diversified offerings should further improve the market position
 
Weaknesses
* Stretched working capital cycle
Gross current assets are estimated at over 150 days, largely because of debtors of more than 110 days, as on March 31, 2020. The increase in debtors (from 76 days a year earlier and 29 days two years ago) is because of a decline in contribution of cash sales to total revenue, which was at 54%, 24% and 19% in fiscals 2018, 2019, and the first nine months of fiscal 2020, respectively. The decline is attributed to increase in proportion of sales from various empanelled schemes such as DGHS, ECHS and CGHS.
 
With contribution from empanelled schemes expected to remain at least at the fiscal 2020 level, debtors should remain stretched over the medium term as well.
 
* Moderate financial risk profile
Significant infusion in corpus funds of around Rs 79 crore (including reduction in unsecured loans from Rs 18 crore) in fiscals 2019 and 2020 has led to lower leverage. However, the gearing is still estimated to have been high 3.1 times as on March 31, 2020 (4.18 times a year earlier and 8.27 times two years ago). With a term loan of Rs 30 crore expected to be availed for a capital expenditure (capex) plan towards setting up a new oncology and dialysis facility (in the same campus), the gearing should remain high at 3-4 times over the medium term.
 
Debt protection metrics are moderate, with interest coverage and net cash accrual to adjusted debt (NCAAD) ratios estimated at 1.6 times and 0.06 time, respectively, for fiscal 2020. Despite the expected improvement in operating profits, the metrics should remain average, with interest coverage ratio at below 2 times and NCAAD ratio at less than 0.1 time.
 
* Geographic concentration in revenue with exposure to intense competition in the healthcare sector
The society operates one hospital at Dwarka in New Delhi, and thus faces competition from other multi-specialty hospitals operating in the vicinity, such as Maharaja Agrasen Hospital Charitable Trust (rated 'CRISIL BBB+/Stable') and Manipal Hospital and Aakash Healthcare. The image-sensitive nature of the healthcare industry aggravates risks relating to presence of other corporate hospitals. Revenue growth, improvement in profitability, and sustenance of the customer base will remain exposed to the risk of intensifying competition.
Liquidity Adequate

Liquidity benefits from the strong support from the promoters, sufficient cushion in bank lines, and adequate cash accrual vis-a-vis repayment obligation.
 
The society members have infused Rs 79 crore in fiscals 2019 and 2020, and should continue to extend support if needed. Average utilisation of the bank lines was 61% during the 12 months through December 2019. Further, the society is in the process of enhancing its existing working capital limit by Rs 10 crore, which, if sanctioned and disbursed, will support liquidity.
 
Cash accrual is estimated at Rs 15-16 crore in fiscal 2020 against debt obligation of Rs 7 crore. Cash accrual is expected at Rs 18-20 crore per fiscal, against scheduled repayment obligation of around Rs 13 crore and Rs 16.4 crore in fiscals 2020 and 2022, respectively. Further, term loan repayments are secured by an escrow mechanism and maintenance of a debt service reserve accounts of three months.

Outlook: Stable

CRISIL believes A.S.H.A will maintain its market position on the back of its established market presence supported by its service offerings.
 
Rating sensitivity factors
Upward factors
* Improvement in debt protection metrics, with the interest coverage ratio being maintained at over 2 times
* A shorter working capital cycle
 
Downward factors
* The net cash accrual to repayment obligation ratio reducing to less than 1.3 times
* Unanticipated debt-funded capex, impacting the capital structure

About the Society

ASHA, registered under the Societies Registration Act XXI, 1860, was formed by Mr Rajpal Solanki to take up the hospital project, Venkateshwar Hospital, in Dwarka. Set up in 2012, this is a 340-bed multi-specialty hospital, which commenced operations from October 2016. It is located at Sector 18A and has a built-up area of 4.7 lakh square foot.

Key Financial Indicators
Particulars Unit 2019 2018
Revenue Rs crore 215.5 128.3
Profit after tax (PAT) Rs crore (16.1) (23.2)
PAT margin % (7.5) (18)
Adjusted debt/Adjusted networth Times 4.2 8.3
Interest coverage Times 1.4 1.1

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.
Annexure - Details of Instrument(s)
ISIN Name of instrument Date of allotment Coupon
rate (%)		 Maturity date Issue size
(Rs crore)		 Rating ssigned with outlook
NA Working Capital Facility NA NA NA 63 CRISIL BBB/Stable
NA Long Term Loan NA NA Sep-28 187 CRISIL BBB/Stable
NA Proposed Term Loan NA NA NA 30 CRISIL BBB/Stable
Annexure - Rating History for last 3 Years
  Current 2020 (History) 2019  2018  2017  Start of 2017
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  280.00  CRISIL BBB/Stable      28-02-19  CRISIL BBB/Stable      01-11-17  CRISIL BBB-/Stable  CRISIL B-/Stable 
            19-02-19  CRISIL BBB/Stable      31-10-17  CRISIL BBB-/Stable   
                    22-05-17  Withdrawal   
                    22-04-17  CRISIL B-/Stable (Issuer Not Co-operating)*   
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Long Term Loan 187 CRISIL BBB/Stable Cash Credit 30 CRISIL BBB/Stable
Proposed Term Loan 30 CRISIL BBB/Stable Overdraft 25 CRISIL BBB/Stable
Working Capital Facility 63 CRISIL BBB/Stable Term Loan 195 CRISIL BBB/Stable
Total 280 -- Total 250 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings
CRISILs Criteria for rating short term debt
The Rating Process

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