| Apollo Cvhf Limited | ||||
| Rating upgraded to 'CRISIL BBB+/Stable' | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has upgraded its rating on the long-term bank facilities of Apollo Cvhf Limited (Apollo CVHF) to 'CRISIL BBB+/Stable' from ‘CRISIL BBB/Stable’.
The upgrade reflects a similar rating action on the bank facilities of Apollo CVHF’s parent, Apollo Hospitals International Ltd (AHIL), to ‘CRISIL A/Stable/CRISIL A1’ from ‘CRISIL A-/Stable/CRISIL A2+’. The rating upgrade also factors in consistent improvement in the company’s standalone operational performance with higher occupancy and average revenue per occupied bed, resulting in operating profit in fiscal 2021, against operating loss in fiscal 2020.
The rating reflects operational, financial and managerial support the company expects from the parent, AHIL. The rating also factors in the established repute of the promoters in Ahmedabad, including Dr Sameer Dani, which should help to ramp up occupancy. These strengths are partially offset by moderate occupancy ratios, average financial risk profile and geographic concentration in revenue. |
Analytical Approach CRISIL Ratings has applied its parent notch-up framework to factor in the intensity of distress support available from AHIL. Also, CRISIL Ratings believes Apollo CVHF will, during exigencies, receive need-based support from AHIL for timely servicing of debt, considering the letter of comfort extended by the parent for the debt obligation of the company. |
Key Rating Drivers & Detailed Description Strengths:
AHIL and its shareholders (Apollo Hospital Enterprise Ltd (AHEL) and Cadila) have strong oversight over Apollo CVHF, and control strategic and operational decisions. Four out of five members on Apollo CVHF’s board are from AHIL (including two each from Cadila and AHEL). Moreover, the letter of comfort provided by AHIL ensures timely support to Apollo CVHF for meeting its debt obligation.
The company commenced operations in 2019; the hospital is in the stabilisation phase, and hence, occupancy will remain low in the initial years. However, association with the Apollo brand and reputation of Dr Sameer Dani have ensured consistent improvement in occupancy, which rose to 34% in the first half of fiscal 2022 from 24% in fiscal 2021 and 19% in fiscal 2020. Increase in occupancy and operating income have enabled the company to turn profitable, with operating margin (operating profit before depreciation, interest and tax {OPBDIT}) of ~16% in fiscal 2021, against operating loss in the previous fiscal. With improvement in occupancy, the operating margin will improve further over the medium term.
Weaknesses:
The hospital’s ability to tap potential customers is constrained by its single-location and single-specialty operations in Ahmedabad. The image-sensitive nature of the healthcare industry aggravates the risk of revenue concentration. However, association with the Apollo brand and repute of Dr Sameer Dani mitigate the risk.
Despite improvement in the operating profit since last fiscal, financial risk profile continues to be constrained by negative tangible networth owing to accumulated losses, weak debt protection metrics (interest coverage ratio of less than 1 time in fiscal 2021) and high leverage (debt to OPBDIT ratio was 19.1 times as on March 31, 2021).
However, with improvement in the operating performance backed by ramp up in occupancy, the financial risk profile will likely improve over the medium term. Additionally, expected support from AHIL to fund losses and meet debt obligations supports the ratings. |
Liquidity: Adequate Liquidity position is adequate, supported by average unutilized fund-based limits of Rs 2.6 cr. (~53% of sanctioned limits) for last twelve months through September 2021, and cash and bank balance was Rs 0.26 crore as on September 30, 2021. Expected cash accrual of Rs 1.3 crore and Rs 4 crore in fiscals 2022 and 2023, respectively, will sufficiently cover term debt obligation of Rs 0.26 crore and Rs 1.3 crore, respectively. Further, the liquidity of Apollo CVHF will be supported by strong linkages with AHIL, which will provide need-based financial support to the company. |
Outlook: Stable CRISIL Ratings believes AHIL will continue to provide operational, managerial and financial support to Apollo CVHF. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company Apollo CVHF provides holistic cardiac care using invasive/non-invasive therapeutic and diagnostic services. Based in Ahmedabad, the hospital has 64 beds. The company is a subsidiary of AHIL with 66.7% stake. The remaining 33.3% stake is held by Dr Sameer Dani, who is a leading cardiologist in Ahmedabad and owner of Advanced Cardiovascular Care Pvt Ltd. |
Key Financial Indicators (CRISIL Ratings-adjusted numbers):
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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)
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||
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This Annexure has been updated on 03-Jan-2022 in line with the lender-wise facility details as on 18-Aug-2021 received from the rated entity.
Criteria Details
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