Rating Rationale
August 28, 2023 | Mumbai
Dr. Agarwals Eye Hospital Limited
Rating outlook revised to 'Positive'; Rating reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.80 Crore
Long Term RatingCRISIL A/Positive (Outlook revised from 'Stable'; Rating Reaffirmed)
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has revised its outlook on the long-term bank facilities of Dr. Agarwals Eye Hospital Limited (DAEHL) to ‘Positive’ from ‘Stable’ while reaffirming the rating at ‘CRISIL A’.  

 

The outlook revision reflects strengthening of the financial risk profile of the company from the recent equity infusion of Rs.640 Cr by the existing investors while the business performance continues to remain robust with steady and sustained stabilization of the recently added centres. Net worth would improve to over Rs.1200 crores by the end of current fiscal resulting in a sharp improvement in capital structure.

 

The equity infusion would fuel growth over the medium term through addition of new centres, both the greenfield and acquisition way, however, with no major debt addition. The group is estimated to grow at over 30% CAGR in the current fiscal while the growth would witness acceleration over the coming fiscals with the addition and scaling up of centres. The timely ramp up and stabilization of operations in the newly added centres would remain key rating monitorable.

 

The ratings reflect the strong operational, technical and management support that DAEHL receives from its parent Agarwals Healthcare Limited (DAHCL). The ratings also factor in established market position, healthy brand recall in the eye care segment and its strong financial risk profile. These strengths are partially offset by competition from other hospitals/standalone clinics and geographical concentration risk.

Analytical Approach

For arriving at DAEHL’s rating, CRISIL Ratings has applied its parent notch up framework for framework on notching up for ratings for support received from its parent, DAHCL.

Key Rating Drivers & Detailed Description

Established market position and healthy brand recall: The group has a strong presence in eye care segment with 149 centers (as on June 30, 2023) across domestic and international destinations. With a long vintage of close to 30 years, the group has built an established market position and healthy brand recall. As a result, the group has been able to report a compounded annual growth rate of 24 percent over the past three years, to Rs.1009 crore in fiscal 2023. During this period, the group has witnessed increase in operating margins to around 24% from 16.8%, supported by break-even of new centers and increasing footfalls at its existing centers. Further, the group recently raised funds through existing investors, which is expected to be utilized for expansion by addition of new centers as well as ramp-up in its existing centers. The same is expected to support the improvement in business risk over the medium term.

 

Further, Chennai Region has been foundation for growth post COVID impact of the business. Seasoned centres (more than decade old) like Anna Nagar, Nanganallur, and Velachery have shown exponential growth and are continuing to grow at a strong pace. This is due to strong network benefits arising amongst branches.

 

ROTN (Rest of Tamil Nadu) Region has maintained a steady contribution of close to 40% of the business with significant contribution coming from exceptional performances of Salem, Vellore, and Erode among others.

 

Strategic investments done in recent years targeting future growth: The Company has commenced a project of constructing a new state-of-the-art facility at Cathedral Road, Chennai (erstwhile main hospital, which is currently located at TTK Road). The new hospital is in the heart of the city and will be a landmark project.

 

In addition, the company had invested in relocation of Salem branch and additional space at Vellore respectively in the previous years, which is now yielding healthy returns, and adding to the growth. Further to this, the Company has been investing significantly in upgradation of bio-medical equipments (introduced Contoura Lasik, dry-eye suite, among others). Also, in order to expand its reach, the Company intends to expand into southern Tamil Nadu and enter the Kerala market in the near future.

 

The Company has established primary vision centres under the brand "20|20 Eyecare" – with a focus to provide high–quality eye care to the population who lack access due to infrastructural and geographic limitations. Six such centers have been opened around Chennai, Vellore, and Madurai regions.

 

Comfortable financial risk profile:  Financial risk profile has improved further with the recent equity infusion. Debt protection metrics are comfortable, with interest coverage of 3.5 times for FY2023. Further, rise in net worth with healthy accretion to reserves, capital structure is expected to further improve. Debt protection metrics are expected to remain comfortable over the medium term.

 

Weaknesses:

Competition from other hospitals/standalone clinics: The group faces competition from other large multi-specialty hospitals, as well as neighborhood eye clinics. Despite widespread geographical presence, the group continues to face competition from neighborhood eye clinics for smaller procedures like cataract. For complex procedures, other large multi-specialty hospitals remain the key competitors. With expansion in new geographies such as, Maharashtra and Rajasthan, the group further faces competition from other established players in those regions.

 

Exposure to risks related to ramp up and stabilization of operations in newly added centers: The group has added more than 33 centres in the last one year ended fiscal 2023 and 10 centers in for Q1FY24. The group is exposed to risks related to ramp up and stabilization of operations in its newly added centers, which typically incur higher costs during the initial phases. Any delay in the ramp-up and stabilization of operations in its new centres, can adversely impact the financial risk profile, particularly liquidity.

Liquidity: Strong

Bank limit utilisation is moderate at around 20 percent for the past 12 months ending March 2023. Comfortable accruals expected to be over Rs 175 Cr vis-à-vis Rs.60-65 Cr debt obligation in the medium-term leaves cushion to absorb unexpected shocks or to service other requirements such as incremental working capital requirements or any unplanned capex. The current ratio is expected to be 3.50 times on March 31, 2024.

Outlook: Positive

CRISIL Ratings believes the group will continue to benefit from a strong market position and healthy brand recall over the medium term.

Rating Sensitivity factors

Upward factors

  • Sustained revenue growth while maintaining operating margin of over 20%
  • Geographical diversification in revenue profile with sustenance of more than 85% EBITDA Positive units in key contributing centres


Downward factors

  • Significant decline in revenue or operating margin falling below 17%
  • Large debt funded capex or acquisitions resulting in weakening of financial risk profile.

About the Group

Incorporated in 2010, DAHCL is engaged in the business of running, owning and managing eye care hospitals, opticals, pharmacies and other related services across the country, majorly through hospitals in South India and Maharashtra. The group is currently managed by Dr. Amar Agarwal, the Chairman and Managing director and Mr. Adil Agarwal, the chief executive officer.

 

Incorporated in 1994, DAEHL is engaged in the business of providing eye care and related business, majorly in Tamil Nadu. DAEHL is listed on the Bombay Stock Exchange. DAHCL holds 71.75 percent of the shareholding in DAEHL.

 

Orbit was acquired by DAHCL in fiscal 2017 and is engaged in providing eye care related services through hospitals located in Southeast Asia and Africa.

 

The group derives around 60 percent of its revenues from surgeries, 15 percent from consultation and the balance from the sale of pharmaceutical and optical products.

Key Financial Indicators

As on / for the period ended March 31 (Consolidated)

 

2022

2021

Operating income

Rs crore

697.63

471.69

Reported profit after tax

Rs crore

43.16

-59.08

PAT margins

%

6.19

-12.53

Adjusted Debt/Adjusted Net worth

Times

12.91

6.79

Interest coverage

Times

4.02

1.86

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. 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)
Complexity 
levels
Rating assigned
with outlook
NA Cash Credit NA NA NA 4 NA CRISIL A/Positive
NA Long Term Loan NA NA Mar-29 60 NA CRISIL A/Positive
NA Term Loan NA NA Mar-29 16 NA CRISIL A/Positive
Annexure - Rating History for last 3 Years
  Current 2023 (History) 2022  2021  2020  Start of 2020
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 80.0 CRISIL A/Positive 02-03-23 CRISIL A/Stable 10-10-22 CRISIL A-/Positive 03-09-21 CRISIL A-/Stable 28-10-20 CRISIL A-/Stable --
      --   -- 07-07-22 CRISIL A-/Stable   -- 03-01-20 CRISIL A-/Stable --
      --   -- 19-05-22 CRISIL A-/Stable   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 4 Axis Bank Limited CRISIL A/Positive
Long Term Loan 29 Axis Bank Limited CRISIL A/Positive
Long Term Loan 31 Axis Bank Limited CRISIL A/Positive
Term Loan 16 Axis Bank Limited CRISIL A/Positive
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support
CRISILs Criteria for rating short term debt

Media Relations
Analytical Contacts
Customer Service Helpdesk

Aveek Datta
Media Relations
CRISIL Limited
M: +91 99204 93912
B: +91 22 3342 3000
AVEEK.DATTA@crisil.com

Prakruti Jani
Media Relations
CRISIL Limited
M: +91 98678 68976
B: +91 22 3342 3000
PRAKRUTI.JANI@crisil.com

Rutuja Gaikwad 
Media Relations
CRISIL Limited
B: +91 22 3342 3000
Rutuja.Gaikwad@ext-crisil.com


Jayashree Nandakumar
Director
CRISIL Ratings Limited
B:+91 44 6656 3100
jayashree.nandakumar@crisil.com


Rishi Hari
Team Leader
CRISIL Ratings Limited
B:+91 44 6656 3100
RISHI.HARI1@crisil.com


Raghulselvam Rangaswamy
Manager
CRISIL Ratings Limited
B:+91 44 6656 3100
Raghulselvam.Rangaswamy@crisil.com
Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com


 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper/magazine/agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL Ratings. However, CRISIL Ratings alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites and portals.


About CRISIL Ratings Limited (A subsidiary of CRISIL Limited, an S&P Global Company)

CRISIL Ratings pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and innovation, we set the standards in the credit rating business. We rate the entire range of debt instruments, such as bank loans, certificates of deposit, commercial paper, non-convertible/convertible/partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 33,000 large and mid-scale corporates and financial institutions. We have also instituted several innovations in India in the rating business, including ratings for municipal bonds, partially guaranteed instruments and infrastructure investment trusts (InvITs).
 
CRISIL Ratings Limited ('CRISIL Ratings') is a wholly-owned subsidiary of CRISIL Limited ('CRISIL'). CRISIL Ratings Limited is registered in India as a credit rating agency with the Securities and Exchange Board of India ("SEBI").
 
For more information, visit www.crisilratings.com 

 



About CRISIL Limited

CRISIL is a leading, agile and innovative global analytics company driven by its mission of making markets function better. 

It is India’s foremost provider of ratings, data, research, analytics and solutions with a strong track record of growth, culture of innovation, and global footprint.

It has delivered independent opinions, actionable insights, and efficient solutions to over 100,000 customers through businesses that operate from India, the US, the UK, Argentina, Poland, China, Hong Kong and Singapore.

It is majority owned by S&P Global Inc, a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.

For more information, visit www.crisil.com

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK


CRISIL PRIVACY NOTICE
 
CRISIL respects your privacy. We may use your contact information, such as your name, address and email id to fulfil your request and service your account and to provide you with additional information from CRISIL. For further information on CRISIL's privacy policy please visit www.crisil.com.



DISCLAIMER

This disclaimer is part of and applies to each credit rating report and/or credit rating rationale ('report') that is provided by CRISIL Ratings Limited ('CRISIL Ratings'). To avoid doubt, the term 'report' includes the information, ratings and other content forming part of the report. The report is intended for the jurisdiction of India only. This report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the report is to be construed as CRISIL Ratings providing or intending to provide any services in jurisdictions where CRISIL Ratings does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this report does not create a client relationship between CRISIL Ratings and the user.

We are not aware that any user intends to rely on the report or of the manner in which a user intends to use the report. In preparing our report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the report is not intended to and does not constitute an investment advice. The report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind to enter into any deal or transaction with the entity to which the report pertains. The report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Ratings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold or sell any securities/instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL Ratings assumes no obligation to update its opinions following publication in any form or format although CRISIL Ratings may disseminate its opinions and analysis. The rating contained in the report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the report should rely on their own judgment and take their own professional advice before acting on the report in any way. CRISIL Ratings or its associates may have other commercial transactions with the entity to which the report pertains.

Neither CRISIL Ratings nor its affiliates, third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively, 'CRISIL Ratings Parties') guarantee the accuracy, completeness or adequacy of the report, and no CRISIL Ratings Party shall have any liability for any errors, omissions or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the report. EACH CRISIL RATINGS PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Ratings Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. Public ratings and analysis by CRISIL Ratings, as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any), are made available on its website, www.crisilratings.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee - more details about ratings by CRISIL Ratings are available here: www.crisilratings.com.

CRISIL Ratings and its affiliates do not act as a fiduciary. While CRISIL Ratings has obtained information from sources it believes to be reliable, CRISIL Ratings does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and/or relies on in its reports. CRISIL Ratings has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL Ratings has in place a ratings code of conduct and policies for managing conflict of interest. For details please refer to:
https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html.

Rating criteria by CRISIL Ratings are generally available without charge to the public on the CRISIL Ratings public website, www.crisilratings.com. For latest rating information on any instrument of any company rated by CRISIL Ratings, you may contact the CRISIL Ratings desk at crisilratingdesk@crisil.com, or at (0091) 1800 267 1301.

This report should not be reproduced or redistributed to any other person or in any form without prior written consent from CRISIL Ratings.

All rights reserved @ CRISIL Ratings Limited. CRISIL Ratings is a wholly owned subsidiary of CRISIL Limited.

 

 

CRISIL Ratings uses the prefix 'PP-MLD' for the ratings of principal-protected market-linked debentures (PPMLD) with effect from November 1, 2011, to comply with the SEBI circular, "Guidelines for Issue and Listing of Structured Products/Market Linked Debentures". The revision in rating symbols for PPMLDs should not be construed as a change in the rating of the subject instrument. For details on CRISIL Ratings' use of 'PP-MLD' please refer to the notes to Rating scale for Debt Instruments and Structured Finance Instruments at the following link: https://www.crisil.com/en/home/our-businesses/ratings/credit-ratings-scale.html