| Dr. Agarwals Eye Hospital Limited | ||||
| Rating upgraded to 'CRISIL A/Stable' | ||||
| Rating Action | ||||
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| 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 upgraded its ratings on the bank facilities of Dr. Agarwal's Eye Hospital Limited (DAEHL) to 'CRISIL A/Stable' from 'CRISIL A-/Positive’.
The rating upgrade reflects sustained improvement in business performance marked by an expected revenue growth of over 40%-45% in fiscal 2023 while sustaining operating margins at healthy levels. The group reported revenues of Rs.735.59 crore for the period April 2022 to December 2022 with 24% operating margins. The growth stems from a phased expansion programme across geographies resulting in an increase in revenue centres. Moreover, the profitability margins are expected to sustain at healthy levels given the sooner-than-expected breakeven of newly added centres. This has resulted in the group maintaining more than 70% EBITDA positive centres; the EBITDA positive centres excluding the smaller primary, 20|20 eye care centres would be more than 85% as of December 2022. A strong business performance would help sustain a healthy financial risk profile. The interest coverage and Total outside liabilities to Total net worth are estimated at 3.60 times and 1.45 times respectively for FY2023 and as on March 31, 2023. Size and debt funding of future capex programmes would remain key rating monitorables.
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 comfortable 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 Strengths:
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 benefit arising within DAEHL branches.
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.
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 take high-quality eye care to the population who lack access due to infrastructural and geographic limitations. Six such centres have been opened around Chennai, Vellore, and Madurai regions.
Weaknesses:
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Liquidity: Strong Bank limit utilisation is moderate at around 35 percent for the past 12 months ended December 2022. Comfortable accruals expected to be over Rs 150 Cr vis-à-vis Rs.50-55 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. Current ratio is expected to be 1.67 times on March 31, 2023. The group maintains cash and liquid assets of Rs.146.97 crores as on December 31, 2022. |
Outlook: Stable CRISIL Ratings believes the group will continue to benefit from strong market position and healthy brand recall over the medium term. |
Rating Sensitivity factors Upward factors:
Downward factors:
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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 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
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
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 02-Mar-2023 in line with the lender-wise facility details as on 7-Jul-2022 received from the rated entity
Criteria Details
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