Detailed Rationale

Crisil Ratings has reaffirmed its rating on the long term bank facilities of Dr. Agarwals Eye Hospital Limited (DAEHL; part of Dr. Agarwal group) at ‘Crisil A+/Positive’.

 

Crisil Ratings has taken note of the board's approval of the proposed merger of DAEHL, the subsidiary, with its parent company, Dr. Agarwal's Health Care Limited (DAHCL). The merger is contingent upon receipt of various regulatory approvals, including those from shareholders, stock exchanges, the Securities and Exchange Board of India (SEBI), and the National Company Law Tribunal (NCLT). The merger is expected to be completed by the second quarter of fiscal year 2027, and its progress will be monitored.

 

The ratings reflect the Dr. Agarwal Group’s dominant position in the Indian Eye care chains with a strong brand recall and professional promoters. The ratings also factor in a healthy financial risk profile with high net worth and comfortable leverage. These strengths are partially offset by competition from other hospitals and standalone clinics and dependence on scarcely available medical professionals and exposure to risks related to ramp up and stabilization of operations in newly added centers.

Analytical Approach

For arriving at DAEHL’s rating, Crisil Ratings has applied its parent notch up framework for notching up theratings for support received from its parent, Dr. Agarwals Health Care Limited (DAHCL). Debt includes lease liabilities, following adoption of Ind AS 116.

Key Rating Drivers & Detailed Description

Strengths:

Dr. Agarwal Group’s dominant position in the Indian Eye care chains with a strong brand recall and professional promoters: Dr. Agarwal Group has a strong presence in the eye care industry and operates under the brand "Dr. Agarwal's Eye Hospital". With three generations of the promoter family who are also medical professional involved in comprehensive eye care services, Dr. Agarwal Group has established themselves as the largest eye care service chain in India with a market share of more than 25 percent among eye care service chains. As of March 31, 2025, the Dr. Agarwal group has 239 eye care facilities in India, spanning across 14 states and 4 union territories, and 18 facilities spread across nine countries in Africa. The group provides a comprehensive range of eye care services and products, including cataract surgeries, refractive treatments, and other services such as consultations, clinical investigations, and non-surgical treatments, as well as optical and eye care-related pharmaceutical products. This has led to an increase in the number of patients served, with approximately 2.4 million patients served in fiscal 2025, compared to 1.6 million in fiscal 2023. The group's established market position and strong brand recall in the market are expected to continue to support its business risk profile.

 

Healthy financial risk profile with high net worth and comfortable leverage: The group’s adjusted net worth is Rs. 1812 crores (after adjusting for amortization of goodwill) as of March 31, 2025, against Rs. 1334 (after adjusting for amortization of goodwill) with a healthy gearing ratio of around 0.53 times as of 31st March 2025 against 0.72 times as of 31st March 2024 with reduction of gross debt and improved net worth. This is supported by capital infusions over the years and the initial public offering (IPO) of DAHCL in February 2025, where they raised Rs. 300 crores as a fresh issue. As of March 31, 2025, the Total Outside Liabilities (including lease liability) to Adjusted Tangible Net Worth (TOL/TNW) stood healthy at 0.96 times against 1.03 times as of March 31, 2024. Debt protection metrics are comfortable, with OPBDIT coverage of over 4.18 times for fiscal 2025 (Interest cost includes interest on lease liabilities and interest on deferred consideration). Going forward, an increase in net worth and improvement in capital structure is expected with healthy accretion to reserves backed by sustained profitability and no huge debt funded capital expenditure or huge acquisitions. As of March 31st, 2025, the group was in net debt negative position (excluding lease liabilities) with cash and cash equivalents of around Rs. 522 crores against Term debt of around Rs. 247 crores.

 

Weaknesses:

Competition from other hospitals and other standalone clinics, risks related to attraction and retention of talent and presence in a regulated environment: Dr. Agarwal group’s operational success is significantly contingent upon the availability of skilled ophthalmologists, a resource that is in short supply within the medical profession. As of March 2025, the organization employed a substantial workforce of approximately 831 doctors, highlighting the critical importance of these professionals to its operations. To attract and retain top medical talent, Dr. Agarwal group provides its doctors with access to state-of-the-art technology and offers competitive incentives that surpass the benefits associated with individual practice. Nevertheless, the company operates in a highly competitive market, characterized by an increasing presence of single-doctor clinics. In this context, the ability to retain its existing pool of skilled ophthalmologists will be a key factor in differentiating the Agarwal group from its competitors and driving its continued success in the face of intensifying market competition. The group operates in a highly regulated healthcare industry, that requires certain approvals from government and regulatory authorities. Hence, similar to other healthcare entities, the group remains exposed to regulatory risk, and this will remain a key monitorable.

 

Exposure to risks related to ramp up and stabilization of operations in newly added centers: The rapid expansion of the group into new locations presents execution risks, as the timely ramp-up and operational stabilization of newly added centers are crucial to achieving projected revenues and margins. Delays in scaling patient volumes, recruiting skilled medical staff, or establishing local brand recognition could negatively impact the financial performance of these centers, particularly during the initial years of operation. Such challenges may strain cash flows and liquidity until operations stabilize and break-even is achieved. Furthermore, the competitive landscape in many regions means that a slower-than-expected ramp-up could result in underutilized capacity and elevated fixed costs, thereby exerting additional pressure on profitability. Notwithstanding these challenges, the group has demonstrated a successful track record of expansion, having added 45 centers in fiscal 2024 (16 through acquisition) and 59 centers (7 through acquisition) in fiscal 2025. Receptively, more than 50% of the centers (secondary and tertiary centers) opened in fiscal 2024 and more than 15% of the centers (secondary and tertiary centers) opened in fiscal 2025 are currently generating positive EBITDA at the regional level, indicating a robust and rapid ramp-up. Looking ahead, the group is expected to add approximately 50-55 centers in the current year, primarily through organic growth and no major acquisitions are expected. Effective management of the expansion process, efficient operational stabilization, and successful establishment of local brand recognition will be critical in maintaining the healthy EBITDA levels which remains a key monitorable.

Liquidity: Strong

On a group level, cash and cash equivalents stood at Rs. 522 crores as on March 31, 2025, while fund-based limit of Rs. 11 crores remain unutilized. The group is expected to generate net cash accruals of more than Rs. 300 crores in the medium term sufficient against term debt obligation of around Rs. 80 to 90 crores. The current ratio stood at around 2.18 times on March 31, 2025.

Outlook: Positive

Crisil Ratings anticipates that the group will continue to derive benefits from its robust market position and strong brand recognition over the medium term with sustenance of it’s strong financial risk profile

Rating sensitivity factors

Upward Factors:

• Sustenance of revenue growth and operating profitability at over ~25 percent
• Maintenance of strong financial risk profile, including sustenance of total outside liabilities (including lease liabilities) to total adjusted net worth at less than 1.5 times

 

Downward Factors:

• Significant decline in revenue growth rate or operating margin falling below 18% owing to delay in ramp up of centers for the group.
• Debt funded capex or acquisitions resulting in weakening of financial risk profile for the group.

About the Group

Incorporated in 2010, DAHCL provides a comprehensive range of eyecare services, including covering cataract, refractive and other surgeries; consultations, diagnosis and non-surgical treatments; and sell optical and eyecare related pharmaceutical products. The group has a network of 239 facilities, as of March 31, 2025. The group commenced international operations in 2012 and as of March 31, 2025, operates 19 facilities across nine countries in Africa.

 

The group is led by Chairman, Dr. Amar Agarwal, who has more than 35 years of clinical experience in the eyecare services industry, and an experienced management team comprising of Dr. Adil Agarwal - Chief Executive Officer, Dr. Anosh Agarwal - Chief Operating Officer, Dr Ashvin Agarwal – Chief Clinical Officer and Dr Ashar Agarwal - Chief Business 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 BSE Limited. DAHCL holds 71.90 percent of the shareholding in DAEHL as of March 2025.

 

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.

 

In 2021, DAHCL acquired Aditya Jyot Eye Hospital Private Ltd and currently have 87.8 percent ownership in the company.

 

In 2024, DAHCL acquired Dr Thind Eye Care Private Limited and currently holds around 51 percent of shareholding in DTECPL as of March 2025.

Any other information: Not Applicable