| Dr. Agarwals Health Care Limited | ||||
| Rating reaffirmed at 'CRISIL A-/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 reaffirmed its ‘CRISIL A-/Stable’ rating on the bank facilities and non-convertible debentures of Dr. Agarwals Health Care Limited (DAHCL),
The ratings continue to reflect AHCL’s established market position, healthy brand recall in the eye care segment and its moderate financial risk profile. These strengths are partially offset by competition from other hospitals/standalone clinics and exposure to risks related to ramp up and stabilization of operations in newly added centres. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of DAHCL, Dr. Agarwals Eye Hospital Limited (DAEHL), Orbit Healthcare Services (Mauritius) Limited (Orbit). This is because all these entities, together referred as the Dr. Agarwal’s group, operate in the same industry and have operational and financial linkages.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Established market position and healthy brand recall: The group has a strong presence in eye care with 105 centers (as on June 30, 2022) 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 13 percent over the past three years, to Rs.692 crore in fiscal 2022. During this period, the group has witnessed increase in operating margins to around 18% from 14.5%, supported by break-even of new centers and increasing footfalls at its existing centers. Further, the group recently raised fund through new investment partners, a part of 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 trajectory over the medium term.
Moderate financial risk profile: Financial risk profile remains healthy, backed by capital structure and healthy debt protection metrics. Net worth and gearing were moderate at around Rs.100 crore and 2.19 time, respectively, as on March 31, 2022. Debt protection metrics is comfortable, with interest coverage and net cash accrual to total debt ratios of 6.19 times and 40%, respectively for FY2022.
Weaknesses: Competition from other hospitals/standalone clinics: The group faces competition from other large multi-specialty hospitals, as well as neighborhood eye clinics. Despite wide spread 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 like Maharashtra and Rajasthan the group further faces competition from other established players in those regions. In the previous fiscals, the share of centres breaking even at an operating level improved to close to 65 percent in fiscal 2021 as against 60 percent in fiscal 2019. However, with consistent addition of new centers as wells other expansion projects in the pipeline, increase in the share of operating loss centres due to expansion can adversely impact operating profitability.
Exposure to risks related to ramp up and stabilization of operations in newly added centers: The group has added more than 30 centres in the last three years ended fiscal 2022. 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. Further, The management plans to add more than 10 centres in fiscal 2023. Any delay in ramp up and stabilization of operations in its new centres, can adversely impact the financial risk profile, particularly liquidity. |
Liquidity: Strong On 10th of May, 2022, DAHCL has announced fund raise of Rs. 1050 crore through private equity investors TPG group. This fund is to be primarily utilized for expansion plans and to provide exit to existing investors i.e., ADV developers. ADV Developers has been replaced by TPG Group. Apart from TPG group, Temasek continues to be shareholders in DAHCL.
Rs.300 crore, out of the total fund raised, has been added in reserves of DAHCL to support long term growth plans of the company and group. The same has led to increase in cash and cash equivalents to more than Rs.340 crore as on 30th June, 2022. Utilization of the incremental funds and its implementation for the planned expansion will remain key rating sensitivity factor going forward.
Also, the group’s liquidity is supported by moderate utilization of bank limits and adequate cash accrual for meeting repayment obligations. The fund based working capital limits of Rs.11 crore have been utilized at an average of around 80-85 percent over the last 12 months ended. The group is expected to generate cash accrual of around Rs.100 crore over the medium term that shall be adequate to meet repayment obligations of less than Rs.10 crore annually. |
Outlook: Stable CRISIL Ratings believe 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 Company 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 South East 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
*Provisional |
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 – List of entities consolidated
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||
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Criteria Details
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