| Global Health Patliputra Private 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 long-term rating on the bank facilities of Global Health Patliputra Private Limited (GHPPL) to 'CRISIL A+/Stable' from 'CRISIL A/Positive'.
The rating action factors in similar rating action on the parent Global Health Ltd (GHL; CRISIL AA-/Stable/CRISIL A1+). The ratings also factor faster-than-expected ramp up in operations with significant improvement in scale and margin. GHPPL receives technical and managerial support from the parent, which exercises oversight on operations and key functions. It also benefits from the extensive experience and track record of the promoter, Dr Naresh Trehan, founder-promoter of GHL in setting up and stabilising greenfield hospitals, under the well-established brand, Medanta.
Fiscal 2023 was the first full year of operations for GHPPL. Revenue rose to Rs 170 crore, from Rs 24 crore in fiscal 2022, driven by occupancies (47%) and average revenue per occupied bed (ARPOB) of over Rs. 40,000. Higher ARPOBs are driven by specialties such as cardiology and neurology. In-patient revenue formed nearly 81% of overall revenue and stood at Rs 137 crore. Outpatient revenue of Rs 28 crore was recorded during the year. Going forward, the company plans to expand its bed capacity every year, funded via internal accrual keeping in mind the demand situation. Stabilisation of occupancy and increasing traction from the outpatient segment should drive overall revenue. While 25% of the capacity is allocated for government schemes, average revenue per bed (ARPB) could be lower compared with GHL’s hospitals in Gurugram and Lucknow, but still will be healthy vis-à-vis peers, due to various specialty offerings.
Following the footsteps of the Lucknow hospital, GHPPL achieved operational breakeven in fiscal 2023, with operating profit of Rs 16 crore (operating margin of 9.4%) against operational losses earlier. Introduction of newer specialties and increasing traction in outpatient department would keep the margin healthy in double-digits over the medium term. However, the company is expected to achieve a breakeven in profit after tax (PAT) by fiscal 2025.
The prudent funding mix for GHPPL’s hospital at Patna (Bihar), with long maturity loans, will help in easing pressure on liquidity in the initial phase. The promoter group is also likely to offer adequate funding to ensure debt servicing and capital expenditure are met until operations and cash generation stabilise. These rating strengths are partially offset by the early stage of operations at the hospital, and the sub-par financial risk profile, constrained by initial gestation losses.
GHPPL, which represents the Medanta group’s presence in east India, commissioned its hospital in Patna during the second half of fiscal 2022, with 100 beds. Fiscal 2023 was the first full year of operations with installed capacity of 330 beds as of March 31, 2023. The total project cost was funded via a debt: equity ratio of 55:45 with overall capacity of nearly 650 beds, implemented in phases.
Besides the brand image, infrastructure and recruitment of established doctors, the hospital will also benefit from reference by two diagnostic centres of GHL, located in Patna and Darbhanga. CRISIL Ratings expects revenue of GHPPL to gradually ramp up in similar trajectory to its other group entity in Lucknow, under Medanta Holdings Pvt Ltd (MHPL), which commenced operations in November 2019. |
Analytical Approach To arrive at the ratings for GHPPL, CRISIL Ratings has factored support from its parent, GHL since GHPPL is an integral part of the Medanta group (whose flagship is GHL), and will continue to receive operational, managerial, and financial support from the parent. |
Key Rating Drivers & Detailed Description Strengths: Strong parentage along with experience and track record of founder promoter, Dr Naresh Trehan: GHPPL should benefit from the leadership of Dr Naresh Trehan, one of India’s leading cardiac surgeons and the founder promoter of GHL. Dr Trehan was instrumental in the establishment and subsequent management of the Escorts Heart Institute & Research Centre (Escorts) [New Delhi]. He has spent 18 years at Escorts, developing healthcare delivery in India and research in cardiology. Dr Trehan also successfully commissioned GHL’s flagship, Medanta Medicity, the largest single-location hospital in the private sector in India and Medanta Hospital, Lucknow. Furthermore, GHL has diversified its geographical reach through hospitals managed at Ranchi and Indore.
These factors have enabled the Patna hospital to achieve operational break-even in its first full year of operations i.e. fiscal 2023.
Prudent funding mix with long maturity loans: GHPPL’s facility will be a 650-bedded hospital in Pataliputra, Patna, with the total project cost funded through a debt: equity ratio of 55:45. GHL has infused equity of over Rs 326 crore as on date. Debt repayment is spread over a 13-year period (including moratorium of four years) and will be back-ended. Furthermore, the debt obligations are structured in a way that the initial payments are low. The IPO primary issuance proceeds of Rs. 125 Crs (out of Rs. 500 Crs.) of parent GHL has been utilised for investment in GHPPL for 10 years in the form of debt for prepayment of external borrowings in April, 2023. Repayment of the loan shall start post moratorium of one year.
Weaknesses: Early stage of operations and vulnerability to demand risk: While GHPPL commenced operations in the second half of fiscal 2022, it remains exposed to demand risk associated with large greenfield projects. While CRISIL Ratings believes that the ramp up in occupancy at GHPPL will be better than industry standards, given the experience of the management, the unit is expected to incur profit after tax (PAT) losses during the next 2-3 fiscals. Though the strong brand reputation of Dr Trehan and reference from GHL’s diagnostic centres in Patna and Darbhanga should help attract patients, this is yet to be demonstrated, considering the existing competition in the vicinity. Experienced doctors and staff from other hospitals of GHL are also likely to be made available at the Patna facility on a need-basis.
Sub-par financial risk profile post-commissioning of project: Greenfield hospitals break-even at the operating profit level within 3-4 years once they commence operations. They normally witness losses in the initial phase as occupancy picks up gradually and the hospital gains operational efficiency. Also, losses could be substantial and directly proportional to the scale of operations. Gestation losses combined with high debt levels in the early stage of operations, could constrain debt protection metrics in the first 2-3 years. To offset this, bed capacity will be commissioned in phases. The hospital building and key infrastructure (excluding medical equipment and beds), however, have been completed for the overall capacity of 650 beds. |
Liquidity: Adequate Liquidity is marked by an unencumbered cash balance of around Rs 32 crore as on March 31, 2023. The company inaugurated the in-patient facility in October 2021 and commenced operations after obtaining necessary approvals. Its long-term debt obligations are comfortable, aided by the long tenure and back-ended nature of repayments. Furthermore, the parent, GHL is likely to provide adequate funding support to ensure timely debt servicing, until operations and cash generation stabilise. |
Outlook: Stable CRISIL Ratings believes GHPPL will benefit from the established track record of its management in stabilising operations at greenfield hospitals, consolidation of operations and key functions, and adequate oversight from the parent, GHL. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company GHPPL is a 100% owned subsidiary of GHL and houses the group’s Patna Hospital.
GHPPL had been setting up a greenfield hospital in Patna, Bihar and has inaugurated the in-patient facility in the second half of fiscal 2022. The hospital commenced operations after receiving necessary approvals, with 100 beds initially (the structure now is ready for 650 beds). Fiscal 2023 was the first full year of operations and the company achieved operational breakeven in same year. Out of the 330 beds installed as on March 31, 2023, 213 are operational beds. |
About the Group GHL was established in 2004 by Dr Naresh Trehan. A world-class, super-specialty, tertiary-care hospital in Gurugram, Medanta Medicity commenced operations in November 2009, and has capacity of ~ 1,400 beds and ~40 operation theatres, besides state-of-the-art diagnostic and laboratory facilities.
In fiscal 2015, GHL entered into an arrangement to manage a ~150-bed hospital each in Indore and Ranchi on a lease basis. The company also operates two hospitals at Lucknow and Patna under 100% subsidiaries named MHPL and GHPPL, respectively. The Lucknow hospital commenced operations in November 2019 and the Patna Hospital in the second half of fiscal 2022; the company is also setting up a greenfield hospital in Noida. GHL also incorporated a wholly owned subsidiary, GHPDPL, in June 29, 2022, and proposes to move its outpatient pharmacy business to this entity and start diagnostic services in it.
Consolidated operational bed count stood at ~2,048 as on March 31, 2023. |
Key Financial Indicators(GHPPL)
*NM: Not meaningful |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Rs.200 crore non-fund based limit as sub-limit |
| 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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