Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AA/Stable/Crisil A1+’ ratings on the bank facilities of Krishna Institute of Medical Sciences Limited (KIMS; part of the KIMS group).

 

The ratings continue to reflect the established market position of the KIMS group in Telangana and Andhra Pradesh through its network of fifteen hospitals under the KIMS Hospital brand, and sound operational efficiencies, as reflected in good occupancy and high average revenue per operating bed per day (ARPOBD), leading to healthy operating profitability. The ratings are also supported by the company’s strong financial risk profile, and adequate liquidity. These strengths are partially offset by high dependence on the flagship hospital in Secunderabad for revenue and profit, geographical concentration of its hospitals and regulatory risks associated with the hospital sector.

 

Revenue grew 21% on-year in fiscal 2025 to Rs 3,039 crore driven by bed additions, improvement in ARPOBD and healthy occupancy. KIMS added around 1,000 beds in fiscal 2025, which included commissioning of its greenfield hospital with capacity of 325 beds in Nashik in October 2024. Further bed addition has been done through inorganic expansions in Telangana and Kerala clusters. Operating margin also increased by 30 basis points (bps) to 26.3% (26% in fiscal 2024) driven by improvement in operating efficiencies in the existing hospitals as evident from moderation in average length of stay to 3.66 days (4.11 days in fiscal 2024). Furthermore, the better performance of the existing hospitals, especially Begumpet and Nagpur, contributed to the sustenance of operating profitability.

 

The business risk profile of KIMS is supported by the established market position of ‘KIMS’ brand in Telangana and Andhra Pradesh clusters through its network of 15 hospitals. Furthermore, KIMS has also diversified into adjacent geographies, with hospitals in Maharashtra, Karnataka and Kerala. KIMS presently operates six hospitals in Maharashtra and Kerala (three owned, one leased and two through operations and management agreement [O&M]) and two hospitals in Karnataka cluster will commence operations in the next 3-4 months. KIMS is expected to add around 1,100 beds in fiscal 2026 and a further 1,000 beds in fiscals 2027 and 2028. Supported by bed addition, Crisil Ratings expects that the revenue growth for KIMS will continue at mid double digits over the medium term. In addition to the planned greenfield and brownfield expansions, KIMS is planning to expand its bed capacity to 3,000 beds in Kerala over the next 5-6 fiscals. This will be primarily done through O&M model and KIMS will be receiving management fee for the same.

 

Despite the bed additions and initial drag on profitability due to greenfield hospitals commencing operations, the operating profitability is expected to sustain at 25-26% over the medium term supported by better operational performance of the existing hospitals, expected quicker ramp-up of the new hospitals and healthy operating efficiencies.

 

The KIMS group’s financial risk profile remains healthy, albeit has moderated compared with fiscal 2024 due to a large part of the capital expenditure (capex) being front ended. KIMS incurred capex of around Rs 1,792 crore in fiscal 2025 primarily towards greenfield hospitals in Thane, Bengaluru and inorganic expansions. Due to higher capex, long-term debt increased to Rs 1,776 crore as on March 31, 2025 (Rs 955 crore as on March 31, 2024). Furthermore, lease liabilities increased to Rs 651 crore (Rs 309 crore as on March 31, 2024) due to leased assets. At overall level, the debt (including the lease liabilities) increased to Rs 2,557 crore (Rs 1,355 crore as on March 31, 2024). This resulted in moderation of the capital structure, with gearing increasing to 1.22 times (0.73 time in fiscal 2024). Furthermore, on account of debt addition, ratio of debt (including lease liabilities) to earnings before interest, taxes, depreciation and amortisation (debt/Ebitda) increased to 3.2 times (2.1 times in fiscal 2024).

 

KIMS will incur capex of Rs 2,200-2,500 crore between fiscals 2026 and 2028 for adding around 2,000 beds and setting up oncology department in hospitals. This will be funded through a mix of accrual and debt. A major portion of the capex will be incurred in fiscal 2026 and therefore the long-term debt is expected to peak at around Rs 2,400 crore by the end of fiscal 2026. Overall debt (including lease liabilities) will be Rs 3,000-3,200 crore by the end of fiscal 2026. Post the completion of the present capex cycle, KIMS does not have further new capex plans, and the focus will be on ramping up the new facilities to optimal levels. Therefore, the overall debt will gradually decline from fiscal 2027 onwards with progressive debt reduction and limited capex. Debt/Ebitda (post Ind AS) ratio is expected to increase to over 3.5 times in fiscal 2026 and is expected to moderate to less than 3 times over the medium term.

Analytical Approach

For arriving at its ratings, Crisil Ratings has fully consolidated the business and financial risk profiles of KIMS and its subsidiaries, which are strategically important to KIMS and have a significant degree of operational integration with it. These companies are together referred to as the KIMS group. Crisil Ratings considers these entities as being strategic to KIMS in view of their common line of business and management and strong integration with the operations of KIMS. Furthermore, the group allows transfer of funds among entities depending upon the requirement.

 

Crisil Ratings has amortised the goodwill of Rs 212 crore on acquisition of Sarvejana Healthcare Pvt Ltd (SHPL) over a period of five years starting April 2022.

 

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: Through its network of 21 hospitals under the KIMS Hospital brand, the group has an established presence in the south India market. The group also has a long operational track record of more than two decades in the tertiary and the quaternary healthcare segments and benefits from the strong brand reputation and the extensive experience of the group’s promoters in the healthcare industry.

 

In terms of specialties, cardiac treatments account for the highest share of revenue at ~17%, followed by neurosciences at ~11% and renal sciences at ~8%. With the acquisition of SHPL in fiscal 2023, which is primarily an orthopedics player, the share of revenue from orthopedics increased to 14% compared with 8% before the pandemic. The balance is spread across oncology, mother and child, gastric sciences and others.

 

The group, with a combined bed capacity of 5,179 beds as of March 2025, is one of the leading players in the tertiary care segment in Andhra Pradesh and Telangana. The group’s Secunderabad facility is one of the largest single location hospitals with ~1,000 beds, offering multi-specialties. Addition of SHPL has further enhanced the market presence of the KIMS group in Hyderabad, which is a core market. KIMS commissioned its greenfield hospitals in Maharashtra cluster – Nashik and Mumbai in October 2024 and May 2025, respectively. KIMS already has presence in Nagpur through the acquisition of SPANV Mediresearch Pvt Ltd in fiscal 2023. KIMS also signed O&M agreements and expanded its presence into Kerala market as well. Furthermore, two greenfield hospitals will commence operations in Bengaluru in the next 3-4 months. The expansion into adjacent markets contribute to revenue diversity and enhances the market position of KIMS in south India.

 

Sound operating efficiency: The group has reported above-average operating profitability of more than 25% (barring an exceptional 31.8% in fiscal 2022, which was buoyed by high occupancy during the second wave of the Covid-19 pandemic) despite constant capacity addition, including through acquisitions. The policy of providing equity partnerships to its key doctors has enabled the company to attract talent in Tier 2 locations and maintain low attrition and tight control over costs. These factors, coupled with prudent capital spending, have helped KIMS to turn around acquired hospitals as well as achieve breakeven at newer hospitals in a short span of time, translating into healthy operating capabilities. Due to bed additions, the occupancy has dropped to 50.1% in fiscal 2025 (61.3% in fiscal 2024). However, supported by improvement in operating efficiencies, ARPOBD has risen by 23% to Rs 39,158 (Rs 31,916 in fiscal 2024). ARPOBD registered a compound annual growth rate (CAGR) of 16% between fiscals 2020 and 2025, indicating improvement in the services offered. The presence of highly qualified professionals enables a low average length of stay which is comparable to large hospital chains.

 

Healthy profitability and increasing occupancy, have enabled steady improvement in the group’s return on capital employed (RoCE), which stood at above 24.3% in fiscal 2023, compared with 13-15% in earlier years. With the company entering capex cycle, the RoCE declined to 18.1% in fiscal 2024 and 16.5% in fiscal 2025. Despite the initial loss from newly set up hospitals, the operating margin will sustain at 25-26% over the medium term. RoCE will also moderate in the near term due to aggressive capex and initial loss in new hospitals but will remain at 12-15%.

 

Healthy financial risk profile: Financial risk profile remains healthy supported by healthy networth of Rs 2,097 crore as on March 31, 2025. KIMS incurred capex of around Rs 1,792 crore in fiscal 2025 primarily towards greenfield hospitals in Thane, Bengaluru, and inorganic expansions. Due to higher capex, long-term debt increased to Rs 1,776 crore as on March 31, 2025 (Rs 955 crore as on March 31, 2024). Furthermore, lease liabilities increased to Rs 651 crore (Rs 309 crore as on March 31, 2024) due to leased assets. At overall level, the debt (including the lease liabilities) increased to Rs 2,557 crore (Rs 1,355 crore as on March 31, 2024). This resulted in moderation of capital structure with gearing increasing to 1.22 times (0.73 time in fiscal 2024). Furthermore, on account of debt addition, ratio of debt (including lease liabilities) to earnings before interest, taxes, depreciation and amortisation (debt/Ebitda) increased to 3.2 times (2.1 times in fiscal 2024).

 

KIMS will incur capex of Rs 2,200-2,500 crore between fiscals 2026 and 2028 for adding around 2,000 beds and setting up oncology department in hospitals. This will be funded through a mix of accrual and debt. A major portion of the capex will be incurred in fiscal 2026 and therefore the long-term debt is expected to peak at around Rs 2,400 crore by the end of fiscal 2026. Overall debt (including lease liabilities) will be Rs 3,000-3,200 crore by the end of fiscal 2026. Post the completion of the present capex cycle, KIMS does not have further new capex plans, and the focus will be on ramping up the new facilities to optimal levels. Therefore, the overall debt will gradually decline from fiscal 2027 onwards, with progressive debt reduction and limited capex. Debt/Ebitda (post Ind AS) is expected to increase to over 3.5 times in fiscal 2026 and is expected to moderate to less than 3 times over the medium term. Any additional capex or large inorganic acquisition, resulting in higher-than-expected leverage metrics will remain monitorable.

 

Weaknesses:

Revenue and geographical concentration risks: The group has had a high reliance on its flagship hospital in Secunderabad, which used to contribute to 60% of revenue and 66% of Ebitda in fiscal 2018. With steady organic and inorganic expansion, this has reduced the revenue dependance to <35% in fiscal 2025.

 

While the contribution of the Secunderabad unit has reduced in recent years, the flagship hospital is likely to continue to be the key revenue and profitability driver (contributing to 30-35% of overall Ebitda) over the medium term exposing the group to significant revenue and geographical concentration risks. Besides, a sizeable number of the company’s other hospitals are in Telangana and Andhra Pradesh (over 90% of its revenue), which renders operations partly vulnerable to any regulations imposed by authorities in these states. The geographical diversification is modest compared to other peers in the healthcare space.

 

Even as the group continues to expand in existing markets, it is also diversifying geographically by building or acquiring new hospitals in the neighbouring states of Karnataka (Bengaluru), Maharashtra (Thane, Nashik, Nagpur) and Kerala (mostly O&M).

 

Nashik hospital commenced operations in October 2024 and Thane hospital commenced operations in May 2025. Furthermore, two hospitals in Bengaluru will commence operations in the next 3-4 months. However, there are already established players in these geographies, and the ability of KIMS to ramp-up occupancy after completion of the project, will be critical to reduce revenue dependence on its flagship hospital.

 

Exposure to regulatory risk: The group, like other hospital chains, remains exposed to regulations which may come into play, as introduced. For instance, the performance of private hospitals was significantly impacted on account of price caps imposed on cardiac stents and knee implants in the last quarter of fiscal 2017. Besides, the cap on cash transactions, up to Rs 2 lakh, also caused temporary challenges when introduced in fiscal 2018. In addition, the recent Supreme Court proposal to standardise the prices for different procedures across public and private hospitals, if implemented, will be monitorable.

Liquidity: Strong

Liquidity is supported by an unencumbered cash balance of Rs 112 crore as on March 31, 2025, and healthy cushion in existing fund-based facilities. Expected annual cash accrual of Rs 600-800 crore should be sufficient to fund routine maintenance capex as well as part of the expansion capex. The group has also successfully raised long tenure debt for funding capex, which has resulted in modest annual debt obligation. The group has principal debt obligation of Rs 122 crore and Rs 229 crore in fiscals 2026 and 2027, respectively, which can be comfortably serviced from accrual. The company has been obtaining loans of longer tenures similar to peers, which permits enough time for newer hospitals to ramp-up and stabilise operations, without straining liquidity.

 

Given the current sizeable capex, the group is unlikely to pay out material dividend over the medium term, with cash flow likely to be reinvested. Given healthy relationships with the lending community, the tie up of additional long tenure debt for funding capex is not expected to be an issue.

Outlook: Stable

Crisil Ratings believes that KIMS will continue to benefit, over the medium term, from its established presence in the south Indian market and diversified revenue stream. Ramp-up in operations of new hospitals is expected to benefit revenue growth while there will be a temporary drag on profitability. The company is also expected to maintain financial prudence and sustain its debt protection metrics at healthy levels, while pursuing organic and inorganic growth.

Rating sensitivity factors

Upward factors

• Sustained double-digit revenue growth, supported by contribution from newer hospitals and reducing dependence on the flagship hospital, leading to material improvement in the scale of operations and geographical diversity, while maintaining healthy operating margin of over 25%
• Sustaining healthy debt protection metrics, considering organic and inorganic expansion plans

 

Downward factors

• Sluggish revenue growth and deterioration of operating margin to 20-22%, affecting cash generation
• Higher-than-expected, debt-funded capex or acquisitions, or additional debt raised to fund cost overruns in ongoing projects, leading to sustained moderation in key debt protection metrics; for instance, net debt to Ebitda ratio (post Ind-AS) of more than 3 times on sustained basis
• Adverse regulations impacting the hospital sector, including KIMS

About KIMS group

Founded by Dr Bhaskar Rao Bollineni, a renowned cardiothoracic surgeon, KIMS operates a chain of multispecialty hospitals in Andhra Pradesh and Telangana, with a focus on tertiary and quaternary healthcare. It began its journey in 2004 with a 300-bed hospital in Secunderabad. Today, KIMS is one of India's leading multi-disciplinary integrated private healthcare service providers offering comprehensive healthcare services across specialties and super specialties.

 

The flagship hospital of the group in Secunderabad has a capacity of 1,000 beds. KIMS has a network of 23 hospitals (including under construction hospitals) across five states — Telangana, Andhra Pradesh, Maharashtra, Kerala and Karnataka — with a combined bed capacity of 5,179 beds as on March 31, 2025.

 

At present, Dr Bhaskar Rao, his associate firm, and relatives have 38.8% stake in KIMS. In June 2018, General Atlantic invested over $ 130 million, in a combination of primary capital and secondary purchases, to acquire a significant minority stake of 42.6% in KIMS. This included the takeover of 30% stake from India Advantage Fund, India's largest private equity fund held by ICICI Ventures.

Key financial indicators (consolidated)

As on/for the period ended March 31	Unit	2025	2024
Revenue	Rs crore	3,039	2,503
Profit after tax (PAT)	Rs crore	415	336
PAT margin	%	13.6	13.4
Adjusted debt/adjusted networth*	Times	1.22	0.73
Interest coverage	Times	8.24	11.99

*lease liabilities have been considered as debt

Any other information: Not Applicable