Rating Rationale

Strengths:
* Longstanding track record: MGUMT (earlier managed by Indian Education Trust) started operations in 2001 with a hospital and later on expanded to provide education in medicine. Over the years, the university has diversified into education and hospital services. In 2011, it was granted university position under Jaipur Ordinance, 2011 (Ordinance No. 4 of 2011) by the Governor, and since then, it has expanded even further and has built a healthy reputation in the market.

* Healthy occupancy of college and hospital: The university has reported 100% occupancy in all the departments in the last three years, thus driving healthy occupancy. Furthermore, the university provides hospital services. The hospital has 1,472 beds, including 90 super specialty beds, 151 intensive care units/critical care units (ICU/CCU) beds, 97 beds in deluxe/private rooms, and 250 beds in the semi-private ward. In fiscal 2019, the hospital reported occupancy of 82%, which improved from 80% the previous fiscal.

* Strong operating efficiency: The university has been operating at a healthy level due to full occupancy of the course and healthy occupancy in the hospital. This has resulted in earnings before interest, taxes, depreciation, and amortisation of 24.4% in fiscal 2019, improving from 18.9% in the previous fiscal. Return on capital employed was healthy at around 14% in fiscal 2019.

* Trustees' support and the management's healthy reputation: The trustees have been providing consistent support in shaping the quality of education provided at the university. They have taken care of the operations of the university and have implemented best practices from their decade-long experience in the education and hospital management. Furthermore, they have provided unsecured loans during the university's expansion phase.

* Large scale of operations and improving profitability: Scale of operations is large, indicated by revenue of Rs 294.58 crore in fiscal 2019 (Rs 232.38 crore the previous fiscal), improving from Rs 161.3 crore in fiscal 2016. This improvement is majorly triggered by growth in hospital and education income. With commencement of Medicinae Doctor (MD) ,Master of Surgery (MS), Doctorate of medicine (DM) courses in fiscal 2021, hospital beds (210 beds), additions of 100 seats to bachelor of medicine and bachelor of surgery (MBBS) course and various radiation blocks and other labs in fiscal 2022, receipts are expected to increase further. Currently, around 50% of the capital expenditure (capex) is completed, and the rest is expected to be completed on time.

Weaknesses:
* Project completion- and approval-related risk: The university has revised its third phase of expansion (Phase III) expenditure, which now comprises addition of 100 MBBS seats (unchanged), 44 MD/MS seats (from 42), 42 DM/ Magister Chirurgiae (M Ch) seats (from 21), 95 hostel beds (from 384), scrapping of 24 staff quarters, and 210 hospital beds (from 360). However, there is no change in additional medical facilities, which include a nuclear medicine and nuclear therapy unit, diagnostic laboratory medicine, medicine and paediatric surgery and paediatric radiology, and the Department of Transfusion Medicine/Blood Bank and Bone Marrow and Stem Cell Transplantation. This revision has reduced the capex from Rs 423 crore to Rs 252.85 crore. This revision in project is also expected to lead to reduction in the term loan for the project to Rs 164.25 crore (which was earlier estimated at Rs 278.39 crore). The university will draw term loan to the tune of only Rs 164.25 crore out of total sanction of Rs 278.39 (till September, 2019 Rs 82.52 crore has been utilised from such term loan) as articulated by management. Until September, 2019 the university incurred around 50% of the capex (Rs 123 crore) and is expected to complete the capex in phases in between fiscals 2021 and 2022. Furthermore, the university needs approval from various departments for the addition of university seats; this is in process. Therefore, time taken for the completion and approval of the project will remain a key rating sensitivity factor.

* Risk related to unfavourable regulatory changes: Establishment and operations of educational institutions are regulated by various governmental and quasi-governmental agencies, such as the University Grants Commission, All India Council for Technical Education, universities, state governments, Medical Council of India, and Indian Nursing Council. Each body has detailed procedures for granting permission to set up institutions, and approvals need to be renewed every three or five years. Also, the university needs to regularly invest in its workforce and infrastructure. Any non-compliance would result in cancellation of affiliation and license, leading to loss of reputation for the college and revenue for the trust. Also, risks related to any regulatory changes implemented by these bodies could have a disruptive effect on some private education institutions (such as changes in the student teacher ratio and increases in minimum infrastructure and fees control).

* Risk of competition from government medical college: Demand for government colleges is high because of lower fees charged by them. Due to the mismatch between demand and availability, private colleges have been able to cater to this space. However, in recent years, the government has started to acknowledge that there is a steep gap between demand for medical colleges and their availability and has started to act upon this. Government actions include relaxation of norms for private college and universities along with addition of government colleges. In 2019, the government gave the nod for setting up of 75 new medical colleges. Previously, the government extended permission for 58 medical colleges in phase I and another 24 in phase II; this led to addition of 15,700 MBBS seats across the country. Out of those approved in phase I, around 39 medical colleges are already operational. Therefore, addition of government colleges, where fees is substantially lower than private colleges, could attract prospective students away from private colleges.