| Sahyadri Hospitals Private Limited | ||||||
| 'CRISIL A-/Stable/CRISIL A2+' assigned to Bank Debt | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed rationale: CRISIL Ratings has assigned its ‘CRISIL A-/Stable/CRISIL A2+’ ratings to the bank facilities of Sahyadri Hospitals Pvt Ltd (SHPL; part of the Sahyadri group).
The ratings reflect the established regional position of the group in the healthcare industry, its effective working capital management and healthy financial risk profile aided by recent fresh equity infusions. These strengths are partially offset by exposure to intense competition and regulatory risk and geographic concentration in revenue. The group also faces risks associated with its large capital expenditure (capex) plan. |
Analytical approach: CRISIL Ratings has combined the business and financial risk profiles of SHPL and its subsidiaries Sahyadri Karad Hospitals Pvt Ltd and Surya Hospitals Pvt Ltd, collectively referred to as the Sahyadri group.
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: Establish regional market position: SHPL, along with its subsidiaries, operates eight hospitals in Maharashtra: six in Pune and one each in Nashik and Karad. Healthy infrastructure and the established Sahyadri brand developed under the aegis of an experienced management team have helped the group establish a sound market position in Maharashtra.
The Sahyadri group’s operating performance has been improving, as reflected in compound annual growth rate of around 10% in revenue in the five years through fiscal 2021 and improved operating margin backed by ramp-up in operations and better ARPOB (Average Revenue Per Occupied Bed). The group is estimated to achieve revenue of about Rs. 550 crore and operating margin over 17.5% in fiscal 2021 against Rs 460 crore and 12.5%, respectively, in the previous fiscal. More than 25% of the revenue in fiscal 2021 came from Covid-19 treatments which helped offset the revenue loss from elective surgeries and other segments. Measures to curb costs and improve efficiency, along with ramp-up of operations at the new Hadapsar hospital, helped improve the operating profitability. The performance is likely to be sustained this fiscal.
Efficient working capital cycle: The group has an efficient working capital cycle given the limited share of government and insurance business. The controlled working capital cycle is reflected in gross current assets of less than 50 days (excluding cash and equivalent) with receivables of less than 25 days in the past five years.
Healthy financial profile: The financial risk profile is supported by improved networth, comfortable capital structure and adequate debt protection metrics. Networth is estimated to have increased to over Rs 315 crore as on March 31, 2021, from Rs 116 crore as on March 31, 2019, backed by fresh capital infusion of around Rs 150 crore in 2020 and 2021. The Everstone group acquired 86.55% stake in SHPL in October 2019 and infused Rs 140 crore in the past two fiscals, leading to a strong networth and healthy capital structure. Gearing is estimated to have improved to below 0.5 time as on March 31, 2021, from 0.68 time a year earlier. With improving operating performance, the debt protection metrics also improved in fiscal 2021 with interest coverage and net cash accrual to total debt ratio estimated over 6 times and 0.40 time, respectively.
The group plans large capex of over Rs 100 crore annually over the medium term. Its reliance on debt, however, is expected to remain limited given its strong operating cash flow and surplus liquidity.
Weaknesses: Exposure to intense competition and regulatory risk: The hospitals under the group face competition from various large hospitals in their region. Also, the group is exposed to regulatory risk inherent in the healthcare industry. Government policy on capping of prices for medical procedures and devices may impact profitability as seen in the past.
Geographic concentration in revenue: Revenue comes primarily from Pune, rendering the group susceptible to any increase in competition because of entry of any large hospital chain in the region.
Exposure to risks associated with planned capex: SHPL has just completed renovation and construction of two additional floors at its flagship hospital at Deccan Gymkhana, Pune, where in it has added around 66 beds. The group is adding 70 beds at its Nagar Road hospital which will be commercialised in the second half of 2022. The group is adding over 100 beds at its Hadapsar hospital and plans to construct a hospital building at Deccan Gymkhana for which land acquisition is in progress. The large capex is likely to be funded primarily through surplus liquidity and operating cash flow with limited reliance on debt. Successful completion of the capex within the defined timelines and stabilisation and quick ramp-up of operations remain critical for maintaining the operating performance. |
Liquidity: Strong SHPL has ample liquidity as reflected in its barely utilised fund-based bank lines of Rs 15 crore, healthy surplus liquidity in the form of cash and equivalent and recent instances of prepayment of debt. SHPL had cash and equivalent of about Rs 190 crore as on March 31, 2021, built up from recent equity infusion and healthy operating cash flow. It prepaid debt of over Rs 60 crore with available surplus funds in recent months. Although, the surplus funds will be deployed towards the planned capex, the group is likely to maintain surplus liquidity of Rs 60-70 crore supported by operating cash flow. Larger-than-expected capex or debt funded acquisition remain key monitorables. |
Outlook: Stable CRISIL Ratings believe SHPL will continue to benefit from its established market position and healthy financial position. |
Rating sensitivity factors: Upward factors
Downward factors
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About the company: SHPL (formerly known as Sahyadri Hospitals Ltd) was incorporated in 1996. It operates eight hospitals with over 760 beds across Maharashtra along with its subsidiaries. It owns three of the hospitals and has long-term leases on four, while the flagship hospital at Deccan Gymkhana is under an operator arrangement with a hospital trust. SHPL was promoted by Dr Charudutt Apte and his business acquaintances. Currently Private equity firm Everstone Group holds controlling stake (86.55%) in SHPL. |
Key financial indicators (Consolidated):
*Operating income is exclusive of discounts and concession given |
Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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