Rating Rationale
July 20, 2021 | Mumbai
Trivitron Healthcare Private Limited
 
Rating Action
Total Bank Loan Facilities RatedRs.200 Crore
Long Term RatingCRISIL BBB+/Stable
Short Term RatingCRISIL A2
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings’ ratings on the bank facilities of Trivitron Healthcare Private Limited (THPL; part of the Trivitron Group) continue to reflect the improvement in business and financial risk profile of the Trivitron group. Despite COVID-led slowdown, revenue grew at 75% to Rs.748 crore in FY2021 while the operating margins improved to over 20% during the fiscal from 3 per cent in the previous fiscal. Revenue growth would sustain in the near team with higher contribution from COVID-business in the diagnostics segment and sale of ventilators. However, with gradual decline in COVID-business in the coming fiscals, sustenance of revenue and operating margins with increased contribution from conventional business remains to be seen and shall be a key rating monitor-able.

 

The ratings also reflect an improvement in financial risk profile. Larger cash accruals and net worth have resulted in stronger financial risk profile. The TOLTNW is estimated at 0.91 times as on March 31, 2021 against 1.57 times as on March 31, 2020. The interest coverage ratio is estimated to have improved to over 15 times in FY2021 from around 2 times in the last two fiscals.

 

CRISIL Ratings had upgraded its rating on the bank facilities of THPL to ‘CRISIL BBB+/Stable/CRISIL A2’ from ‘CRISIL BBB/Stable/CRISIL A3+’ on June 25, 2021.  The ratings continue to reflect the group's diversified product portfolio, healthy relationship with global principal suppliers, extensive industry experience of its promoter and comfortable financial risk profile. These rating strengths are partially offset by the group's large working capital requirements, and susceptibility to intense competition in the healthcare industry.

Analytical Approach

For arriving at the rating, CRISIL Ratings has combined the business and financial risk profiles of THPL with its subsidiaries, namely, Trivitron Healthcare Middle East (THME), Labsystems Diagnostics Oy (LDx) Finland, Anilabs - Finland and Imaging Products India Private Limited (IPI).

 

CRISIL Ratings has also proportionately combined the business and financial risk profiles of THPL's joint ventures (JVs), namely, Aloka Trivitron Medical Technologies Private Limited, Biosystems Diagnostics Private Limited, Trivitron Nawakarma Medical Technologies Private Limited, and Trivitron Healthcare Africa and its subsidiaries. This is because these entities are in the same lines of business, under a common management, and have financial linkages. These companies are collectively referred to as the Trivitron 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:

  • Diversified product portfolio and healthy relationship with suppliers: The Trivitron group is engaged in manufacturing various medical devices ranging from low cost Ventilators, X-Ray, C-Arm, Ultrasound,  Digital and Analog Mammography machines, Invitro Diagnostics instruments and trading of a wide range of healthcare products including COVID diagnostics testing equipment and kits. The group has been associated with its principal suppliers and joint ventures such as Hitachi Healthcare Manufacturing Limited (Japan), BOME, Biosystems SA (Spain) and others for over a decade. The long term association has resulted in strong presence in the healthcare equipment market.

 

  • Extensive industry experience of promoter: The group's business risk profile continues to benefit from the extensive industry experience of its promoter Dr. G S K Velu, who has been in the healthcare industry for almost two decades. Apart from the Trivitron group, he is also associated with other prominent organizations in the healthcare sector such as Neuberg Diagnostics Pvt. Ltd., Apollo Dialysis Pvt. Ltd, Maxivision Laboratories Pvt. Ltd, Alliance Dental Care Ltd and Kauvery Group of Hospitals.

 

  • Comfortable financial risk profile: The group has a comfortable financial risk profile as indicated by adjusted net worth at over Rs. 274 crore and low gearing at around 0.35 time as on March 31, 2021. Debt protection metrics are comfortable with net cash accrual to total debt (NCATD) and interest coverage ratios at over 1.3 times and 15 times, respectively, in fiscal 2021.

 

Weakness:

  • Large working capital requirements: The operations are expected to be working capital intensive in nature with gross current asset (GCA) days over 200 days over the medium term. High GCA days was mainly on account of large inventory holding and receivables of around three months each. Further, the GCA days is inclusive of high cash balance and marketable securities maintained by the group. The adjusted GCA is expected to be in the range of 190 - 200 days. Furthermore, the working capital requirements get comfort by its creditor’s days at around 100 days.  During current fiscal, the receivables cycle was aided by the advances received for the COVID related orders which would result in shortening the receivable cycle.

 

  • Exposure to risks related to intense competition in healthcare industry: The Trivitron group is predominantly engaged in manufacturing and trading of imported medical equipment, devices, and consumables. Manufacturing contribution to total revenues is estimated at around 65 – 70% and is expected to increase further in subsequent years. However, on the trading front, the domestic medical equipment market is dominated by players such as GE Healthcare (a division of General Electric Company USA), Philips Healthcare (a division of Koninklijke Philips Electronics NV), and Siemens Healthcare (a division of Siemens AG); these companies account for a considerable portion of the market. The Trivitron group does not supply any products manufactured by these players and, hence, operates in a relatively small market. Moreover, these players are very competitive and have aggressive pricing policies, resulting in reduced market share for other players. The group's revenues will be impacted by any reduction in the market share of its suppliers because of competition or by discontinuation of tie-ups with its suppliers.

Liquidity: Adequate

Average month-end bank limit utilization has been moderate at around 80 percent for the 12 months ended April 2021. Cash accruals estimated at over Rs. 80 crore each in FY2022 and FY2023 are sufficient against term debt obligations of Rs 10 crore each over the same period.

 

Current ratio was healthy at around 1.4 times on March 31, 2021. Cash and other liquid instruments of around Rs. 60 crore as on April 30, 2021 provides further comfort to liquidity profile. Low gearing and moderate net worth support the company’s financial flexibility, and provide  the financial cushion available in case of any adverse conditions or downturn in the business.

Outlook: Stable

CRISIL Ratings believes that Trivitron group's credit risk profile will benefit from the extensive experience of the promoter and management. 

Rating Sensitivity Factors

Upward Factor

  • Substantial improvement in the revenue profile, with sustained EBITDA margin of over 18%
  • Improvement in the working capital cycle

 

Downward Factor

  • Decline in the revenue or EBITDA margin of less than 12%.
  • Stretch in the working capital or large debt funded capex impacting financial risk profile.

About the Company

Promoted by Dr. G S K Velu, the Chennai-based Trivitron group trades in and manufactures medical equipment, medical devices, and medical consumables. THPL, incorporated in 1998, is the group's flagship company. The Trivitron group has also floated several JVs with leading global medical equipment manufacturers and healthcare service providers.

Key Financial Indicators

As on / for the period ended March 31

Unit

2021*

2020

Operating income

Rs.Crore

748.00

425.89

Reported profit after tax

Rs.Crore

114.63

2.20

PAT margins

%

15.32

0.63

Adjusted Debt/Adjusted Networth

Times

0.35

0.70

Interest coverage

Times

17.43

1.33

*Provisional Figures

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)

ISIN

Name of instrument

Date of allotment

Coupon rate (%)

Maturity date

Issue size (Rs.Cr)

Complexity Levels

Rating assigned with outlook

NA

Cash Credit

NA

NA

NA

65

NA

CRISIL BBB+/Stable

NA

Letter of credit & Bank Guarantee

NA

NA

NA

55

NA

CRISIL A2

NA

Long Term Loan

NA

NA

Mar-2025

25.79

NA

CRISIL BBB+/Stable

NA

Working Capital Term Loan

NA

NA

Apr-2026

6.3

NA

 CRISIL BBB+/Stable

NA

Working Capital Facility

NA

NA

NA

20

NA

CRISIL BBB+/Stable

NA

Proposed Long Term Bank Loan Facility

NA

NA

NA

25

NA

CRISIL BBB+/Stable

NA

Proposed Short Term Bank Loan Facility

NA

NA

NA

2.91

NA

CRISIL A2

Annexure - List of Entities Consolidated

Names of Entities Consolidated

Extent of Consolidation

Rationale for Consolidation

Trivitron Healthcare Middle East

100%

Wholly Owned Subsidiary

Lab Systems OY (LDx), Finland

100%

Wholly Owned Subsidiary

Imaging Products India Private Limited

100%

Wholly Owned Subsidiary

BOME Trivitron, Turkey

60%

Joint Venture

Biosystems Diagnostics Private Limited

50%

Joint Venture

Trivitron Healthcare Africa (THA)

50%

Joint Venture

Vision Medicaid Equipments Private Limited, Pune

51%

Joint Venture

Trivitron Navakarama Medical Technologies Private Limited, Srilanka

50%

Joint Venture
Annexure - Rating History for last 3 Years
  Current 2021 (History) 2020  2019  2018  Start of 2018
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT/ST 145.0 CRISIL BBB+/Stable / CRISIL A2 25-06-21 CRISIL BBB+/Stable 06-08-20 CRISIL A3+ / CRISIL BBB/Stable 23-08-19 CRISIL BBB/Negative 03-07-18 CRISIL BBB+/Negative CRISIL BBB+/Stable
      --   -- 31-07-20 CRISIL BBB/Stable   --   -- --
      --   -- 24-07-20 CRISIL BB+ /Stable(Issuer Not Cooperating)*   --   -- --
Non-Fund Based Facilities ST 55.0 CRISIL A2 25-06-21 CRISIL A2 06-08-20 CRISIL A3+ 23-08-19 CRISIL A3+ / CRISIL BBB/Negative 03-07-18 CRISIL BBB+/Negative / CRISIL A2 CRISIL BBB+/Stable / CRISIL A2
      --   -- 31-07-20 CRISIL A3+ / CRISIL BBB/Stable   --   -- --
      --   -- 24-07-20 CRISIL BB+ /Stable / CRISIL A4+ (Issuer Not Cooperating)*   --   -- --
All amounts are in Rs.Cr.
* - Issuer did not cooperate; based on best-available information
 
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Cash Credit 65 CRISIL BBB+/Stable Cash Credit 65 CRISIL BBB+/Stable
Letter of credit & Bank Guarantee 55 CRISIL A2 Letter of credit & Bank Guarantee 55 CRISIL A2
Long Term Loan 25.79 CRISIL BBB+/Stable Long Term Loan 27.4 CRISIL BBB+/Stable
Proposed Long Term Bank Loan Facility 25 CRISIL BBB+/Stable Working Capital Facility 40 CRISIL BBB+/Stable
Proposed Short Term Bank Loan Facility 2.91 CRISIL A2 Working Capital Term Loan 12.6 CRISIL BBB+/Stable
Working Capital Facility 20 CRISIL BBB+/Stable - - -
Working Capital Term Loan 6.3 CRISIL BBB+/Stable - - -
Total 200 - Total 200 -
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for the Pharmaceutical Industry
CRISILs Criteria for rating short term debt
CRISILs Criteria for Consolidation
The Rating Process
CRISILs Bank Loan Ratings
Understanding CRISILs Ratings and Rating Scales

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