Adesh Welfare Society

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs.131.95 Crs. of Adesh Welfare Society

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (06 Apr 2022)	Present
Fund Based	103.91	102.25	Long Term	BWR BBB+ /Stable Reaffirmation	BWR BBB + /Stable Reaffirmation
Non Fund Based	28.00	29.70	Long Term	BWR BBB+ Reaffirmation	BWR BBB + /Stable Reaffirmation
Grand Total	131.91	131.95	(Rupees One Hundred Thirty One Crores and Ninety Five lakhs Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure
*** Note: This rating pertains to an existing assignment received prior to 6 October 2022.

RATING ACTION / OUTLOOK

Brickwork Ratings has reaffirmed the rating to BWR BBB+/Stable for the long term bank loan facilities of Rs.131.95Crores of Adesh Welfare Society (AWS or the society).

The ratings reaffirmed for the bank facilities of AWS continue to drive strength from experienced management with a long track record of operations in the education sector for running various institutes with diversified courses under Adesh Group and sustained popularity of its hospital leading to assured cash flows for the society. The rating also factors in improvement in its operational performance and AWS’s satisfactory financial risk profile marked by improvement in total operating income, comfortable gearing and moderate debt coverage metrics and steady operating and net surplus generated by its operations.However, these rating strengths are partially offset due to its presence in a highly competitive sector with exposure to high regulatory risks associated with the stringent compliance requirements of relevant regulatory authorities.

OUTLOOK: STABLE

BWR believes that the business and financial risk profile of Adesh Welfare Society will be maintained over the medium term due to favourable demand outlook for education in India. The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. The rating outlook may be revised to 'Positive' in case the receipts and surplus show sustained improvement. The rating outlook may be revised to 'Negative' if the receipts decrease and margins remain lower than expected.

KEY RATING DRIVERS

Credit Strengths:

Experienced management with long track record of Adesh group of institutions :
Adesh Welfare Society was established in 1993 by Dr Harinder Singh Gill (Founder member and Chairman) who holds a PG degree in Medicine. The other members of the society are independent/ technical members involved in strategic planning and decision making. All the members are professionally qualified with most of them having experience in medical and other related fields.The management has over 25 years of experience in running different institutes. AWS is a part of Adesh group, which also runs Adesh University, Bhatinda under Adesh Foundation, Muktsar. Adesh group on the whole runs 12 different institutes in Punjab & Haryana state and offers a variety of courses. AWS benefits from the financial flexibility of Adesh group and its brand recognition among students. The society has established Adesh Medical College & Hospital at Kurukshetra, Haryana in 2016 which contributes more than 85% of the society’s overall revenues with its satisfactory infrastructure backed by experienced faculties leading to satisfactory enrolment rates in its educational institute. In addition to that, it operates a general hospital with a capacity of 720 beds.
Improvement in operational performance :
AWS total operating income increased by 25.63% to Rs.108.90Crores in FY22 from Rs.86.68Crores in FY21 on account of increase in student strength as well as average fees. The society has booked income of ~ Rs.103.15 Crores in 9MFY23. The total student strength increased to 1179 students during academic session 2022-23 (as on 31st Dec, 2022) as compared to 1159 students during academic session 2021-22.
Satisfactory financial risk profile :
The society has reported a satisfactory financial risk profile as depicted by overall gearing improved to 0.83times as on March 31, 2022 (PY: 0.95x) on account of repayment of loans, accretions of surplus and contribution of donations to corpus fund resulting in increase in net worth. However operating and surplus margins remained steady at 58.93% and 18.75% respectively in FY22, as compared to 58.53% and 13.03% respectively in FY21. The interest coverage and net cash accrual to total debt (NCATD) ratio are at 3.55times and 0.37times for FY22. AWS’s debt protection measures are expected to remain at similar levels over the medium term.
Healthy demand in healthcare services :
The society is operating a general hospital under Adesh Medical College & Hospital, Mohri which is accredited by National Accreditation Board for Hospitals & Healthcare Providers (NABH) on 13 January, 2023 for a period of 4 years. The receipts from hospital operations have contributed Rs.15.20Crores in FY22 and Rs.7.16Crores during H1FY23 and has an average occupancy rate of approximately 80.94%. Further, society has also got permission to increase in the student fees and induction of two new PG streams viz, MD Psychiatry and MD Pediatrics in academic year 2022-23 with an increase in total seats to 41 from 34 in last academic year which is likely to aid revenue growth.

Credit Risks:

High competition :
AWS faces competition from other educational institutes located in and around Haryana. It derives demand for its professional courses from students in nearby villages and areas. Several educational institutes setting up their campuses in the vicinity, along with a process of central counseling conducted by the Haryana government have led to increase in competition for AWS.
Regulatory Risks :
Despite the increasing trend of privatization of the education sector in India, regulatory challenges continue to pose a significant threat to the educational institutes. The educational institutes & hospitals have to comply with a number of guidelines/rules such as fee structure, complying with infrastructural standards, minimum number of resident doctors and faculty members and minimum bed occupancy at the hospital. As a result, the colleges under the society run with a risk of not getting permissions for student admissions, imposition of financial & other penalties, risk of downgrade by accrediting agencies etc. Statutory bodies and other professional councils such as National Medical Commission (NMC), Indian Nursing Council (INC), All India Council for Technical Education (AICTE) are responsible for the regulation, coordination and development of higher education in India. The seats for professional courses and fees for various courses are fixed by the regulatory authorities and AWS has to follow the same fee structure, which puts limitations on the revenue growth.

ANALYTICAL APPROACH - Consolidated

For arriving at rating, BWR has considered the consolidated approach for Adesh Welfare Society (AWS) and its colleges viz, Adesh Medical College & Hospital, Adesh Institute of Technology, Adesh Institute of Information Technology & Management, College of Nursing and College of Physiotherapy etc. BWR has essentially relied on the audited consolidated financials up to FY22, projected financials up to FY24, publicly available information, as well as information/clarifications provided by the company's management and bankers.

RATING SENSITIVITIES

Going forward, the ability of the society to report healthy enrolment ratios and steady growth in student strength, improvement in overall credit risk profile and efficient management of working capital requirements would be the key rating sensitivities.

Positive: The ratings may be upgraded if there is consistency in maintaining the healthy financial risk profile marked by comfortable capital structure and substantial improvement in debt protection metrics, besides other factors favoring an upgrade.

Negative: The ratings may be downgraded if there is a decline in operating income and/or profitability due to decline in enrolment ratio or any moderation in debt coverage indicators.

LIQUIDITY INDICATORS - Adequate

The liquidity in the company remains adequate as indicated by moderate cash accruals vis-a-vis debt repayments, comfortable debt coverage indicators, besides financial flexibility of the society in raising funds and donations in times of need. The society has generated cash accruals of Rs.47.29Crs in FY22 against debt obligations of Rs.13.75Crs and is expecting to generate cash accruals of Rs.53.17Crs in FY23 and Rs.58.98Crs in FY24 against debt obligations of Rs.13.93-14.50Crs respectively. The society had unencumbered cash and cash equivalents of Rs.8.55Crs as on 31 March 2022 and ~Rs.13Crs as on 31 December 2022. The short term borrowing of the company includes an overdraft limit of Rs.5Crs which has moderate average utilization of approximately 37.60% in the past 12 months period ended January 2023.The Current Ratio of the society stood comfortable at 3.65x in FY22. Debt protection metrics stood moderate, with ISCR at 3.55x and DSCR stood at 3.45x in FY22.

ABOUT THE ENTITY

Adesh Welfare Society (Regd.), Muktsar (AWS), is a society registered on 22.02.1993 with Registrar of Firms & Societies, Punjab, under Societies Registration Act, 1860 having its registered office at Kotkapura Road, Muktsar, Punjab. The Society has a primary membership of five Members. The main promoters of the AWS are Dr. Harinder Singh Gill, Chairman and Mrs. Gurpreet Singh Gill, Vice Chairman with Kamaldeep Kaur Gill, General Secretary. The Society also has colleges in the field of Nursing, Physiotherapy, Para-Medical Sciences, Institute of Technology, Hospital and Medical college. However the primary focus of the society is on Adesh Medical College & Hospital which started its operations in 2016, as this contributes to maximum income.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 21-22 (Audited)	FY 20-21 (Audited)
Operating Revenue	Rs.Crs.	108.90	86.68
EBITDA	Rs.Crs.	64.18	50.74
PAT	Rs.Crs.	20.42	11.30
Corpus	Rs.Crs.	155.55	145.74
Total Debt/Corpus	Times	0.83	0.95
Current Ratio	Times	3.65	6.69

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2023)			2022		2021		2020
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	102.25	BWR BBB+/Stable (Reaffirmation)	06Apr2022	BWR BBB+ Stable (Reaffirmation)	29Jan2021	BWR BBB+ Stable (Reaffirmation)	NA	NA
Non Fund Based	LT	29.70	BWR BBB+/Stable (Reaffirmation)	06Apr2022	BWR BBB+ (Reaffirmation)	29Jan2021	BWR BBB+ (Reaffirmation)	NA	NA
Grand Total		131.95	(Rupees One Hundred Thirty One Crores and Ninety Five lakhs Only)

*** Note: This rating pertains to an existing assignment received prior to 6 October 2022. COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.

Hyperlink/Reference to applicable Criteria

Analytical Contacts
Akanksha Senior Rating Analyst akanksha@brickworkratings.com	Ravi Rashmi Dhar Associate Director - Ratings ravi.d@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Adesh Welfare Society

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	HDFC Bank	Term Loan	97.25	_	97.25
2	HDFC Bank	Bank Guarantee	29.70	_	29.70
3	HDFC Bank	Overdraft	5.00	_	5.00
Total			131.95	0.00	131.95
TOTAL (Rupees One Hundred Thirty One Crores and Ninety Five lakhs Only)

* Note: This rating pertains to an existing assignment received prior to 6 October 2022.

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