RATING RATIONALE
24Jun2022
Ayursundra Hospitals (Guwahati) Pvt. Ltd.
Brickwork Ratings reaffirms the rating for the reduced aggregate long term Bank Loan Facilities of Rs. 54.94 Crs of Ayursundra Hospitals (Guwahati) Pvt. Ltd.
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (10 Mar 2021) |
Present | ||
| Fund Based | 62.55 | 54.94 | Long Term |
BWR BB- /Stable
Upgrade |
BWR BB -
/Stable Reaffirmation |
| Grand Total | 62.55 | 54.94 | (Rupees Fifty Four Crores and Ninety Four lakhs Only) | ||
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure
RATING ACTION / OUTLOOK
Brickwork Ratings has relied upon the Audited financials of the company for FY 19, FY 20 and FY 21, provisional financials of FY 22 and Projected financials of FY 23 and FY 24, information available in public domain as well as feedback from the company and its bankers, for arriving at the present rating.
Based on annual review, Brickwork Ratings has reaffirmed the rating of the long term bank loan facilities of Ayursundra Hospitals (Guwahati) Pvt. Ltd. for the reduced aggregate amount of Rs.54.94 Crs (reduced from Rs.62.55 Crs), at BWR BB-/Stable. The rating reaffirmation factors in the the promoters’ strong background, the multi speciality services offered by the Hospital, the established brand image of Ayursundra, empanelments/tie-ups with various institutions, location of the hospital in Guwahati facilitating inflow of patients from across the NE region and even from the neighbouring countries, its wide reach through the hub and spoke model of operations, as well as the defensive nature of the healthcare industry. The rating is, however, constrained by its moderate financial risk profile with stretched liquidity, geographical concentration risk, as well as stiff competition, and the reputation risk associated with the healthcare sector.
BWR believes that the business risk profile of Ayursundra Hospitals (Guwahati) Pvt. Ltd. will be maintained over the medium term, and the 'Stable' outlook assigned indicates a low likelihood of rating change over the medium term. The rating outlook may be revised to 'Positive' in case the revenues and profit show sustained improvement. The rating outlook may be revised to 'Negative' if the revenues go down and profit margins show lower than expected figures on a continuous basis.
Credit Strengths:
-
Strong Promoter background :
The professional experience of the promoters, along with their technical and business knowledge, has enabled them to establish and manage the operations of a state-of-the-art Super Speciality Hospital in Guwahati.
-
Super Speciality Hospital :
AHGPL is built as a Super Speciality Hospital, with diversified services. It specializes in various important disciplines like Orthopaedics, Gastroenterology, Nephrology, Gynaecology, Cardiology, Oncology, In Vitro Fertilization (IVF), Trauma, Emergency, Medicine, Critical Care, etc.
-
Established Brand Image :
The “Ayursundra” brand is well known in the Diagnostic field in Assam since 2011, as the Promoters have been establishing Diagnostic centres since then under this brand name. While these centres are able to channelise patient referrals to AHGPL, brand recall by itself is expected to promote footfalls in the hospital of the same name.
-
Hub and Spoke business model with empanelments with various institutions: :
AHGPL operates through a hub and spoke model, which substantially increases its reach and feeds patients to the main hospital through referrals from remote locations. The existing as well as upcoming alliances and tie-ups with TPAs, Corporates and other institutions will enable the hospital in ensuring a steady flow of patients and in consolidating its position in the market.
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Location of the Hospital :
AHGPL is located in Guwahati on NH-37 which links Guwahati to the rest of North East India. Guwahati being the largest city in the North East, it also caters to the requirement of the population of other states in the northeast region where advanced medical facilities are not readily available. Further, Guwahati is well connected by rail and air to other parts of the country and to some neighboring countries like Bangladesh, Myanmar and Bhutan, for which reason it is a preferred medical tourism destination for people from these countries also.
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Defensive nature of Healthcare Industry :
The Healthcare industry is relatively immune to seasonal and economic factors. Given the growing population, higher incidence of lifestyle diseases, and increased awareness about health amongst people, demand for specialized medical services is bound to increase.
-
Geographical Concentration Risk :
AHGPL has its presence only in Guwahati. Although through its Hub & Spoke model it has expanded its footprint to various locations in Assam enabling referrals for the hospital and providing diagnostic services, it carries a significant degree of risk due to its regional concentration.
-
Moderate Financial Risk profile with stretched liquidity :
The financial risk profile of the company is marked by moderate scale of operations, moderate net worth, low profitability and debt coverage indicators, as well as stretched liquidity. The Total Operating Income stood at Rs.57.74 crore with a PAT of Rs.1.44 crore in FY21 and the same has increased to Rs.99.36 Crs with a PAT of Rs.5.58 Crs in FY 22 Provisional. However, the EBITDA margin, which stood low at 1.41% in FY21, has improved to 29.15% in FY22 Provisional, while the net margin, which stood negative in FY 21, has improved to 5.61% in FY 22 Provisional .The TNW of the company stood mderate at Rs.37.42 Crs in FY21 and it has increased to Rs.43.00 Crs in FY 22 Provisional. The debt to equity ratio stood moderate at 2.30 times as on 31st March, 2021 and slightly improved to 1.91 times as per the 31st March, 2022 Provisional figures. The interest coverage ratio (ISCR) and debt service coverage ratio (DSCR) of the company stood poor at 0.09 times and 0.06 times respectively in FY 21 but have improved significantly to 3.44 times and 1.38 times in FY 22 provisional. This improvement will remain a key monitorable.
-
High Competition :
Hospital industry in India is extremely fragmented, as evidenced by the large number of nursing homes and hospitals in the country. There are quite a few hospitals in the region offering similar facilities However, the internal channel of referrals of AHGPL through their own chain of diagnostic centres and tie ups with various agencies / institutions, coupled with state-of-the-art hospital infrastructure, should enable an increase in patient base. Moreover, Guwahati being the gateway to the north eastern region and easily accessible to adjacent countries like Bangladesh, Myanmar, Bhutan, there exists adequate scope for broadening their customer base.
-
Reputation Risk :
This is an inherent risk in the Healthcare industry, and any act of negligence by the Hospital staff, may tarnish the image of the Hospital.
Positive
- Increase in scale of operations and profits,Improvement in EBITDA margin and Net profit Margin on a consistent basis.
- Improvement in ISCR and DSCR on a sustained basis
- Improvement in Total Debt/Tangible Net Worth over the present levels on a sustained basis.
Negative
- Decline in Revenue & deterioration of the financial position of the company, including deterioration in liquidity, leverage and TNW on a continuous basis
- Dealy / default in debt servicing obligations
- Non achievement of sales vis-a-vis projections on a continuous basis
- Any deterioration in gearing, and coverage ratios falling below 1.
The liquidity position of the company is stretched, marked by high cash credit utilization ~at 96% for the last six months ended May, 2022. Further the net cash accruals stood negative at Rs. 7.55 Crs in FY21 against repayment obligations of 13.39 Crs However the company was able to meet its term debt obligations through capital subsidy of Rs.29.89 Crs received in FY20, under NEIIPP-2007 programme. The NCA has improved to Rs.21.66 Crs in FY 22 provisional as against repayment obligations of Rs.13.72 Crs.The current ratio stood poor at 0.72 times in FY21 and the same has improved to 1.32 times in FY 22 provisional. Going forward however, the liquidity position of the company is expected to ease and it will be able to meet its debt obligations through cash accruals of Rs. 23.67 Crores in FY 23, which will be sufficient to meet the debt obligations of Rs.9.34 for the corresponding period. The cash and Bank balances stood moderate at Rs.2.75 Crs as on 31 March 2022 provisional and it is expected that the same would be maintained at approximately the same level in FY 23.
ABOUT THE ENTITYAyursundra Hospitals (Guwahati) Pvt. Ltd. or AHGPL (formerly known as Ayursundra Healthcare Pvt. Ltd.) is a Guwahati based private limited company incorporated in December 2007. It was promoted by Mr. Simanta Das, Dr. Abhijit Hazarika and Mr. Lakshi Baishya. AHGPL started operations with diagnostic centers in 2011, in December 2016, the company set up a 272 bed super speciality Hospital in Guwahati, which is catering to the needs of the local population, as well as upcountry and international patients.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 57.74 | 67.08 |
| EBITDA | Rs.Crs. | 0.82 | 13.27 |
| PAT | Rs.Crs. | -23.64 | -15.01 |
| Tangible Net Worth | Rs.Crs. | 37.42 | 61.06 |
| Total Debt/Tangible Net Worth | Times | 2.30 | 1.55 |
| Current Ratio | Times | 0.72 | 1.05 |
Usual Covenants as Bank loan rating
RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)
| Facilities | Current Rating (2022) | 2021 | 2020 | 2019 | |||||
|---|---|---|---|---|---|---|---|---|---|
| Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
| Fund Based | LT | 54.94 |
BWR BB-/Stable
(Reaffirmation) |
10Mar2021 |
BWR BB- Stable
(Upgrade) |
11Dec2019 |
BWR B+ Stable
(Assignment) |
NA |
NA
|
| Grand Total | 54.94 | (Rupees Fifty Four Crores and Ninety Four lakhs Only) | |||||||
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.
| Analytical Contacts | |
|---|---|
|
Saroj Kumar Das Ratings Analyst sarojkumar.d@brickworkratings.com |
Anuradha Gupta Director - Ratings anuradha.g@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Name of the Bank/Lender | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) | |
|---|---|---|---|---|---|---|
| 1 | HDFC Bank | Over DraftSanctioned | 1.41 | _ | 1.41 | |
| 2 | North Eastern Development Finance Corporation Limited | Term LoanSanctioned | 18.14 | _ | 18.14 | |
| 3 | Punjab National Bank | Cash CreditSanctioned | 2.00 | _ | 2.00 | |
| 4 | Punjab National Bank | Term LoanSanctioned | 6.68 | _ | 6.68 | |
| 5 | State Bank Of India (SBI) | Term LoanSanctioned | 26.71 | _ | 26.71 | |
| 6 | State Bank Of India (SBI) | Cash CreditSanctioned | _ | _ | 0.00 | |
| Total | 54.94 | 0.00 | 54.94 | |||
| TOTAL (Rupees Fifty Four Crores and Ninety Four lakhs Only) | ||||||
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