North East Healthcare Pvt. Ltd.

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs. 59.79 Crs. of North East Healthcare Pvt. Ltd.

Particulars

Facilities**	Amount(Rs.Crs.)	Tenure	Rating#
Fund Based	59.79	Long Term	BWR BBB - /Stable Assignment
Grand Total	59.79	(Rupees Fifty Nine Crores and Seventy Nine 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 assigned ratings of BWR BBB- with a Stable outlook to the long term bank loans of Rs. 59.79 Crs of North East Healthcare Pvt. Ltd (NEHPL or the Company).The rating reflects the extensive experience of over three decades of the Promoters’ of NEHPL’s in the healthcare industry,as they have been running four hospitals under the Pratiksha group, including one in Uzbekistan and three in India, for a considerable period. The hospital also benefits from the established market position of NEHPL being a NABH and NABL accredited multispeciality hospital having 20 medical departments offering various critical medical services, as well as it's improving financial and credit risk profile with the hospital achieving breakeven in FY22 on the back of a sequential increase in bed occupancies to 60% in FY22. The ratings also take cognizance of its adequate liquidity position along with the expected improvement in NEHPL's financial risk profile with the completion of the ongoing expansions of the installed bed capacities by 100 beds as well as receipt of license and approvals for kidney transplant and cardiac surgeries which is likely to trigger higher OPD footfalls and IPD admissions going forward. The ratings are however constrained by NEHPL's exposure to intense competition, regulatory risks as well as the risk arising out of the ongoing debt-led CAPEX which shall add to the Hospital's gearing levels and increase its debt obligations. Timely completion of the expansion and ramp-up of bed occupancy will be the key monitorables going forward. 

Brickwork Ratings believes that the business profile of North East Healthcare Pvt Ltd. will be maintained over the medium term. The “Stable ” Outlook factors in the increase in the scale of operations and average revenue per occupied bed along with stable margins and improved cash flows resulting in an improved financial risk profile. The rating outlook may be revised to Positive in case the revenues and profitability surpass the projected levels meaningfully. The rating outlook may be revised to Negative if the revenues go down and margins show lower than expected figures.
BWR has essentially relied upon NEHPL's audited financials upto FY22, brief provisional financials for April 2022-August 2022 and projected financial statements from FY23 to FY26, publicly available information and information/clarifications provided by the Hospital’s management, and their bankers.

KEY RATING DRIVERS

Credit Strengths:

• Extensive industry experience of the Promoter :

  NEHPL's management is professionally skilled and has extensive experience in the medical industry. Dr. Pramod Kumar Sharma, Chairman and Managing Director of the hospital is a renowned Gynecologist and has about three decades of experience in the medical profession in India. He specializes in IVF treatment.  The hospital also has an experienced team of doctors and executives in managing the day-to-day affairs. Dr. Rajesh Kumar Verma, Director-orthopaedics has over two decades of experience in Orthopedics and specialises in spine surgery. Dr. Hemant Sharma, another renowned orthopedist has a total experience of over 15 years and also specialises in spine surgery. He has been associated with the hospital for the last 6 years.

• Accredited Multispecialty Hospital :

  The W Pratiksha hospital run under NEHPL is a multi-specialty hospital catering to patients in Gurgoan and surrounding regions. The 110 bedded hospital is accredited by the National Accreditation Board for Hospitals and Healthcare providers (NABH) and  National Accreditation Board for Testing & Calibration (NABL). The accredited hospital has about 20 medical services departments including Orthopedics, Cardiology, Internal medicine and diabetology,Neurosurgery,Pulmonology, Urology, Gastroenterology, Clinical Oncology, etc. Orthopedics and related surgeries continue to be its forte, accounting for nearly about 30% of the total income. The hospital is focussing on high-end surgeries. It has recently obtained licenses for kidney transplants and cardiac surgeries. This is likely to trigger higher OPD footfalls and IPD admissions leading to an improvement in bed occupancies and high end surgeries, going forward.

• International presence: :

  The hospital attracts international patients particularly from Iraq and Afghanistan through referrals from the international arm of the Group-Zarmed Pratiksha in Samarkand, Uzbekistan, which is a multi-speciality hospital in the Country with departments like Gynaecology, Paediatrics, Gastroenterology, Urology, Nephrology and others. NEHPL also has channel partners in Afghanistan and Iraq as well as tie ups with the Ministries and government bodies that sponsor their patients for surgeries. In the same region, the Company had in the past tied up with the Red Cross for speciality surgeries. The hospital’s doctors also frequently visit Uzbekistan for surgeries and consultations which help direct patients from the location to NEHPL.

• Improving financial and Credit risk profile: :

  The hospital reported a 30% y-o-y jump in topline to Rs.85Crs in FY22 on bed occupancies of 60%, up from 55% in FY21. Total OPD footfall has increased by 18.28% in FY22 to 33970 after a 36% fall in footfalls in FY21 owing to the pandemic. IP admissions have increased by 27% y-o-y to 5889 in FY22 from 4625 in FY21. The Company expects footfalls and IP admissions to increase further in FY23 on the back of expected higher bed occupancies and high end surgeries with license and approvals received for kidney transplants and Cardiac surgeries. Average revenue per bed improved to Rs.41206 in FY22 from Rs.35949 in FY21. EBIDTA improved to Rs15.65Crs in FY22 from Rs.8.18Crs in FY21 while the hospital achieved breakeven and reported net profits of Rs.8.97Crs in FY22 as against a net loss of Rs.0.61Crs in FY21. PAT is expected to moderate slightly going forward due to higher depreciation charges on the back of the Capex. Debt protection metrics continue to remain acceptable. ISCR has improved to 3.32x in FY22 from 1.45x in FY21 and DSCR improved to 1.12x in FY22 from its historically low levels with improved profitability. Total borrowings reduced in FY22 to Rs.58.4Crs. from Rs.74.5Crs in FY21 with repayment of term loans and unsecured loans.  However, debt is likely to increase in FY23 on account of drawdown of Term Loans which are being proposed. Net worth is negative due to past losses (which is characteristic of new entities in this sector) as well as adjustment of revaluation reserves. However, net worth is expected to turn positive as the hospital has reported net profitability in FY22 and consistent accretion to reserves is expected to strengthen the capital structure.      

• Increase in installed Beds and Occupancies :

  The hospital is ramping up its bed capacities by adding 100 beds to its existing bed capacities by building two additional floors at the same premises. The total number of beds will increase to 210 beds from 110 beds currently post expansions which are expected to be completed and become fully operational by FY24. By FY25, the hospital expects to run at bed occupancies of 75% to 80%.

Credit Risks:

• Competition :

  NEHPL faces competition from well-established multi-specialty hospitals in the region. Further, the company’s income depends on a single hospital unit located in Gurgoan which exposes it to greater risk.  

• Government Regulated :

  The hospital industry is government regulated. Apart from licensing and approvals, the Government has also capped prices of drugs and consumables as well as medical processes including medical devices such as coronary and knee implants which has impacted the topline and margins of the players in the industry. 

• Debt led CAPEX :

  The hospital has an ongoing debt-led CAPEX at a cost of Rs.17Crs. The hospital intends to fund ~75% of the total CAPEX with bank loans which will add to its gearing levels and debt service obligations. Successful and timely completion of the CAPEX, functioning of the new capacities as well as sustained gearing levels and debt coverage ratios will be the key monitorable going forward. 

ANALYTICAL APPROACH - Standalone

BWR has applied its rating methodology as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale)

RATING SENSITIVITIES

Positive:

• Timely completion of capex alongwith sustained bed occupancy of above 70% leading to an increase in the scale of operations 
• Maintenance of an optimum capital structure and the liquidity position
• DSCR of over 1.5x on a sustained basis

Negative:

• Delays in completion of capex resulting in lower than projected revenue and profitability and stretched liquidity
• DSCR of below 1.2x on a conitnued basis.

LIQUIDITY INDICATORS - Adequate

NEHPL's liquidity is adequate. Average bank limit utilization for the last 12 months has remained low. Expected net cash accruals of ~Rs.15 Crs is expected to remain sufficient against repayment obligations of around Rs.11.6Crs in FY23 (including repayments of unsecured loans which depends on the funds availability). Estimated moderate cash and bank balance provides additional support to liquidity. Current ratio is estimated to be moderate at around 1.5 times as on 31 March, 2023.
 

ABOUT THE ENTITY

North East Healthcare Private Limited (NEHPL) was incorporated on 28 June 2010 with registered office in Guwahati, Assam. The Company owns and runs W Pratiksha Hospital located in Gurgoan. W Pratiksha hospital is the flagship hospital of the Pratiksha Group of North East and is a premier multispecialty hospital that commenced operations in 2015 with an initial capacity of 110 beds in Gurgoan. It offers services in Obstetrics & Gynaecology, Pediatrics & Neonatology, IVF & Fertility, Critical Care, ICU& NICU, Cardiology, Orthopaedics & Spine Surgery, GI Bariatric & Minimal Access Surgery, Neurology & Dialysis, Neuro Surgery, Urology &  Andrology, Nephrology, Gastroentrology& Hepatology, Plastic Surgery, Nutrition &Dietitics, Internal Medicine, Pulmonology,Medical Oncology & Cancer Care with Chemo Day Care,ENT, Opthalmology, Physiotherapy & Rehabilitation, Clinical  Psychology, Dermatology, Audiology and Speech Therapy and Emergency. The hospital has a cafeteria, wellness lounges, an OPD area and premium lounges for international patients. In 2019, the hospital was accredited by - National Accreditation Board for Hospitals & Healthcare providers and National Accreditation Board for Testing & Calibration.

NEHPL is a part of the Northeast based- Pratiksha Group which runs four hospitals including 2 in the Northeast, 1 in Gurgaon, and 1 in Uzbekistan under the group companies as mentioned below- 

• W Pratiksha Hospital in Gurugram, Haryana run and operated by North East Healthcare Pvt. Ltd.
• Srishti Hospital in Dibrugarh, Assam run and operated by Srishti Hospitals & Research Centre Pvt Ltd
•  W Pratiksha Hospital in Guwahati, Assam run and operated by Pratiksha Hospitals, a partnership firm 
•  Zarmed Pratiksha hospital in Samarkand, Ukbekistan run and operated by Pratiksha Global Healthcare Pvt. Ltd.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 21-22 (Audited)	FY 20-21 (Audited)
Operating Revenue	Rs.Crs.	85.26	65.44
EBITDA	Rs.Crs.	15.65	8.18
PAT	Rs.Crs.	8.97	-0.61
Tangible Net Worth	Rs.Crs.	-9.56	-18.56
Total Debt/TNW	Times	-6.11	-4.01
Current Ratio	Times	0.72	1.27

KEY COVENANTS OF THE FACILITY RATED

The terms of sanction include standard covenants normally stipulated for such facilities.

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

NA.

RATING HISTORY FOR LAST 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	59.79	BWR BBB-/Stable (Assignment)	NA	NA	NA	NA	NA	NA
Grand Total		59.79	(Rupees Fifty Nine Crores and Seventy Nine lakhs Only)

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

• General Criteria
• Approach to Financial Ratios
• Services Sector

Analytical Contacts
Madhu Sonthalia Senior Rating Analyst Board : +91 80 4040 9940 madhusonthalia@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	Term Loan - Sanctioned	40.19	_	40.19
2	HDFC Bank	Term Loan - Proposed	10.00	_	10.00
3	HDFC Bank	Over Draft - Proposed	3.00	_	3.00
4	HDFC Bank	Dropline OD - Sanctioned	2.00	_	2.00
5	HDFC Bank	GECL - Sanctioned	4.60	_	4.60
Total			59.79	0.00	59.79
TOTAL (Rupees Fifty Nine Crores and Seventy Nine lakhs Only)