Asclepius Hospitals and Health Care Pvt. Ltd.

Brickwork Ratings revises the ratings for the Bank Loan Facilities of Rs. 80.75 Crs. of Asclepius Hospitals and Health Care Pvt. Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
	Previous	Present		Previous (06 Jan 2021)	Present
Fund Based	74.94	80.75	Long Term	BB,Stable, Issuer Not Cooperating Reaffirmation	BWR
Non Fund Based	(8.00)	(8.00)	Short Term	A4, Issuer Not Cooperating Reaffirmation	_
	(6.00)	(6.00)
Grand Total	74.94	80.75	(Rupees Eighty Crores and Seventy 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

RATING ACTION / OUTLOOK

Brickwork Ratings has Upgraded the long the ratings and short term Ratings of BWR BB,/BWRA4 to BWR BB+/ BWR A4 on bank loans of  Rs.80.75crs of Asclepius Hospitals and Health Care Pvt. Ltd. enhanced from Rs.74.94crs with a Stable Outlook.  BWR principally relied upon audited financials upto FY20, Provisional brief financials of FY21, projections of FY22 and FY23, publicly available information and information/clarification provided by the management. 

The rating Upgradation is based on the consistent increasing in the hospital's scale of operation since FY19, increase in Bed occupancy with larger patient inflow, increasing EBIDTA, improved ISCR and DSCR in FY20 and receipt of capital subsidy from the state government for setting of Hospital in Guwahati. The ratings also continue to draw strength from the experienced promoters and infusions of funds by them to meet liquidity requirements, the Hospital’s association with the financially sound Kayal Group, reputed doctors on board, and the multi specialty nature of its operations. The ratings are however constrained by the continued net losses since FY19 due to high fixed costs, high gearing owing to the CAPEX  and COVID loans and competition from the established hospitals in the region. 

The “Stable” Outlook indicates a low likelihood of rating change over the near to medium term. Brickwork Ratings believes that the business profile of Asclepius Hospitals and Health Care Pvt. Ltd. will be maintained over the medium term. The rating outlook could be revised to “Positive” on the hospital achieving breakeven with increase in bed occupancy. The rating outlook may be Downgraded to “negative” on a decline in bed occupancy, and the hospital not being able to achieve the projected financials, or any additional borrowing that will lead to deterioration in the gearing and debt protection metrics.

KEY RATING DRIVERS

Credit Strengths:

• Increasing Scale of Operations and Bed Occupancy :

  The Hospital's scale of operations has been increasing since FY19. Revenue from operations has grown substantially by 32.45% in the FY20 with increase in bed occupancy to 44% in FY20 from 36% in FY19. Despite operations being impacted by COVID, the Hospital managed to sustain its topline and reported total operating income of Rs.84.58crs in FY21(Provisional). Bed Occupancy was maintained at 45% in FY21. The Hospital has been able to manage the second wave of COVID better which is visible in the monthly revenues of Rs.7.5crs in April 2021 as against Rs.crs recorded in the month of April 2020. Average Revenue Per Bed has improved to Rs.30,000 in FY20 from Rs.26830 in FY19.

• Improved Profitability :

  EBIDTA improved to Rs.11.77crs in FY20 from Rs.3crs in FY19. Growth in EBDITA was helped by increase in Surgeries. The Hospital has witnessed a surge in the number of surgeries performed from 1304 in FY19 to 1673 in FY20. As of Dec. 2020, the hospital reported 834 surgeries. Of the above surgeries, critical surgeries i.e. CTVS surgeries increased from 78 in FY20 to 92 in FY21. Upto Nov 2020, the Hospital did not have a full time CTVS Doctor but since Nov 2020, the it added full time CTVS Doctor which has increased the no. of surgeries performed and is likely to increase further going forward. For FY21, the Hospital did extensive manpower planning and has re-negotiated its terms with the Doctors and as such was successful in reducing its Doctors' Cost by 14% and Employment Cost by 10% during FY 2020-21 as compared to FY 2019-20. This has also helped sustain EBIDTA during FY21.

• Receipt of Capital Subsidy and Improved net worth :

  The Hospital has received Rs.7.10crs of capital subsidy from the State government for setting up of Hospital in Guwahati. This has improved total net worth from Rs.13.47crs as on March 31, 2020 to Rs.14.65crs as of March 31, 2021. The Hospital expects balance subsidy of Rs.19crs to be received in May 2021. The funds will ease liquidity pressures going forward.

• Debt Protection Metrics :

  DSCR and ISCR of the company stand at 1.11x (FY19:0.40x) and 1.48x (FY19:0.38x) respectively in FY20 indicating company’s adequacy to meet its debt obligations. Although, ISCR moderated slightly to 1.18x, it is at an acceptable level. DSCR was at 1.0x in FY21 (provisional) but the Hospital managed to pay its debt obligations regularly with the help of infusion of funds by the Directors, GECL loans as well as its internal cash accruals.

• Experienced Management :

  The Promoter Directors include four doctors, namely Dr. Neil Bordoloi, Dr. Prakritish Bora, Dr. R.P. Soni and Dr. Manash Pratim Baruah and also experienced management graduates. These promoters have a decade’s experience in running a health care unit. The other Promoter Directors are from the 'Kayal Group' and have diversified business experience with sound financial background.

Credit Risks:

• High Gearing and Low Net Worth :

  The Hospital has reported total gearing of over 5.0x in FY20 and FY21(provisional) owing to high term loans and low net worth. The Company also availed COVID loans in FY21 which further increased gearing for the year. Net worth is depleted due to continuous net losses. However, the capital subsidy received in FY21 has helped increase net worth and contain gearing levels at 5.5x despite additional borrowings. The expected subsidies in FY22 will help reduce gearing levels with improved Net Worth. TOL/TNW is also expected to reduce with the receipt of the subsidies. The Ratio is at over 6.0x in FY20 and FY21(Provisional).

• Continuous Net Losses :

  The Hospital is reporting net losses since FY19 due to high fixed costs as it is in its initial stage of operations. It is expected to breakeven in FY22 reporting net profitability - although marginal - with increase in revenues on the back of improved occupancy and patient turnover.

• Competition :

  The Hospital faces intense competition from the established Hospitals in the region.

ANALYTICAL APPROACH - Standalone

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

RATING SENSITIVITIES

 Positive: Increase in scale of operations with increase in bed occupancy to a minimum of ~60%, and improved debt protection metrics to acceptable levels with increase in profitability will trigger a positive rating action. 
 Negative: Stagnation or any decline in scale of operations due to lower bed occupancy, or deterioration in the debt protection metrics with any decline in profitability will trigger a negative rating action.

LIQUIDITY INDICATORS - Stretched

The liquidity of the Hospital is Stretched with tightly matched cash accruals to repayment obligations in FY20. The hospital is adequately utilising its working capital limits. The current ratio is below acceptable levels. The Hospital is in its initial stage of operations and is yet to achieve breakeven. Bed occupancy is below 50%. Going forward liquidity is likely to improve with higher bed occupancy levels. Repayment of term loan has started and is met from cash accruals, infusion of funds from Directors and Capital subsidy of Rs.7.10Crs received from the state government in FY21. The Hospital had availed moratorium  under the RBI COVID relief package during from April 2020 to August 2020. The payments were regular post moratorium. It has also availed GECL loans in FY21 to meet liquidity requirements. However, the Hospital has maintained a DSRA (three months of principal installments) with one of its lenders which as confirmed by the lender has never been utilised. The Hospital is also likely to receive Rs.19crs of Capital subsidies in May 2021 which will ease out liquidity pressures going forward.

ABOUT THE ENTITY

Incorporated in 2005, AHHCPL is a Multi-Specialty Hospital in Paschim Boragaon, Guwahati. The Hospital started operations in March 2017, earlier than the scheduled COD of April, 2018. It has specialties across Cardiology, General Medicine, General Surgery, Orthopaedics, Gynecology & Obstetrics, Pediatrics, Dental, ENT Clinic, Neurology, Ophthalmology, Physiotherapy, Dermatology, Emergency Care and others and is equipped with latest medical equipment and state of the art infrastructure. The hospital has 178 beds (10 beds higher than the expected 168 Beds), 5 Operation Theatres, 4 Surgical suites, 2 Casualty rooms, 20 OPD Rooms and 1 Cathlab. Total number of Doctors are 72 and total supporting Staff are 543.

KEY COVENANTS OF THE FACILITY RATED

Standard Covenants 

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

None.

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

Facilities	Current Rating (2021)			2021 (History)		2020		2019		2018
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	80.75	BWR ()	06Jan2021	BB,Stable, Issuer Not Cooperating (Reaffirmation)	NA	NA	14Oct2019	BB,Stable (Reaffirmation)	02Jul2018	BB,Stable (Reaffirmation)
Non Fund Based	ST	NA	NA	06Jan2021	A4, Issuer Not Cooperating (Reaffirmation)	NA	NA	14Oct2019	A4 (Reaffirmation)	02Jul2018	A4 (Reaffirmation)
NFB SubLimit	ST	(8.00)	BWR ()	NA	NA	NA	NA	NA	NA	NA	NA
		(6.00)	BWR ()	NA	NA	NA	NA	NA	NA	NA	NA
Grand Total		80.75	(Rupees Eighty Crores and Seventy Five lakhs Only)

Rating Advisory, as on 05Nov2020
Press Release, as on 05Nov2020
Rating Advisory was issued as review of ratings was not been possible to review the rating within the stipulated time, mainly due to non-receipt of complete essential information required for review arising from the prevailing country-wide pandemic condition. On Jan.06,2021, the ratings of BWR BB, Stable/BWR A4 were moved to Issuer Not Cooperating Category as they Company delayed in sharing requisite information/documents for review of ratings.

COMPLEXITY LEVELS OF THE INSTRUMENTS - NA

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
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.	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Cash Credit - Sanctioned	2.90	_	2.90
2	Term Loan - Sanctioned	6.34	_	6.34
3	GECL - Sanctioned	1.92	_	1.92
4	Term Loan - Sanctioned	6.34	_	6.34
Sub-Limit (ILC/FLC/BG) - Sanctioned		(8.00)
5	Cash Credit - Sanctioned	3.00	_	3.00
6	Term Loan - Sanctioned	42.65	_	42.65
7	GECL - Sanctioned	9.47	_	9.47
8	Term Loan - Sanctioned	8.13	_	8.13
Sub-Limit (ILC/FLC/BG) - Sanctioned		(6.00)
Total		80.75	0.00	80.75
TOTAL (Rupees Eighty Crores and Seventy Five lakhs Only)