M.M. Patel Public Charitable Trust

Brickwork Ratings revises the ratings for the Bank Loan Facilities of Rs. 49.35 Crs. of M.M. Patel Public Charitable Trust (MMPPCT or The Trust)

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
	Previous	Present		Previous (11 Nov 2020)	Present
Fund Based	56.48	40.00	Long Term	BWR BB+/Stable Assignment	BWR BBB - /Stable Upgrade
Non Fund Based	9.35	9.35	Short Term	BWR A4+ Assignment	BWR A3 Upgrade
Grand Total	65.83	49.35	(Rupees Forty Nine Crores and Thirty 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

The rating upgrade takes into account the sustained improvement in the financial performance marked by improved profitability margins and improvement in capital structure along with the debt servicing capabilities of the trust. The rating further derives comfort from resourceful trustees with experience from diverse fields, a healthy occupancy ratio for the hospital and a healthy enrollment ratio for the college. The ratings continue to remain constrained due to the modest scale of operations, sub-optimal current ratio, and regulatory risk governing the education and healthcare sector.

KEY RATING DRIVERS

Credit Strengths:

• Healthy occupancy ratio for the hospital :

  The hospital of the trust i.e. Ashwini Rural Hospital (560 bedded) is situated 10 km away from main Solapur city resulting in the occupancy levels remaining around ~85% between FY18 to FY20. The occupancy fell to around 63% during FY21 on account of Covid-19. However, the occupancy is back to 83% for H1FY22.

• Healthy enrollment ratios for the college :

  The college started the admissions during the academic year 2012-13. The trust has been able to achieve a healthy enrollment ratio for its medical college of above 90% for the past years ending FY21. Furthermore, the trust introduced Post Graduate courses in 11 disciplines with an intake capacity of 48 students during FY20 where the enrollment ratio reached 97%. The enrollment ratio is likely to remain high considering that the institution is the only private medical college offering PG courses in the Marathwada region of Maharashtra. Any material deterioration in student strength/enrolment would be a key rating sensitivity.

• Significant improvement in the financial risk profile :

  The debt profile of MMPPCT includes term loans from banks of Rs.51.21 Crs, unsecured loans from trustees, related parties, and group companies to the tune of Rs.11.34 Crs, and working capital borrowings of Rs.0.02 Crs as of March 31, 2021 (Provisional). The capital structure of the trust improved by overall gearing at 0.69x as of March 31, 2021, against 1.33x as of March 31, 2020, led by scheduled repayment of term loans, repayment of unsecured loans, and improvement in tangible net-worth to Rs.90.34 Crs as on March 31, 2021, against Rs.69.34 Crs as on March 31, 2020. The DSCR improved to 1.43x from 0.87x and ISCR improved to 3.6x from 2.17x during FY21.

• Improvement in Operating Income and Margins :

  The total operating income of trust improved to Rs.81.76 cr during FY21 (Prov.) against Rs.72.74 cr in FY20. The increase in TOI is mainly on account of income from new PG courses introduced by the trust and revision in fees of existing courses. The surplus ratios improved with SBILDT margin and SAT margin at 36.35% and 10.85% in FY21 from 28.90% and 7.84 % in FY20 respectively. The improvement in profit margins is mainly on account of an increase in revenue and lower interest cost due to repayment of term loans including prepayment of Rs. 9 crores. As of H1FY22, the trust has clocked revenues of Rs. 51.0 Crs.

• Resourceful and experienced trustees :

  MMPPCT was established in the year 2008 by Mr. Bipinbhai Patel (Chief trustee) and his family members. The trustees have vast entrepreneurial experience in the fields of textiles, dye cream, civil construction, transportation, construction, and petrol pumps.

Credit Risks:

• The modest scale of operations and a weak current ratio :

  The scale of operations of the trust, though improved, continues to remain modest as marked by a total operating income of Rs.81.76 cr during FY21 (Prov.). The current ratio though improved marginally to 0.74x (FY20: 0.67x) remains weak on account of higher current liabilities due to a security deposit of Rs 9 Crs and provision for salary/stipend at Rs 19. Crs. In our discussion with the trustee, it has been confirmed that the amount of provision for salary/stipend has been reduced to Rs. 9 Crs during H1FY22. Further, the security deposit is collected from a new batch of students enrolling each year hence the same remain long-term in nature.

• Higher amount of fee receivable :

  The fees receivable from students almost doubled yoy to Rs. 14.5 Crs. in FY21. The higher amount of fees receivables is mostly on account of the delay of receipt of fees under government scholarship. The government agencies usually take 50-60 days to clear the dues. The trustee in our interaction has confirmed that the pending fees as at H1FY22 is Rs. 4 Crs.

• The regulatory risk associated with Healthcare and Education Sector :

  The educational institutes are regulated by respective state governments with respect to the number of management seats, amount of the tuition fees charged for the government quota, and the management quota. The factors have a significant impact on the revenue and surplus margins of the institutions. Also, the healthcare sector in India has become one of the largest sectors - both in terms of revenue and employment. There are extensive opportunities for investments to be made in healthcare infrastructure in both urban and rural India. However, MMPPCT faces regulatory risks associated with the regulations governing the healthcare sector.

• Competitive Industry :

  Since the privatization of education commenced in India, several private colleges and institutes have been established in different parts of the country. There is an increasing preference for quality private educational institutions amongst the urban population. The competition risk is mitigated to a certain extent for MMPPCT as its the only private college offering MBBS and PG Courses in the Marathwada region of Maharashtra.

ANALYTICAL APPROACH - Standalone

BWR has principally relied upon the audited financial results up to FY20, provisional financials of FY21, H1FY22 key numbers, projections of FY22, FY23, publicly available information, and information/clarification provided by the Trust’s management.

RATING SENSITIVITIES

Positive Sensitivities
Substantial improvement in the trust’s operational profile leading to a sustained increase in Total Operating Income, sustenance of profitability margins, and an improvement in the current ratio.

 Negative Sensitivities

Any delay in receipts leading to cash flow mismatches, or lowers occupancy in the hospital below 70% and enrolment ratios in the medical college below 80%, weakening the operating performance and profitability. Unanticipated debt-funded capital expenditure weakening the financial risk profile especially liquidity.

LIQUIDITY INDICATORS - Adequate

Liquidity is adequately marked by net cash accruals of Rs.22.14 cr in FY21 (FY20: Rs 12.11 Crs.). The cash and bank balance were seen at Rs.2.26 crore as of March 31, 2021. The utilized fund-based limits remain moderate to the extent of 22% for the past 11 months ended November 2021. The maximum CC utilization remained at 98.20% in the months of January and September 2021. Further, the trust has no debt-funded CAPEX plans projected in the short to medium term. The trust corpus has been steadily increasing for the past 3 years. The expected net cash accruals during FY22 and FY23 are at 28.02 and 31.20 Crs. respectively which should be sufficient for the upcoming debt servicing obligations.

ABOUT THE ENTITY

MMPPCT operates Ashwini Rural Medical College, Hospital & Research Centre in Kumbhari, Solapur. The hospital is a 560-bedded hospital, namely, ‘Ashwini Rural Hospital’ and a medical college-namely ‘Ashwini Rural Medical College’ in Solapur district, Maharashtra. The Executive Chairman of M. M. Patel Public Charitable Trust is Mr. Bipinbhai, Mahijibhai Patel. The medical college has an intake capacity of 100 students for MBBS, 48 students for Postgraduate Courses(11 disciplines), 20 students for nursing, and 50 students for modern pharmacology. As of 31.03.2021, the hospital has 271 doctors, 265 nurses, and 465 support staff. During H1FY22 the hospital had treated ~1.35 lakh OPD patients(FY21: 1.95) and ~14650 IPD patients (FY21: 32000).

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Provisional)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	81.76	72.74
EBITDA	Rs.Crs.	29.72	21.02
PAT	Rs.Crs.	9.46	4.20
Tangible Net Worth	Rs.Crs.	90.34	69.34
Total Debt/Tangible Net Worth	Times	0.69	1.33
Current Ratio	Times	0.74	0.67

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

N.A,

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

Facilities	Current Rating (2021)			2020		2019		2018
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	40.00	BWR BBB-/Stable (Upgrade)	11Nov2020	BWR BB+Stable (Assignment)	NA	NA	NA	NA
Non Fund Based	ST	9.35	BWR A3 (Upgrade)	11Nov2020	BWR A4+ (Assignment)	NA	NA	NA	NA
Grand Total		49.35	(Rupees Forty Nine Crores and Thirty Five 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
• Education Sector
• Approach to Financial Ratios
• Short Term Debt

Analytical Contacts
Sagar Harendra Desai Ratings Analyst sagar.d@brickworkratings.com	Chintan Dilip Lakhani Director- Ratings chintan.l@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	Canara Bank	Term Loan - Out-standing	_	_	0.00
2	Cosmos Cooperative Bank	Bank Guarantee - Out-standing	_	9.35	9.35
3	HDFC Bank	Over Draft - Sanctioned	5.00	_	5.00
4	HDFC Bank	Term Loan - Out-standing	35.00	_	35.00
5	Indian Overseas Bank	Term Loan - Out-standing	_	_	0.00
6	Pandharpur Urban Co-operative Bank	Term Loan - Out-standing	_	_	0.00
7	Solapur Janata Sahakari Bank	Cash Credit - Out-standing	_	_	0.00
8	Solapur Janata Sahakari Bank	Term Loan - Out-standing	_	_	0.00
9	State Bank Of India (SBI)	Term Loan - Out-standing	_	_	0.00
10	Union Bank of India	Term Loan - Out-standing	_	_	0.00
Total			40.00	9.35	49.35
TOTAL (Rupees Forty Nine Crores and Thirty Five lakhs Only)