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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 75.00 | ACUITE BBB | Stable | Assigned | - |
| Bank Loan Ratings | 50.00 | ACUITE BBB | Stable | Reaffirmed | - |
| Total Outstanding Quantum (Rs. Cr) | 125.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed and assigned its long-term rating of ‘ACUITE BBB’ (read as ACUITE Triple B) on the Rs.125.00 Cr bank facilities of Felix Healthcare Private Limited (FHPL). The outlook is ‘Stable’.
Rating Rationale The rating takes into consideration track record of the company along with marginal improvement in the top line of the business and the margins. Further, the financial risk profile of the company remains moderate. However, the above mentioned strengths are partly offset by working capital intensive nature of operations along with execution risk of project which is on nascent stage currently. |
| About the Company |
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Noida-based FHPL was incorporated in 2011 by Dr. D.K. Gupta and Dr. Rashmi Gupta. The company is engaged in the running of a 150 Bed multi-specialty hospital in Noida. FHPL’s operations began in 2015 and currently the hospital has team of 55 qualified doctors. Besides regular specialties, Felix Hospital has a varied range of super specialty services, modular operation theatre complex with HEPA filter laminar flow and hermetically sealed doors, well equipped critical care units and hemodialysis facilities. The hospital is accredited by both NABH and NABL. Currently, an expansion project is ongoing at FHPL post which the number of beds at the hospital would increase to 200 and new specialty services of IVF, Nephrology etc would be introduced. This project is expected to be completed in FY2022.
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| Analytical Approach |
| Acuité has considered the standalone business and financial risk profiles of FHPL to arrive at this rating. |
Key Rating Drivers
| Strengths |
| Experienced Management and Reputed Customers
FHPL is promoted by Dr. D.K. Gupta and Dr. Rashmi Gupta and Dr. Shilpi Gupta who have an experience of more than a decade each in the healthcare industry. All of the directors of the company are practicing doctors. The promotors of the company are backed by qualified doctors. FHPL has tie ups with most Third Party Administrators (TPAs) in the industry and also caters to corporate clients. Corporate clientele of FHPL includes Bharat Heavy Electricals Limited (B.H.E.L), National Thermal Power Corporation Limited (NTPC), Northern railways etc. Acuité believes that the Company will continue to derive benefit from its experienced management and corporate clientele over the medium term. Augmentation in Business risk Profile The revenue of the company has increased to Rs 102.27 Crore in FY22 against Rs 50.24 Crore in FY21 which is supported by the increase in number of beds to 200 in FY22 from 150 in FY21. Further, the increase in revenue is also supported by increase in average revenue per bed to Rs 14,000 in FY22 against Rs 8,000 in FY21. The company has achieved the revenue of Rs 89.72 Crore till December 2022 and is expecting to generate a revenue of Rs 122.70 Crore in this fiscal year. The growth is driven by on an account of increased occupancy and revenue from per bed, along with this new services of IVF, Nephrology which has started in FY22 will also contribute in the profitability. Acuite’ believes that the increase in beds and the new services added may continue to help in the revenue growth of the company. Moderate Financial Risk Profile The Financial risk profile of the company is moderate marked by the net worth of Rs.21.41 Crore in FY22 against Rs.13.34 Crore in FY21. The total debt of the company is Rs.52.61 Crore in FY22 against Rs.39.14 Crore in FY21 increase in debt is due to ongoing project with a costing of Rs.91.5 Crore out of which total debt is of Rs.68.5 Crore and rest Rs.23 Crore by equity and internal accruals. On the back of improved profitability, the interest coverage ratio and debt service coverage ratio of the entity has improved from 2.31 times and 1.20 times in FY21 to 5.11 times and 1.75 times in FY22 respectively. TOL/TNW ratio stood at 3.50 times in FY22 against 3.66 times in FY21. Further, the debt-equity ratio stood at 2.46 times in FY22 against 2.93 times in FY21. Acuite’ believes that financial risk profile of the FHPL may continue to remain moderate with the debt-funded capex plans. |
| Weaknesses |
| Working Capital intensive nature of operations
Working capital management of the company is intensive marked by GCA Days at 175 in FY22 against 204 days in FY21. GCA Days has improved in FY22 on the back of improvement in debtor collection. Debtors days stood at 122 days in FY22 against 172 days in FY21 as they are stretched during Covid due to FHPL has registered with most of the TPA’s in the industry as well as caters to government agencies wherein payments are received with some delay and now the payments are made in the given time frame which is within 120 days. Further, inventory days of the company stood at 7 days in FY22 against 6 days in FY21. On the other hand, the creditor days of the company stood at 40 days in FY22 against 117 days in FY21. However, Acuité believes FHPL’s working capital operations may continue to remain intensive considering the higher receivable cycle. Nascent stage of operations multi-speciality operations The company has planned to launch the new project, the hospital building which will be adjacent to the Felix Healthcare Private will take a time frame of two years to get completed. However, the execution risk is associated with the project and revenue visibility is yet to be seen. Regulatory and Competition Risk The healthcare sector functions under multiples layers of regulations of government and professional bodies. In view of the Covid-19 pandemic, regulatory restrictions and state intervention in the normal operations of hospitals has increased. Additionally, the hospital faces intense competition from several players in the city from small players as well as large players. |
| Rating Sensitivities |
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| Material covenants |
| None. |
| Liquidity Position |
| Adequate |
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The Liquidity profile of the company is adequate. FHPL generated net cash accruals in FY22 is Rs.11.22 crore against maturing debt obligation of Rs.5 Crore during the same tenure. The cash accrual is expected to remain in the range of Rs. 14 Crore to Rs. 16 Crore over the medium term while its repayments are expected to remain under the range of Rs.10 Crore in FY 23 and FY24 respectively. The liquidity position of the company is adequate as the bank loan for the construction of hospital is already disbursed and is having the moratorium till March 2025. The unencumbered cash and bank balance was at Rs.1.71 Crore. The average bank limit utilization stood 75% of last 10 months ending December 2022.
Acuité believes that the liquidity of the Company is likely to remain adequate over the medium term on account of moderate cash accruals against debt repayments and moderately unutilized bank limits. |
| Outlook: Stable |
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Acuité believes that FHPL will maintain a stable outlook over medium term on account of experienced management, reputed clientele, steady revenue growth and moderate financial risk profile. The outlook may be revised to ‘Positive’ in case the company achieves higher than expected improvement in its operating income and profitability while maintaining its capital structure. Conversely, the outlook may be revised to ‘Negative’ in case of substantial reduction in its operating income, sharp decline in its operating margins and further stretch in its working capital cycle
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| Other Factors affecting Rating |
| None. |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 102.27 | 50.24 |
| PAT | Rs. Cr. | 8.07 | 1.80 |
| PAT Margin | (%) | 7.89 | 3.59 |
| Total Debt/Tangible Net Worth | Times | 2.46 | 2.93 |
| PBDIT/Interest | Times | 5.11 | 2.31 |
| Status of non-cooperation with previous CRA (if applicable) |
| Brickwork Ratings vide its press release dated 17.03.2022, had reaffirmed the company to BWR BB-; INC |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Service Sector: https://www.acuite.in/view-rating-criteria-50.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm |
| Note on complexity levels of the rated instrument |
| In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in |
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