- Established brand name and experience of promoters in healthcare industry
SHPL is promoted by Dr. H. D Shenoy and Dr. Kalyana Chakravarthy Yeluri, who have around three decades of experience in the healthcare industry. Dr. H. D Shenoy specializes in Trauma care, Anaesthesia and Dr. Kalyana Chakravarthy Yeluri is an Anaesthesia. The company was incorporated in December, 2010 along with eight other doctors and runs a 183 bed multispecialty hospital located in Kakinada offering of multispecialty services in the field o f Orthocare, Nephrology, Gastroenterology, Cardiology and Cardiothoracic segments to name a few. SHPL has recruited specialists/ consultants across various disciplines to attract patients and also to cater patients from the nearby districts. SHPL operates 2 superspeciality hospitals under the brand name of ‘Trust Hospitals’. Acuité believes that SHPL will continue to benefit from the promoters’ experience in the healthcare industry.
- Stable operating performance
The company has reported moderate growth with y-o-y growth of 5.40 percent in FY2024 as compared to FY2023. Revenues stood at Rs.74.10 Cr. in FY2024 as against Rs.70.30 Cr. in FY2023. Occupancy remained stable at 80 percent in FY2024. The modest growth in FY2024 and expected the same in FY2025 is on account of stagnant occupancy rates for inpatient services. Of the total revenue generated, ~58.69 percent was from in-patient services (IPD), ~16.25 percent was from outpatient services (OPD), and ~25.07 percent was from the sale of pharmacy products. The operating profit margins ranged between 18.47-19.5 percent in the last two years ending in FY2024. Acuite believes that the ability of the company to improve its occupancy levels leading to improvement in overall business risk profile will remain a key rating sensitivity.
- Healthy financial risk profile
The company’s financial risk profile is healthy, marked by a moderate net worth, low gearing, and healthy debt protection metrics. The net worth of the company stood at Rs. 36.19 Cr. and Rs. 31.27 Cr. as on March 31, 2024, and 2023, respectively. The improvement in the networth is owing to accretion of reserves. The gearing of the company stood at 0.45 times as on March 31, 2024, against 0.70 times as on March 31, 2023. The improvement in the gearing ratio is due to a decrease in long-term debt. Debt protection metrics—interest coverage ratio and debt service coverage ratio—stood at 8.09 times and 1.64 times as on March 31, 2024, respectively, as against 6.69 times and 1.65 times as on March 31, 2023, respectively. Improvement in ICR is mainly due to a decrease in interest cost during FY2024. TOL/TNW (total outside liabilities/total net worth) stood at 0.76 times and 1.05 times as on March 31, 2024, and 2023, respectively. The debt to EBITDA of the company stood at 1.17 times as on March 31, 2024, as against 1.55 times as on March 31, 2023. Acuité believes that SHPL’s financial risk profile will continue to remain at the healthy levels over the medium term.
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- Moderate nature of working capital operations
SHPL's working capital operations are moderate in nature marked by gross current asset (GCA) of 92 days in FY2024 as against 86 days in FY2023. The GCA days are impacted mainly on account of elongation in debtors’ collection period (delay in reimbursement from the government and other schemes, Arogyasri, Arogyaraksha, among others). Inventory days stood at 12 days in FY2024 as against 11 days in FY2023. The debtor day stood at 67 days in FY2024 as against 63 days in FY2023. Subsequently, the payable period stood at 71 days in FY2024 as against 72 days in FY2023, respectively.
- High competition; retention of experienced consultants remains a key challenge
Given the growing demand for healthcare services in India, the sector has been witnessing rising interest from domestic and foreign players. Improvement in operational profile is highly dependent on the hospital’s ability to retain and attract reputed consultants, which will be a challenge in the light of increased competition in the healthcare sector from various private healthcare chains as well as government hospitals. SHPL enjoys good brand equity and a track record, which lends it some competitive advantage. Furthermore, any restrictions on treatment costs or pharmaceutical sales would have an adverse effect on the company's margins.
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