|
|
| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 7.25 | ACUITE BBB- | Stable | Assigned | - |
| Bank Loan Ratings | 12.00 | ACUITE BBB- | Stable | Upgraded | - |
| Total Outstanding Quantum (Rs. Cr) | 19.25 | - | - |
| Rating Rationale |
|
Acuité has upgraded its long-term rating to ‘ACUITE BBB-’ (read as ACUITE Triple B minus) from ‘ACUITE BB+’ (read as ACUITE double B plus) on the Rs.12.00 Cr bank facilities of Sparsh Hospitals and Critical Care Private Limited (SHCCPL). The outlook remains ‘Stable’. The ratings were downgraded vide our rationale dated June 16, 2023 based on information risk.
Further, Acuité has assigned its long-term rating of ‘ACUITE BBB-’ (read as ACUITE Triple B minus) on the Rs.7.25 Cr bank facilities of Sparsh Hospitals and Critical Care Private Limited (SHCCPL). The outlook is ‘Stable’. Rationale for the rating upgrade The rating upgrade is driven by the company’s growing scale of operations coupled with improvement in the profitability margins. The company has achieved revenues of Rs. 78.56 Cr in FY2023 (Provisional) as compared to revenues of Rs. 72.77 Cr backed by higher increase in ARPOB (Average revenue per bed) and a diversified revenue stream across various specialties. The rating also draws comfort from the promoters' well-established reputation as a high-quality healthcare provider in eastern India, supported by a skilled and experienced group of experts and physicians. The rating further factors in the above average financial risk profile of the company with low gearing, modest networth and adequate liquidity in the form of surplus cash accruals.
These strengths are, however, offset by the working capital intensive nature of operations and competition risk coupled with regulatory risk associated with healthcare industry. |
| About the Company |
|
Incorporated in 2007, Sparsh Hospitals and Critical Care Private Limited (SHCCPL) is based in Bhubaneswar, Odisha and is promoted by Dr. Priyabrata Dhir. Sparsh Hospitals is an ISO 9001:2015 multi-specialty hospital with cuttingedge technology. The hospital provides medical treatments in a variety of specialties, including neurology, neurosurgery, orthopaedics, and oncology, among others. The hospital is affiliated with a number of reputable professional doctors who provide medical services to patients from Odisha and nearby states.
|
| Analytical Approach |
|
Acuité has considered the standalone business and financial risk profiles of SHCCPL to arrive at this rating.
|
Key Rating Drivers
| Strengths |
| Experienced management and reputed customer base
SHCCPL is based in Bhubaneswar, Odisha and was founded in 2007 by Dr. Priyabrata Dhir , who earned his medical degree from Kathmandu University's College of Medical Science in 2002. He is the hospital's Chairman and Managing Director and have an expertise of over a decade in the healthcare field and is a surgical oncology and treatment specialist. The director is further assisted by Dr. Ghanshyam Biswas (MBBS, MD, DM. Oncologist), who has over 20 years of expertise in the medical field, along with the support from other directors who are equally experienced and skilled experts. The vintage of the promoters has enabled the company to maintain healthy relations with reputed client like Airport Authority of India (AIA), Food Corporation of India (FCI), National Aluminum Company Ltd. (NALCO), Reserve Bank of India and National Thermal Power Corporation Limited (NTPC), among others. Acuité believes that the established track record of operations along with the expertise of the management will continue to benefit the company going forward. Steady business risk profile The company has achieved revenues of Rs. 78.56 Cr in FY2023 (Provisional) as compared to revenues of Rs. 72.77 Cr in FY2022 and Rs. 50.66 Cr in FY2021, thereby, registering a CAGR of 24.46 per cent over the two years. Moreover, SHCCPL has achieved revenues of Rs. 20.71 Cr in Q1 of FY2024 (Provisional). The steady growth in the operating income is on account of increase in the operating beds, ALOS (average length of stay) and ARPOB (Average revenue per bed). Number of operating beds increased to 200 beds in FY2023 from 100 beds in FY2022. Further, the revenue mix is fairly diversified between cashpayment, TPA/Insurance patients and Government/ other panel patients. Further, the operating margin of the company increased to 15.84 per cent in FY2023 (Provisional) against 14.70 per cent in FY2022. The PAT margin also rose to 7.15 per cent in FY2023 (Provisional) against 6.78 per cent in FY2022. The improvement in profitability margins has translated into comfortable RoCE levels for the company of about 13.41 per cent in FY2023 (Provisional). Acuité believes that the ramp up of operations will continue to support the growth plans of the company going forward. Above average financial risk profile The financial risk profile of the company remains above average marked by moderate networth base, low gearing and comfortable debt protection metrices. The tangible networth stood at Rs. 56.59 Cr as on 31st March, 2023 (Provisional) as compared to Rs. 49.07 Cr in the previous year. The gearing of the company stood low at 0.29 times in FY2023 (Provisional) as compared to 0.32 times over the previous year. The Total outside Liabilities/Tangible Net Worth (TOL/TNW) stood at 0.61 times as on March 31, 2023 (Provisional) as against 0.93 times as on March 31, 2022. The debt protection matrices remained comfortable marked by healthy Interest coverage ratio (ICR) of 7.19 times in FY2023 (Provisional) and moderate Debt Service Coverage Ratio (DSCR) of 1.99 times for the same period respectively. The Net Cash Accruals to Total Debt (NCA/TD) stood at 0.53 times in FY2023 (Provisional). Acuité believes that, going forward, the financial risk profile of the company will remain above average backed by steady accruals and no major debt funded capex plans. |
| Weaknesses |
| Working capital intensive nature of operations
The working capital management of the company is intensive in nature marked by high Gross Current Assets (GCA) of 253 days as on March 31, 2023 (Provisional) as against 285 days as on March 31, 2022. The high GCA days are on account of the debtor period which improved but stood high at 90 days as on March 31, 2023 (Provisional) as compared to 119 days as on 31st March 2022. The debtors are primarily high due to the inherent nature of the business. However, the inventory period stood comfortable at 9 days in FY2023 (Provisional) and in FY2022. Going forward, Acuité believes that the working capital cycle of the company will remain around similar levels as evident from the high debtor level. Fiercely competitive healthcare industry limiting the ability to attract and retain high quality consultants The healthcare industry is very competitive with a large number of established organised players and their growing network of hospitals catering to middle/high income group which has affected the pricing flexibility of the company, in addition to restricting occupancies to a certain extent. Further, improvement of the occupancy levels is highly dependent on the hospital’s ability to retain and add reputed consultants which will be a challenge in light of heightened competition in the healthcare sector. |
| Rating Sensitivities |
|
| All Covenants |
|
None
|
| Liquidity Position: Adequate |
|
The company’s liquidity position is adequate marked by net cash accruals of Rs. 8.77 Cr as on March 31, 2023 (Provisional) as against long term debt repayment of only Rs. 1.96 Cr over the same period. The cash and bank balances of the company stood at Rs. 0.61 Cr as on March 31, 2023 (Provisional) as compared to Rs. 0.23 Cr as on March 31, 2022. The current ratio stood at 1.82 times as on March 31, 2023 (Provisional). However, the fund based limit utilisation stood high at 94 per cent over the six months ended June, 2023 owing to working capital intensive nature of operations of the company marked by Gross Current Assets (GCA) of 253 days as on March 31, 2023 (Provisional) as against 285 days as on March 31, 2022.
Acuité believes that going forward the company’s liquidity position will remain adequate due to steady accruals. |
| Outlook: Stable |
|
Acuité believes that SHCCPL will maintain a stable outlook over the medium term on account of experienced management, steady revenue growth and above average 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 improving its capital structure and working capital cycle. Conversely, the outlook may be revised to ‘Negative’ in case of substantial reduction in its operating income, sharp decline in its operating margins, deterioration in the financial risk profile and further stretch in its working capital cycle.
|
| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Provisional) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 78.56 | 72.77 |
| PAT | Rs. Cr. | 5.62 | 4.93 |
| PAT Margin | (%) | 7.15 | 6.78 |
| Total Debt/Tangible Net Worth | Times | 0.29 | 0.32 |
| PBDIT/Interest | Times | 7.19 | 7.19 |
| Status of non-cooperation with previous CRA (if applicable) |
|
Infomerics, vide its press release dated April 27, 2023 had denoted the rating of Sparsh Hospitals & Critical Care Private Limited as 'IVR BB-; ISSUER NOT COOPERATING’.
|
| Any other information |
|
Not Applicable
|
| Applicable Criteria |
|
• 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
|
|
| |
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| |
|
Contacts |
|
|
|
About Acuité Ratings & Research |
