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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 83.28 | ACUITE BB+ | Stable | Downgraded | - |
| Bank Loan Ratings | 7.00 | - | ACUITE A4+ | Downgraded |
| Total Outstanding Quantum (Rs. Cr) | 90.28 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 0.00 | - | - |
| Rating Rationale |
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Acuité has downgraded its long-term rating to ‘ACUITE BB+’ (read as ACUITE double B ‘plus’) from ‘ACUITE BBB-’ (read as ACUITE triple B ‘minus’) and short term rating to ‘ACUITE A4+’ (read as ACUITE A ‘four plus’) from ‘ACUITE A3’ (read as ACUITE A ‘three’) on the Rs.90.28 Cr bank facilities of Virinchi Healthcare Private limited (VHPL). The outlook is ‘Stable’.
Rationale for the downgrading in rating |
| About Company |
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Incorporated in 2013, VHPL is a 100 percent wholly – owned subsidiary of V irinchi Limited (VL) - a public listed company on the Bombay Stock Exchange and part of Virinchi Group. The company operates a 400 bedded multi-specialty hospital in Banjara Hills, Hyderabad which started operations in August 2016. VHPL is a National Accreditation Board for Hospitals and Healthcare Providers (NABH) and National Accreditation Board for Testing and Calibration Laboratories (NABL) - accredited hospital comprising of 11 operating theatres, 140 ICU beds, 3T MRI, 128 Slice Spectral CT and a ceiling-mounted Cath Lab. VHPL also operates 2 hospitals under the name ‘Bristlecone’, a 140-beded hospital at Hayathnagar, Hyderabad and a 60- beded hospital at Barkatpura, Hyderabad. Virinchi Limited, the holding company, is promoted By Mr. Maddala Veera Srinivasa Rao, Mr. Sri Kalyan Kompella and Mr. Sunder Kanaparthy.
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| About the Group |
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Hyderabad based Virinchi Limited (VL) was incorporated in 1990 by Mr. Vishwanath Kompella, engaged in the business of providing IT based products and services to fintech companies. In the year 2016, Virinchi Health care Private Limited was incorporated with 350 beds capacity at Hyderabad which is 100% subsidiary of Virinchi Limited. The subsidiaries of Virinchi Limited includes Virinchi Healthcare Private Limited, Q fund Technologies Private Limited, KSoft systems Inc, Tensor Fields Consultancy Services Private Limited, Virinchi Combinatorics & Systems Biology Private Limited, Virinchi Learning Private Limited, Virinchi Media & Entertainment Private Limited, Virinchi Infra & Realty Private Limited, Tyohar Foods Private Limited, Asclepius Consulting & Technologies Private Limited.
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Analytical Approach
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| Acuité has consolidated the business and financial risk profile of Virinchi Limited (VL) and its subsidiary - Virinchi Healthcare Private Limited (VHPL); together referred as Virinchi Group (VG) to arrive at the rating. The consolidation is on account of common management, significant financial linkages and corporate guarantee extended by VL.
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Key Rating Drivers
| Strengths |
| Experienced management and established track record of operations;
Hyderabad based Virinchi Limited (VL)was incorporated in 1990 by Mr. Vishwanath Kompella, engaged in the business of providing IT based products and services to fintech companies. The company’s flagship product Q-Fund is used by the alternate finance companies in North America to fund the subprime customers for a short term. In the year 2016, Virinchi Health care Private Limited was incorporated with 350 beds capacity at Hyderabad and current capacity at 700 beds, which is 100% subsidiary of Virinchi Limited. Virinchi Group (VG) is promoted by Mr. Vishwanath Kompella who has more than three decades of experience in IT and Healthcare Industry. The group has an established position in the IT industry of about three decades. VL’s revenues are 100 percent export-oriented catering to North America. Due to the group’s established track-record of operations and management experience, the group has booked the revenue of Rs.364.01 Cr in FY2022 as compared to Rs.354.01 Cr in FY2021. Acuité believes that VG shall continue to benefit from its long standing presence of more than three decades in the IT and Health care industry and its established position which is likely to result in steady stream of revenues for the company over the medium term. Moderate financial risk profile Virinchi Group’s financial risk profile is moderate, marked by moderate capital structure and debt protection metrics. Virinchi Group has healthy net worth at Rs.281.96 Cr as on March 31, 2022 as against Rs.292.78 Cr as on March 31, 2020. The reduction in net worth is due to the restatement of lease liability. Its gearing (debt-to-equity) and total outside liabilities to tangible net worth (TOL/TNW) were healthy marked by debt-to-equity of 0.62 times and 1.18 times, respectively, as on March 31, 2022 against 0.55 times and 1.06 times March 31, 2021. Debt protection metrics are comfortable, reflected in interest coverage (ICR) and net cash accrual to total debt ratio (NCA/TD) of 3.79 times and 0.36 times, respectively, in FY2021 against 3.14 times and 0.32 times for FY2021. Acuité believes that the financial risk profile of the group is expected to remain healthy backed by expected ramp-up in operations and moderate routine capital expenditure towards addition and replacement of equipment’s. |
| Weaknesses |
| Working capital intensive operations
The working capital management of the group remained moderate with high gross current asset (GCA) days at 183 days as on March 31, 2022 as against 178 days as on March 31, 2021. Inventory days stood at 20 days as on March 31, 2022 as against 17 days as on 31 March,2021. Subsequently, the payable period stood at 122 days as on March 31, 2022 as against 130 days as on March 31, 2021 respectively. The debtor day stood at 76 days as on March 31, 2022 as against 79 days as on March 31, 2021. Further, the average bank limit utilization in the last twelve months ended October 22 remained at 88.53 percent for fund based bank facilities. Acuité believes that the working capital operations of the company will remain at similar levels over the medium term owing to the nature of the industry. Highly competitive industry and stringent regulatory framework, reputational intensive healthcare sector IT industry is characterized by intense competition from large players enjoying benefits and higher bargaining power. The company also remains susceptible to industry-specific risks, such as exchange-rate fluctuations. However, the entrepreneurial experience is supporting its operating margins. Despite the increasing trend of privatization of healthcare sector in India, the group continues to operate under stringent regulatory control. Accordingly, regulatory challenges continue to pose a significant risk to private healthcare institutions, as they are highly susceptible to changes in regulatory framework. Healthcare is a highly sensitive sector, where any mishandling of a case or negligence on the part of any doctor and/or staff of the unit can lead to distrust among the masses. Thus, all the healthcare providers need to monitor each case diligently and maintain standard of services in order to avoid the occurrence of any unforeseen incident. They also need to maintain high vigilance to avoid any malpractice at any pocket. |
| Rating Sensitivities |
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| Material Covenants |
| None |
| Liquidity: Adequate |
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Virinchi Group has adequate liquidity marked by adequate net cash accruals (NCA) as compared to its maturing debt obligations. VG generated net cash accruals of Rs.62.17 Cr for FY2022 against repayment obligations of Rs.38.44 Cr over the same period. The net cash accruals are estimated to be around Rs.46.22 - 52.29 Cr during FY2022-24 against repayment obligations in the range of Rs.26.89 Cr to Rs.38.12 Cr. VG maintained cash and bank balances of Rs.36.60Cr as on March 31, 2022. The current ratio stood modest at 1.86 times as on March 31, 2022. The working capital limits of the company remained 88.53 percent utilized for the last twelve months ended October, 2022. Acuité believes that the group's liquidity is expected to remain adequate over the medium term.
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| Outlook: stable |
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Acuité believes that the company will maintain a ‘Stable’ outlook over the medium term on account of the extensive experience of the promoters and healthy financial risk profile. The outlook may be revised to ‘Positive’ if the company achieves substantial improvement in its working capital management and liquidity. Conversely, the outlook may be revised to 'Negative' in case of a steep decline in revenues and profitability or financial risk profile leading to deterioration in liquidity.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 364.01 | 354.01 |
| PAT | Rs. Cr. | 14.12 | 2.68 |
| PAT Margin | (%) | 3.88 | 0.76 |
| Total Debt/Tangible Net Worth | Times | 0.62 | 0.55 |
| PBDIT/Interest | Times | 3.79 | 3.14 |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| Any Other Information |
| None |
| Applicable Criteria |
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• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Complexity Level Of Financial Instruments: https://www.acuite.in/view-rating-criteria-55.htm • Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.htm • Service Sector: https://www.acuite.in/view-rating-criteria-50.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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