­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 600 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.  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:
Financial risk profile of the group is marked by healthy net worth, moderate gearing and debt protection metrics. The group’s net worth stood at Rs. 255.68 Cr. as on March 31, 2024 as compared to Rs. 234.85 Cr. as on March 31, 2023. Improvement in net worth is on account of ESOPs issued during the year and accretion for profits to reserves. Virinchi group’s capital structure marked by moderately high gearing and total outside liabilities to total net worth (TOL/TNW) of 1.29 times and 1.55 times respectively as on March 31, 2024 as against 1.35 times and 1.62 times as on March 31, 2023. The coverage indicators were moderate with DSCR of 1.50 times as on March 31, 2024 as against 1.64 times as on March 31, 2023. Interest coverage stood at 2.63 times as on March 31, 2024 as against 3.27 times as on March 31, 2023. Debt to EBITDA is continued to remain moderate at 2.89 times as of March 31, 2024 compared to 2.87 times during previous year. Acuite believes that the financial risk profile of the company will remain moderate for the medium term as well on account of healthy net worth position.

Continuous decline in operating revenue albeit marginal recovery in 9MFY2025:
The Virinchi group’s revenue declined by 4 percent to Rs.300.03 Cr. in FY2024, compared to Rs.311.94 Cr. in FY2023 and Rs.364.01 Cr. in FY2022. This decline is primarily due to lower revenue reported in healthcare segment, which saw a 9 percent decrease in FY2024 to approximately Rs.118 Cr, down from Rs.130 Cr. in FY2023. The decline in revenue is attributed to lower IP flow post Covid period followed by departure of few specialized doctors during last 2 years. However, the group registered a 3 percent revenue growth in 9MFY2025, reaching Rs.232.18 Cr. compared to Rs. 225.35 Cr. in 9MFY2024. Despite the overall growth, the health care segment reported a 10 percent decline in revenue during the same period due to lower in patient counts. Acuite expects the operating revenue of the group to improve in the medium term on account of the expansion plans in healthcare segment.

Intensive working capital operations:
The working capital operations of the group are intensive which is evident from the Gross Current Assets (GCA) of 224 days in FY2024.  The elongated GCA days are primarily on account of elongated debtor days at 90 days. Receivable period in healthcare segment is generally stretched as the recovery from general insurance, ESI and government’s Arogya Shree schemes takes 3-4 months to recover. However, debtors in I.T business will be recovered in 30- 45 days. Acuite believes that working capital operations of the group will remain intensive over the medium term as the nature of its operations.

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. Further, 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.