Rating Rationale
August 02, 2024 | Mumbai
Dr. Agarwals Eye Hospital Limited
Rating upgraded to 'CRISIL A+/Stable'
 
Rating Action
Total Bank Loan Facilities RatedRs.80 Crore
Long Term RatingCRISIL A+/Stable (Upgraded from 'CRISIL A/Positive')
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has upgraded its rating on the long term bank loan facilities of Dr. Agarwals Eye Hospital Limited (DAEHL; part of Dr. Agarwal’s Healthcare group) to 'CRISIL A+/Stable’ from 'CRISIL A/Positive’.

 

The rating action follows sustained improvement in the group’s business profile supported by a healthy growth in revenues with sustained profitability. Operating income grew 31% to ~Rs.1332 crores in fiscal 2024, driven by a 32% growth in the number of operational centers to 180 in fiscal 2024. Operating margins have remained stable in the last three fiscals ending 2024 at ~ 26-28 per cent. The group’s focus on continued expansion, strengthening brand equity, attracting, and retaining qualified doctors, will continue to benefit the growth and sustenance of profitability.

 

A healthy business performance also supports a strong financial risk profile. The group’s adjusted net worth stood at Rs. 1333 crores as of March 31, 2024 (Rs.1380 crores before adjusting for amortization of goodwill), with adjusted gearing (including lease liabilities) of 0.72 times. The OPBDIT (operating profit before depreciation, interest and taxes) coverage ratio also remained comfortable for fiscal 2024 at over 3.5 times.

 

The ratings reflect the strong operational, technical and management support that DAEHL receives from its parent, Dr. Agarwals Health Care Limited (DAHCL). The ratings reflect the established market position, strong brand recall in the eye care segment and its healthy financial risk profile. These strengths are partially offset by competition from other hospitals/standalone clinics and exposure to risks related to ramp up and stabilization of operations in newly added centers.

Analytical Approach

For arriving at DAEHL’s rating, CRISIL Ratings has applied its parent notch up framework for framework on notching up for ratings for support received from its parent, Dr. Agarwals Health Care Limited (DAHCL). For arriving at the ratings of Dr. Agarwals Eye Hospital Limited (DAEHL), CRISIL Ratings has combined the business and financial risk profiles of DAHCL, Dr. Agarwals Eye Hospital Limited (DAEHL), Orbit Healthcare Services (Mauritius) Limited (Orbit), Elisar Life Science Private Limited, and Aditya Jyot Eye Hospital Private Ltd. This is because all these entities, together referred to as the Dr. Agarwal’s Healthcare group, operate in the same industry and have operational and financial linkages. 

Key Rating Drivers & Detailed Description

Strengths:

  • Established marked position with a strong brand recall: DAHCL has a strong presence in the eye care industry and operates under the brand “Dr Agarwal’s Eye Hospital”. As of March 31, 2024, DACHL has 165 eye care facilities in India spanning across 15 states and union territories, and 15 facilities spread across nine countries in Africa. DAHCL provides a comprehensive range of eyecare services and products, covering cataract surgeries, refractive treatments; and other services, such as consultations, clinical investigations and non-surgical treatments; and optical and eyecare related pharmaceutical products. The group’s established market position and a strong brand recall in the market would continue to support its business risk profile.

 

  • Healthy financial risk profile: The group’s adjusted net worth to Rs. 1333 crores (after adjusting for amortization of goodwill) as of March 31, 2024. The gearing ratio is ~0.72 times as of March 31, 2024. Debt protection metrics are comfortable, with OPBDIT coverage of over 3.5 times for FY2024. Going forward, an increase in net worth and improvement in capital structure is expected with healthy accretion to reserves backed by improved profitability. Debt protection metrics are expected to remain comfortable over the medium term.

 

Weaknesses:

  • Competition from other hospitals and other standalone clinics: The Group faces competition from a large number of public facilities, private facilities, clinics and private practitioners located in the same geographic areas in which it operates.

 

  • Exposure to risks related to ramp up and stabilization of operations in newly added centers: The group is exposed to risks related to ramp up and stabilization of operations in its newly added centers. Any delay in the ramp-up and stabilization of operations in its new centers, can adversely impact the financial risk profile, particularly liquidity.

Liquidity: Strong

Bank limit utilization is low at 2 percent for the past twelve months ended June 2024. The group generated cash accruals of over Rs.260 crores in fiscal 2024 and its future cash accruals would be sufficient against term debt obligations over the medium term. As of March 2024, the group had cash and cash equivalents of around Rs. 112 crores. The current ratio is healthy at around 2 times on March 31, 2024.

Outlook: Stable

CRISIL Ratings believes the group will continue to benefit from a strong market position and healthy brand recall over the medium term.

Rating Sensitivity factors

Upward factors

  • Significant revenue growth while maintaining operating profitability above 23%, thereby benefiting cash generation.
  • Maintenance of strong financial risk profile, including sustenance of gross debt (including lease liabilities) to Ebitda ratio.

 

Downward factors

  • Significant decline in revenue growth rate or operating margin falling below 18% owing to delay in ramp up of centres.
  • Debt funded capex or acquisitions resulting in weakening of financial risk profile.

About the Group

Incorporated in 2010, DAHCL provides a comprehensive range of eyecare services, including covering cataract, refractive and other surgeries; consultations, diagnosis and non-surgical treatments; and sell optical and eyecare related pharmaceutical products. The group has a network of 180 facilities, as of March 31, 2024. The group commenced international operations in 2012 and as of March 31, 2024, operates 15 facilities across nine countries in Africa.

 

The group is led by Chairman, Dr. Amar Agarwal, who has more than 35 years of clinical experience in the eyecare services industry, and an experienced management team comprising of Dr. Adil Agarwal - Chief Executive Officer, Dr. Anosh Agarwal - Chief Operating Officer, Dr Ashvin Agarwal – Chief Clinical Officer and Dr Ashar Agarwal - Chief Business Officer.

 

Incorporated in 1994, DAEHL is engaged in the business of providing eye care and related business, majorly in Tamil Nadu. DAEHL is listed on BSE Limited. DAHCL holds 71.90 percent of the shareholding in DAEHL as of June 2024.

 

Orbit was acquired by DAHCL in fiscal 2017 and is engaged in providing eye care related services through hospitals located in Southeast Asia and Africa.

 

In 2021, DAHCL acquired Aditya Jyot Eye Hospital Private Ltd and currently have 75.50 percent ownership in the company.

Key Financial Indicators: DAHCL Consolidated Financials:

As on / for the period ended March 31

 

2024*

2023

Operating income

Rs crore

1,332.15

1017.98

Reported profit after tax**

Rs crore

95.05

103.23

PAT margins

%

7.14

10.14

Adjusted Debt/Adjusted Net worth***

Times

0.74

1.27

*Provisional financial representing unaudited financial information for the year ending March 2024

** CRISIL Ratings-adjusted numbers after amortization of goodwill is Rs. 48.85 crore.

*** CRISIL Ratings-adjusted numbers. Net worth has been adjusted for intangible assets such as goodwill.

 

DAEHL Financials:

As on / for the period ended March 31

 

2024

2023

Operating income

Rs crore

319.30

268.10

Reported profit after tax

Rs crore

46.36

36.92

PAT margins

%

4.52

13.77

Adjusted Debt/Adjusted Net worth

Times

1.71

2.07

Interest coverage

Times

11.27

9.52

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of Instrument Date of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs Cr) Complexity Levels Rating Assigned with Outlook
NA Cash Credit NA NA NA 4 NA CRISIL A+/Stable
NA Long Term Loan NA NA Mar-2029 60 NA CRISIL A+/Stable
NA Term Loan NA NA Mar-2029 16 NA CRISIL A+/Stable
Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 80.0 CRISIL A+/Stable   -- 28-08-23 CRISIL A/Positive 10-10-22 CRISIL A-/Positive 03-09-21 CRISIL A-/Stable CRISIL A-/Stable
      --   -- 02-03-23 CRISIL A/Stable 07-07-22 CRISIL A-/Stable   -- --
      --   --   -- 19-05-22 CRISIL A-/Stable   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 4 Axis Bank Limited CRISIL A+/Stable
Long Term Loan 29 Axis Bank Limited CRISIL A+/Stable
Long Term Loan 31 Axis Bank Limited CRISIL A+/Stable
Term Loan 16 Axis Bank Limited CRISIL A+/Stable
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support
CRISILs Criteria for rating short term debt

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