| Krsnaa Diagnostics Limited | ||||||
| Ratings Reaffirmed and Withdrawn | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its rating on the bank facilities of Krsnaa Diagnostics Limited (KDL) and subsequently withdrawn the rating at the company's request and on receipt of no-objection certificate from the lenders. The withdrawal is in line with CRISIL Ratings’ policy on withdrawal of bank loan ratings.
The ratings continue to reflect established market position of KDL in the healthcare public-private partnership (PPP) segment, the experience and established track record of promoters and robust financial risk profile. These strengths are partially offset by exposure to intense competition, tender-based nature of business and any sudden hike in cost, and large working capital requirement. |
Analytical Approach To arrive at its ratings, CRISIL Ratings has combined the business and financial risk profiles of KDL and its recently set up seven subsidiaries.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths:
The promoters have a decade of experience in the diagnostic services industry; their strong understanding of market dynamics and established track record and healthy relations with customers and suppliers will continue to support the business. The company has established itself as a leading diagnostics service provider in the PPP space. It expanded operations while successfully undertaking new projects. KDL has over 1,800 centres currently from about 50 centres in 2017. The strong market position is also corroborated by its presence across 14 states in India and regular addition of new projects. Further, the company derives its revenue from the PPP model, in both government and private sectors.
KDL’s hub in Pune, where all radiology scans are centrally reported, is one of its kind in India, and accredited by the National Accreditation Board for Hospitals and Healthcare Providers. Presence in the radiology and pathology segments and control over costs help maintain the operating margin at over 25%.
The financial risk profile has been strengthened with recent initial public offer (IPO) and equity receipt. KDL has substantially reduced its debt post IPO and currently has strong networth of over Rs 660 crores (as on December 31, 2021). Further, financial risk profile should remain supported by healthy cash flow and no additional large, debt funded capex planned for the near term.
Weaknesses:
As KDL derives nearly 70% of its revenue via tenders bagged from government departments, it remains susceptible to the quantum of orders floated by the government. Further, the company faces competition in the PPP set up from both established and regional players. For tenders/contracts with short tenure, there exists risk related to renewal of these contracts. Contracts of a longer tenor (7-10 years) usually have price escalation of 3-4% available after the initial few years. Hence, any sudden or sharp hike in cost associated with running of diagnostic centres would be passed on with certain lag, and the operating margin may be impacted.
The company derives a significant portion of its receivables from PPP in the government segment. Given the typical stretch in payments from government departments, receivables have been moderately high at 67-139 days for the past three fiscals. Though it improved to about 67 days in fiscal 2021, it was largely backed by the higher Covid-related business and timely cash inflow during the last quarter of the fiscal. |
Liquidity: Strong Liquidity is expected to remain ample during the near to medium term. Cash accrual is projected at more than Rs 100 crore over the medium, sufficient to meet the negligible yearly repayment obligation. Cash and cash equivalent were Rs 379 crore as on September 30, 2021. Though part of this surplus is to be utilised towards the ongoing capex of about Rs 150 crore, a substantial portion will be maintained in the near term. Any further large capex or a sizeable acquisition remains a key monitorable. |
Outlook: Positive KDL’s financial risk profile is expected to remain robust over the medium term, given its sizeable surplus cash and current net debt-free balance sheet. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company KDL, incorporated on 22nd December 2010, runs diagnostic centres that conduct all tests pertaining to radiology and pathology, across India through PPP and shop-in-shop model. Within a decade of operations, the company became a leading player in the PPP segment for diagnostics services in India. It operates both in private and government sectors through the PPP model. It is present across 14 states in India. On August 16, 2021, the company was listed on Bombay Stock Exchange and National Stock Exchange. Mr Rajendra Mutha and his family members are the promoters. |
Key Financial Indicators (Consolidated)*
*The financials for fiscal 2021 and fiscal 2020 shown above are as per Ind AS and the movement in fair value of Compulsory Convertible Preference shares (CCPS) had an impact on reported PAT.
In current fiscal 2022, KDL has reported total operating income of Rs. 347.2 crore and PAT of Rs. 50.72 crore in first nine months ended December 31, 2021. |
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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||
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Criteria Details
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