Key rating drivers and detailed description

Strengths:

Established position as a healthcare provider: 

RHL is an established healthcare provider, with a track record of over 25 years in Kanpur. The flagship multi-specialty hospital at Sarvodaya Nagar has 271 beds, with high occupancy of 75% in fiscal 2022. RHL enjoys strong brand equity in Kanpur and adjoining areas, as it is the only tertiary care provider in the region. Benefitting from healthy brand equity, the company has grown at CAGR of 20% in the five fiscals through 2022. Revenue is expected to be around Rs 400 crore in fiscal 2023 on account of stabilisation of the Lucknow unit and healthy occupancy in existing hospitals.

Adequate financial risk profile: 

The financial risk profile is supported by healthy networth of Rs 172.8 crore and moderate gearing of 1.53 times as on March 31, 2022. The capital structure is expected to improve with gearing likely below 1 time on account of capital infusion from venture capital. This will be a key monitorable in the near term. The debt protection metrics were adequate with interest coverage ratio above 3 times and net cash accrual to adjusted debt ratio above 0.20 time in fiscal 2022. Despite large capex, the debt protection metrics are expected to remain comfortable in the near term.

Weaknesses:

Risks related to timely commercialization of new hospitals:

RHL undertook several greenfield expansion projects in the past five years, with one facility becoming operational each year between fiscals 2017 and 2021. The company further plans to open two new units in the next 3-4 years in Uttar Pradesh. CRISIL Ratings will continue to monitor the progress of these projects and their timely completion, as well as any cost over-run in capex and its impact on the company’s capital structure and debt protection metrics.

Geographical concentration in revenue: 

Majority of the healthcare facilities of RHL are in Kanpur. Though these hospitals do cater to patients from adjoining areas in Uttar Pradesh, dependence on local patients remains high. Though the company has started a super specialty hospital in Lucknow in July 2020, the majority of its revenue currently comes from the Kanpur units. The company plans to diversify its presence further, which will be a key monitorable.

About the company

RHL was incorporated in 1987 by Dr Atul Kapoor and his wife, Dr Rashmi Kapoor. The company has multiple healthcare centres and hospitals in Kanpur. It has six operation theatres at its multi-specialty hospital, three at its renal care centre, and three at the South Kanpur hospital. RHL also operates a city clinic and a cancer and gastro care centre, which commenced operations in January 2017. Its super-speciality hospital in Lucknow started operations in July 2020.

Key financial indicators

Annexure - Details of instrument(s)

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