| Regency Hospital Limited | ||||||
| Ratings upgraded to 'CRISIL BBB+/Positive/CRISIL A2' | ||||||
| Rating Action | ||||||
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| 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 ratings on the bank facilities of Regency Hospital Ltd (RHL) to ‘CRISIL BBB+/Positive/CRISIL A2’ from ‘CRISIL BBB/Stable/CRISIL A3+’.
The upgrade and the positive outlook reflects continued expected improvement in the credit profile of the company over the medium term. Company’s business risk profile has improved driven by increasing revenue and sustenance of improved operating margin. The company has already achieved revenue of Rs.362 crore during the nine months ended December 31, 2023 owing to sustenance of improved occupancy at ~69% in the first 9 months of fiscal 2024. As a result of this, the company is expected to achieve revenue of more than Rs. 481 crore in fiscal 2024 supported by average revenue of Rs.40 cr. per month. RHL is expected to witness healthy growth in revenue aided by its diversified presence in various specialties with experienced consultants and quality of healthcare provided. Company further plans to add two hospitals over next one year and a third hospital over next 2-3 years which will further support the company’s revenue growth and business risk profile. Also, RHL’s revenue improved to Rs. 425 crores in fiscal 2023 from Rs. 365 cores in fiscal 2022 and the same was also higher than CRISIL Ratings’ previous expectations. The growth in revenue is supported by the increase in the occupancy levels from 55% in FY22 to more than ~64% in FY23. The ARPOB of the hospital has been consistently increasing owing to increase in the number of surgeries and in-patients.
Operating margins of the company have remained stable at around 20% in last 2 fiscals ending FY23; the operating margin is expected to remain at similar level of ~20% in FY24. The operating margin has improved from historical levels owing to the healthy occupancy levels across all the hospitals and also due to increasing patients for Oncology treatment which has higher margins. Further, with additional capex and diversification of locations, and resultant operating efficiencies, continued growth in revenue backed by improved occupancy along with sustenance of improved operating margin is expected. The operating margins are expected to remain comfortable in the range of 17-18% over the medium term backed by consistent improvement in the occupancy levels and increasing scale, and the same will remain a key rating sensitivity amid the timely completion of on-going capital expenditure and stabilization of operations in the new hospitals.
Also, improvement in the business risk profile has consequently resulted in improvement in the financial risk profile. Networth improved to Rs.204 crore as on March 31, 2023 (Rs 174 crore as on March 31, 2022) which is expected to further improve to over Rs.384 crore with gearing level below 1.0 times as on March 31, 2024. The improvement in networth is on account of healthy profitability along with capital infusion of Rs. 150 crore by Private Equity (PE) investor, Norwest Capital LLC.
The rating reflects the company’s established position as a healthcare provider and its healthy financial risk profile. These strengths are partially offset by risks related to timely commencement of operations at the new hospitals and high geographical concentration in revenue and regulatory risk. |
Key Rating Drivers & Detailed Description Strengths:
Weaknesses:
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Liquidity: Adequate Bank limit utilization is low at around 54 percent for the past twelve months ending December 2023. Cash accruals are expected to be over Rs.55-65 crore which are sufficient against term debt obligation of Rs. 25-30 crore over the medium term. In addition, it will act as a cushion to the liquidity of the company.
The current ratio is low at 0.93 times on March 31, 2023. Moderate cash and bank balance of around Rs. 40.55 crore as on March 31, 2023. |
Outlook: Positive CRISIL Ratings believes the business risk profile will continue to improve with the sustenance of improved operating margin backed by increase in occupancy level and revenue growth. |
Rating Sensitivity factors Upward factors:
Downward factors:
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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 eight operation theatres at its multi-specialty hospital in Sarvodaya Nagar in Kanpur (including Tower-1 and Tower-2), two at its Renal Scinces centre in Swaroop Nagar in Kanpur and two at the South Kanpur hospital. RHL also operates a city clinic in Parade in Kanpur. Its super-speciality hospital in Lucknow started operations in April 2020. |
Key Financial Indicators
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Status of non cooperation with previous CRA: RHL has not cooperated with India Ratings which has classified it as issuer not cooperative vide its release dated May 09, 2017. The reason provided by India Ratings is non-furnishing of information for rating. |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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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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