| Yatharth Hospital And Trauma Care Services Limited | ||||
| Rating outlook revised to 'Negative'; Rating reaffirmed | ||||
| 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 revised its rating outlook on the long-term bank facilities of Yatharth Hospital And Trauma Care Services Limited (Yatharth Hospital; part of the Yatharth group) to ‘Negative’ from ‘Stable’, while reaffirming the rating at ‘CRISIL BBB’.
The outlook revision reflects high bank limit utilization of over 95% in the six months (over 100% in some) through December 2022. Though, the same has moderated to below 60% in last 3 months ending Mar-2023 on account of better recovery from government debtors like ECHS/CGHS however, sustainability of the same and cushion in bank lines shall remain a key monitorable. There are no enhancement plans in near term which constrains the cushion to liquidity. Additional support to the new hospital, RamRaja may put further pressure on liquidity of the group which shall remain a key monitorable.
The rating factors in the improvement in the business risk profile supported by compound annual growth rate (CAGR) of 55% in the three fiscals through 2023. Revenue of the group is estimated at Rs 520-525 crore in fiscal 2023, as against Rs 400 crore in fiscal 2022. The group has added new hospitals over the years which has enabled continued healthy growth. Stabilization of the recently acquired hospital, RamRaja Multispecialty Hospital & Trauma Centre Pvt Ltd (RamRaja), which operationalized in April 2022, with healthy occupancy remains critical and is a key monitorable. Operating margin is expected at more than 22% over the medium term.
The financial risk profile of the group was above-average, as indicated by estimated networth of over Rs 155 crore and gearing of 1.5 times as on March 31, 2023 (Rs 77 crore and 3.35 times, respectively, as on March 31, 2022). Debt protection metrics were adequate, as reflected in interest coverage and net cash accrual to adjusted debt ratios of more than 5 times and around 0.35 time, respectively, in fiscal 2023.
The rating continues to reflect the extensive experience of the promoter in the healthcare industry, diversified service offerings and healthy operating profitability of the group. These strengths are partially offset by geographic concentration in revenue, exposure to intense competition and large working capital requirement. |
Analytical approach CRISIL Ratings has combined the business and financial risk profiles of Yatharth Hospital and its 100% subsidiaries, AKS Medical and Research Centre Pvt Ltd (AKS) and RamRaja Multispecialty Hospital & Trauma Centre Pvt Ltd, collectively referred to as the Yatharth group. This is because the companies have significant operational, financial, and managerial integration and operate under a common brand.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key rating drivers and detailed description Strengths Extensive experience of the promoters The two-decade-long experience of the promoters in the healthcare industry, their strong understanding of market dynamics and healthy business relationships in the region will continue to support the business. The group has been offering multispecialty primary healthcare services since 2010 and has expanded its presence with four hospitals and 1,405 beds. Occupancy has remained healthy around 70% in Yatharth Hospital and has been increasing year-on-year on account of improving brand visibility. The business acumen of the promoters enabled increase in consolidated revenue to Rs 520-525 crore in fiscal 2023 (Yatharth Hospital contributing around 75%) from Rs 400 crore in fiscal 2022.
Diversified service offerings The group offers a wide range of medical services under Yatharth Hospital, including medical oncology, surgical oncology, interventional cardiology, cardio thoracic and vascular surgery, urology and nephrology, orthopedics, neurology, and gastroenterology. It has further diversified its service offerings with introduction of medical services such as radiation oncology, human organ transplant, robotics surgery and medical tourism in Yatharth Hospital and RamRaja from fiscal 2023, which will support the business over the medium term.
Healthy operating profitability Operating profitability of the group was moderate above 25% in the three fiscals through 2023 on account of healthy occupancy of 70% in Yatharth Hospital and around 30% in the newer hospital, AKS. As fiscal 2023 was RamRaja’ s first year of operations, the hospital is expected to incur earnings before interest, tax, depreciation and amortization (Ebitda) losses for the next two years. However, the operating margin of the group is expected to remain comfortable above 22% in the near term.
Weaknesses Large working capital requirement Gross current assets (GCAs) have increased to an estimated 95 days as on March 31, 2023, from 65 days as on March 31, 2021, owing to increased debtor days. Receivables are usually large because of the revenue composition, as TPA and Ex-Servicemen Contributory Health Scheme (ECHS) / Central Government Health Scheme (CGHS) contribute to around 65% of receivables and pay in 3-4 months. Consequently, the group’s reliance on external debt has increased, leading to full bank limit utilization in the six months through December 2022.
Geographic concentration in revenue and exposure to intense competition and regulatory changes Operations are localized in north India, compared with corporate hospitals which have presence across India. All three hospitals of the group are in Noida, rendering the group susceptible to the dynamics of a market. Also, the group is exposed to competition as the healthcare industry in Delhi-NCR is highly competitive. However, entering Jhansi with the newly acquired hospital will diversify geographic concentration in revenue to some extent. Furthermore, the healthcare industry is susceptible to government guidelines related to medical practices, such as disposal of solid waste and timely renewal of approvals, licenses and permits. Increase in compliance cost or regulatory changes may adversely affect the business over the medium term. |
Liquidity: Stretched Bank limit utilization has been over 95% in last 6 months ending Dec-22 (over 100% in some of the months as well). Though, the same has moderated to below 60% in last 3 months ending Mar-2023 on account of better recovery from government debtors like ECHS/CGHS however, sustainability of the cushion in bank lines shall remain a key monitorable. There are no enhancement plans in near term which constrains the cushion to liquidity. Net cash accrual of the group is expected at Rs. 85-90 crore against repayment obligations of Rs. 35 crore in fiscal 2023 and accruals of Rs. 95-120 crore are expected against repayment obligations of Rs. 35-40 crore per annum in near term. Current ratio of the group was modest at 1.13 times on 31-Mar-2022 and is expected at similar level in fiscal 2023 as well. |
Outlook: Negative CRISIL Ratings believes the liquidity of the group will remain constrained on account of high bank limit utilization. |
Rating sensitivity factors Upward factors
Downward factors
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About the group Incorporated in 2008, Yatharth Hospital operates hospitals in Greater Noida (operations began in 2010; 400-bed capacity) and Noida (operations began in 2013; 250-bed capacity). The company holds 100% stake in AKS and RamRaja. It is promoted by Dr Ajay Tyagi and Dr Kapil Tyagi.
Incorporated in 2009, AKS operates a 450-bed multispecialty hospital in Noida Extension. The company is a wholly owned subsidiary of Yatharth Hospital. It began operations in May 2019.
Incorporated in 2012, RamRaja operates a 305-bed hospital in Jhansi and was acquired by Yatharth Hospital in fiscal 2022. Operations commenced from April 2022.
All the hospitals (two under Yatharth Hospital, one under AKS and one under RamRaja) operate under the brand Yatharth Hospitals. |
Key financial indicators (consolidated)
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
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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This Annexure has been updated on 11-Apr-2023 in line with the lender-wise facility details as on 04-Aug-2021 received from the rated entity
Criteria Details
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