02/1172023, 10:18 Rating Rationale CRISIL Ratings Rating Rationale ‘August 01, 2022 | Mumbai Sahyadri Hospitals Private Limited Ratings reaffirmed at 'CRISIL A-/Stable/CRISIL A2+' Rating Action Total Bank Loan Facilities Rated Rs. 100 Crore Long Term Rating GRISIL A/Stable (Reaffirmed) Short Term Rating CRISIL A2+ (Reaffirmed) Neto: None of he Directors on GRISIL Range Lnfeds Board are momar atng commas ad thus do ot pariipateh dseusson o asian! oT ay ‘ating. Tho Board of Decors alsa dos na siscuss any range ats mooting® Perore = 10 mallon, Refer to Annet for Deals of struments & Bank Facies ied Rational CRISIL Ratings has reaffirmed its ‘CRISIL A-/Stable/CRISIL A2+’ ratings on the bank facilities of Sahyadri Hospitals Private Limited (SHPL; part of Sahyadri group). Group's operating performance has improved in fiscal 2022 reflected in estimated revenue and operating margin of over Rs. 750 crore and 24% respectively vis-8-vis Rs.570 crore and 22% in previous fiscal. Benefit of covid hospitalization atthe start of fiscal, pick up in non-covid treatments and regular surgeries, higher realization per occupied beds and steady occupancy had led'to improved performance during the year. With sizable addition of new capacity (primarily for private/ICU beds) in coming fiscals and group's established regional market position, the business risk profile should continue to bolster over medium term. ‘The financial risk profile continues to remain healthy despite ongoing debt funded capex majorly aided by healthy accretion to reserves and reducing debt. The company had received the funding of Rs. 140 crores from Everstone Group in recent fiscals which was used to prepay some of the debt and fund the capex. Liquidity of the company continues to remain healthy supported by healthy accruals, negligible utlization of working capital bank lines and healthy cash and cash ‘equivalents, ‘The ratings continue to reflect SHPL's extensive industry experience of the promoters and establish market position, cfficient working capital cycle and healthy financial profile, These strengths are partially offset by its exposure to intense ‘competition and regulatory risks, geographic concentration in revenue and ongoing large capex. Analytical Approach GRISIL Ratings has combined the business and financial risk profiles of SHPL and with its wholly owned subsidiaries 1.¢. Sahyadri Karad Hospitals Pvt Ltd and Surya Hospitals Pvt Lid, these have synergistic businesses and are operated by the same promoters and management, Please refer Annexure - List of Entiles Consolidated, which ceptures the ist of entities considered and their analytical treatment of consolidation. Key Rating Drivers & Detailed Desc Strengths: + Establish regional market position: SHPL, along with its subsidiaries, operates eight hospitals in Maharashtra: six in Pune and one each in Nashik and Karad. Healthy infrastructure and the established ‘Sahyadri ‘brand developed under the aegis of an experienced management team have helped the group establish a sound market position in Maharashtra ‘The Sahyadri group's operating performance has been improving, as reflected in compound annual growth rate of around 16% in revenue in the five years through fiscal 2022 and improved operating margin backed by ramp-up in operations and better ARPOB (Average Revenue Per Occupied Bed). The operating performance is likely to improve further over medium term as well aided by addition of new capacity and group's established market position in the region hitos wwe comimotiwinshare/RatingsRatingLstRatingDocs/SahyadtospalsPrivateLimited_ August 01, 2022_RR_284865.himl w02/1172023, 10:18 Rating Rationale + Efficient working capital cycle: The group has an efficient working capital cycle given the limited share of government and insurance business. The controlled working capital cycle is reflected in gross current assets of less than 50 days (excluding cash and equivalent) with receivables of less than 25 days in the past five years, + Healthy financial profile: The group capital structure has been at healthy level due to lower reliance on extemal funds yielding gearing of 0,23 times and low total outside liabilities to adjusted tangible networth (TOL/ANW) of 1,06 times for year ending on 31st March 2022. The debt protection measures have also been at healthy level due to low leverage and healthy profitability. The interest coverage and net cash accrual to total debt (NCATD) ratio are at 6.19 times and 1.41 times for fiscal 2022. The group plans large capex of over Rs. 100 crores annually over the medium term, Its reliance on debt, however, is expected to remain limited given its strong operating cash flow and surplus liquidity Weaknesses: + Exposure to intense competition and regulatory risk: The hospitals under the group are exposed to competition from various large hospital chains in the regions it operates in. the group remains exposed to regulatory risk faced by the healthcare industry. Government policy on capping of prices for medical procedures and devices may impact profitability as seen in the past. * Geographic concentration in revenue: Operations are localized with major revenue coming primarily from Pune region. This renders entities in the segment to susceptible to dynamics of a single market. The hospital is also vulnerable to entry of other big players in its region. + Exposure to risks associated with planned capex: SHPL has just completed renovation and construction of two additional floors at its flagship hospital at Deccan Gymkhana, Pune, where in it has added around 66 beds. The group has also completed capex at Nagar Road adding about 70 beds. The group is adding over 100 beds at its Hadapsar hospital and plans to construct a new hospital building at Deccan Gymkhana for which land plots are being acquired and construction shall commence in due course. The large capex though primarily be funded by operating cash flaws and surplus liquidity, the successful completion of the capex within the defined timelines and stabilisation and quick ramp-up of operations from the new capacity remain critical for maintaining the operating performance. Liquidity: Strong Bank limit utlization remained minimal at around 2 percent for the past twelve months ended March 2022. Cash accrual are expected to be over Rs 100 crores which are sufficient against term debt obligation of Rs 12-20 crores over the medium term. In addition, cash and cash equivalents of more than Rs. 140 crores wil continue to cushion the liquidity amidst ongoing capex. During fiscal 2022, the group has prepaid the debt of over Rs. 60 crore. Current ratio was quite adequate at 1.40 times on March 31, 2024 look: Stabl CRISIL Ratings believe the group will continue to benefit from its established presence in the region and healthy financial risk profile Rating Sensitivity factors, Upward factors + Sustained improvement in operating income by over 20% and maintenance of healthy operating margin, leading to sizable cash accruals + Sustained financial risk profile and maintenance of surplus liquidity Downward factors + Decline in net cash accruals to below Rs 60 crore on account of decline in revenue or severe dip in operating profitability margin + Larger than expected debt funded capex or acquisition thus weakening its liquidity & financial profile. About the Company SHPL (formerly known as Sahyadri Hospitals Ltd) was incorporated in 1996. It operates eight hospitals with over 845 beds ‘across Maharashtra along with its subsidiaries. It owns three of the hospitals and has long-term leases on four, while the flagship hospital at Deccan Gymkhana is under an operator arrangement with a hospital trust. SHPL was promoted by Dr Charudutt Apte and his business acquaintances. Currently Private equity fim Everstone Group holds controlling stake (86.55%) in SHPL. Key Financial Indicators (Consolidated): ‘As on /for the period ended March 31 2021 2020 ‘Operating income. Rs crore 569.89 460.27 Reported profit affer tax Rs crore, 24.66 731 PAT margins % 4.33 1.59 ‘Adjusted DebtAdjusted Net worth Times 0.58 0.68 hitos wwe comimotiwinshare/RatingsRatingLstRatingDocs/SahyadtospalsPrivateLimited_ August 01, 2022_RR_284865.himl ar02/1172023, 10:18 Rating Rationale [nterest coverage Status of non coopera n with pros vious CRA: Times L358 L320] SHPL has not cooperated with India Ratings And Research Private Limited which classified it as not-cooperative vide a release dated May 12, 2022. The reason provided is non-furnishing of information for monitoring the rating, Any othe 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 wwww.crsilratings.com, Users may also call the Customer Service Helpdesk with queries on specific instruments, Annexure - Details of Instrument(s) Tate hace ctincwament | Bate of] Coupan | watarify | faue size | Complonfy] Rating assigned allotment_| rate (%) date (Rs crore) level with outlook TA Cash Grad NR [NA NR [ts | "Na CRISTLASB WatKat of ea WA—[ Na] NA} 3 | na oC Wa —Overfa aet WA [Na] NA} 18 | Na | wa | Proposed FuncBased Bark] wn [na | wa | 2 wa) ORISILALStabe WA Term Lan wR ne aca} 0 wR —FoRISILATSae jes consolidated Annexure - List of er Names of Entities Consolidated _| Extent of Consolidation Rationale for Consolidation Sahyadri Karad Hospitals Pvt Ltd Full ‘Sahyadri Karad Hospitals Pvt Ltd and Surya Surya Hospitals Pu Ltd Fal Hospitals Pvt Lid are subsidiaries of SHPL. All the ‘Companies have the same promoters and Sahyadri Hospitals Pvt Lid Full significant business synergy. Annexure - Rating History for last 3 Years cuent 2022 ton) aoa 220 19 Suatot Instrument Type | OMSIANES Rating Date |Rating —_Dnln_—~Rtng_—«Daty_ |Rating _—Date—Ratng Rating crit casi Facilites Uist 985 cRISIL > 180821 rts - - - sate stale Nonund Bases Ist 5 ‘cist Facilities: s os Aas ~ 80621 Re > > > ‘Al amounts arn 8. cr Annexure - Details of Bank Lenders & Facilities Facility “Amount (Rs,Grore) Name of Lender Rating Gash Credit 10 HDFC Bank Limited GRISIL Stable ‘Cash Credit 3 Union Bank of india CRISIL AJStable Letter of Credit 05 Union Bank of India CRISILAZ+ Overdraft Facility 45 HDFC Bank Limited CRISIL AZ+ Proposed Fund-Based Bank Limits 23 Not Applicable GRISIL Stable Term Loan 60 HDFC Bank Limited GRISILAJStable This Annexure has been updated on 04-Apr-2023 in line with the lender-wise facility details as on 03-Apr-2023 received from the rated entity Criteria Details Links to related criteria CRISILs Approach to Financial Ratios hitos wwe comimotiwinghare/RatingsRatingLstRatingDocs/SahyadtospalsPrivateLimited_ August 01, 2022_RR_294865.himl02/1172023, 10:18 Rating Rationale Media Relations ‘Aveek Datta Media Relations GRISIL Limited M: +91 99204 93912 B: +91 22 3342 3000 AVEEK,DATTA@crisi com Prakruti Jani Media Relations RISIL Limited M: +91 98678 68976 B: +91 22 3342 3000 PRAKRUTLJANI@erisi com Rutuja Gaikwad Modia Relations CRISIL Limited B:+91 22 3342 3000 Rutuja.Galkwad@ext-crisiLcom Analytical Contacts Rahul Subrato Kumar Guha Director GRISIL Ratings Limited D:+81 22 4097 8320 tahulguha@eriil com Shirish A Mujumdar Associate Director CRISIL Ratings Limited D:+91 20 4018 1934 shitish mujumdar@eriileom ‘Shraddhash Shah Rating Analyst CGRISIL Ratings Limited D:+91 22 4040 8571 ‘Shradghesh Shah@crsileom Customer Service Helpdesk Timings: 10.00 am to 7.00 pm Toll fee Number: 1800 267 1301 For a copy of Rationales / Rating Reports: RIS catingdesk@crsi.com For Analytical queries: ratingsinvestordesk@ersilcom hitos wwe comimotiwinshare/RatingsRatingLstRatingDocs/SahyadtospalsPrivateLimited_ August 01, 2022_RR_284865.himl an02/1172028, 10:19 Rating Rationale ntps:www crs. comimnUwinshareRatings/RatngListRatingDocs/SahyadhiMosptasPrivateLmited_August 01, 2022_RR_294965 hil oT02/1172023, 10:18 Rating Rationale Note for Madi Ths rang valonae is transmitted to you fr te gle purpose of caseminaton through your newspaperimagazinelagency. 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