ICRA Assigns B+ Rating to Park Health Systems Private Limited's Debt Instruments

Park Health Systems Private Limited's (PHSPL) 130-bed hospital in Somajiguda, Hyderabad faces challenges in maintaining profitability due to high competition and revenue concentration risk. The hospital has shown some improvement in occupancy levels, revenue growth, and patient footfall. However, its leveraged capital structure and weak liquidity position pose significant risks. ICRA has assigned a long-term rating of B+ to PHSPL's debt instruments, citing concerns about the hospital's ability to service its debts.

Key Takeaways:

• ICRA has assigned a long-term rating of B+ to PHSPL's term loans, cash credit limits, and unallocated limits of Rs 7.36 crore, Rs 2.50 crore, and Rs 0.14 crore, respectively.
• The assigned rating is constrained by the hospital's small scale of operations, high competition, revenue concentration risk, leveraged capital structure, and weak liquidity position.
• Despite concerns, the rating positively factors in the steady increase in hospital revenues, experienced and reputed team of doctors, and central location of the hospital, which ensures good patient footfall.
• Maintaining healthy bed occupancy levels and timely receipt of payments, particularly from ESI and central government entities, will remain key rating sensitivities from a credit perspective.

Statistics:

• PHSPL reported an operating income of Rs 33.10 crore and net profit of Rs 2.32 crore (provisional and unaudited) in FY15.
• The hospital's occupancy levels increased from 30% in FY11 to 75% in FY15, resulting in revenue growth.
• PHSPL has a gearing of 2.19 times as on March 31, 2015, indicating a leveraged capital structure.

Sources:

• ICRA Limited. (July 6, 2015). Park Health Systems Private Limited.
• ICRA Limited. (2015). Rating Methodology for Hospital Sector.
• Park Health Systems Private Limited. (2015). Annual Report.