Rationale-Press Release
Katihar Medical College February 25, 2021 Ratings Amount Facilities/Instruments Ratings Rating Action (Rs. crore) Rating continues to remain CARE BB; Stable; under ISSUER NOT ISSUER NOT COOPERATING* Long Term Bank Facilities 22.00 COOPERATING category and (Double B; Outlook: Stable Revised from CARE BB+; Stable; ISSUER NOT COOPERATING*) (Double B Plus; Outlook: Stable) 22.00 Total Bank Facilities (Rs. Twenty-Two Crore Only) Details of facilities in Annexure-1 Detailed Rationale & Key Rating Drivers CARE has been seeking information from Katihar Medical College (KMC) to monitor the rating vide e-mail communications/letters dated January 04, 2021, January 07, 2021 and January 12, 2021 and numerous phone calls. However, despite our repeated requests, the entity has not provided the requisite information for monitoring the ratings. In line with the extant SEBI guidelines, CARE has reviewed the rating on the basis of the publicly available information which however, in CARE’s opinion is not sufficient to arrive at a fair rating. Further, Katihar Medical College has not paid the surveillance fees for the rating exercise as agreed to in its Rating Agreement. The rating on KMC’s bank facilities will now be denoted as CARE BB; Stable; ISSUER NOT COOPERATING*. Further due diligence with the banker and auditor could not be conducted. Users of this rating (including investors, lenders and the public at large) are hence requested to exercise caution while using the above ratings. The rating has been revised by on account non-availability of information due to non-cooperation by KMC with CARE’s efforts to undertake a review of the rating outstanding. Detailed description of the key rating drivers At the time of last rating in December 30, 2019 the following were the rating strengths and weaknesses: Key Rating Weaknesses: Moderate size of operation: The total operating income (TOI) of the entity has witnessed a growth of 13.43% in FY18 (refers to the period April 1 to March 31). The growth is primarily attributable to increased collection from students including hostel income (Rs.73.46 crore in FY18 as against Rs.65.58 crore in FY17) along with increased receipts from hospital (Rs.3.40 crore in FY18 as against Rs.2.88 crore in FY17). Seats at the medical college have been fully occupied in the last three years on the back of demand for medical education in the area. Furthermore, the overall occupancy rate of the hospital has also remained satisfactory at 90% during FY18. The absolute profit levels of the entity remained moderate over the past years with continuous improvement. Gross Cash Accruals of the entity improved to Rs.33.05 crore in FY18 as against Rs.31.99 crore in FY17. Although the total operating income & net surplus have improved to Rs.79.41 crore & Rs.24.05 crore in FY18 from Rs.70.01 crore & Rs.23.42 crore respectively in FY17, the overall scale of operations still remains on the moderate side. Continued deployment in fixed assets: Being a trust of charitable nature, there is a requirement to deploy 85% of the income towards the objects of the trust. Hence, there is continuous deployment of capital in fixed assets. The trust is carrying out building construction (Emergency, Casualty, Radiology block and biochemistry block) with an estimated cost of Rs.78.00 crore which is to be funded by term loan of Rs.15.0 crore, corpus fund of Rs.15.96 crore and balance of Rs.47.04 crore from internal accruals and the same is expected to be completed by March 2019. The financial closure for the same has been achieved and the trust has already spent Rs.45.00 crore on the aforesaid project till August 31, 2018. Challenges involved in attracting students and retaining high quality faculty: KMC is exposed to challenges of attracting students and high quality faculty for its educational institute. However, given the experience and established name of the medical college & hospital in the educational sphere in Bihar, the same does not pose much of a threat. Highly regulated industry with reputational risk: Both healthcare and educational sectors are highly regulated requiring various statutory approvals from entities like MCI, etc. Moreover, healthcare is a highly sensitive sector where any mishandling of a case or negligence on part of any doctor and/or staff of the unit can lead to distrust among the masses. Thus, all the healthcare providers need to monitor each case diligently and maintain standard of services in order to avoid the occurrence of any unforeseen incident. They also need to maintain high vigilance to avoid any malpractice at any pocket. Also, the education and healthcare sector are highly fragmented with few players in the organised sector. Barring a few, most of the organised sector players have one or two institutes/hospitals only. All these lead to high level of competition in the business.
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Rationale-Press Release
Key Rating Strengths Extensive experience of the promoter and established operational track record: The promoter has about three decades of experience in running hospitals and educational institutions. Mr Ahmad Ashfaque Karim, CMD & promoter, holds a Bachelor degree in Pharma. Mr Karim is a Senate member of B.N. Mondal University, Madhepura and Member of Parliament (Rajya Sabha) of Rashtriya Janata Dal. He also holds important positions in various Muslim organizations. The day-to-day affairs of KMC are looked after by Mr Karim with adequate support from a team of experienced professionals. KMC started operations at its medical college and hospital in the year 1988. Thus, it has a long and satisfactory track record of about three decades in healthcare and education sector. Healthy profit margins and high occupancy rate: The operating margin has remained healthy over the past three years in the range of 39.80% to 46.30%. However, the same deteriorated by 380 bps in FY18 due to higher cost of operations. Further, the net surplus margin also deteriorated by 318 bps due to high interest expenses in FY18 but the same remained healthy at 30.28% in FY18. Seats at the medical college have been fully occupied in the last three years on the back of demand for medical education in the area. Furthermore, the overall occupancy rate of the hospital has also remained satisfactory at 90% during FY18. Comfortable capital structure with strong debt protection matrices: The capital structure of the entity remained comfortable marked by overall gearing of 0.05 times as on March 31, 2018. The debt protection metrics of the entity also remained strong with strong interest coverage at 48.70x and Total debt to GCA of 0.18x in FY18. Satisfactory infrastructure with association of experienced doctors: The campus, which is spread over 55 acres of land with a built up area of 600000 sqft, provides well equipped laboratories, auditoriums, playgrounds and a well-stocked library. Furthermore, KMC has a dedicated team of more than 150 qualified doctors to address to the needs of its in-house as well as outdoor patients. The teacher (generally doctors) student ratio is also quite satisfactory at 1:3. Demand for medical educational institutes and hospitals in the area: There are only 13 medical colleges (both public and private) in Bihar which are recognized by the MCI offering less than 1000 MBBS seats. The doctor population ratio in the state as per National Census is around 1:3500 which is much lower than the all-India average of 1:1700. Thus, the demand supply gap resulting from inadequate number of medical colleges and hospitals provides huge opportunity for KMC.
Analytical approach: Standalone Applicable Criteria Policy in respect of Non-cooperation by issuer Criteria on assigning ‘outlook’ and ‘credit watch’ Rating Methodology – Education Sector Financial ratios – Non-Financial Sector CARE’s Policy on Default Recognition Liquidity Analysis of Non-Financial Sector Entities
About the Entity KMC, established in 1987 by ‘Al-Karim Educational Trust’ (AKET), was started operations in the year 1988 by setting up a medical college and hospital. Currently, KMC is operating with 648 hospital beds and 100 seats in MBBS course within the same campus in Katihar district of Bihar for the social upliftment of Muslim community (religious minority). KMC is affiliated to the B.N. Mondal University, Madhepura and approved by Medical Council of India (MCI) and Ministry of Health and Family Welfare, Govt. of India.
Brief Financials (Rs. crore) FY17 (A) FY18 (A) Total operating income 70.01 79.41 SBID 32.41 33.75 Net Surplus 23.42 24.05 Overall gearing (times) 0.02 0.05 Interest coverage (times) 77.06 48.70 A: Audited
Status of non-cooperation with previous CRA: Not Applicable.
Any other information: Not Applicable
Rating History for last three years: Please refer Annexure-2
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Rationale-Press Release
Annexure-1: Details of Instruments/Facilities
Size of the Name of the Date of Coupon Maturity Rating assigned along with Issue Instrument Issuance Rate Date Rating Outlook (Rs. crore) CARE BB; Stable; ISSUER NOT Fund-based - LT-Term - - February 2025 15.00 COOPERATING* Loan
CARE BB; Stable; ISSUER NOT Non-fund-based - LT- - - - 7.00 COOPERATING* Bank Guarantees
*Issuer did not cooperate; Based on best available information
Annexure-2: Rating History of last three years
Current Ratings Rating history Date(s) & Date(s) & Date(s) & Name of the Type Rating Date(s) & Sr. Amount Rating(s) Rating(s) Rating(s) Instrument/Bank Rating(s) No. Outstanding assigned assigned assigned Facilities assigned in 2019- (Rs. crore) in 2020- in 2018- in 2017- 2020 2021 2019 2018 1)CARE BB+; 1)CARE 1)CARE CARE BB; Stable; Stable; ISSUER BBB+; BBB+; Fund-based - LT- ISSUER NOT NOT Stable Stable 1. LT 15.00 - Term Loan COOPERATING* COOPERATING* (25-Sep- (07-Dec- (30-Dec-19) 18) 17)
1)CARE BB+; 1)CARE 1)CARE CARE BB; Stable; Stable; ISSUER BBB+; BBB+; Non-fund-based - ISSUER NOT NOT Stable Stable 2. LT-Bank LT 7.00 - COOPERATING* COOPERATING* (25-Sep- (07-Dec- Guarantees (30-Dec-19) 18) 17)
*Issuer did not cooperate; Based on best available information
Annexure-3: Detailed explanation of covenants of the rated instrument / facilities: Not Applicable
Annexure 4: Complexity level of various instruments rated for this Company
Sr. Name of the Instrument Complexity Level No. 1. Fund-based - LT-Term Loan Simple 2. Non-fund-based - LT-Bank Guarantees Simple
Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. This classification is available at www.careratings.com. Investors/market intermediaries/regulators or others are welcome to write to [email protected] for any clarifications.
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