Press Release Little Flower Hospital Trust April 02, 2019 Rating Amount Facilities Ratings1 Remarks (Rs. crore) 32.75 CARE BB+; Stable Long-term Bank Facilities Reaffirmed (reduced from 41.22) (Double B Plus; Outlook: Stable) 32.75 Total Facilities (Rupees Thirty-Two Crore and Seventy-Five Lakh only) Detailed Rationale & Key Rating Drivers The rating assigned to the bank facilities of Little Flower Hospital Trust (LFHT) continues to be tempered by growing competition in healthcare industry and availability and retention of trained medical professionals. The rating continues to derive strength from long track record and well-established operation of the hospital, run by LFHT and the satisfactory occupancy level. The rating also factors in improvement in the overall financial performance marked by growth in gross receipts, improved SBID margins, capital structure and debt coverage indicators. Going forward, the ability of the trust to improve its profitability margins, improve its capital structure, retain its medical professionals and improve occupancy level of the hospital remain the key rating sensitivities. Detailed description of the key rating drivers Key Rating Weakness Growing competition in healthcare industry and availability and retention of trained medical professionals The hospital sector is highly fragmented with few large players in the organized sector and numerous small payers in the unorganized sector leading to high level of competition in the sector. One of the major problems faced by most private hospitals is retention of medical professionals – doctors, paramedical, lab technicians, etc., who are essential for their operation. Key Rating Strengths Improvement in the overall financial profile marked by growth in gross receipts, improved SBID margins, capital structure and debt coverage indicators The gross receipts of the trust increased by ~9% from Rs.100.50 crore in FY17 to Rs.109.40 crore in FY18. The increase in the revenue was on back of revision of rates w.r.t., accommodation charges, nursing care, consultation charges among others. The SBID margin of the trust marginally declined by 93 bps from 16.91% in FY17 to 15.98% in FY18 on back of an increase in the employee costs and other administrative and general expenses like maintenance and repairs, legal charges, hospital functions etc. The surplus margin, however, has marginally improved from 3.52% in FY17 to 3.78% in FY18 as the interest cost had decreased on account of systematic repayment of the term loan obligations during FY18. The capital structure marked by overall gearing improved from 2.26x as on March 31, 2017 to 1.75x as on March 31, 2018 on the back of repayment of term loans along with an increase in the tangible net worth of the trust on account of accretion of profits to the funds of the trust. The debt coverage indicators marked by interest coverage ratio improved from 3.26x in FY17 to 3.62x in FY18 the back of decline in interest charges by 7% due to repayment of term loans. TD/GCA also improved from 4.63x in FY17 to 3.89x in FY18 on account of decline in the term loan level coupled with an increase in the cash accruals. The increase in the cash accruals was on back of an increase in SBID levels and depreciation provisions as on March 31, 2018. Long track record and well-established operation of the hospital, run by LFHT and the satisfactory occupancy level The hospital is in existence since 1936 and is well known for its ophthalmology department. The hospital is a 910 bedded multi-speciality hospital. It is recognized for the various health care initiatives taken by it in the field of eye care through regular eye camps, school screening, peripheral eye care centers, eye bank, etc. in addition to other village health care initiatives taken by it. Analytical Approach: Standalone Applicable Criteria: Criteria on assigning Outlook to Credit ratings 1Complete definitions of the ratings assigned are available at www.careratings.com and in other CARE publications. 1 CARE Ratings Limited Press Release CARE’s Policy on Default Recognition Rating Methodology – Service Sector Companies Financial ratios – Non-Financial Sector About the Trust M/s. Little Flower Hospital Trust (LFHT) is a ‘not-for-profit’ organization with the primary objective of providing health care & related services for charitable and philanthropic purposes. LFHT runs a 910-bed hospital in the name of ‘Little Flower Hospital & Research Centre’ (LFHRC) in Angamaly, Kerala. In addition, LFHT also operates a research division, a nursing school & college, and one annex for the hospital at Koonammavu (Kerala) to extend their reach of service. LFHT was established in 1994 to enable the Arch Bishop of Ernakulam Diocese to take over the then ‘Little Flower Hospital’, which has been providing healthcare for public in the Angamaly region of Kerala since 1936. The operations of LFHT are managed by trustees who are in turn appointed by the Ernakulam Archdiocese. The present operations of the trust are managed by Reverend Father Sebastian Kalapurackal, who is the executive trustee of LFHT. Brief Financials (Rs. crore) FY17 (A) FY18 (A) Total operating income 100.50 109.40 SBID 16.99 17.49 Surplus 3.54 12.75 Overall gearing (times) 2.26 1.75 Interest coverage (times) 3.26 3.62 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 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. Analyst Contact Name: Mr. Manish Kumar Tel: 040-67937415 Cell: + 91 99495 47551 Email: [email protected] **For detailed Rationale Report and subscription information, please contact us at www.careratings.com About CARE Ratings: CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading credit rating agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an External Credit Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of its rightful place in the Indian capital market built around investor confidence. CARE Ratings provides the entire spectrum of credit rating that helps the corporates to raise capital for their various requirements and assists the investors to form an informed investment decision based on the credit risk and their own risk-return expectations. Our rating and grading service offerings leverage our domain and analytical expertise backed by the methodologies congruent with the international best practices. Disclaimer CARE’s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. CARE has based its ratings/outlooks on information obtained from sources believed by it to be accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/instruments. In case of partnership/proprietary concerns, the rating /outlook assigned by CARE is based on the capital deployed by the partners/proprietor and the financial strength of the firm at present. The rating/outlook may undergo change in case of withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial performance and other relevant factors. 2 CARE Ratings Limited Press Release Annexure-1: Details of Instruments/Facilities Name of the Date of Coupon Maturity Size of the Rating assigned Instrument Issuance Rate Date Issue along with Rating (Rs. crore) Outlook Fund-based - LT-Bank - - - 10.00 CARE BB+; Stable Overdraft Fund-based - LT-Term - - December 2017 1.70 CARE BB+; Stable Loan Fund-based - LT-Term - - July 2021 9.78 CARE BB+; Stable Loan Fund-based - LT-Working - - - 2.77 CARE BB+; Stable Capital Demand loan Fund-based - LT-Term - - August 2027 8.50 CARE BB+; Stable Loan Annexure-2: Rating History of last three years Sr. Name of the Current Ratings Rating history No. Instrument/Bank Type Amount Rating Date(s) & Date(s) & Date(s) & Date(s) & Facilities Outstanding Rating(s) Rating(s) Rating(s) Rating(s) assigned (Rs. crore) assigned in assigned in assigned in in 2015-2016 2018-2019 2017-2018 2016-2017 1. Fund-based - LT-Term LT - - - - - 1)Withdrawn Loan (27-Apr-15) 2. Fund-based - LT-Bank LT 10.00 CARE 1)CARE BB+; 1)CARE BB+; 1)CARE BB 1)CARE BB Overdraft BB+; Stable Stable (11-Apr-16) (01-Jun-15) Stable (02-Apr-18) (15-May-17) 2)CARE BB (27-Apr-15) 3. Fund-based - LT-Term LT 1.70 CARE 1)CARE BB+; 1)CARE BB+; 1)CARE BB 1)CARE BB Loan BB+; Stable Stable (11-Apr-16) (01-Jun-15) Stable (02-Apr-18) (15-May-17) 2)CARE BB (27-Apr-15) 4. Fund-based - LT-Term LT 9.78 CARE 1)CARE BB+; 1)CARE BB+; 1)CARE BB 1)CARE BB Loan BB+; Stable Stable (11-Apr-16) (01-Jun-15) Stable (02-Apr-18) (15-May-17) 5. Fund-based - LT-Working LT 2.77 CARE 1)CARE BB+; 1)CARE BB+; 1)CARE BB 1)CARE BB Capital Demand loan BB+; Stable Stable (11-Apr-16) (01-Jun-15) Stable (02-Apr-18) (15-May-17) 6.