CRISIL said that the rating action factors in an improvement in the business and financial risk profiles of the company, driven by faster-than-expected ramp-up of operations in the Lucknow (Uttar Pradesh) hospital, and the Patna (Bihar) hospital in fiscal 2023 and improving operating performance of the flagship hospital in Gurugram.

Further, improvement in the financial risk profile is driven by the reduced leverage post successful conclusion of its initial public offering (IPO) on November 16, 2022, raising Rs 500 crore as primary issuance. From the net proceeds of the offer, Rs 375 crore have been utilised towards external debt reduction in subsidiaries, Medanta Holdings (MHPL) and Global Health Patliputra (GHPPL).

On consolidated basis, revenue grew 24% to Rs 2,694 crore in fiscal 2023 (from Rs 2,177 crore in fiscal 2022), driven by higher inpatient volumes, changes in specialty mix towards higher value specialties leading to better average revenue per occupied bed (ARPOB) as well as better scale up of the Lucknow and Patna hospitals. Occupancies registered a slight moderation to 58.8% in fiscal 2023 against 60.5% in fiscal 2022, owing to higher hospitalizations during the second wave of the Covid-19 pandemic.

This, along with consequent benefits of operating leverage, resulted in operating margin (Pre IndAS) of 21.4% in fiscal 2023 against 20.2% in fiscal 2022. Operating margins should sustain at healthy levels with planned tariff hikes, although pre-operative expenses towards bed additions at existing hospitals and commencement of the hospital at Noida expected in the second half of fiscal 2025 might limit the improvement .

The financial risk profile is supported by strong capital structure, healthy debt protection metrics and liquidity. Consolidated adjusted networth stood at over Rs 2,400 crore and debt at Rs 842 crore as on 31 March 2023, with gearing at 0.35 time. With further repayment of debt (availed in subsidiaries) worth Rs 375 crore in April, 2023, gearing may improve further to under approximately 0.3 time over the medium term.

The ratings continue to reflect the experienced management of GHL in therapeutic segments and healthy financial risk profile. These strengths are partially offset by risks related to implementation and timely stabilisation of upcoming hospitals, geographic and therapeutic segmental concentration in revenue and exposure to intense competition.

Global Health operates super-specialty, tertiary-care hospital in Gurugram, Medanta Medicity. It has a capacity of approximately 1,400 beds and approximately 40 operation theatres, besides state-of-the-art diagnostic and laboratory facilities. In fiscal 2015, GHL entered into an arrangement to manage a approximately 150-bed hospital each in Indore and Ranchi on a lease basis. The company also operates two hospitals at Lucknow and Patna under 100% subsidiaries named MHPL and GHPPL, respectively.

The company's consolidated net profit surged to Rs 101.07 crore in the quarter ended March 2023 as against Rs 17.55 crore during the previous quarter ended March 2022. Sales rose 34.99% to Rs 703.42 crore in Q4 FY23 over Q4 FY22.

The scrip rose 0.97% to currently trade at Rs 667.40 on the BSE.