The ratings continue on 'Rating Watch with Developing Implications', the credit rating agency said. CRISIL said that the rating upgrade is driven by improvement in consolidated operating performance, which should sustain over the medium term.

Profitability across hospitals has improved through various cost optimization measures while higher Covid-19 related testing and efforts to boost per lab utilisation have led to improvement in the diagnostics business. Recovery in international patient flow would further benefit the operating performance of the company, going forward.

Reported debt reduced to Rs 1,001 crore as of December 31, 2021, from Rs 1,359 crore a year earlier, aided by improved operating performance. The company maintains adequate liquidity, estimated at more than Rs 700 crore (including cash and equivalents and unutilised bank lines) as of January 31, 2022.

Though the third wave of the pandemic will have an impact on the operating performance in the fourth quarter of fiscal 2022, it is not expected to be significant. The lockdown restrictions were not as strict or long as before and management has demonstrated the ability to successfully navigate through the second wave.

The ratings remain on watch because of pending legal issues. The Supreme Court had initiated suo moto contempt proceedings inter alia against FHL, with regard to the IHH Healthcare Berhard (IHH) equity infusion and purchase of RHT Health Trust (RHT) assets. There is also a proposal to change the Fortis and SRL brand names, subject to various requisite approvals. The hearing in this matter has been concluded and the Supreme Court has reserved its judgment.

Moreover, the Securities and Exchange Board of India (Sebi) and the Serious Fraud Investigation Office are investigating alleged financial irregularities at FHL.

SEBI issued show-cause notices to Fortis group entities for alleged involvement in the diversion of funds by the erstwhile promoters and misrepresentation of the financials. The company has filed its legal responses and the outcome is awaited.

The outcome of these matters, including any punitive action, may have a bearing on the financial risk profile of FHL.

Fortis Healthcare is an integrated healthcare services provider, with a presence in hospitals, diagnostics, daycare, and specialty facilities. It has both owned and managed hospitals. The diagnostics brand, SRL, is among the leading chains in the country.

The company's consolidated net profit surged to Rs 116.74 crore in the quarter ended December 2021 from Rs 29.90 crore during the previous quarter ended December 2020. Sales rose 24.61% to Rs 1466.65 crore in Q3 FY22 over Q3 FY21.

The scrip gained 3.96% to end at Rs 241.30 on the BSE yesterday.