Rationale

The assigned ratings draw comfort from Krsnaa Diagnostic Limited's (KDL/ the company) established market position in the Public-Private Partnership (PPP) diagnostic services segment and extensive experience of the promoter in the healthcare industry. As on September 30, 2021, KDL operated 1,847 diagnostic centres across 14 states in India (as against 50 centres in FY2017), wherein 97% of the centres are under PPP contract. The ratings also factor in the healthy bid-win ratio of the company in the Government tenders. This coupled with long contract tenor of 2-10 years and captive patient footfalls (from the partnered hospitals) ensures strong revenue visibility for the company. Further, ICRA notes that the company is expanding its geographical presence with new contract wins in Punjab, Karnataka and Himachal Pradesh. The ratings also consider the strong financial risk profile of the company characterised by continued revenue growth momentum and healthy operating profit margins coupled with significant improvement in debt metrics further to equity infusion of Rs 400.0 crore post Initial Public Offering (IPO) in August 2021. The company witnessed robust revenue growth during FY2017 – H1 FY2022 (compounded annual growth rate; CAGR of 48.4%) on the back of expanding its footprint across Maharashtra, Karnataka, Rajasthan, Himachal Pradesh, among others, along with 37% contribution of Covid-19 revenues in FY2021 (which tapered to 12% in H1 FY2022). The operating profit margins also remained healthy in the range of 24-28% in the past four years on the back of sustained revenue growth. In H1 FY2022, KDL repaid Rs 177.9 crore of its debt out of the IPO proceeds, resulting in significant improvement in its coverage metrics.