Thanks for the kind words.
I do agree that given their recent cash generating power they will get the debt down overtime although I would have felt more comfortable if they had disclosed patient numbers bothforeignand local and bed utilization. Without the benefit of local knowledge I am unable to judge whether the hospital has continuous patient pulling power despite high competition. If so, is it because of star doctors or competitive pricing or both? Understanding the source of success is very important for any business if one is to avoid nasty surprises!
While reduced debt and increased profits will lead to positive pricing action and trading profits from current levels it is unlikely to lead to a sustained re-rating. for that to happen investors need to be happy with their future strategy. In my view, there are broadly two options for the management to create value for shareholders
1). aggressive expansion- the mgmt starts building/acquiring another hospital through raising more debt or equity in their quest to becoming a leading hospital chain in India. If done without clear positioning it will destroy shareholder value.
2). steady grower while sharing profits with shareholders- the mgmt starts paying at-least 50% of profits as dividends and uses internal accruals to expand steadily with a clear strategy ( e.g best cancer treatment in the South), this option will likely create long term value for shareholders and I would be more than happy to be a part owner of such a business!