Krsnaa Diagnostics latest credit rating report by ICRA - 02/01/2023 [ICRA]A(Stable); reaffirmed.
Key highlights from the report.
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the ramp-up of operations in the new centres shall remain a key monitorable.
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capex plans of over Rs. 100.0 crore in FY2023 for setting up new centres.KDL is also exploring asset-light expansion (pay-per-use or deferred credit from original equipment manufacturers) over the near to medium term.
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KDL’s high debtor days with ~70% of its debtors being receivables from various Government entities. The debtor days improved to 46 days as of March 31, 2022, from 69 days as of March 31, 2021, backed by improved collection from Government debtors. However, its debtor holding period remained at 88 days as of September 30, 2022, in line with the cyclical trend in Government receivables witnessed during the fiscal.
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KDL’s established position in the PPP segment mitigates the competitive pressure to a certain extent.
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The company has an established market position in the PPP segment with over 2,020 diagnostic centres across 15 states and two union territories (UT; Delhi and Chandigarh) in India. KDL also has tie-ups with private hospitals and operates 27 centres under this segment (as on September 30, 2022).
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OPM improved to 28.9% in FY2022 from 23.8% in FY2021, backed by significant improvement in the core business. During H1 FY2023, additional manpower costs for the newly launched centres (which is yet to fully ramp-up) led to contraction in OPM, while remaining healthy at 24.8%.
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As on September 30, 2022, the company had over 45 active PPP contracts, with the contract tenor ranging between 3-12 years(including renewal clauses). Additionally, the PPP contracts have an embedded price escalation clause (mandating yearly price increases of 2-7%), which is expected to support the realisation levels, going forward.
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The company witnessed a healthy bid-win ratio of ~78% in the past four years and the same is expected to remain healthy going forward as well, backed by its strong market position.
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60% of its revenues coming in from western India. With new centres in Punjab, Himachal Pradesh, Uttar Pradesh, Maharashtra, Tripura, Chandigarh, Rajasthan and Delhi expected to generate revenue from FY2023-FY2024, the geographical diversification is expected to improve, going forward.
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The company derives ~73% of its revenues (FY2022) from the PPP segment.
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The company operates a teleradiology hub in Pune with a team of over 200 radiologists. This addresses the shortage of fulltime doctors and staff in the diagnostic industry, and considerably increases the turnaround time for diagnostic test reports. In addition, it also allows KDL to serve patients in remote locations where diagnostic facilities are limited.