TEXT-Fitch affirms Alchemist Hospitals at 'Fitch B+(ind)'/stable

(The following statement was released by the rating agency)

Feb 13 - Fitch Ratings has affirmed India-based Alchemist Hospitals Limited's (AHL) National Long-Term rating at 'Fitch B+(ind)'. The Outlook is Stable. The agency has also affirmed AHL's INR281.8m term loans (reduced from INR434.8m) at 'Fitch B+(ind)'.

The affirmation reflects the increase in occupancy levels at AHL's hospitals, especially its Panchkula hospital, to 50% in the financial year ended March 2011 (FY11) from 33% in FY10. This resulted in strong revenue growth of around 41% yoy to INR450m in FY11. The occupancy levels for the Panchkula hospital further picked up to around 70% in H112.

The ratings are also supported by the wide range of services offered by AHL, reputed doctors associated with the company and the support extended by the Alchemist Group through unsecured loans and equity. The ratings are also underpinned by the relative immunity of the healthcare sector against seasonal and economic factors compared with other industries.

The ratings are, however, constrained by AHL's continued operating EBITDA losses (FY11: INR35m, FY10: INR42m) and its stretched financial profile as its Gurgaon hospital is yet to be fully operational and had insignificant occupancy levels in FY11 and H112. The company is adding more speciality services to the Gurgaon hospital and placing new equipment, and upgrading the existing facility. The stiff competition in the region from more established companies also continues to limit the ratings.

Although revenue grew in FY11, total debt increased to INR934m at end-FY11 (FY10: INR595m), including INR572m of unsecured loans from group companies (FY10: INR97m). However, the increase in debt has only been in the form of interest-free unsecured loans from the group. In H112, the company clocked INR295m revenues while continuing to report operating EBITDA losses.

Positive rating guidelines include higher occupancy rates for both the hospitals resulting in positive EBITDA, while higher-than-expected losses or weakening of financial support from the Alchemist Group would be the negative rating guidelines.

AHL belongs to the Alchemist Group, and operates two 100-bed hospitals, one at Panchkula (previously known as Kaiser Hospital) and the other one at Gurgaon (previously known as Healer's hospital). The company offers a wide range of speciality services, such as cardiology, joint replacements, laparoscopic surgery, neurology and neuro surgery, paediatric surgery, endocrinology and nephrology through these hospitals.