Press Release

Devki Devi Foundation

July 07, 2021
Ratings
Amount
Facilities/Instruments Ratings Rating Action
(Rs. crore)
Revised from CARE A (CE) [Single
CARE AA- (CE); Stable
A (Credit Enhancement)] and
[Double A Minus (Credit
Long Term Bank Facilities 127.99 removed from Credit watch with
Enhancement); Outlook:
Developing Implications; Stable
Stable ]
outlook assigned
127.99
(Rs. One Hundred Twenty-
Total Bank Facilities
Seven Crore and Ninety-Nine
Lakhs Only)
Details of instruments/facilities in Annexure-1
*The above ratings are backed by unconditional and irrevocable corporate guarantees of Max Healthcare Institute Ltd

Unsupported Rating 1 CARE A- [Revised from CARE BBB+ ]

Detailed Rationale & Key Rating Drivers for the credit enhanced debt
The above ratings are based on credit enhancement in the form of unconditional and irrevocable corporate guarantee
provided by Max Healthcare Institute Limited (MHIL). Devki Devi Foundation (DDF) has medical service agreement with MHIL
under which DDF is allowed to use the brand name of Max Hospital & MHIL can provide medical services in the hospital
managed by DDF.
The ratings for the bank facilities of MHIL & DDF have been removed from ‘Credit Watch with Developing Implications’
following the conclusion of Qualified Institutional Placement (QIP) in March 2021 leading to a total fund raise of Rs.1,200
crore as CARE has now analyzed the impact of the expected equity infusion on the credit risk profile of MHIL and accordingly
revised the ratings.
The revision in ratings assigned to the bank facilities of MHIL takes into account the significant deleveraging of balance sheet
achieved through pre-payment of debt out of the proceeds of QIP and healthy cash accruals accruing to MHIL in FY21 (refers
to period from April 01 to March 31). The rating revision further takes into account the group's improving operational
efficiencies after the change in control post-merger (effective from June 01, 2020) as reflected in its improved occupancy and
average revenue per bed (ARPOB) quarter on quarter from Q2FY21 and strong liquidity. The first quarter of FY21 though was
marred by the impact of covid-19 related disruptions, nevertheless company reported healthy profitability in full year on
account of structural cost savings and improved operational parameters. Such uptick in metrics is expected to be sustained
over the long run as a result of the cost containment measures adopted by the new management.
The ratings continue to derive strength from its established and leading market position, diversification across various
specialties, experienced team of doctors, modern infrastructure, and the strong brand equity of Max Healthcare.
The strengths are partially offset by regulatory and concentration risk along with competition from other established players
in the Delhi and NCR region.

Key Rating Drivers of DDF

The revision in ratings of DDF takes into account significant improvement in financial and operational profile of its operator
i.e. MHIL, from which, the trust has received continued financial support in the past. The ratings of DDF continue to derive
strength from medical service agreement with MHIL under which it benefits from experienced team of doctors with expertise
in various specialities and established brand positioning of Max healthcare. The ratings also take into cognizance consistent
improvement in operational parameters. The strengths are however offset by weak financial risk profile, exposure to
regulatory risk and competition from other established players in Delhi and NCR region.

Key Rating Sensitivity (MHIL - Guarantor)

Positive factors: Factors that could lead to positive rating action/upgrade:
 Increase in operating income above Rs. 4000 crore while maintaining profitability margins over 20% on a sustained
basis.
 Improvement in Total debt/PBILDT below 2x on a sustained basis

1
As stipulated vide SEBI circular no SEBI/ HO/ MIRSD/ DOS3/ CIR/ P/ 2019/ 70 dated June 13, 2019
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 Press Release

 Increase in diversification both in terms of geographical footprint and hospitals network.

Negative factors: Factors that could lead to negative rating action/downgrade:

 Decline in PBILDT margins below 15% on a sustained basis affecting its cash flows.
 Significant expansion by way or organic or inorganic routes such that Total debt/ PBILDT increases above 2.5x

Key Rating Strengths

Resourceful promoter group and experienced management team
With the conclusion of the merger on June 01, 2020; the erstwhile MHIL promoters have been reclassified as public
shareholders, and Mr. Abhay Soi and KKR (through Kayak Investments Holding Pte. Ltd) have now become the promoters of
MHIL and together they hold 70 % as on March 31, 2021.
Mr. Abhay Soi is the Promoter, Chairman and Managing Director of MHIL. Before the acquisition and merger with MHIL, Mr.
Soi was the Promoter, Chairman and Managing Director of Radiant Life Care Private Limited (RLCPL). Mr. Soi forayed into
healthcare space in 2010 and is credited for successfully revamping RLCPL healthcare facilities i.e. Dr BL Kapur Memorial
hospital, Delhi (BLK) & Dr Balabhai Nanavati hospital, Mumbai (Nanavati). Both of these hospitals have now come under the
MHIL umbrella post-merger. He has experience in financial restructuring business and exposure of various industries like
mining, financial services, textiles, and specialty chemicals etc.
KKR & Co. Inc. (formerly known as Kohlberg Kravis Roberts & Co. and KKR & Co. L.P.) is an American global investment
company that manages multiple alternative asset classes, including , energy, infrastructure, real estate, credit, and, through
its strategic partners- KKR through Kayak Investments Holding Pte. Ltd holds 48.64% shareholding in MHIL as on Mar 31,
2021. KKR has invested around Rs.2,000 crore in erstwhile Radiant for the acquisition of MHIL. CARE is also given to
understand that should KKR wish to exit the investment in MHIL, there is no obligation on MHIL' promoters or the company
to buy-back the stake, nor has any fixed return on funds invested been assured.

Healthy operational parameters and long-term structural cost-savings boosting profitability margins
With its hospital portfolio having matured over the past few years, the group has demonstrated improvement in its
operational parameters as indicated by occupancy rate, average revenue per occupied bed (ARPOB), average length of stay
(ALOS), inpatient-outpatient registrations, etc. Presence in premium markets (namely Delhi NCR and Mumbai) along with
superior case mix leads to a higher ARPOB for MHIL when compared with its industry peers. The operational performance
has marginally deteriorated in FY21 on account of impact of covid-19 specifically in Q1FY21 with nation-wide lockdown,
complete lack of medical tourism and lower revenues from elective surgeries. Post Q1FY21, operating metrics too has
improved QoQ. MHIL’s focus on cost-saving initiatives and long-term structural cost savings programme helped it to achieve
operational efficiency and stable earnings.
For MHIL consolidated (excluding 3 trusts), the ARPOBs have reduced from Rs.50,759 in FY20 (post-merger basis) to
Rs.49,850 in FY21 accompanies by drop in occupancies from 71% to 65% during the same period.
For MHC network (MHIL consolidated plus 3 trusts), the occupancies and ARPOBs dipped marginally to 65% (PY: 72% post-
merger basis) and Rs.50,771 (PY: Rs.51,112 post-merger basis) respectively, during FY21.
On a quarterly basis, while ARPOB dropped to below of Rs.47,200 in first half of the year, the same was subsequently
restored to Rs.56,900 in Q4FY21. MHIL reported an improvement in its PBILDT margin by 150 bps (which stood at 18.9% for
FY21 as compared to 17.44% in FY20 on post-merger basis) on account of cost saving initiatives.
On a quarterly basis, the company managed to report PBILDT margins in the range of 24% in Q3 FY 21 and Q4 FY 21.
MHIL is further expected to generate higher ARPOBs on account of the market share it has in north India in complex
treatments like bone marrow transplant (BTM), Oncology etc. The improvement in profitability margins is expected to be
sustained in the long term with gradual restoration in medical tourism, management’s focus on optimization of higher
ARPOB generating payor mix and cluster approach to maintain its brand in the metros. In Q1FY22 as well, the performance is
expected to remain healthy on the back of high occupancies across the hospitals during second wave of covid-19.

Improvement in the financial risk profile on the back of pre-payment of high cost debt
MHIL’s financial profile has improved in FY21 following the substantial debt pre-payments in FY21 which has led to
deleveraging its balance sheet. The debt has been paid partly from the QIP funds and partly from the cash accruals of MHIL.
The liabilities that were retired majorly included the high-cost shareholders loan of Rs.440 crore as well as stake purchase
liabilities carrying put option amounting to ~Rs.480 crore in Saket City Hospitals Ltd and ~Rs.80 crore in Crosslay Remedies
Ltd (both are subsidiaries of MHIL). The repayments of the high-cost shareholders’ loan along with prepayments of other
debts will result in significant interest saving going ahead. Interest coverage indicators stood at 2.72x for FY21 and they are
expected to improve to the range of 6.4x going forward.
The capital structure further stood improved with pre-payment of scheduled debt obligations for FY22 barring an amount of
Rs.6 cr for the entire year. The debt coverage indicators of the company also remained comfortable. The gross debt to PBILDT

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 Press Release

improved to 2.73x as on March 31, 2021 from 4.29x as on March 31, 2020 (on pre-merger basis) on account of the reduced
debt outstanding and healthy cash accruals and is expected to remain below 2.5x going ahead.
However, any debt-funded capex or inorganic growth through acquisitions etc and its impact on the debt profile will be a key
monitorable going forward. However, as per clear articulation from the management, pursuant to any organic or inorganic
growth initiatives the debt to PBILDT ratio on consolidated basis is not expected to exceed 2.5x.

Established and leading market position driven by strong brand equity

MHIL started its operations in 2001 and has established itself as a leading market player in the Northern India region. After
the completion of the merger, MHIL operates 16 facilities in India (including three trusts where it has medical service
agreement), offering services in over 32 medical disciplines. Out of the total network, eight hospitals and four medical
centers are located in Delhi and the NCR, and the others are located in the cities of Mumbai, Mohali, Bathinda, and
Dehradun. The average occupancy has been around 70% over the last couple of years driven by strong brand equity and
MHIL’s acceptability among the patients.
All the hospitals are National Accreditation Board for Hospitals & Healthcare Providers (NABH) and ISO accredited and have
also received Joint Commission International (JCI) accreditation for two of its hospitals which will help MHIL expand its
international business further.

Experienced team of doctors

The operations of the company are well supported by a team of experienced doctors, nurses, and paramedic staff. The
doctors on board are well qualified and have relevant experience. The group (including 3 trusts) has around 2200+ doctors,
5300+ nurses, and 1000+ consultant physicians on board to service its patients as on June 30, 2020.

Diversification across various specialties and improving channel mix

MHIL derives its revenues from several specialties including cardiology, oncology, neurology, orthopedic, etc., thus not
depending upon any single specialty. Among the various specialties, oncology, cardiac, neurology has demonstrated healthy
growth during the last year.
The MHIL also has a well-diversified channel mix which includes cash, TPA & corporates, institutions, referrals, and
international business. MHIL derived 23.2% (PY: 22.1% on post-merger basis) of its total FY21 revenue from the
Institutional/PSU segment which is a low margin business while international segment was at all-time low of 3.9% (PY: 11.1%
on post-merger basis) due to covid related travel restrictions. The company plans to optimize its payor mix by reducing the
contribution from PSU segment and focus more on international business going forward.

Liquidity: Strong
MHIL’s liquidity profile is strong, marked by free cash and cash equivalents of Rs.528 crore as on April 31, 2021. MHIL’s
residual debt repayments in FY22 and FY23 are low at Rs.6 crore (post pre-payments in April-21) and Rs.31.52 crore
respectively. While the company has planned brownfield expansions other than routine capex in the near-to-medium term, it
is projected to generate sufficient cash accruals, providing adequate headroom for the additional debt being raised.
However, any significant debt-funded inorganic expansion which impacts the debt protection metrics will remain a key rating
monitorable.

Key Rating Weakness

Exposed to regulatory and concentration risk
MHIL operates in a regulated industry that has witnessed continuous regulatory intervention during the past couple of years.
Regulations such as capping of stent prices and knee implants and stricter compliance norms have adversely impacted the
margin of the company in past. Any such future regulation might have an adverse impact on the group’s profitability and thus
would remain an important monitorable.
Further, the group’s concentration in metros like Delhi NCR and Mumbai is also a significant credit risk which makes it
vulnerable to any adverse political, regulatory or environmental event which impacts the socio-economic situation of
particular geography.

Intense competition from other established players

Given the new wave of opportunities created by covid-19 pandemic, rising self-awareness among masses and increasing
insurance penetration, there is high competition in the healthcare sector. However, comfort is drawn from the sizeable
presence and established position of Max Hospitals. Going forward, MHIL’s prospects would depend upon its ability to
improve its profitability, continued scale-up of operations, and to manage the competitive pressures in the sector by
diversifying into other geographies or build up on its asset light adjacencies such as ‘Max Labs’.

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 Press Release

Industry outlook:
The healthcare industry being considered the most essential service continued even during the lockdown period where many
other services were shut. While treatment of non-Covid patients (primarily non-emergency treatments) were instructed by
the government to be kept on hold, treatment of Covid patients was prioritised after the outbreak of pandemic in India. Also,
some hospitals had suspended outpatient departments (OPD) to ensure safety of the healthcare workers and to avoid the
spread of infection in healthcare premises. Also, imposition of lockdown restrictions by the government in the end of March
2020 further constrained the mobility of patients. The above-mentioned factors, in turn, reduced the number of non-Covid
patients visiting hospitals and clinics. Nevertheless, with easing of lockdown restrictions, the situation of hospital &
healthcare industry improved sequentially in the September 2020 quarter and the December 2020 quarter. The industry is
estimated to return to normal levels by end of Q1FY22 backed by expected improvement in occupancy rates, footfalls and
ongoing vaccination program. Also, increase in momentum of non-Covid treatments and elective surgeries which tend to
provide better ARPOBs on an average compared to the ARPOBs from Covid patients will support the industry growth in FY22.
In addition to this, the healthcare industry is extending the services of e-consultations and other home care services that will
also support their revenues. Moreover, international patients are also allowed to travel to India for medical treatments
(though with certain conditions) and this will benefit healthcare units that have a fair share of international patients. Thus,
the hospital and healthcare industry is expected to grow by about 10%-12% during FY22.

Analytical approach: CARE while arriving at the ratings of Devki Devi Foundation (DDF) has analysed Max Healthcare Institute
Limited (MHIL) credit profile owing to unconditional and irrevocable corporate guarantee provided by MHIL to DDF.
For analysing MHIL Consolidated financials have been considered and the support to be extended to 2 trusts operating under
MHC network for which MHIL has issued unconditional & irrevocable corporate guarantee has also been factored in.
The entities being consolidated in MHIL are as follows:
Name of Entity % Ownership Relation with MHIL
Max Healthcare Institute Limited - -
Alps Hospital Limited (ALPS) 100% Subsidiary
Crosslay Remedies Limited 98.16% Subsidiary
Hometrail Buildtech Private Limited 100% Subsidiary
Saket City Hospitals Private Limited 100% Subsidiary
Radiant Life Care Mumbai Pvt Ltd 99.99% Subsidiary
Dr BL Kapur Memorial Hospital* Trust Operation & Management Agreement
Dr Balabhai Nanavati Hospital* Trust Operation & Management Agreement
* MHIL (earlier Radiant) has O& M agreement BLK and Nanavati wherein MHIL will operate, manage and provide medical
services. As per Ind-AS the financials of BLK and Nanavati are consolidated due to presence of control.

Applicable Criteria
Criteria on assigning outlook and credit watch to ratings
Criteria on consolidation
CARE's policy on default recognition
Financial ratios- Non-Financial sector
Criteria on credit enhanced debt
Liquidity Analysis of Non-Finance sector companies
Criteria for short-term instruments
Rating methodology-Hospital Industry
Notching by factoring linkages in ratings

About the society

Devki Devi Foundation (DDF) registered under Society Registration Act XXI of 1860, started its healthcare facilities in 2004-
2005 by launching its Tertiary Care Hospital with specialisation in Cardiac, it operates a 325 beds hospital in Saket (East
Block), New Delhi. MHIL has a service agreement signed with DDF under which MHIL has the right to provide medical services
in these hospitals for various specialties and DDF is allowed to use brand name of Max hospital. The Saket hospital reported
ARPOB of Rs.50,414 (PY: Rs.47,036) and occupancy level of 59% in FY21 (PY: 73%).
Brief Financials (Rs. crore) FY20 (A) FY21 (A)
Total income 556.56 535.94
PBILDT 50.50 66.75
PAT 9.24 25.11
Overall gearing (times) NM NM
Interest coverage (times) 1.61 2.26

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About MHIL (Guarantor)

Max Healthcare Institute Limited (MHIL) was incorporated in 2001 and operates/ provides medical services to 16 facilities
under its umbrella with around 3,400 bed capacity as of March-2021. Out of the total portfolio, 13 hospitals comprising 2,299
beds fall under MHIL (consolidated) profile while 3 hospitals comprising 972 beds are part of 3 trusts. In totality, the number
of operational beds for Max healthcare network (including 3 trusts) stood at 3,210 beds for FY21. Out of the total network,
eight hospitals and four medical centres are located in Delhi and the NCR, and the others are located in Mumbai, Mohali,
Bathinda, and Dehradun. Through a composite scheme of merger, Radiant Life Care Private Limited’s (RLCPL) health care
assets (2 hospitals i.e. Dr BL Kapur Memorial Hospital & Dr Balabhai Nanavati Hospital) have merged in MHIL effective from
June 01, 2020. Further, MHIL got listed on August 21, 2020.
Brief Financials (Rs. crore) – MHIL Consolidated FY20 (A) FY21 (A)
Total income 1948.27 2581.21
PBILDT 353.11 488.78
PAT 95.34 -137.55
Overall gearing (times) 0.90 0.44
Interest coverage (times) 2.31 2.72
A: Audited
Status of non-cooperation with previous CRA: Not Applicable
Any other information: Not Applicable
Rating History for last three years: Please refer Annexure-2

Annexure-1: Details of Instruments/Facilities

Size of the Rating assigned
Name of the Date of Coupon Maturity
Issue along with Rating
Instrument Issuance Rate Date
(Rs. crore) Outlook
Fund-based - LT-Term CARE AA- (CE);
- - February-31 107.99
Loan Stable
Fund-based - LT-Cash CARE AA- (CE);
- - - 20.00
Credit Stable
Un Supported Rating-
CARE A-
Un Supported Rating - - - 0.00
(Long Term)

Annexure-2: Rating History of last three years

Current Ratings Rating history
Name of the Type Rating Date(s) & Date(s) & Date(s) & Date(s) &
Sr. Amount
Instrument/Bank Rating(s) Rating(s) Rating(s) Rating(s)
No. Outstanding
Facilities assigned in assigned in assigned in assigned in
(Rs. crore)
2021-2022 2020-2021 2019-2020 2018-2019
1)CARE A
CARE 1)CARE A
1)CARE A (CWD)
AA- (CE) (CWD)
Fund-based - LT-Term (CWD) (03-Jan-19)
1. LT 107.99 (CE); - (04-Nov-
Loan (09-Oct-19) 2)CARE A
Stable 20)
(CWD)
(05-Oct-18)
1)CARE A
CARE 1)CARE A
1)CARE A (CWD)
AA- (CE) (CWD)
Fund-based - LT-Cash (CWD) (03-Jan-19)
2. LT 20.00 (CE); - (04-Nov-
Credit (09-Oct-19) 2)CARE A
Stable 20)
(CWD)
(05-Oct-18)
1)CARE
Un Supported Rating- BBB+
CARE A-
3. Un Supported Rating LT 0.00 - (04-Nov- - -
(Long Term) 20)

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Annexure 4: Complexity level of various instruments rated for this Company

Sr.
Name of the Instrument Complexity Level
No.
1. Fund-based - LT-Cash Credit Simple
2. Fund-based - LT-Term Loan Simple
Un Supported Rating-Un Supported Rating (Long
3. Simple
Term)
Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. This
classification is available at www.careratings.com. Investors/market intermediaries/regulators or others are welcome to write
to care@careratings.com for any clarifications.
Contact Us
Media Contact:
Name: Mradul Mishra
Contact no.: +91-22-6837 4424
Email ID – mradul.mishra@careratings.com

Analyst Contact 1:
Group Head’s Name: Ravleen Sethi
Group Head’s Contact no.: +91-11- 45333251
Group Head’s Email ID: ravleen.sethi@careratings.com

Analyst Contact 2:
Name: Jasmeen Kaur
Contact no.: +91-11- 45333200
Email ID: jasmeen.kaur@careratings.com

Business Development Contact:

Name: Swati Agrawal
Contact no. : +91-11-4533 3200
Email ID: swati.agrawal@careratings.com

About CARE Ratings:

CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading credit
rating agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an
External Credit Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of its rightful place in
the Indian capital market built around investor confidence. CARE Ratings provides the entire spectrum of credit rating that
helps the corporates to raise capital for their various requirements and assists the investors to form an informed investment
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Disclaimer
CARE’s ratings are opinions on the likelihood of timely payment of the obligations under the rated instrument and are not
recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security.
CARE’s ratings do not convey suitability or price for the investor. CARE’s ratings do not constitute an audit on the rated
entity. CARE has based its ratings/outlooks on information obtained from sources believed by it to be accurate and reliable.
CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not responsible for
any errors or omissions or for the results obtained from the use of such information. Most entities whose bank
facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank
facilities/instruments. CARE or its subsidiaries/associates may also have other commercial transactions with the entity. In
case of partnership/proprietary concerns, the rating /outlook assigned by CARE is, inter-alia, based on the capital deployed
by the partners/proprietor and the financial strength of the firm at present. The rating/outlook may undergo change in case
of withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial
performance and other relevant factors. CARE is not responsible for any errors and states that it has no financial liability
whatsoever to the users of CARE’s rating.
Our ratings do not factor in any rating related trigger clauses as per the terms of the facility/instrument, which may involve
acceleration of payments in case of rating downgrades. However, if any such clauses are introduced and if triggered, the
ratings may see volatility and sharp downgrades.
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6 CARE Ratings Limited