Rationale

 The rating assigned to Asian Institute of Oncology Pvt Ltd (AIOPL/the company) favourably factors in its promoters’ extensive experience in the healthcare industry. The company’s business is supported by the increasing demand for healthcare services and better affordability on the back of increasing awareness and penetration level of health insurance in India. However, the rating is constrained by the modest scale of operations, continued losses and weak debt metrics over the last few years. While the company’s average revenue per occupied bed (ARPOB) levels are healthy, the occupancy remains low at 35% and 30% in FY2023 and FY2024, respectively. While ICRA expects some improvement in the entity’s operating performance of its key hospital in the medium term, the successful ramp-up of operations at the new hospitals remains to be seen. AIOPL also faces stiff competition from the other established oncology hospitals, limiting its pricing flexibility. Further, the rating adversely factors in AIOPL’s anticipated large debt-funded capex for expansion in the near to medium term, which is expected to weaken its capital structure and debt protection metrics. The resultant sizeable repayment obligation is likely to impinge on the debt servicing capacity in the long term. The company’s ability to generate commensurate returns at the expected level from the mentioned capex will remain a key rating monitorable. The Stable outlook on the long-term rating reflects ICRA’s expectation that the company will continue to benefit from the extensive experience of its promoters and the proven track record of the hospital.