Concurrently, the agency has also upgraded the company's short term rating to 'IND A1+'.

India Ratings stated that the rating action reflects a significant improvement in the consolidated scale of operations during FY24 and 8MFY25, led by the quick turnaround of new hospitals and improved profitability at the existing facilities, exceeding the agency's expectation.

The Kauvery Group has added 1,000 beds over the past two years. Furthermore, the group plans to add an additional 1,000 beds over FY25-FY27, entailing a capex of Rs 580 crore.

Despite the higher capex, India Ratings expects the net leverage to remain below 2.5x in the near-to-medium term, driven by healthy EBITDA generation, led by strong execution capabilities, and strong cash on books.

An improvement in the operating performance, led by an increased consolidated occupancy, resulting in a sustained improvement in the consolidated revenue and EBITDA, with the net adjusted leverage (including leases) falling below 2.0x beyond FY25, all on a sustained basis, and maintaining the linkages with the parent, could result in a positive rating action.

However, any deterioration in the operating performance, with an inability to improve the occupancy or a decline in the average revenue per occupied bed (ARPOB), resulting in a decline in the consolidated revenue or low EBITDA, leading to the net adjusted leverage (including leases) remaining above 2.0x beyond FY25, all on a sustained basis, and deterioration in the linkages with the parent, could result in a negative rating action.

KMC Speciality Hospitals (India) is a 75% subsidiary of Kauvery Group. Kauvery is a group of 12 hospitals; 10 hospitals in Tamil Nadu and two hospitals in Bengaluru. The group operates at a capacity of 2,355 beds at end-November 2024.

The company's net profit declined 43.52% to Rs 3.88 crore despite a 32.87% increase in sales to Rs 56.23 crore in Q2 FY25 over Q2 FY24.

The scrip was up 0.04% to currently trade at Rs 77.82 on the BSE.

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