Business Times

Nawaloka Hospital's ratings held up by RAM, even despite space, personnel, liquidity issues

Ratings agency RAM has maintained its long term "A," with stable outlook, and short term "P2" corporate credit ratings for Nawaloka Hospitals, saying that they were "supported by the group’s strong competitive position, sturdy financial profile and the bright demand outlook for the private healthcare sector."
However, also noted was that these ratings were "weighed down by the lack of branch network and insufficient space amid the increased demand for its services, the shortage of skilled healthcare personnel in the sector and the group’s heightened exposure to liquidity risk."

Further, identifying Nawaloka as the "largest private hospital in Sri Lanka in terms of beds in a single location" and, with regard to revenue, the "second-largest private healthcare provider among the four listed hospital operators, which are also the main players in this sector"; RAM noted that, even with what it terms "keener" competition, the hospital's "competitive position has remained strong, underpinned by its strong reputation and track record. Furthermore, its hospital benefits from its strategic location, which is in close proximity to the largest state-owned hospital in Colombo; this has enabled it to attract a large number of visiting consultants, many of whom are among the industry’s best."

RAM also indicated that "plans are afoot for the construction of new mini-hospitals outside Colombo, which will increase Nawaloka’s bed capacity and extend its reach." And that proceeds from the sale of its associate stake in Galadari Hotels had gone towards "significantly" improving its financial profile as per the fianncial year ending end March 2011, as a part of the Rs 1.30 billion received from the sale had gonbe towards paying off its debts.

Additionally, RAM stated that a "lack of a branch network and the insufficient space amid the increased demand for its services, have eroded Nawaloka’s competitiveness, as evidenced by its lower patient volumes in FY Mar 2010. To address these issues, Nawaloka intends to augment its capacity and reduce congestion at the Colombo hospital by adding 50 channel consultation rooms adjacent to the current building, together with a new multi-storey car park."

RAM also added that the "growth prospects of the local private healthcare industry remain encouraging, underscored by increased health awareness among the public, higher disposable incomes amid the more favourable macroeconomic conditions, growth in Sri anka’s ageing population and increasing healthcare insurance coverage among the working population. As such, there has been a shift in the number of patients seeking treatment - from the government sector to the private sector - over the years; this trend is expected to continue. Moreover, better service quality and shorter waiting times compared to public hospitals will continue to attract patients to private hospitals."

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