Press Release

VIS Reaffirms Ratings of Shifa International Hospitals Limited

Karachi, November 06, 2019: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Shifa International Hospitals Limited (Shifa) at ‘AA-/A-1’ (Double A Minus /A-One). The medium to long-term rating of ‘AA-’ denotes high credit quality coupled with strong protection factors. Moreover, risk factors may vary slightly with possible changes in the economy. The short-term rating of ‘A-1’ denotes high certainty of timely payment, liquidity factors are excellent and supported by good fundamental protection factors. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on March 01, 2018.

The assigned ratings take into consideration the clinical reputation of Shifa as a large private healthcare organization within northern region of the country and ample experience of senior management team. The ratings draw comfort from Shifa’s unique positioning, vis-à-vis other large hospitals, as an integrated health system providing primary, secondary, tertiary and quaternary healthcare services with the hospital specializing in high acuity cases. The ratings also factor in broad services array and scale of operations as well as significant expansion plans, including establishment of large-scale hospital and medical center in Faisalabad and Islamabad, respectively.

The ratings draw comfort from the limited demand cyclicality in healthcare services sector and growing demographic trends of Pakistan. Underpinned by growing demand for healthcare services, the company has generated sustainable revenue growth on a timeline basis. Revenue stream of Shifa comprises four segments, namely Inpatient (IPD), Outpatient (OPD), Pharmacy, and Cafeteria. Revenue concentration risk is considered manageable as the overall mix has remained largely stable over the past three years. Deficit of human capital in the industry is considered a business risk factor. The ratings also factor in sustained profitability, healthy generation of funds from operations (FFO), adequate debt coverage and manageable leverage. The ratings also positively view the equity issuance to International Finance Corporation (IFC) with the aim to support the expansion plans. The ratings are sensitive to any considerable change in profit margins, liquidity position, debt service coverage and leverage indicators.

For further information on this rating announcement, please contact undersigned or Mr. Maimoon Rasheed at 021-35311861-70/ 042-35723411 or fax to 021-35311872-3.

Javed Callea

VIS Entity Rating Criteria: Corporates (May 2019)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not 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.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2019 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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