PACRA Assigns Initial Entity Ratings to Dr. Ziauddin Hospital Trust

The Dr. Ziauddin Hospital Trust (“the trust”, “the hospital” or ‘ZHT”) rating emanates from the strapping profile of the trust in the private hospital industry of Pakistan. Three entities primarily operate under the umbrella of the Ziauddin group, which includes Ziauddin Hospital Trust, Ziauddin Memorial Hospital and Ziauddin University. The group has expanded their business diversity by venturing into the education field and establishing university and education board. The hospitalization industry is highly fragmented and primarily dispensed into the public and private sectors. According to data published by the Health Economic Survey of Pakistan as of 2021, the public sector operators with a capacity of ~1,276 hospitals, accompanied by 282,383 registered doctors and 146,053 units of beds. The prime challenges specific to the private hospital industry are reputational risk followed by capacity and infrastructure development, ensuring the quality-of-care standards and managing the high cost of import coupled with escalated energy requirements. The ZHT is in process of installing solar plant to manage escalated energy cost risk. To ensure sustainable organic growth in business the trust has optimally diversified its geographical presence and revenue streams in all income tiers of society. The trust has generated a revenue of PKR 8.04bln during FY23(FY22: PKR 7.04bln) reflecting a growth of 14.2% YoY basis with a capacity of more than 600 beds. In terms of the number of patients treated branch-wise annually, the majority of the volume has been served in the North Nazimabad branch followed by Clifton and Kemari. During FY23, the margins of the ZHT showed a slight dip mainly on the back of expensive procurement of imported consumables coupled with the recruitment of highly qualified physicians and surgeons on the payroll and a consistent surge in policy rate. The ZHT has provided 32 different therapeutic services and currently is in the process of commencement of the Cyclotron project for the diagnoses of cancer through the production of isotopes and strategic expansion by the opening of the Sukkur campus which includes a capacity of 180 beds. The Board of the Trust is more of an advisory nature dominated by Medical Professionals and guides the management in the execution of multiple operations. The top-tier management of the hospital is highly qualified along with adequate delegation of authority matrix. The financial risk profile of the trust is considered moderate as they aptly manage their working capital requirement through short-term borrowings and internally generated cashflows. The trust has a low-leveraged capital structure along with moderate coverages and cashflows.
The ratings are dependent on the consistent sustainable growth in the top line while maintaining profitability matrix, coverages and cashflows at an optimal level. Going forward, adherence to the debt matrix at an adequate level is a prerequisite for assigned ratings. The prudent management of reputational risk and alignment of the financial projections with the performance of the trust remain critical for the ratings.

About the Entity
Dr. Ziauddin Hospital Trust (“the Trust” or “the Hospital” or "ZHT”) is registered under section 16-A of the Sindh Trust Act 2020, valid till April 2024, to be renewed as per Sindh Trust Act 2020. The board consists of six members, Mr. Asim Hussain (grandson of Dr. Ziauddin Ahmed) is the Chief Trustee and Chairman of the Ziauddin Group of Hospitals.