PACRA Maintains Entity Ratings of Dr. Ziauddin Hospital Trust

The assigned ratings of Dr. Ziauddin Hospital Trust (“the Trust” or “ZHT”) reflect the prominent profile of the Trust in the private hospital industry of Pakistan. The Sindh Healthcare Commission is the regulatory body of the Trust. The Ziauddin group has a history spanning over six decades, beginning as a 25-bed maternity home in Nazimabad and gradually evolving into a healthcare institution with a capacity of 845 beds. The group has expanded their business diversity by venturing into the education field and establishing a university and education board. Three entities primarily operate under the Ziauddin group, including Ziauddin Hospital Trust, Ziauddin Memorial Hospital and Ziauddin University. ZHT focuses on ensuring sustainable organic growth in its business. To achieve this, it has optimally diversified its geographical presence and revenue streams across all income tiers of society. ZHT operates as a multispecialty hospital, providing 35 therapeutic services that augment its business sustainability profile and market presence. The Cyclotron project, designed for cancer diagnosis through the production of isotopes, is currently operational at a commercial level. Additionally, the strategic expansion of ZHT includes the completion of the Sukkur campus with a capacity of 180 beds and the addition of 43 beds on the 5th floor of the Clifton campus. These projects have started contributing to ZHT's topline and are expected to improve business volumes in the upcoming quarters. During FY24, ZHT generated revenue of PKR 9.64bln (FY23: PKR 7.96bln), reflecting a growth of 21.1% on a YoY basis, primarily driven by an increase in the number of patients treated annually and a moderate rise in treatment pricing. This aligns with the Trust's vision to provide healthcare services at affordable prices to the underprivileged segment of society. 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. The recruitment of highly qualified physicians and surgeons, along with the procurement of imported consumables, are the primary costs associated with the Trust's cost structure. During FY24, the gross margins remained largely intact; however, inflated finance costs and a surge in the tax burden impacted the net margins of ZHT. On a positive note, operating cash flow witnessed a significant improvement compared to the previous year, reflecting stronger cash generation capabilities and operational efficiency. 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 ZHT is considered moderate as they aptly manage their working capital requirement through short-term borrowings and internally generated cashflows. ZHT maintains a low-leveraged capital structure along with adequate coverages and cashflows. 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 and escalated energy requirements.
The ratings are dependent on the consistent 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, 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 is registered under section 16-A of the Sindh Trust Act 2020. The board consists of six members. Mr. Asim Hussain is the Chief Trustee and Chairman of the Ziauddin Group of Hospitals.