Over 300 pharma, healthcare companies eligible for new Covid loans: Crisil

Hospitals to gain most with up to 3.5% dip on cost of funds; may add half a million beds, says rating agency

As many as 354 CRISIL-rated companies, predominantly pharmaceutical firms and hospitals, with an aggregate bank exposure of Rs 40,000 crore will be eligible for Covid loans from lenders under RBI's liquidity facility.

 

Though pharmaceutical firms account for 68 per cent of rated bank exposure, hospitals (about 24 per cent of rated exposure) are likely to avail most of the funding available.

 

The borrowing cost of hospitals rated by CRISIL are 10.5-11 per cent. The new loans taken for expansion under this RBI scheme could be 300-350 basis points cheaper, leading to substantial interest savings for hospitals, CRISIL said a statement today.

 

Subodh Rai, Chief Ratings Officer, CRISIL Ratings, “increased availability of funds at low cost will incentivise hospitals to augment beds, oxygen storage, ICUs and critical medical equipment. Even if half of the funding available is used to add hospital beds through brownfield expansion, it will mean five lakh incremental beds, or 15-20 per cent of India’s current capacity.”

 

Reserve Bank of India will open Rs 50,000 liquidity window to banks under priority-sector lending to augment Covid-19 healthcare infrastructure.

 

In comparison, for entities in other health care related sectors such as pharmaceuticals, the capital requirements for enhancing production capacity of critical Covid-19 related drugs is not very high.

 

Further pharmaceutical companies, owing to their strong credit profiles and availability of export credit facilities, have a relatively lower average cost of borrowing (8.0-8.5%). Thus, the majority of pharmaceutical companies may not be keen to take on substantial debt under the RBI window to fund expansion.

 

While incentives under the liquidity window are attractive, hospital firms would carefully evaluate decisions considering sustainability of demand and availability of critical resources such as manpower and equipment.

 

Anuj Sethi, Senior Director, CRISIL Ratings, said augmenting healthcare infrastructure has challenges beyond capital requirements. Higher lead times for equipment and availability of qualified manpower are critical factors that can create bottlenecks. This is especially true for enhancing production of critical drugs such as Remdesivir, where the outlay to increase the production capacity of seventy million doses is only Rs 200-250 crore. But, the lead times for ordering and installation of machines exceed a year.

 

It is still early for healthcare players to evaluate their expansion plans. There will be more clarity once banks and lending institutions announce their policies for loans, and eligible firms decide on capital spends, rating agency added.