AN INSIGHT INTO INDIAN

HEALTHCARE SERVICES
Performance analysis of the industry on
financial & operational parameters
CONTENTS
1. EXECUTIVE SUMMARY
2. INTRODUCTION
3. KEY DEMAND DRIVERS
4. INDUSTRY OUTLOOK
5. INDUSTRY STRUCTURE
6. RESEARCH METHODOLOGY AND FINDINGS
7. DEAL ANALYSIS
a) PE Deals
b) M&As
c) Exits
8. CLINICS
a) Dental Clinics
b) IVF Clinics
c) Derma/Skin Care Clinics
d) General Clinics
9. HOME HEALTHCARE
10. SINGLE-SPECIALITY HOSPITALS
a) Maternity and Child Care
b) Eye Care
c) Cardiac
d) Oncology
e) Others
11. MULTI-SPECIALITY HOSPITALS
a) Secondary Care
b) Tertiary Care
(i) Tertiary Care multi-specialty hospitals with revenue less than INR 200
million
(ii) Tertiary Care multi-specialty hospitals with revenue between INR 200
million and INR 500 million
(iii) Tertiary Care multi-specialty hospitals with revenue between INR 500
million and INR 2 billion
(iv) Tertiary Care multi-specialty hospitals with revenue more than INR 2
billion
12. CONCLUSION
EXECUTIVE SUMMARY
The healthcare sector is slated to be close to USD 280 billion by 2020. The sector
consists of Pharmaceuticals, Diagnostics, Hospital/Clinics (Care Providers),
Medical Equipment and Lab Supplies, Medical Insurance and Health Tech. The
healthcare service providers segment (which include clinical establishments like
hospitals, clinics, nursing homes) is expected to contribute about 32-33% to the
sector’s revenue ($90 billion by size in 2020) and continue to grow at a similar rate
as the overall sector.

KEY DEMAND DRIVERS: Changing demographics, increasing lifestyle diseases,

increasing healthcare spend and penetration of health insurance are the four key
demand drivers which will propel the growth of this sector.

People belonging to age group above 60 is likely to double from 100 million to 200
million by 2025 is a key growth driver for the industry. Rapid globalization and
urbanization have increased the risk of non-communicable diseases (NCDs or
lifestyle diseases) like heart disease, diabetes, cancer, mental illness and respiratory
diseases. Per capita healthcare expenditure is currently at USD 90 and growing at
>12% per annum. Health Insurance penetration is still very low with only 1 in 5 people
covered by health insurance. Health insurance sector is growing at 22-25% per
annum leading to more people have access to private healthcare.

The report discusses the performance of various segments and sub segments of
private healthcare services as structured below:

Private Healthcare Services

Home
Clinics Single-Specialty Multi- Specialty
Healthcare
Maternity & Secondary Care
Dental Child Care

Eye Care Tertiary Care

IVF

Cardiac
Derma / Skin Care
Oncology
General Clinics
Others

3
 A total of 385 companies were analyzed based on the financials available in FY16.
The revenue of these 385 companies accounted for INR 360 billion. Overall segment
level analysis: An overview of the key financial performance indicators for the
different segments and sub-segments has been summarized in the table below.

Sum YoY
Sub Revenue Range No. of EBITDA PAT ROCE FATO
Category Revenue Growth
Category (INR) Companies (Median) (Median) (Median) (Days)
(INR mn) (Median)
Clinics Dental 12 1,640 49.1% -3.7% -15.73% -10.46% 166
Clinics IVF 12 3,010 26.8% 12.9% 6.33% 40.67% 124
Clinics Dermatology 10 3,260 42.2% 5.4% 0.33% 2.01% 112
Clinics General 13 3,640 34.5% -9.6% -31.70% -50.83% 211
Home Healthcare 11 1,010 57.9% -92.3% -116.64% -57.51% 105
Single-Specialty Maternity 18 8,260 15.8% 15.0% 3.89% 12.49% 246
Single-Specialty Eye-care 21 6,700 22.6% 17.3% 3.50% 8.83% 242
Single-Specialty Cardiac 11 7,540 8.2% 21.5% 4.33% 21.66% 149
Single-Specialty Oncology 9 7,450 30.1% 16.2% 0.21% 9.57% 295
Single-Specialty Others 19 9,550 16.6% 19.7% 7.08% 24.66% 215
Multi-Specialty Secondary >200 million 13 3,970 10.2% 15.5% 4.94% 24.77% 181
Multi-Specialty Secondary 0-200 million 79 6,400 13.8% 13.3% 2.90% 10.90% 181
Multi-Specialty Tertiary 0-200 million 31 2,580 12.4% 16.7% 3.64% 9.11% 184
Multi-Specialty Tertiary 200-500 million 40 13,280 12.8% 18.1% 4.56% 18.17% 208
Multi-Specialty Tertiary 500 million -2 billion 56 58,740 14.0% 13.6% 3.38% 12.79% 239
Multi-Specialty Tertiary >2 billion 30 2,23,890 11.3% 12.8% 3.18% 15.28% 224

The table gives a quick snapshot of the financial performance of mature businesses
like multi-specialty hospitals and some of the new age business models like clinics
(organized branded, single-specialty). While the mature businesses have good ROCE
and EBITDA with stable growth, the newer models like home healthcare and clinics
are still in the early stages of the lifecycle curve experiencing high growth at the cost
of EBITDA and ROCE.

Dental Clinics: A segment whose recent growth has been driven primarily by funded
companies is now in a consolidation phase which has already seen two acquisitions.
Also, the funded companies are now focusing on improving profitability as against
growth. Future growth of this industry will be driven by penetration of dentistry to the
bottom of the pyramid and increase in % of preventive care.

4
IVF Clinics: One of the few segments growing at over 20% and EBITDA above 10%.
Primary growth drivers for the segment is increase in infertility and medical tourism.
Cost of IVF treatment for infertility in India is one-fourth as compared to the
developed countries. The IVF Market is likely to grow annually at 16.6% for the next
5 years and IVF clinics are bound to benefit the most. It could get further boost from
medical tourism depending on the regulations surrounding surrogacy.

Dermatology Clinics: Dermatology clinics is a relatively new but fast emerging

segment in the healthcare sector. The segment has three categories of clinics:
haircare, skincare and cosmetic surgeries. Majority of the players in the segment
have their own personal care product range branded with the clinic’s name which
forms a good share of their overall revenue.

General Clinics: A fast growing but loss making segment due to focus on growth.
Major hospital brands are trying to establish in this segment so that it serves as a
feeder to their tertiary care hospitals. The segment has seen several investments
and few M&As as well. Branded clinics chain is relatively a new concept in India and
hence the investments are high. Chains with good tertiary hospital in their network
as either group company or seamless partner hospital are likely to succeed
compared to standalone chains.

Home Healthcare: Home healthcare can be defined as healthcare delivered at

doorsteps. It is a very small but growing segment and has been attracting a lot of
investments in the recent past. The segment was expected to do very well and hence
attracted very high investments in the past. However, the segment failed to be even
EBITDA positive.

Maternity Hospitals: This is a segment which has been carved out of multi-specialty
hospitals to separate illness from the happy occasion of child birth. While the
segment is growing profitably, organized chains seem to be more prominent in
South India. There is no single chain at the national level. Clearly, there is space for
growth amongst the existing chain for the national level. Also, high end maternity
hospitals are very local, limited to cities. There is scope for a chain of high end
hospital like Birthplace. The largest opportunity in the segment is branded chains at
a low price point catering to middle class families who now either go to small tertiary
care hospitals or standalone maternity centers.

5
Eye Hospitals: Eye-care segment’s growth is driven by the aging population and
changing lifestyle (like excessive usage of smart phone, computer and smart phone
at young age). Advanced technology offers various modern equipment for eye-care
procedures. However, the challenge for the eye-care providers is to ensure capacity
utilization of such expensive equipment. Some of the chains have created hub and
spoke operating model where smaller outlets or the spokes can take care of 90% of
the procedure and the hub or the mother hospital has the expensive equipment for
more intensive procedures. This ensures high utilization of expensive equipment.

Cardiac Hospitals: One of the oldest single specialty hospital segment, the segment
has not been growing much in the last few years and hence there has not been many
investments in the segment. Standalone cardiac hospitals are giving way to
multispecialty hospitals with great cardiac facility as patients prefer comprehensive
care.

Oncology Hospitals: The segment is growing profitably and has huge potential with
very few organized players. Clearly, there is room for more organized players like
HCG. Since this segment needs high level of investments and technical knowledge,
either international players can enter Indian markets or set up JVs with multi-
specialty hospitals in India.

Secondary Care Multi-Specialty Hospitals: Secondary care multi-specialty hospitals

are smaller hospitals with minimal procedural capabilities. This is not a very large
segment compared to tertiary care but still growing steadily at reasonable EBITDA.
There are no large chains in this segment and the largest of the company analysed
was just above INR 500 million revenue. Off late, new investments have happened in
chains of small 10-20 bedded hospitals with secondary care facilities. Seems like a
phenomenon more for tier 2 and tier 3 cities. Secondary care hospitals with good
general consultation clinics and a good network of tertiary care hospitals for major
procedure shall give customers a seamless experience and good reach for the
network as a secondary care hospital can be set up sooner with relatively lower
capital.

6
Tertiary care Multi-Specialty Hospitals: Compared to rest of the segments in
healthcare services, tertiary care hospitals is a much matured segment which is
evident from the lower EV/Revenue multiplier as focus is on profitability.

For companies with revenue over INR 2 billion, EBITDA is seen increasing with
growth rate peaking at a growth rate of 15-18% to an EBITDA of 25-26%. Any rate of
growth beyond 25% comes at the cost of EBITDA. It was observed that revenue per
bed decreases with bed capacity with two broad groups due to either factors of
lower occupation and higher duration of stay. Based on the data analysed, fixed
asset turnover days (FATO) of 200-220 days (annual asset turnover of 1.6-1.8) with
an ROCE of 18-20% seems to be a good hospital operations case. Challenge that
remains with hospitals is how they can ensure faster recovery and hence fast
discharge of patients so as to maintain lower nights per case to maximize the
revenue per bed.

(The report includes pointers on key players in the segment, firms who raised most
funding, major investors in the segment, major M&As, no. of deals and EVs in each of
the segments wherever data was available.)

Overall Deals Analysis:

The report analyses the investments in the segment in three buckets: PE/VC
investments, M&As and Exits.

PE Deals –

A clear peak in the number of deals and deal value during the 2012-14 periods, was
driven by a sudden surge in interest in the multi-specialty segment and good number
of small sized deals observed in clinics (newer segment for investments). In line with
the sudden surge in the number of deals and the deal value, 2012-14 has also seen
companies get the best EV/Income multipliers, showing the rising interest of the
investment fraternity in the industry during that period. The period from 2012-14 also
saw interest from PE funds in new age business models like clinics (multi and
single), home healthcare and a few single-specialty hospitals.

7
 Clinics Home Healthcare Single-specialty Multi-specialty

2017
2016
2015
2014
2013
Year

2012
2011
2010
2009
2008
0 100 200 300 400 500 600 700
Value of Deals (USD milion)

Figure 1: Segment wise breakdown of deal numbers

Year Groups Median EV/Income Number of Deals

<=2007 11.4 23
2008-11 7.9 40
2012-14 9.3 74
2015 5.4 19
2016-17 6.8 14

Figure 2: Median EV/Income through the years

Deal Size Groups (USD million) Median EV/Income Number of Deals

<0.5 11.8 21
0.5-2.5 16.9 15
2.5-10 8.2 31
10-50 6.4 44
>50 9.1 59

Figure 3: Median EV/Income for different deal sizes

8
 Clinics Home Healthcare Single-specialty Multi-specialty

>50 USD million

10-50 USD million

Deal Size range

2.5-10 USD million

0.5-2.5 USD million

<0.5 USD million

0 10 20 30 40 50 60 70 80 90
Number of Deals

Figure 1: Deal sizes by segment

(Similar analysis were done on M&A and Exits which is in the full report)

9
INTRODUCTION
The healthcare sector was a USD 100 billion sector in 2015 and is slated to be close
to USD 280 billion by 20201. The sector consists of Pharmaceuticals, Diagnostics,
Hospital/Clinics (Care Providers), Medical Equipment and Lab Supplies, Medical
Insurance and Health Tech.

The healthcare service providers segment (which include clinical establishments

like hospitals, clinics, nursing homes) is expected to contribute about 32-33% to
the sector’s revenue ($90 billion by size in 2020 1,2,3,4) and continue to grow at a
similar rate as the overall sector.

10
KEY DEMAND DRIVERS
The demand for healthcare service providers has been on the rise and growing
consistently at over 17-18% 1 over the last few years. The good companies have
managed to consistently grow at 25-30%. Growth is expected to continue or
probably even increase over the next 7-10 years. This strong growth in the sector
is being driven by multiple factors – some macroeconomic, some technological,
some policy driven and some because of the changing face of the healthcare
sector.

Some of the key demand drivers for healthcare providers going forward are as
follows –

a. The demographics are changing – 8.3% of the population today is above 60

years of age, and this is expected to become 12.5% by 2025 1 ,5,6. This will mean
an elderly population of about 200 million from a current 100 million. Also with
improvements in medicine and procedures, the average life expectancy has
gone up from 62 years in 2000 to 68 year as on date. All this has meant an
aging population will drive more need for healthcare services.

b. There is a significant shift in the occurrence of diseases from the

communicable ones to the non-communicable (NCDs or lifestyle diseases),
especially in urban India. Rapid globalization and urbanization have increased
the risk of NCDs like heart disease, diabetes, cancer, mental illness and
respiratory diseases. There are three main triggers – unhealthy diet, physical
inactivity and tobacco & alcohol abuse. Also with the elimination/reduction of
some infectious diseases like polio, malaria etc. over the years, the nature of
care will also change.

c. Growth in per capita income – Income levels are growing annually at 7.5% and
will be USD 2,200 by 2018 5,6; this is >4x growth in the income levels seen at the
turn of the century. This has meant an increase in per capita health care
expenditure at USD 90 and growing at >12% per annum. 5,6

d. Increasing penetration of health insurance – 62% of total medical expenses

borne is out-of-pocket even today, which is down from the 80% levels in 2010
1,5,6
. Insurance penetration is still very low with only 1 in 5 people covered by
health insurance. But with this sector growing at 22-25% CAGR 1 for over the

11
 last 10 years and with support from the policymakers, the sector will continue
to grow ensuring more people have access to private healthcare.

e. Expansion of private sector to Tier 2 and 3, aided by government policy backing

is playing a major role in healthcare accessibility beyond metros. Further focus
on profitable business models will help drive healthcare services growth.

f. Growth in mobile telephony, telecom and technology amongst masses have

helped drive health technology, home healthcare and other new age
businesses.

12
OVERALL OUTLOOK
With a good outlook for the healthcare services sector, there are certainly a few
obstacles or bottlenecks that may potentially affect growth. The chief among
these is the availability of quality man-power – both in terms of doctors and
support staff (nurses, ward boys etc.)
Currently a constant shortage of the above, especially doctors, has led to a
burgeoning informal healthcare sector, especially in the smaller towns. The
government will need to strengthen policy to ensure crackdown on the informal
sector, while also invest more to help develop skills to serve the healthcare
services sector. This shortage of skilled support staff has led to a number of
private players investing in skill building schools (nursing schools). Though this is
a good thing, there is a need for ensuring and standardizing the quality of people
coming from these private institutions.
Another aspect of healthcare very unique to India is the low penetration of health
insurance. Though penetration has been increasing steadily over the last few years
because of opening up of the sector for private foreign players, the accessibility of
such insurance policies will continue to remain low for the majority (65% of
population live in rural India who are dependent on farming and unorganized
sectors). This again is an area of concern that the government will need to address
for continued growth of the healthcare services sector. The government has
already started taking steps in this direction by announcing the Universal Health
Coverage plan.
Private investments in research – to help develop medicines and technology
specific to Indian context and diseases are very important. That said, the
government has an equally important role to play in terms of creating sufficient
skilled man-power to participate in quality research, creating strong IP protection
laws and providing the right incentives for these companies to invest in research
in India.
The ability of the private sector and the government to work together to overcome
these obstacles will define the growth of the healthcare services sector over the
next few years.

___________________________________________________________________

1. IBEF Healthcare Aug-2015 Report

2. https://www.ibef.org/industry/pharmaceutical-india.aspx
3. http://businessworld.in/article/Aggregating-The-Fragmented-Diagnostic-Sector-In-India/09-05-2016-97780/
4. http://www.skpgroup.com/data/resource/skp_the_medical_device_industry_in_india_.pdf
5. OPPI Publications – Healthcare in India
6. India Healthcare – Inspiring Possibilities and Challenging Journey – Mckinsey and Co

13
 HEALTHCARE INDUSTRY STRUCTURE
Healthcare Services

Private Healthcare
Public Healthcare Services
Services (Organized/Formal)

Central
Institutions – E.g. Army Clinics
Government – State Government – E.g. BMC
Hospitals
E.g. AIIMS

Home
Sub-Centres Healthcare

Primary Health Single-

Centres (PHC) Specialty

Community Health
(CHC) Multi-
Specialty
District + Sub-division
Hospitals

Private Healthcare Services

Home
Clinics Single-Specialty Multi- Specialty
Healthcare
Maternity & Child Secondary Care
Dental Care

Eye Care Tertiary Care

IVF

Cardiac
Derma / Skin Care
Oncology
General Clinics
Others

The segmentation of the industry exercise was undertaken taking care to ensure
only similar companies are compared. For e.g. a clinic segment is very different

14
from a super-specialty in terms of fixed assets, man power, business model,
growth plans and patient needs. Hence, to compare the financials for a clinic with
that of a single-specialty hospital and draw conclusion would be very wrong.

Segmentation was done through secondary research and expert interviews

(industry veterans, doctors). The various segments mentioned under the private
healthcare services include –

1. Clinics – only out-patient/day-care procedures possible in these locations

2. Home Healthcare – some of the services like nursing and care that are being
provided at home or on-demand (new age model)
3. Single/Super-Speciality – cater to only one type of ailment or disease and have
the capability to provide tertiary/quaternary care when required.
4. Multi-Speciality – most predominantly present across India, these facilities
have IPD and OPD for a range of diseases/ailments. They can vary from simple
secondary care, to having tertiary care for various diseases.

Every company which is part of the data set or analysed has been classified into
one of the above segments and then into a second level sub-segment. Financial
and operational analysis has been done after the extensive classification exercise.

Total Revenue (under

Segment Name Number of Companies
consideration) – in INR million
Clinics 47 11,550
Home Healthcare 11 1,010
Single-Specialty 78 39,500
Multi-Specialty 249 308,860

15
 RESEARCH DATA SET AND
METHODOLOGY
1. A total of 500+ private held companies were a part of the data set used for
analysis
2. Segmentation of the companies, their financial analysis, and the conclusions
or finding from the various analyses was obtained via a combination of –
i. Secondary Research
ii. VCCEdge Database (for data)
iii. Expert interviews and discussion
iv. Management interviews/Primaries
3. All analyses have been done by our in-house analysts and have been vetted by
industry experts
4. Only private companies that have filed with ROC in FY16 or FY15 have been
considered. Also, only companies where the total income for the year is greater
than INR 2.0 million have been considered; there are a total of 385 such
companies

Sum YoY
Sub Revenue Range No. of EBITDA PAT ROCE FATO
Category Revenue Growth
Category (INR) Companies (Median) (Median) (Median) (Days)
(INR mn) (Median)
Clinics Dental 12 1,640 49.1% -3.7% -15.73% -10.46% 166
Clinics IVF 12 3,010 26.8% 12.9% 6.33% 40.67% 124
Clinics Dermatology 10 3,260 42.2% 5.4% 0.33% 2.01% 112
Clinics General 13 3,640 34.5% -9.6% -31.70% -50.83% 211
Home Healthcare 11 1,010 57.9% -92.3% -116.64% -57.51% 105
Single-Specialty Maternity 18 8,260 15.8% 15.0% 3.89% 12.49% 246
Single-Specialty Eye-care 21 6,700 22.6% 17.3% 3.50% 8.83% 242
Single-Specialty Cardiac 11 7,540 8.2% 21.5% 4.33% 21.66% 149
Single-Specialty Oncology 9 7,450 30.1% 16.2% 0.21% 9.57% 295
Single-Specialty Others 19 9,550 16.6% 19.7% 7.08% 24.66% 215
Multi-Specialty Secondary >200 million 13 3,970 10.2% 15.5% 4.94% 24.77% 181
Multi-Specialty Secondary 0-200 million 79 6,400 13.8% 13.3% 2.90% 10.90% 181
Multi-Specialty Tertiary 0-200 million 31 2,580 12.4% 16.7% 3.64% 9.11% 184
Multi-Specialty Tertiary 200-500 million 40 13,280 12.8% 18.1% 4.56% 18.17% 208
Multi-Specialty Tertiary 500 million -2 billion 56 58,740 14.0% 13.6% 3.38% 12.79% 239
Multi-Specialty Tertiary >2 billion 30 2,23,890 11.3% 12.8% 3.18% 15.28% 224

16
THE FINDINGS
Overall segment level analysis: An overview of the key financial performance
indicators for the different segments and sub-segments has been summarized in
the table on previous page.

The table gives a quick snapshot of the financial performance of mature

businesses like multi-specialty hospitals and some of the new age business
models like home healthcare and single-specialty hospitals. While the mature
businesses have good ROCE and EBITDA with stable growth, the newer models like
home healthcare and clinics are still in the early stages of the lifecycle curve
experiencing heady growth at the cost of EBITDA and ROCE.

A good part of the growth that the industry per se has experienced, especially the
new age businesses, has been due to funds infused into this sector by Private
Equity players. The report going forward will get into details of each of the above
segment’s financial performance and a discussion on how individual companies
constituting the sector have performed on various financial and operational
parameters. We will also try to throw some light on the various business models in
the segment/sub-segment (rental vs owned facility, commission vs salary
specialists).

17
DEAL ANALYSIS
Deals have been clubbed into 3 major buckets – PE/VC investments, M&As and
Exits. Key points to note –

a) PE Deals

800 35
Value of Deals (USD Million)

700 30
600 25

Number of Deals
500
20
400
15
300
200 10

100 5
0 0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Year

Deal Value # of Deals

Figure 2: PE deal flows in the sector

Clinics Home Healthcare Single-specialty Multi-specialty

2016
2014
Year

2012
2010
2008
0 100 200 300 400 500 600 700

Value of Deals (USD milion)

Figure 3: Segment wise breakdown of deal numbers

Year Groups Median EV/Income Number of Deals

18
 <=2007 11.4 23
2008-11 7.9 40
2012-14 9.3 74
2015 5.4 19
2016-17 6.8 14

Figure 4: Median EV/Income through the years

Clinics Home Healthcare Single-specialty Multi-specialty

>50 USD million

Deal Size range

10-50 USD million

2.5-10 USD million
0.5-2.5 USD million
<0.5 USD million

0 10 20 30 40 50 60 70 80 90
Number of Deals

Figure 5: Deal sizes by segment

Deal Size Groups (USD million) Median EV/Income Number of Deals

<0.5 11.8 21
0.5-2.5 16.9 15
2.5-10 8.2 31
10-50 6.4 44
>50 9.1 59

Figure 6: Median EV/Income for different deal sizes

A clear peak is observed in the number of deals during the 2012-14 periods, where
the total deal value has also surged. This peaking in total deal value has been
driven by a sudden surge in interest in the multi-specialty segment, but there have
also been a number of small sized deals observed in clinics (newer segment for
investments). In line with the sudden surge in the number of deals and the deal
value, 2012-14 has also seen companies get the best EV/Income multipliers,
showing the rising interest of the investment fraternity in the industry during that

19
 period. The period from 2012-14 also saw interest from PE funds in new age
business models like clinics (multi and single), home healthcare and a few single-
specialty hospitals.

There is also a clear trend in the way EV/Income changes with the size of deals.
Smaller deals typically seem to get higher EV/Income. This is probably because a
lot of the smaller sized deals happen in new-age business segments like clinics
and home healthcare (early stage investments) as seen in chart 4.

b) M&As

Increased M&A activity is a clear indicator of maturity in an industry.

Total Value of M&A # of Deals

700 16
14
Value of Deals (USD million)

600
500 12

Number of Deals
10
400
8
300
6
200 4
100 2
- -
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Year of Deal

A lot of M&A activity was seen during the 2012-14 period, with a large majority
being driven by the multi-specialty segment. Within the multi-specialty segment,
the activity seems to be driven by large hospital chains (like Apollo and Fortis)
buying smaller secondary/tertiary standalone facilities in the cities and smaller
towns.

20
 Clinics Home Healthcare Single-specialty Multi-specialty

2016-17
2015
Year of Deal

2012-14
2008-11
<=2007

- 100.00 200.00 300.00 400.00 500.00 600.00 700.00

Deal Value (in USD million)

Year Groups Median EV/Income Number of Deals

<=2007 4.8 6
2008-11 5.1 3
2012-14 4.6 12
2015 5.1 6
2016-17 2.1 2

Over the years, multi-specialty has been the focus of healthcare M&As, but clinics
(especially IVF and Dental) have seen a few M&A activities in the recent years.
Unlike the PE deals, M&A deals EV/Income multiplier has stayed more less range
bound and steady (about 4-5X the income) and typically lower than the PE deals
EV/Income. This stability in EV/Income multiple across the years, with consistently
lower valuations is an indicator of the fact that M&A investments to a large extent
are value driven investments, which may not necessarily be the case in PE
investments.

21
 Clinics Home Healthcare Single-specialty Multi-specialty

>50 USD million

10-50 USD million

Size of Deal

2.5-10 USD million

0.5-2.5 USD million

<0.5 USD million

- 5.00 10.00 15.00 20.00 25.00 30.00

Number of Deals

Deal Size Groups (USD Million) Median EV/Income Number of Deals

<0.5 1.5 3
0.5-2.5 7.4 5
2.5-10 3.9 3
10-50 4.6 8
>50 5.1 10

A lot of M&A activity is seen in the $2.5-10 million deal value bracket, with a
majority of the deals happening in the multi-specialty space. Many of these M&As
are 100% buy-outs by larger chains of 50-100 bed hospitals that are doing well in
a particular city/region.

22
 c) Exits

Exits in this industry have typically happened via multiple avenues for an investor
– IPO, buy-back or even a secondary sale (to a bigger investor)

Exits Buy-Back IPO M&A Open Market Secondary Sale

Number of Number of Number of Number of Number of Number of Number of Number of Number of Number of
Investor Deals Investor Deals Investor Deals Investor Deals Investor Deals
Clinics 1 1 - - 2 2 - - 3 1
Single-Specialty 1 1 3 1 - - 1 1 7 7
Multi-Specialty 4 4 2 1 7 6 10 9 9 8

Only two companies have seen an IPO in the data set we have considered –
Narayana - Hryudayalaya and Healthcare Global (total investors who have exited
are 5). Multiple exits have happened mostly through the open market sale (for
investors invested in listed companies like Fortis, Apollo) or via the secondary sale
to a larger investor. As expected, the more mature multi-specialty segment has
seen the major number of exits happen.

Clinics Single-specialty Multi-speciality

2016-17

2015
Year of Deal

2012-14

2008-11

<=2007

- 100 200 300 400 500 600 700 800

Deal Value

There is a definite peaking in the number of exits that have happened during the
bullish years of 2012-15. A majority of the exits have happened in the multi-
specialty segment and have happened via secondary sale, i.e., a number of smaller
investors got good exits by selling to larger PE’s in this period when EV/Income
multiples (valuations) were generally higher. This is seen by the subsequent chart
(that excludes exit via secondary sale) – though the trend across years has

23
remained similar, the overall investment values (and number of deals) have both
reduced by 40%

A large number of exits have happened in the exit value range of $10-50 million.
This is significantly higher (the deal range) than both PE investments (peak deal
range is $0.5-2.5 million) and M&A (peak deal range is $2.5-10 million)

Clinics Single-specialty Multi-speciality

>50 USD million

10-50 USD million

Size of Deal

2.5-10 USD million

0.5-2.5 USD million

<0.5 USD million

- 5.00 10.00 15.00 20.00 25.00 30.00

Number of Deals

24
CLINICS

25
a) Dental Clinics

Dental clinics is one of the fastest growing segments in the healthcare industry,
the primary driver behind the revenue growth being increasing awareness. While
the 12 sample companies analysed had a stunning median growth of 49% in FY16,
they also had poor median EBITDA of -4%. The factors driving negative EBITDA are
high marketing expenses and opening of new outlets which are yet to break even.
However, most of the companies confirmed that they have broken even in FY17
and will be making positive PBT in FY18. FY17 happened to be the year when most
of the chains focused on profit than on growth.

Median - YoY Income - 49%; EBITDA - (4%)

50% Partha Dental
S J Healthcare
Axiss South 55%, 18%, 204 INR mn
25%, 13%, 219 INR mn)
-7%, 5%, 136 INR mn
Vanamo Care
66%, 13%, 35 INR mn
0%
-20% 0% 20% 40% 60% 80% 100% 120% 140% Median EBITDA
Axiss Dental
14%, -27%, 129 INR mn YoY Growth
-50%
Total Dental
19%, -33%, 501 INR mn Today's Healthcare
44%, -64%, 165 INR mn
EBITDA %

-100%

-150%

Star Dental
117%, -211%, 158 INR mn
-200%

-250% Median YoY Growth %

There are three major categories of dental chains in the pool analysed:

1. Premium players like Dentzz (SJ Healthcare) who cater to HNIs and medical
tourists. While the EBITDA of 13% is comparable to few other profitable chains,
the ROCE of 60% is way above the rest of the chains. With just 6 clinics, average
revenue per clinic per month of Dentzz is estimated to be over INR 30 lakhs
(based on FY16 revenue).

2. Large chains like Sabkadentist, Clove Dental and Axiss who focus on the crowd
in the metros and tier 1 cities. That is a crowded market with players competing

26
 for the same set of customers. Most of the chains have been growing rapidly
by acquiring existing practices. These chains make an average revenue of INR
3 - 5 lakhs per clinic per month which is also the breakeven revenue for a typical
clinic in a metro city. The biggest challenge for these chains is to achieve this
revenue in every clinic while maintaining reach for customer within 3 - 5 kms.

3. Regional players like Partha and Finefeather (Vanamo) from Andhra and
Gujarat respectively. Both are profitable and growing.

Another category is dentistry at doorsteps. The pioneer in this category is

Bangalore based Mobident which has grown close to 400% in FY16 compared to
FY15. According to Mobident’s team, any business where real estate is a major
cost driver is likely to undergo major change to reduce the real estate component
of the cost.

Total Income
Name Trade Name YoY Growth PAT %
(INR Million)
Total Dental Care Pvt. Ltd Sabkadentist 501 19% -45%
S J Healthcare Pvt. Ltd Dentzz 219 25% 6%
Partha Dental Care India Pvt. Ltd 204 55% 7%
Today's Healthcare India Pvt. Ltd Clove-Dentys 165 44% -71%
Star Dental Centre Pvt. Ltd Clove 158 117% -228%
Axiss Dental South Pvt. Ltd Axiss 136 -7% -10%
Axiss Dental Pvt. Ltd Axiss 129 14% -39%
Signature Smiles Dental Clinic Pvt.
Signature Smiles 70 30% -2%
Ltd
Vanamo Care Pvt. Ltd Finefeather 35 66% 0%
Doux Dentistry Pvt. Ltd Mobident 13 384% -21%
Smilechain Panacea India Pvt. Ltd Smilekraft 9 54% 2%
Free 3 Health Care Services Pvt. Ltd Smile Merchant 8 92% -48%

Investments and M&As

The segment saw peak investments in the initial years of 2011 to 2015. Based on
the available data, total investments (PE and M&As) in the segment is estimated
to be around USD 43 million with a median revenue multiplier of 11.45.

27
SabkaDentist (Total Dental Care Pvt. Ltd.) has attracted the most funding (USD 19
million) followed by Axiss Dental (USD 9.46 million).

Industry consolidation started from the year 2013 when Axiss Dental acquired NH
Dental to establish their presence in the South. The latest acquisition being in 2017
when Star Dental (Clove) acquired Todays Healthcare (Dentys).

Future Outlook

While the industry is consolidating and the major players are focusing on profit
more than growth, there is no denial that India’s dental market is quite untapped.
Future growth shall be driven by the following levers:

1. More standalone clinics merging with branded chains

2. Penetration of dentistry to the bottom of the pyramid
3. Increase in % of preventive care

28
b) IVF Clinics

IVF clinics is one of the few healthcare provider segments which is growing over
20% per annum and has EBITDA of over 10%. The other two segments meeting the
two criteria are Eye-care and Oncology.

The IVF industry in India was estimated to be around INR 20 billion7 in FY16.
Treatment is delivered through multi-specialty hospitals (both tertiary and
secondary), maternity hospitals and IVF clinics. The sample of 12 entities analysed
have a cumulative turnover of close to INR 3 billion with a median revenue growth
of 26.8% and median EBITDA of 12.9%. The sample’s median PAT is 6.3% and fixed
asset turnover of 123 days.

50% Median YoY Growth % Median - YoY Income -

Prashanth 27%; EBITDA - 13%
40% 12%, 29%,
935 INR mn Sadguru
30% 71%, 27%,
GBR
46%, 15%, 175 INR mn
20% 51 INR mn Median EBITDA
EBITDA %

10% Rotunda
104%, 11%, 69 INR mn
0%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 110%
-10%
Morpheus Life Sciences YoY Growth
-20% 28%, -21%, 94 INR mn

-30% Nova Pulse

42%, -32%,
-40% 1,033 INR mn

Nova pulse IVF Clinic Pvt. Ltd. is the largest player in the segment with INR 1,030
million turnover in FY16 and growing at 42% in FY16 over FY15. However, it is still
in negative EBITDA. Of the samples analysed, Prashant Fertility Research Centre is
the most profitable with INR 930 million revenue and 29% EBITDA though growing
only at 12% which is below median. Sadguru is a relatively smaller venture with INR
170 million turnover but growing at 71% and EBITDA of 27%, both of which is way
above the median of the sample.

29
 Total Income YoY
Name EBITDA % PAT %
(INR million) Growth
Nova Pulse IVF Clinic Pvt. Ltd 1,033 42% -32% -50%
Prashanth Fertility Research Center Pvt. Ltd 935 12% 29% 12%
Ankur Healthcare Pvt. Ltd 316 5% -6% -13%
Sadguru Healthcare Services Pvt. Ltd 175 71% 27% 14%
N. G. Industries Ltd 169 10% 18% 9%
Nova Medical Centers Pvt. Ltd 132 -84% 71% 65%
Morpheus Life Sciences Pvt. Ltd 94 28% -21% -51%
Rotunda Center For Human Reproduction Pvt. Ltd 69 104% 11% 7%
GBR Clinic and Fertility Centre Pvt. Ltd 51 46% 15% 3%
Shrikhande Hospital and Research Centre Pvt. Ltd 23 25% 45% 18%
Ganesh Test Tube Baby Centre Pvt. Ltd 9 30% 6% 1%
Sunflower Hospital Pvt. Ltd 8 3% 9% 6%

Rise in the incidence of obesity, stress, and delayed pregnancies are leading to
increased infertility. In addition, the cost of IVF services in India is very low as
compared to other developed countries. India is becoming a preferred destination
for medical tourism owing to low service cost and availability of skilled work force.
According to the Government of India’s Medical Tourism Department, cost of IVF
treatment for infertility in India is one-fourth as compared to the developed
countries.

Investments and M&A

The segment has had relatively lesser investment activities compared to others.
Nova Medical Centers Pvt Ltd. attracted the most funding of USD 75 million,
followed by Ankur Healthcare (USD 7.32 million) and Sadguru Healthcare Services
Pvt. Ltd. (USD 5.95 million). Based on the data available, median EV/Income for
the segment is 26 which is primarily driven by high valuation of Nova in the past
(ranging from 20 to 58).

The one significant M&A in the segment is Manipal Health Enterprises investment
of USD 7.32 million for a 51% stake in Ankur Healthcare Pvt. Ltd at an EV/Income
multiple of 5.33 and a whopping EV/EBITDA of 21.

30
Future Outlook

The IVF Market is likely to grow annually at 16.6%7 for the next 5 years and IVF
clinics are bound to benefit the most. It could get further boost from medical
tourism depending on the regulations surrounding surrogacy.

31
 http://www.business-standard.com/content/b2b-pharma/ivf-market-in-india-to-
reach-775-million-by-2022-117050200507_1.html

c) Derma/Skin-care Clinics

Dermatology clinics is a relatively new but fast emerging segment in the healthcare
sector. The segment has three categories of clinics: haircare, skincare and
cosmetic surgeries. Majority of the players in the segment have their own personal
care product range branded with the clinic’s name and form a good share of their
overall revenue.

The sample of 9 entities analyzed had a cumulative turnover of INR 2,200 million
with a median revenue growth of 43.7% and a median EBITDA of 4.4%. The
sample’s median PAT was 0.4% and fixed asset turnover of 112 days.

Median YoY Median - YoY Income- 44%; EBITDA- 4%

Richfeel Growth %
30%
21%, 20%, 1,124 INR mn

20% Dr.Anjali
Dr. Tvacha 195%, 8%,
181%, 8%, 44 INR mn 19 INR mn
10% Median EBITDA

0%
EBITDA %

-15% 10% 35% 60% 85% 110% 135% 160% 185%

-10% YoY Growth
Sreyas Holistic Remedies
-20% 71%, -10%, 163 INR mn

-30% Enhance Aesthetic and

Cosmetic Studio
-40% 54%, -27%, 308 INR mn

-50%

-60%

Richfeel Health and Beauty Pvt Ltd is the largest by revenue amongst the pool of
companies analysed. The 30-year old firm clocked a turnover of INR 1,120 million
in FY16. It is primarily a hair treatment clinic but also has its own range of personal
care products and spa treatment services. Present in 28 cities with a total of 81
clinics, they are funded by Brand Equity Treaty and Fulcurm India Venture Fund.

32
Dr. Anjali Shere Hair Science Pvt. Ltd registered the highest growth of 195% in
FY16. It is a 13-year-old hair transplant company using robotics extensively. They
have clinics in Mumbai, Pune and Kolhapur. Dr. Tvacha Pvt Ltd. registered the
second highest growth of 181% in FY16. It is a 5-year-old company into laser
cosmetic surgery services only in Mumbai with 8 branches. Brand Equity Treaty
has invested in them very recently.

Total Income
Name YoY Growth EBITDA % PAT%
(INR million)
Richfeel Health and Beauty Pvt. Ltd 1,124 21% 20% 4%

Advanced Hair Studio Pvt. Ltd 446 2% 4% 0%

Enhance Aesthetic and Cosmetic
308 54% -27% -34%
Studio Pvt. Ltd
Sreyas Holistic Remedies Pvt. Ltd 163 71% -10% -24%

B Lab Pvt. Ltd 62 41% -48% -50%

Dr. Tvacha Pvt. Ltd 44 181% 8% 0%

Monarch Health Services Ltd 26 -17% 21% 3%

Dr.Anjali Shere Hair Science Pvt. Ltd 19 195% 8% 4%

Sareen Hair Clinic Pvt. Ltd 13 44% 2% 1%

Future Outlook

The segment is a blend of skincare clinics, haircare clinics, cosmetic surgery

services and clinic branded beauty products. While there are not enough data
points to substantiate, this segment is likely to grow (already growing at 40%) but
it is to be seen if a pan country brand emerges in the segment.

33
d) General Clinics

General clinics is another fast growing segment in the healthcare sector. The
sample of 13 entities analyzed had a cumulative turnover of close to INR 3,640
million with a median revenue growth of 34.5% and a median EBITDA of -9.6%. The
sample’s median PAT is -34%% and fixed asset turnover of 211 days.

Median YoY Median - YoY Income - 34%; EBITDA - (10%)

Growth %
75%

Condis India
7%, 45%, 121 INR mn Ramakrishna
25% 75%, 6%, 344 INR mn
White Cross
171%, 1%, 34 INR mn

-100% 0% 100% 200% 300% 400% 500%

-25% Median EBITDA
YoY Growth
Apollo Health and Lifestyle
21%, -6%, 1,347 INR mn
EBITDA %

-75%
Apollo Specialty Hospitals
506%, -57%, 1,245 INR mn

-125%
Wellspring Healthcare
109%, -164%, 277 INR mn

-175%

Apollo Health and Lifestyle is the clinics division of Apollo. Apollo Clinics is the
largest of the organized chains with INR 1,240 million revenue in FY16, growth of
21% over FY15 and EBITDA of -6%. The second largest chain Apollo Specialty
Hospitals who operate a chain of day care centres under the brand name of Apollo
Spectra is a 100% subsidiary of Apollo Clinics. It is the erstwhile Nova Super
Specialty Hospitals. Apollo Health and Lifestyle Ltd bought the Nova entity for USD
21.25 million in the year 2015. Wellspring Healthcare (brand Health Spring) is a
fast growing chain of clinics cum home healthcare provider. It had grown at the
rate of 109% in FY16 over FY15.

34
 Total Income
Name YoY Growth EBITDA % PAT %
(INR million)
Apollo Health and Lifestyle Ltd 1,347 21% -6% 14%
Apollo Specialty Hospitals Pvt. Ltd 1,245 506% -57% -92%
Ramakrishna Hospitals Pvt. Ltd 344 75% 6% 0%
Wellspring Healthcare Pvt. Ltd 277 109% -164% -178%
Condis India Healthcare Ltd 121 7% 45% 44%
Manappuram Health Care Ltd 95 34% -10% -29%
Trinity Sunrise Health Care Pvt. Ltd 70 3% -19% -32%
Modern Family Doctor Pvt. Ltd 68 23% -92% -81%
White Cross Health Initiatives Pvt. Ltd 34 171% 1% 0%
Suvitas Holistic Healthcare Pvt. Ltd 23 - -113% -139%
Nova Medical Centers NCR Region Pvt. Ltd 14 -93% 65% 65%

WhiteCross clinics is a new model which is asset light by delivering services at

“Employer Sponsored Private Clinics”. A Bangalore based chain, having very basic
services including diagnostic, pharmacy, the chain has grown at 171% in FY16 over
FY15 and is EBITDA positive. It will be interesting to see how the chain scales up
in future.

Investments and M&A

Two major investors in this segment are International Finance Corporation (USD
68 million) and Columbia Pacific Advisors LLC (USD 41 million) in Apollo Clinics
and Wellspring respectively. The segment attracted total funding of USD 147
million based on the 12 deals analysed, which included 2 M&As. The median
valuation for the 12 deals is 26 times revenue though M&A had a valuation of only
6.5 times revenue.

Apollo Clinics attracted the most funding (total of USD 72 million) followed by
Wellspring (total of USD 45 million).

Future Outlook

35
 Branded clinics chain is relatively a new concept in India and hence the
investments are high. However, chains with good tertiary hospital in their network
as either group company or seamless partner hospital are likely to succeed
compared to standalone chains. The clinics are likely to be the spokes of the
hospital for more detailed procedures

HOME HEALTHCARE

36
HOME HEALTHCARE
Home healthcare can be defined as healthcare delivered at doorsteps. It is a very
small but growing segment and has been attracting a lot of investments in the
recent past. The sample of 11 entities analyzed had a cumulative turnover of close
to INR 1 billion with a median revenue growth of 58% and a median EBITDA of -
92%. The sample’s median PAT is -117% and fixed asset turnover of 105 days.

Median - YoY Income - 58%; EBITDA - (92%)

Saarathi Healthcare
Median YoY
75% 103%, 19%, 190 INR mn
Growth %

25%

-25%
-10% 10% 30% 50% 70% 90% 110% 130% 150% 170% 190%
YoY Growth
-75% Median EBITDA
EBITDA %

Healthcare at Home
-125%
23%, -76%, 170 INR mn

-175%
Medwell Ventures
-225% 185%, -253%, 102 INR mn

-275% Healthvista
150%, -276%, 425 INR mn
-325%

Healthvista India Pvt. Ltd (brand name Portea) is the largest in this segment with
INR 420 million revenue in FY16 with a growth of 150% over the previous year.
However, the EBITDA was -292%. Medwell Ventures (Nightingale Home Health
Services) is the fastest growing of the lot with 185% growth in FY 16. The pick of
the lot is Saarathi Healthcare who not only grew at 100% in FY 16 but also had a
positive EBITDA of 19%.

37
 Total Income
Name YoY Growth EBITDA % PAT %
(INR million)
Healthvista India Pvt. Ltd 425 150% -276% -290%
Saarathi Healthcare Pvt. Ltd 190 103% 19% 12%
Health Care at Home India Pvt. Ltd 170 23% -76% -98%
Medwell Ventures Pvt. Ltd 102 185% -253% -270%
India Home Health Care Pvt. Ltd 70 58% -5% -6%
Tribeca Care Pvt. Ltd 18 16% -30% -35%
Meta Wellness Pvt. Ltd 8 41% -16% -17%
Homital Medcare Pvt. Ltd 7 45% -92% -117%
Aegis Care Advisors Pvt. Ltd 7 46% -914% -921%
Zoctr Health Pvt. Ltd 6 3378% -452% -459%
Indicare Health Services Pvt. Ltd 3 1317% -222% -225%

Investments and M&A

While there are records for a total of USD 51 million having been invested in this
segment, majority of the deals don’t have information on % stakes sought and
hence making it difficult to establish EV/Income ratio with the limited data points.
The data analysed does not include money invested in Medwell Ventures.

Accel India has invested the highest in this segment at USD 28 million (in Portea)
followed by IFC, Ventureeast, Qualcomm and SAIF at USD 7.28 million, USD 6.3
million, USD 5.3 million and USD 3.2 million respectively. Amongst the companies,
Portea attracted the most investment of over USD 47 million followed by Aegis
Care Advisors (USD 4.2 million).

Future outlook:

The segment was expected to do very well and hence attracted very high
investments in the past. However, the segment failed to be even EBITDA positive.
Given the mindset and habits of Indian customers, it has to be seen if the segment
will be able to carve a niche category of customers who can keep the segment
profitable.

38
SINGLE-SPECIALTY
HOSPITALS

39
a) Maternity and Child Care Hospitals

Maternity and Child Care is a segment which is growing steadily and profitably. 19
samples were analysed which accounted for over INR 10 billion. The median
revenue growth of the sample set in FY16 over FY15 was 16% and median EBITDA
was 13%. The sample set’s median PAT is 3.7% and fixed asset turnover of 246
days.

Median - YoY Income -

16%; EBITDA - 13%
Median YoY Growth %
60%

50%
Luthra
14%, 31%, Birthplace Healthcare
40% 60%, 33%, 154 INR mn
117 INR mn
EBITDA %

30%
Neotia Healthcare
20% 33%, 8%, 951 INR mn Rainbow
58%, 18%,
Median EBITDA
10% Surya Children's 2,491 INR mn
42%, 9%, 473 INR mn
0%
-10% 0% 10% 20% 30% 40% 50% 60% 70%
-10%
YoY Growth
-20% Rhea
Kids Clinic 71%, -11%,
-30% 23%, -24%, 527 INR mn
1,896 INR mn
-40%

Amongst the pure play Maternity and Child care hospitals analysed, Rainbow
Healthcare has been the largest with a turnover of close to INR 2.5 billion in FY16
and growth of 58% over FY15 with a healthy EBITDA of 18% in FY16. Rainbow
Hospitals operates out of Hyderabad, Vijayawada and Bangalore with an average
revenue per bed per annum of close to INR 5 million. The second largest hospital
chain Cloudnine (Kids Clinic India Pvt. Ltd) had a turnover of INR 1.89 billion in FY16
and a revenue growth of 23% over FY15 though with a poor EBITDA of -24%.

Motherhood Hospitals (Rhea Healthcare) is the fastest growing at 71% in FY16

over FY15 though EBITDA is at a low -11%. Hyderabad based The Birthplace is the
most profitable of the lot with an EBITDA of 33% and growing at 33%. Established
only in 2011, Birthplace operates with 25 beds and has a revenue of over INR 60
lakhs per bed per revenue.

40
 Total Income YoY
Name EBITDA % PAT %
(INR million) Growth
Rainbow Childrens Medicare Pvt. Ltd 2,491 58% 18% 7%
Kids Clinic India Pvt. Ltd (Cloudnine) 1,896 23% -24% -39%
Fernandez Hospital Pvt. Ltd 1,041 8% 17% 8%
Neotia Healthcare Initiative Ltd 951 33% 8% -5%
Edappal Hospitals Pvt. Ltd 843 16% 17% 6%
Rhea Healthcare Pvt. Ltd (Motherhood) 527 71% -11% -39%
Surya Children's Medicare Pvt. Ltd 473 42% 9% 0%
BACC Health Care Pvt. Ltd 400 10% 23% 12%
Apollo Bangalore Cradle Ltd 286 28% 5% -10%
Ganesh Hospital Pvt. Ltd 195 16% 17% 5%
Neonatal Care and Research Institute Ltd 165 145% -2% -9%
LifeSpring Hospitals Pvt. Ltd 164 12% 11% 1%
Birthplace Healthcare Pvt. Ltd 154 60% 33% 0%
Vasundhara Hospital Ltd 124 9% 18% 4%
Lineage Healthcare Ltd 120 23% -14% -71%
Luthra Hospitals Pvt. Ltd 117 14% 31% 10%
Mayflower Women's Hospital Pvt. Ltd 102 0% 13% 4%
Vidarbha Intensivist Pediatricians Group Pvt. Ltd 55 3% 11% 5%
Amrutaa Pediacare Pvt. Ltd 50 -2% 36% 9%

Investments and M&A

The segment attracted investments of USD 130 million in 14 transactions.

Cloudnine attracted the most investment of USD 89.3 million whereas Rainbow
Hospitals and Motherhood raised USD 31.5 million and USD 6.5 million
respectively.

True North Managers have invested the most in the segment (USD 60 million in
Cloudnine) followed by CDC Group Plc (USD 31.5 million in Rainbow), Matrix India
(14.8 Million in Cloudnine) and Sequoia (USD 14.5 million in Cloud nine)

41
Future Outlook

This is a segment which has been carved out of multi-specialty hospitals to

separate illness from the happy occasion of child birth. While the segment is
growing profitably, organized chains seem to be more prominent in South India.
There is no single chain at the national level. Clearly, there is space for growth
amongst the existing chain for the national level. Also, high end maternity hospitals
are very local, limited to cities. There is scope for a chain of high end hospital like
Birthplace. The largest opportunity in the segment is branded chains at a low price
point catering to middle class families who now either go to small tertiary care
hospitals or standalone maternity centers.

42
b) Eye Hospitals

Eye-care is one of the first super-specialty segments amongst the healthcare

providers. In this segment, 22 companies were analysed which accounted for over
INR 8 billion. The median revenue growth of the sample set in FY16 over FY15 was
21% and median EBITDA was 17%. The sample set’s median PAT is 3.7% and fixed
asset turnover of 236 days.

Median - YoY Income - 21%; EBITDA - 17%

60% Disha
17%, 23%
50%
Aravind Eye Hospital New Delhi Centre
40% for Sight
24%, 22%
Dr. Agarwal's 65%, 20%
30%
EBITDA %

Eye14%, 13% Pushpagiri Healthcare

20% 35%, 23%, 50 INR mn

10% ASG…
Median EBITDA
0%
-10% 0% 10% 20% 30% 40% 50% 60% 70%
-10%
Dr. Agarwal's YoY Growth
-20% Healthcare 23%,
0%
-30% Median YoY Growth %

Key players like Arvind Eye Hospital, Sankara Nethralaya and LV Prasad Eye
Institute could not be considered in the analysis as their financial information are
not available in MCA. Due to data unavailability, Vasan Eye Care was also not
included in the analysis.

The largest and the oldest eye hospital chain in the sample set is Dr. Agarwal Group
which has two entities: Dr. Agarwal Eye Hospital Ltd and Dr. Agarwal Healthcare
Ltd which is the parent company of the former. In FY16 they achieved a standalone
turnover of INR 1.37 billion and INR 870 million respectively. The largest
standalone hospital chain is Centre for Sight (New Delhi Centre for Sight Private
Ltd) which had a turnover of INR 1.64 billion in FY16 growing at the rate of 65%
over FY15 and a healthy EBITDA of 20%.

Kolkata based Disha Eye Hospitals is the third largest with turnover of INR 1.04
billion and growing at 17% with an EBITDA of 23%.

43
 Total Income
Name YoY Growth EBITDA % PAT %
(INR million)
New Delhi Centre for Sight Ltd 1,639 65% 20% 4%
Dr. Agarwal's Eye Hospital 1,368 14% 13% 4%
Disha Eye Hospitals Pvt. Ltd 1,045 17% 23% 13%
Dr. Agarwal's Health Care Ltd 872 23% 0% -13%
Medfort Hospitals Pvt. Ltd 714 2% 16% -5%
ASG Hospital Pvt. Ltd 548 25% 0% -19%
Nethradhama Hospitals Pvt. Ltd 409 12% 18% 4%
Lotus Eye Hospital and Institute Ltd 317 5% 14% 0%
Sharp Sight Laser Centre Pvt. Ltd 233 25% 2% -10%
Sreedhareeyam Ayurvedic Eye Hospital 216 13% 19% 8%
Rajan Eye Care Hospital Pvt. Ltd 188 3% 17% 5%
Thind Eye Hospital Ltd 137 12% 47% 14%

Investments and M&A

The segment attracted investments of USD 223 million in 14 transactions. Median

revenue multiplier in the segment was 7.5.

Vasan Eye Care attracted the most investment of USD 120 million whereas Dr.
Agarwal Healthcare and Eye-Q Vision raised USD 45 million and USD 28 million
respectively.

GIC Pte Ltd has invested the most in the segment (USD 100 million in Vasan)
followed by ADV (USD 45 million in Dr. Agarwal), Matrix Partners India (17 Million
in Centre for Sight) and Helion (USD 11.5 million in Eye-Q Vision).

44
Future Outlook

Eye-care segment’s growth is driven by the aging population and changing

lifestyles (like excessive usage of smart phone, computer and smart phone at
young age). Advanced technology offers various modern equipment for eye-care
procedures. However, the challenge for the eye-care providers is to ensure capacity
utilization of such expensive equipment. Some of the chains have created hub and
spoke operating model where smaller outlets or the spokes can take care of 90%
of the procedure and the hub or the mother hospital has the expensive equipment
for more intensive procedures. This ensures high utilization of expensive
equipment.

45
c) Cardiac Hospitals

Cardiac hospitals are one of the reasonably old single-specialty hospital segments.
However, the segment has not grown much in recent years. In this segment, 11
companies were analysed which accounted for over INR 7.54 billion. The median
revenue growth of the sample set in FY16 over FY15 was 8% and median EBITDA
was 22%. The sample set’s median PAT is 4.3% and fixed asset turnover of 148
days.
Median YoY Growth %

40% Escorts
Median -
EBITDA %

7%, 28%, YoY Income - 8%; EBITDA - 22%

4,623 INR mn
30% Bankers
Divine 29%, 22%, Usha
16%, 29%, 540 INR mn 61%, 18%,
BSR Super Specialty 20% 108 INR mn 211 INR mn
Hospitals Ltd.,
-17%, 7%,
333 INR mn 10%
Median EBITDA

0%
-20% -10% 0% 10% 20% 30% 40% 50% 60%
YoY Growth
-10%

Amongst the data analyzed, Escorts Heart Institute is the largest entity with a
revenue of INR 4.62 billion, growing at a rate of 7% per annum and EBITDA of 28%.
However, a small player like Usha Cardiac Centre based in Vijayawada has grown
61% in FY16 with an EBITDA of 18%. Similarly, Gujarat based Bankers Cardiology
has also above median growth of 29% and EBITDA of 22% at a revenue of INR 540
million in FY16.

46
 Total Income YoY
EBITDA % PAT %
(INR million) Growth
Name
Escorts Heart Institute and Research Centre Ltd 4,623 7% 28% 13%
Frontier Lifeline Pvt. Ltd 746 9% 9% 4%
Bankers Cardiology Pvt. Ltd 540 29% 22% 10%
Avanti Institute Of Cardiology Pvt. Ltd 392 0% 29% 17%
BSR Super Specialty Hospitals Ltd 333 -17% 7% -19%
Metromed International Cardiac Centre Pvt. Ltd 276 17% 1% -11%
Usha Cardiac Centre Ltd 211 61% 18% -1%
Jeevak Heart Hospital and Research Institute Pvt. Ltd 167 8% 11% 5%
Innova Childrens Heart Hospital Pvt. Ltd 132 -34% 37% -2%
Divine Heart Hospital and Research Centre Pvt. Ltd 108 16% 29% 14%
C Heart Care Pvt. Ltd 13 -22% 32% -6%

Investments and M&A

Of the data available, Escorts Heart Institute attracted the most investment USD
133 million from Fortis in the year 2005 for 90% stake. The EV/Income at that point
was 3. Other major investments have been USD 8.4 million by Aureos South Asia
Fund in BSR Super Specialty Hospital and USD 2.8 million by RVCF in Frontier
Lifeline Hospitals.

47
d) Oncology Hospitals

Oncology hospitals is one of the few categories which is growing well and is quite
profitable as well. In this segment, 9 companies were analysed which accounted
for over INR 7.45 billion. The median revenue growth of the sample set in FY16
over FY15 was 30% and median EBITDA was 16%. The sample set’s median PAT
is 0.2% and fixed asset turnover of 295 days.

Median -YoY Income - 30%; EBITDA - 16%

90%

70%

50% International
HCG HCG Medi-Surge Oncology,
EBITDA %

12%, 16%, 30%, 16%, 45%, 23%,

30% 5,854 INR mn 670 INR mn 472 INR mn
KIMS
22%, 11%,
10% 183 INR mn Median EBITDA

-25% -20% -15% -10% -5%

-10% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

YoY Growth
-30%

Median YoY Growth %

-50%

With a revenue of INR 5.85 billion, HCG is the largest of the pool and practically
defines the market size. It is a public company and has over 23 centres in 17 cities
across the country. HCG Medisurge is the second largest with INR 670 million
revenue. It is a 100 bed cancer hospital in Ahmedabad acquired by HCG.
Trivandrum based KIMS Cancer care is based in Trivandrum and is 100%
subsidiary of KIMS.

48
 Total Income YoY
Name EBITDA % PAT %
(INR million) Growth
HealthCare Global Enterprises Ltd 5,854 12% 16% 0%
HCG Medi-Surge Hospitals Pvt. Ltd 670 30% 16% 8%
International Oncology Services Pvt. Ltd 472 45% 23% 7%
KIMS Cancer Care And Research Center Pvt. Ltd 183 22% 11% -3%
Dr. Krishnas Cancer Healer Center Pvt. Ltd 153 268% 2% 0%
Cytecare Hospitals Pvt. Ltd 55 83% 96% 62%
Guntur Cancer Care Centre Pvt. Ltd 53 -2% 43% 20%
Bangalore Cancer Centre Pvt. Ltd 9 37% -34% -160%
Manav Rakshak Cancer Hospitals Pvt. Ltd 5 -20% 50% 0%

Investments and M&A

The segment attracted investments of USD 78 million in 28 transactions. However,

USD 74.5 million out of this was only for HCG in 13 transactions and USD 3.7 million
was invested by RVCF in International Oncology Services Pvt. Ltd. Data was not
available for other investments in Cytecare, Amrish Oncology and HCG medisurge.
Major investors in the segment are Temasek, Premji Invest, IDF, India Build-Out
fund and Evolvence India Lifescience Fund who invested USD 25.7 million, USD
21.4 million, USD 10.9 million, USD 8.1 million and USD 6.3 million respectively, all
in HCG at various points in time.

Future Outlook

The segment is growing profitably and has huge potential with very few organized
players. Clearly, there is room for more organized players like HCG. Since this
segment needs high level of investments and technical knowledge, either
international players can enter Indian markets or set up JVs with multi-specialty
hospitals in India.

49
e) Others

Diabetic care, Nephrology, Orthopedic and Urology are the other single-specialty
hospitals analysed. Due to lack of data, only little analysis could be done on these
categories.

Total Income YoY

Name Specialty EBITDA %
(INR million) Growth
Dr.Mohan's Diabetes Specialities Centre Pvt. Ltd. Diabetic Care 591 0% 6%
M.V. Hospital for Diabetes Pvt. Ltd Diabetic Care 221 5% 6%
Diabetes Thyroid Hormone Research Institute Pvt.
Diabetic Care 118 2% 15%
Ltd
Kanungo Institute of Diabetes Specialities Pvt. Ltd Diabetic Care 117 17% 27%
South Zone Hospitals and Research Centre Pvt. Ltd Diabetic Care 29 11% 3%
Ashwini Kidney Dialysis Centre Pvt. Ltd Nephrology 23 69% 16%
Institute Of Neurosciences Kolkata Neurology 814 31% 30%
Kovai Medical Center and Hospital Ltd Orthopedic 4,730 16% 21%
Soundara Pandian Bone and Joint Hospital and
Orthopedic 271 -2% 17%
Research Institute Pvt. Ltd
Mangal Anand Health Care Ltd Orthopedic 54 6% 13%
Indore Institute Of Orthopaedics And Traumatology
Orthopedic 11 13% 67%
Pvt. Ltd
Ruban Patliputra Hospital Pvt. Ltd Urology 557 22% 18%
Asian Institute of Nephrology and Urology Pvt. Ltd Urology 353 29% 33%
NU Hospitals Pvt. Ltd Urology 275 30% 20%
Tejnaksh Healthcare Ltd Urology 48 133% 49%

Based on the limited data available, Urology and Nephrology seems to be attractive
segment with good growth and EBITDA.

Investments and M&A

Diabetic care player Lifespan Wellness attracted an investment of USD 35 million

from Brand Equity Treaty and Apollo Sugar Clinics attracted an investment of US
14.7 million from Sanofi-Synthelab India Ltd. Kanungo Institute of Diabetes
Specialities had an investment of USD 3 million from Samridhi Funds.

Urology player RG Scientific Enterprises Pvt. Ltd. raised a total USD 30 million out
of which USD 19.8 million was from India Equity Partners and US 10.43 million from
ICICI Venture Funds.

50
MULTI-SPECIALITY
HOSPITALS

51
a) Secondary Care hospitals

Secondary care multi-specialty hospitals are smaller hospitals with minimal

procedural capabilities. 92 companies were analysed with a wide range of revenue.
Hence, the sample was divided into two groups: one set having less than INR 200
million revenue and the other set with more than INR 200 million revenue.

i. Secondary care multi-specialty hospitals with revenue less than INR 200 million

79 companies were analysed in this pool with a cumulative revenue of INR 6.4
billion in FY16 and median revenue growth of 14% with a median EBITDA of 13%.

EBITDA vs Revenue growth for secondary care hospitals with revenue less than
INR 200 million:

Median YoY Growth %

Median - YoY Income Growth- 14%; EBITDA - 13%
40%
Madhuraj
28%, 38%,
160 INR mn
30% Abhijay Qualitas
59%, 22%, 114%, 22%,
169 INR mn 26 INR mn
Namedi Archana
20%
EBITDA %

45%, 24%, 105%, 20%,

155 INR mn 106 INR mn
Median EBITDA

10% Carewell
101%, 11%,
112 INR mn
0%
-20% -10% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 110% 120%

YOY Growth
-10%
Be Well
64%, -18%,
161 INR mn
-20%

Well performing major players in secondary care hospitals with turnover <INR 200
million:

52
 Total Income YoY
Name Location EBITDA % PAT %
(INR Million) Growth

Surbhi Hospital Pvt. Ltd Noida 193 21% 15% 8%

Abhijay Hospital Pvt. Ltd Chain 169 59% 22% 7%

Madhuraj Hospital Pvt. Ltd Kanpur 160 28% 38% 23%

Modern Hospital Kodungallur Ltd Thrissur 159 15% 18% 8%

Namedi Hospital Pvt. Ltd Bhopal 155 45% 24% 10%

Lila Hospitals Pvt. Ltd Berhampur 147 601% 24% 3%

Jain Neuro and IVF Hospitals Pvt. Ltd Delhi 139 30% 20% 8%

Kasturi Medical Centre Pvt. Ltd Kolkata 133 26% 28% 10%

Life Care Hospital Pvt. Ltd Indore 128 20% 37% 23%

Archana Hospitals Pvt. Ltd Hyderabad 106 105% 20% -1%

Ruby Hall Clinic Services Pvt. Ltd Pune 106 16% 32% 2%

53
 ii. Secondary Care hospitals with revenue more than INR 200 million

In this pool, 13 companies were analysed accounting for a cumulative turnover of

INR 3.7 billion in FY16, a median growth of 10% and median EBITDA of 15%. Larger
the secondary care hospital, limited the growth.

Median - YoY Income Growth-

30% Median YoY Growth %
10%; EBITDA - 15%

25%
Ganga Care Bristlecone
12%, 21%, 426 INR mn 58%, 25%, 226 INR mn
20%
EBITDA %

15%
Median EBITDA

10% Bhagat
19%, 13%, 360 INR mn

5%

0%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60%
YoY Growth

Hyderabad based Bristlecone Hospitals has both highest revenue growth (58%)
and EBITDA (25%).

Total Income YoY

Name Location EBITDA % PAT %
(INR million) Growth
Mittal Hospital Ltd Ajmer 538 13% 14% 1%
Ganga Care Hospital Ltd Nagpur 426 12% 21% 11%
North Bengal Clinic Pvt. Ltd Siliguri 392 8% 11% 4%
Bhagat Hospitals Pvt. Ltd Delhi 360 19% 13% 5%
Jeewan Mala Hospital Pvt. Ltd Delhi 307 12% 15% 7%
Sri Viswa Medicare Ltd Hyderabad 304 9% 17% 1%
Orchid Medical Centre Pvt. Ltd Ranchi 278 5% 16% 8%
Albha Health Care Pvt. Ltd Hyderabad 261 1% 16% 5%
Bristlecone Hospitals Pvt. Ltd Hyderabad 226 58% 25% 13%
Srishti Hospitals and Research Centre Dibrugarh 210 9% 7% 15%
Chennai Meenakshi Multispeciality Chennai 207 9% 15% 3%
Maharaja Medical Centre Pvt. Ltd Trivadrum 203 10% 7% -2%

54
Investments

Based on the 11 deals analysed which had all the information required, the
segment attracted a total investment of USD 41 million at a median valuation of
7.4 times revenue. Cygnus Medicare Pvt. Ltd. attracted the highest investment of
USD 15.3 million followed by Vaatsalya (USD 8.4 million) and Baroda Medicare Pvt.
Ltd (USD 5.7 million). Major investors in the segment are India Venture Trust Fund
(USD 5.7 million), Matrix Partners (USD 5.7 million) and Aquarius India Fund (USD
5 million).

55
b) Tertiary Care hospitals

In tertiary care multi-specialty hospitals, 157 companies were analysed with a wide
range of revenue from INR 2 million to over INR 5,0 billion. Hence, the sample was
divided into four groups based on revenue in FY16: <INR 200 million, INR 200-500
million, INR 500 million - 2 billion and >INR 2 billion.

i. Tertiary care multi-specialty hospitals with revenue less than INR 200 million

31 companies were analysed in this pool with a cumulative revenue of INR 2.58
billion in FY16, median revenue growth of 12% and a median EBITDA of 17%.

EBITDA vs Revenue growth for secondary care hospitals with revenue less than
INR 200 million:

Median - YoY Income - 12%; EBITDA - 17%

70%
Median YoY Growth % Cauvery Medical Centre
38%, 67%, 51 INR mn

60%

50%

40%
Deepak Health and
People's Heritage
EBITDA %

City Clinic Wellness

30% 12%, 28%, 21%, 27%, 89 INR mn 41%, 23%,
194 INR mn 154 INR mn

GB Multicare,
20% 51%, 16%, 26 INR mn
Jeevan Rekha Median EBITDA
46%, 13%,
10%
100 INR mn
Palika Vinayak
66%, 8%, 45 INR mn
0%
-20% -10% 0% 10% 20% 30% 40% 50% 60% 70%
YoY Growth
-10%

56
 It is evident from the trend that at a growth rate of 12-14% EBITDA peaks at around
25% whereas any growth beyond that comes at the cost of EBITDA. Cauvery
Medical Centre is an exception to this with a high growth of 38% at a very high
EBITDA of 67%. Given below are select well performing companies based on either
growth, EBITDA or revenue per bed

Revenue/ bed
Total Income YoY No. of
Name Location EBITDA PAT (INR million/ Comments
(INR million) Growth Beds
annum)

Palika Vinayak Hospital Pvt. Ltd Patna 45.5 66% 8% -1% 100 0.45 Growth

GB Multicare Hospital Pvt. Ltd Nagpur 26.4 51% 16% 0% NA NA Growth

Jeevan Rekha Medical Care
Kashipur 100.3 46% 13% 1% 250 0.40 Growth
Services Ltd
Deepak Health and Wellness Ltd Jalna 154.1 41% 23% 4% 150 1.03 Growth

Cauvery Medical Centre Ltd Bangalore 50.7 38% 67% -1% 100 0.51 Profitable

City Clinic Pvt. Ltd Chandigarh 194.2 12% 28% 15% 100 1.94 Profitable

People's Heritage Hospital Pvt. Ltd Agra 89.4 21% 27% 8% 150 0.60 Profitable
Shri Balaji Super Speciality
Raipur 9.0 -85% 27% 5% 0 0.00 Profitable
Hospital Pvt. Ltd
Pawan Gandhi Health Care Pvt. Ltd Delhi 83.6 3% 21% 17% 15 5.57 Rev/Bed

Pranaam Hospitals Pvt. Ltd Hyderabad 137.1 26% 17% 6% 60 2.28 Rev/Bed

City Clinic Pvt. Ltd Chandigarh 194.2 12% 28% 15% 100 1.94 Rev/Bed

Aryan Hospital Pvt. Ltd Gurgaon 146.2 32% 9% 2% 100 1.46 Rev/Bed

Deepak Health and Wellness Ltd Jalna 154.1 41% 23% 4% 150 1.03 Rev/Bed

Surya Hospitals Pvt. Ltd Pune 111.9 4% 16% -1% 110 1.02 Rev/Bed

Bhandari Health Care Pvt. Ltd Jaipur 151.6 27% 9% -4% 150 1.01 Rev/Bed

The trend observed is that growth as well as profitability are high not only in non-
metro cities like Patna, Chandigarh and Jaipur but also smaller cities/towns like
Kashipur, Jalna and Raipur.

57
 ii. Tertiary care multi-specialty hospitals with revenue between INR 200 million
and INR 500 million

40 companies were analysed in this pool with a cumulative revenue of INR 13.28
billion in FY16 and median revenue growth of 13% with a median EBITDA of 18%.

EBITDA vs Revenue growth for tertiary care hospitals with revenue range INR 200
-500 million:

70% Median YoY Income Growth- 13%

Median YoY Growth %
Median EBITDA - 18%
60% Moolchand Healthcare
Radiant Lifecare 5%, 64%, 359 INR mn
-1%, 55%,
294 INR mn 50%

40%
EBITDA (%)

30% Shri Ram Super

Speciality Surgical
Centre, Jodhpur
20% 59%, 14%, 251 INR mn Median EBITDA

10%

0%
-15% -5% 5% 15% 25% 35% 45% 55% 65% 75%
-10%
YoY Revenue Growth (%)

Apollo Rajshree, Indore

-20% 40%, -18%, 202 INR mn

It is evident from the trend that at a growth rate of 13-15% EBITDA peaks at around
22% whereas any growth beyond that comes at the cost of EBITDA.

Moolchand Healthcare is the most profitable in the lot with an EBITDA of 64%
followed by Radiant Lifecare at 55% though both of them have below median
growth of 5% and -1% respectively. Ahmedabad Healthcare has had an outstanding
growth of 70% at EBITDA of 16%. So also Jodhpur based Sri Ram Super Surgical
Centre with a growth of 59% at an EBITDA of 14%.

Given below are select well performing companies based on either growth, EBITDA
or revenue per bed:

58
 Revenue/ bed
Total Income YoY No. of
Name Location EBITDA % PAT % (INR Mn / Comments
(INR million) Growth Beds
annum)
Ahmedabad Healthcare Pvt.
Ahmedabad 230 70% 16% 10% NA 1.7 Growth
Ltd
Shri Ram Super Speciality
Jodhpur 250 59% 14% 0% 150 1.1 Growth
Surgical Centre Pvt. Ltd
Apollo Rajshree Hospitals
Indore 200 40% -18% -42% 180 1.2 Growth
Pvt. Ltd
Charnock Hospitals Pvt. Ltd Kolkata 290 28% 17% 6% 250 0.8 Growth
Rahman Hospitals Pvt. Ltd Guwahati 250 24% 19% 7% 300 1.0 Growth
Moolchand Healthcare Pvt.
Delhi 360 5% 64% 31% 350 0.4 Profitable
Ltd
Radiant Life Care Pvt. Ltd Delhi 290 -1% 55% 30% 650 2.2 Profitable
Sentini Hospitals Pvt. Ltd Vijayawada 330 4% 27% 5% 150 1.5 Profitable
Park Hospitals Gurgaon 370 15% 24% 17% 250 2.5 Profitable
Greater Kailash Hospitals
Indore 380 15% 23% 2% 150 6.6 Profitable
Pvt. Ltd
Midas Multispeciality
Nagpur 330 19% 19% 11% 50 5.6 Rev/Bed
Hospital Pvt. Ltd
Rigid Hospitals Pvt. Ltd Chennai 250 4% 19% 4% 45 3.6 Rev/Bed
Suguna Ramaiah Hospitals
Bangalore 290 11% 15% 5% 80 3.3 Rev/Bed
Pvt. Ltd
Pushpanjali Hospital and
Agra 330 14% 20% 4% 100 3.0 Rev/Bed
Research Centre Pvt. Ltd
Panacea Hospitals Pvt. Ltd Bangalore 310 2% 19% 2% 105 1.7 Rev/Bed

Non-metros cities seem to dominate the list in the growth and EBITDA dimension.

59
 iii. Tertiary care multi-specialty hospitals with revenue between INR 500 million
and INR 2 billion

56 companies were analysed in this pool with a cumulative revenue of INR 58.74
billion in FY16 and median revenue growth of 14% with a median EBITDA of 14%.

EBITDA vs Revenue growth for secondary care hospitals with revenue range INR
500 million -2 billion:

Median YoY Growth %

Median - YoY Income - 14%; EBITDA - 14%

40%
Heritage, Varanasi
55%, 36%, 973 INR mn
Saket Hospitals, Delhi
30% 28%, 25%, 560 INR mn
Median EBITDA

Aayush NRI LEPL, Vijaywada,

EBITDA (%)

20% 40%, 15%, 721 INR mn

Dr. Ramesh, Vijaywada Meridian Medical,

51%, 9%, 1,158 NR mn Kolkata,
10% 75%, 4%, 929 INR mn
Sahrudaya, Hyderabad
62%, 0%, 1,663 INR mn

0%
-5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80%
YoY Revenue Growth (%)
Continental, Hyderabad
-10% 56%, -5%, 1,060 INR mn

Standalone Regional Single City

EBITDA is seen increasing with growth rate peaking at a growth rate of 23-25% to
an EBITDA of 25%. Any rate of growth beyond 25% comes at the cost of EBITDA.

Heritage, Varanasi seems to be an exception to the norm as it had grown revenue

by 55% and had an EBITDA of 36% in the year FY16.

Kolkata based Meridian Hospital has had a stunning growth of 75% followed by
Hyderabad based Sahrudaya and Continental with growth rate of 62% and 56%
respectively.

60
 Revenue/ bed
Total Income YoY No. of
Name Location EBITDA % PAT % (INR mn/ Comments
(INR million) Growth Beds
annum)
Meridian Medical Research
Howrah 929 75% 4% -3% NA NA Growth
and Hospital Ltd
Sahrudaya Health Care Pvt.
Hyderabad 1,663 62% 0% -4% NA NA Growth
Ltd
Continental Hospitals Ltd Hyderabad 1,060 56% -5% -38% 750 1.4 Growth
Profitable
Heritage Hospitals Ltd Varanasi 973 55% 36% 6% 300 3.2
Growth
Dr. Ramesh Cardiac and
Multispeciality Hospital Pvt. Vijayawada 1,158 51% 9% -6% 560 2.1 Growth
Ltd
Delhi/
Park Medi World Pvt. Ltd 527 12% 27% 12% 1020 0.5 Profitable
Punjab
Yatharth Hospital and Trauma
Noida 720 23% 25% 4% 400 1.8 Profitable
Care Services Pvt. Ltd
Saket City Hospitals Pvt. Ltd Delhi 560 28% 25% -46% 250 2.2 Profitable
Ganga Medical Centre and
Coimbatore 1,260 11% 25% 13% 450 2.8 Profitable
Hospitals Pvt. Ltd
ALPS Hospitals Ltd Gurgaon 1,053 21% 22% 15% 74 14.2 Rev/Bed
Unimed Healthcare Pvt. Ltd Hyderabad 1,443 36% 11% -3% 130 11.1 Rev/Bed
Hyderabad Institute of
Hyderabad 1,644 9% 23% 9% 175 9.4 Rev/Bed
Oncology Pvt. Ltd
Hiranandani Healthcare Pvt.
Mumbai 1,397 11% 24% 15% 149 9.4 Rev/Bed
Ltd
Fortis Malar Hospitals Ltd Chennai 1,296 10% 5% 5% 180 7.2 Rev/Bed

As the revenue range is higher, hospitals based in the metros dominate the list of
well performing hospitals with the exception being Ganga Medical Centre of
Coimbatore and Heritage of Varanasi.

61
iv. Tertiary care multi-specialty hospitals with revenue more than INR 2 billion

29 companies were analysed in this pool with a cumulative revenue of INR 224
billion in FY16 and median revenue growth of 11% with a median EBITDA of 13%.

EBITDA vs Revenue growth for tertiary care hospitals with revenue more than INR
2 billion:

80% Median - YoY Income - 11%;

Median YoY Growth %
EBITDA - 13%
70% International Hospitals, Ahmedabad
5%, 71%, 3,322 INR mn
60%

50%
Apollo
18%, 15%,
40% Global Health (Medanta), Gurgaon
EBITDA (%)

54,780 INR mn
16%, 25%, 14,273 INR mn
30% Sarvejana,
Max, North India, Hyedrabad /
27%, 10%, Bhubaneshwar
20% 14,752 INR mn 39%, 13%,
2,177 INR mn
10% Median EBITDA

0%
-15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
-10% AMRI, Kolkata /
YoY Revenue Growth (%)
Bhubaneshwar,
40%, 0%, 2,870 INR mn

Standalone Regional Chain

EBITDA is seen increasing with growth rate peaking at a growth rate of 15-18% to
an EBITDA of 25-26%. Any rate of growth beyond 25% comes at the cost of EBITDA.

Kolkata based AMRI has had stunning growth of 39% followed by Hyderabad based
Sarvejana and Continental with growth rate of 62% and 56% respectively.

Apollo Hospitals Enterprises is the largest entity with a standalone revenue of INR
55 billion growing at 18% (in FY16 over FY15) with an EBITDA of 15%. Amongst the
large hospital chains with revenue over INR 10 billion, Max Healthcare has the
highest growth rate of 27% whereas Global Health (Medanta) has the highest
EBITDA of 25%. Medanta’s profitability is driven by the high revenue per bed of INR
11.4 million per annum which is the second highest amongst the pool analysed.

62
 Mumbai’s Breach Candy Hospital has the highest revenue per bed of INR 128
million per annum followed by Medanta and then Indraprastha Apollo with INR 10.9
million/annum.

Revenue /bed
Total Income YoY Estimated
Name Location EBITDA % PAT % (INR mn/ Comments
(INR million) Growth No. of Beds
annum)
Apollo Hospitals Enterprise Ltd. Chain 54,780 18% 15% 7% 6,263 8.7 Large
Fortis Hospitals Ltd. Chain 21,930 9% 6% -7% 3,786 5.8 Large
Large and
Max Healthcare Institute Ltd. Regional 14,750 27% 10% -1% 2,624 5.6
Growing
Narayana Hrudayalaya Ltd. Chain 14,740 12% 12% 5% 5,600 2.6 Large
Large,
Global Health Pvt. Ltd. Gurgaon 14,270 16% 25% 12% 1,250 11.4 Profitable and
High Rev/Bed
Aster DM Healthcare Ltd. Kochi 2,450 166% 6% -26% 670 3.7 Growth
AMRI Hospitals Ltd. Regional 2,870 40% 0% -19% 780 3.7 Growth
Sarvejana Healthcare Pvt. Ltd. Regional 2,180 39% 13% 3% 725 3.0 Growth
Paras Healthcare Pvt. Ltd. Regional 3,530 23% 16% 5% 995 3.5 Growth
International Hospitals Ltd. Gurgaon 3,320 5% 71% -18% 1,000 3.3 Profitable
Jupiter Lifeline Hospitals Ltd. Mumbai 2,530 13% 25% 12% 325 7.8 Profitable
Profitable and
Breach Candy Hospital Trust Mumbai 2,220 4% 22% 15% 173 12.8
High Rev/bed
Shalby Ltd. Regional 2,890 9% 21% 10% 524 5.5 Profitable
Indraprastha Medical Corpn. Ltd. Delhi 7,600 6% 10% 4% 695 10.9 Rev/bed
Artemis Medicare Services Ltd. Gurgaon 4,070 10% 12% 5% 380 10.7 Rev/bed
Apollo Gleneagles Hospitals Ltd. Kolkata 5,020 14% 17% 6% 510 9.8 Rev/bed

Revenue per bed vs. total bed capacity for hospitals with revenue >INR 2 billion

The revenue per bed decreases with bed capacity with two broad groups due to
either factors of lower occupation and higher duration of stay. Exception to this
trend is Apollo Hospitals whose revenue per bed is INR 8.7 million per annum.

63
 120%

100%

80%

60%
ROCE

40%

20%

0%
0 200 400 600 800 1000 1200 1400 1600

-20%
FATO days

ROCE vs Fixed Asset Turnover days for hospitals with revenue >INR 2 billion

Based on the data analysed, fixed asset turnover days (FATO) of 200-220 days
(annual asset turnover of INR1.60 - 1.80 million) with an ROCE of 18-20% seems to
be a good hospital operations case. If growth is objective, then FATO days is higher
leading to ROCE.

14.00

12.00

10.00
Rev/Bed/annum (INR Million)

8.00

6.00

4.00

2.00

0.00
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000 6,500 7,000
No. of Beds

64
Investments in multi-specialty hospitals:

Of the investments in multi-specialty tertiary care hospitals, 86 deals had all the
required information. The 86 deals analyzed accounted for USD 3.4 billion with a
median revenue multiplier of 3.84.

Max Healthcare attracted the highest investment of USD 381 million followed
Quality Care India Ltd with USD 368 million and Fortis Healthcare at USD 328
million.

IFC tops the chart amongst the investor segment with USD 258 million followed by
Abraaj Capital, IHH healthcare and Life Healthcare with 251, 238 and 238 million
respectively.

Future outlook:

Chain of multi-specialty hospitals is the way forward with feeder network of general
clinics. However, the challenge that remains with hospitals is how they can ensure
faster recovery and hence fast discharge of patients so as to maintain lower nights
per case to maximize the revenue per bed.

65
CONCLUSION
The demand for healthcare services is growing strongly, there are certainly a few
obstacles or bottlenecks that may potentially affect growth. Lack of trained staff
leading to a burgeoning informal healthcare sector, especially in the smaller towns.
Also, there is a need for ensuring and standardizing the quality of people coming
from the private institutions.

Another aspect of healthcare very unique to India is the low penetration of health
insurance. Though there is a steady increase in penetration over the last few years,
it is more only in urban area. Rural segments and economically backward strata in
urban area don’t have access to health insurance easily. The government has
already started taking steps in this direction by announcing the Universal Health
Coverage plan. The ability of the private sector and the government to work
together to overcome these obstacles will define the growth of the healthcare
services sector over the next few years.

66