Structured Financing – Global Hospitals

September 2010

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Table of Contents

 Introduction

 Healthcare Industry

 Company Overview

 Financials

 Terms of the Issue

 Annexures

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Introduction

 Global Hospitals (“Global” or “the Company”) is a group of super-specialty hospitals in India with
over 10 years of operations and over 2,000 beds under buildout

 To fund the capital expenditure for Global’s new Mumbai hospital that is expected to be
commissioned in mid-2011 and other expansion projects in the near term, Global is raising Rs. 100
crores through issue of compulsorily convertible preference shares

 This offer has been structured to offer investors in the issue a minimum return of 16% IRR

 This is therefore an excellent investment opportunity for those looking at guaranteed return
opportunities

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HEALTHCARE INDUSTRY

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Strong Underlying Demand for Healthcare in India

 Underlying supply – demand gap in healthcare facilities in India still low as compared to other
emerging economies

 According to the WHO (World Heath Statistics 2009 report), the total expenditure on healthcare in
India constituted 3.6% of the gross domestic product in 2006, which is much lower than healthcare
spending in other developing countries such as Brazil (7.5%), China (4.6%) and Mexico (6.6%).

 Beds available in India at 1.5 per thousand equals that of sub-Saharan Africa and are less than half
of world average at 3.3 per thousand, which presents significant growth potential for the sector as
affordability and availability increases
Key Measures of Current Weak Infrastructure (# per Thousand)

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Situation Particularly Poor in Case of Tertiary Beds,
the Space where Global Operates
Tertiary beds, 2001* Specialist physicians, 2001*

Country Share in total no. Availability Country Share in total no. of Availability
of beds registered
Beds per ’00,000 Beds per ’00,000
physicians
Percent
Percent
7-14 12-18
India 5 - 10 India 10 - 15

China 5 – 10** 13-25 South Africa 35 – 40 27-31

Brazil 20 – 25*** Korea 50 – 55

65-85 86-95

* Latest data available used (1997-2001)

** Medical colleges and cancer beds account for 5% of total beds
*** Surgery beds and medicine beds in single/multi-specialty hospitals

Source: Espicom reports; Mckinsey analysis

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Significant Upside Potential from Medical Tourism for
Best Quality Care Healthcare Providers
 According to CII-McKinsey, medical value travel in India is expected to grow to an approximately Rs
100 bn (USD 2.4 bn) industry by 2012

 n 2004, according to CRIS-INFAC, between 150,000 and 180,000 international patients received
medical treatment in India, up from approximately 10,000 in 1995. Patients from approximately 55
countries were treated at Indian hospitals.

 India has recently introduced a visa category for individuals seeking medical treatment in India

 Medical Tourism adds upside to the sector and India provides best in class medical practices at
developing world prices

Cost Comparison in US$ Indian Medical Travel Value

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COMPANY OVERVIEW

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Amongst the Top 3 Private Healthcare Providers in
the Country
 Global Hospitals was founded in 1998 by Dr. K. Ravindranath, Chairman & Managing Director, who
is also a reputed surgeon in India and overseas for his work in gastrointestinal surgery and minimal
access surgery
• He has spent considerable time in the UK, working in Memorial Hospital Darlington,
Hammersmith Hospital, London, St. Mark Hospital, London and Kings College Hospital, London
and also trained more than 500 surgeons in the country and has performed over 20,000
laparoscopic surgeries

 The Company has achieved significant success in disciplines like Organ Transplant,
Gastroenterology, Nephrology, Cardiology and many others specialized disciplines.

 The Company has achieved scale to be amongst the Top 3 Healthcare providers in the country in
terms of bed capacity with a dominant presence in the southern India with expansions in West &
East India under execution

 The Company has over 300 professional doctors and 65 experienced management team
members

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Major Player in a Fragmented Market with Few Scaled
Models
 According to CRIS-INFAC, there are six major providers of private healthcare in India, namely the
Apollo Group, CARE Hospitals, Fortis Healthcare, Manipal Group, Max Healthcare, and Wockhardt
Hospitals

 The table below summarizes certain key statistics regarding these healthcare providers, and is
sourced from CRIS-INFAC and hospital published data, except as indicate

Number of Beds* Year Location (s) in India Type of Facility**

Apollo*** 5,556 FY10 Pan India P,T,Q
Fortis Healthcare (Incl. Wockhardt) 5,044# FY10 Pan India S,T,Q
Global Hospitals 1,623 FY10 South, West S,T,Q
Manipal Group 1,519 FY10 South P,S,T
Max Healthcare 1,206 FY10 NCR P,S,T,Q

Notes:
* Providers may not use the same criteria for counting the number of beds
** P: Primary; S: Secondary; T: Tertiary; Q: Quaternary
*** Number of beds does not include beds operated by subsidiaries, joint ventures, associates or those in managed hospitals
# 3,142 without Wockhardt

Source: Company Filings, company Websites and Broker Research

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Global Hospitals: Profile Amongst Best in Class

 Global was founded in 1998 and currently Many First’s in the Country
operates 4 tertiary-care hospitals, supported by 3
regional primary / secondary-care hospitals in a  First Split Liver Transplant.
hub and spoke model  Largest Cadaver Liver Transplant
 Global has entered into associations for Programme
knowledge transfer with leading institutes  First Auxiliary Liver Transplant
– Affiliations – King’s College Hospital,  Foremost Hospital to do stem cell
London, UK, and with Prof Tanaka, Kyoto, transplantation in
Japan for Liver Transplantation Spine/Cardiac/Neuro
– Associations – Medical University of South
 First Hospital to do small bowel
Carolina, USA
transplantation
– Technology Development Board, Dept. of
Science & Technology Govt. of India  Largest Minimal Access
– MOU with Bio-Genex Laboratories, Surgery/Bariatric Surgery
California and ICFAI University Programme
 India’s first ever dedicated center for multi-organ  First Hospital to do Nucleus
transplantation Transplantation in Spine

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 Building a pan-India Chain of Super Tertiary Hospitals
 Total potential capacity of 2,023 beds. Most of the infrastructure spend on 1,623 beds already
complete.
 Current bed count of ~800 beds fully operational with another 775 beds can be “switched” on as
capacity ramps up with minimal capital spend.
 Additional 450 beds in Mumbai to come on stream by June 2011.
 Creating a significant presence in ‘Tertiary Care’ and ‘Transplantation’ markets.
Sl. Location City Area FY10 Potential Commenc Ownership
Operational Bed Capacity ement
(1)
Beds Date
Hubs
1 Lakdi-ka-Pul Hyderabad 67,000 Sft 150 150 1998 Long Term Lease (20 Yr)
2 Aware Hyderabad 130,000 Sft 110 300 Oct-08 Long Term Lease (25 Yr)
3 BGS Global Bangalore 360,000 Sft 200 500 Mar-08 Long Term Lease (30 Yr)
4 Chennai Chennai 21 Acres of 215 500 (2) Mar-09 Owned
Health City plot
5 Lower Parel Mumbai 267,000 Sft - 450 2011E Long Term Lease (99 Yr)
Spokes
6 Vijaynagar Bangalore 5,400 Sft 56 56 2008 Long Term Lease (25 Yr)
7 Divakar Bangalore 8,600 Sft 17 17 2008 Long Term Lease (25 Yr)
8 Ramnagar Bangalore 5,000 Sft 50 50 2008 Long Term Lease
Total Beds 798 2,023
(1) All the common infrastructure under operation and additional beds to be “switched on” as capacity ramps up
(2) Chennai has surplus 9 acre land which can be potentially used for additional 500 beds using the common infrastructure
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 Company Holding Structure

Ravindranath GE Medical
Associates Private Limited
(Holding company)

Center for Digestive & Kidney Global Sunrise Medical

Diseases Private Limited Associates Private Limited Global Clinical Research
(Mumbai) (Kolkata) Services Private Limited
- 65% subsidiary - 65% subsidiary - Clinical research initiative
- Balance with leading partner - Balance with Sureka Group (JV - To be 100% subsidiary
doctors partners)

 Indivision India Partners (“Indivision”) invested Current Stake Stake Post New
in the company in 2007. Indivision is a (%) Investor (%)
$425million private equity fund managed by Promoters & 56.30 50.67
Everstone Capital Friends
Indivision* 43.70 39.33
 The Company has issued further CCPs to
Promoters & Indivision and is undertaking part New Investors 10.00
conversion of CCPS Total 100.00 100.00
* Indivision currently holding CCPS which is getting partly converted to equity
stake subject to RBI approval
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FINANCIALS

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Financial Summary : Profitability on track after initial
ramp up of facilities

 FY10 profitability reflected the first year of operations for 2 new hospitals (Chennai and Aware) and
second year of operations for Bangalore.
 EBITDA turning positive effective FY11 as Bangalore & Chennai ramps up in current year. Chennai is
expected to be key driver of EBITDA by FY14 (37% contribution) with Bangalore, Mumbai and
Hyderabad with 15-16% each being the next key contributors.
 PAT margins projected to be double digit FY13 onwards under steady state operations.
 YTD July tracking broadly in line with plan (93% revenue achieved with EBITDA slightly better than
budgets)
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Raising capital to strengthen the balance sheet

 Minority interests are on account of partner doctors collectively owning 35% equity partnerships for
Mumbai with Equity contribution of Rs400Mn to be funded proportionately

 Equity Funding infusion taken for Rs750Mn in FY11

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Cash Flows and Use of Proceeds

Capex (Rs Mn)

 Increase in Equity from Current Shareholders FY11E FY12E FY13E FY14E

represents additional funding of Rs300Mn Hyderabad 29 10 10 20

Bangalore 135 10 10 20
completed by July 2010
Chennai 75 89 10 20
 Current Fund Raising of Rs750 million primarily to
Mumbai 750 255 20
fund the Capital Expenditure of the Mumbai other Aware 109 10 10 20
hospitals Total 1,099 374 40 100

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Comparable Company Analysis

Rs Mn, Apollo Fortis* Global

unless specified otherwise FY10 FY11 FY12 FY10 FY11 FY12 FY10 FY11 FY12 FY13 FY14
Bed Capacity 5,556 6,756 7,156 3,142 5,044 6,000 1,573 2,023 2,023 2,023 2,023
Operational Beds 3,889 4,729 5,283 3,142 5,044 6,000 798 930 1,323 1,723 2,023
Revenue 20,540 24,081 28,413 9,125 15,535 18,609 1,671 3,036 4,308 5,810 7,098
Revenue/Bed/annum 5.3 5.1 5.4 2.9 3.1 3.1 2.1 3.3 3.3 3.4 3.5
EBITDA 3,196 4,094 4,449 1,502 3,004 3,865 (87) 351 929 1,305 1,654
% margin 15.6% 17.0% 15.7% 16.5% 19.3% 20.8% -5.2% 11.6% 21.6% 22.5% 23.3%

PAT 1,376 1,570 1,859 642 1,282 2,088 (600) (201) 400 770 906
% margin 6.7% 6.5% 6.5% 7.0% 8.3% 11.2% -35.9% -6.6% 9.3% 13.2% 12.8%

Debt 8,300 10,000 11,300 8,250 9,317 10,000 2,931 3,224 3,086 2,723 2,360
Equity 15,766 16,823 18,130 21,313 22,594 25,081 1,110 1,816 2,216 2,986 3,892
Debt:Equity 0.5 0.6 0.6 0.4 0.4 0.4 2.6 1.8 1.4 0.9 0.6

Price# 768 768 768 152 152 152

No. Of Shares 62 62 62 317 317 317
Market Cap 47,473 47,473 47,473 48,265 48,265 48,265
P/E 34.5 30.2 25.5 75.2 37.6 23.1
EV/EBITDA 17.5 13.6 12.9 37.6 18.8 14.9
EV/Bed 10.0 8.3 8.0 18.0 11.2 9.6
* Includes Wockhardt additions in FY11 #Price as of June 16, 2010

 Apollo Hospitals, the largest hospital chain in India, is trading at FY12 EV/EBITDA of 12.9x and
Fortis Healthcare, the second largest chain in India, is trading at 14.9x (better growth profile vs
Apollo)
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TERMS OF THE ISSUE

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Amount of Financing Upto Rs.100 Crores

Instrument Compulsory Convertible Preferential Shares (“CCPS”)

Transaction Date September 30th, 2010

Conversion Date September 30th, 2013 or the Exit Event

Pre-Money Valuation 750 Crores

At an IPO event prior to the Conversion Date, holders of the CCPS can convert their shares into
common shares if they receive at least a 16% IRR based on the post-money IPO per share
valuation of the common share as compared to the pre-money valuation of the CCPS.

At an IPO event prior to the Conversion Date, if upon conversion the holders of the CCPS do not
receive at least an 16% IRR based on the post-money IPO per share valuation of the common
share of the company as compared to the pre-money valuation of the CCPS, the number of
common shares received upon conversion will be increased such that the IRR is 16%.
Conversion
If there is no IPO event by the Conversion Date, the Conversion Date of the CCPS will be
extended by one year during which the Company will attempt exit through a third party / strategic
sale with conversion terms as described in the above two paragraphs.

If there is no exit through third party / strategic sale within one year after the Conversion Date, the
promoters of the Company will buy back the CCPS at a purchase price such that each holder
receives a 20% IRR based on the purchase price as compared to the pre-money valuation of the
CCPS.
First pay 100% of the Amount of Financing to the holders of the CCPS in preference to other
Liquidation Preference
shareholders; the remaining assets shall be distributed pro-rata amongst all shareholders

Fees Profit share of 20% over 16% IRR

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Exit Scenarios
Exit Route Timeline IRR Remarks Taxation

IPO and 16% IRR achieved On or before 16% Conversion of CCPS into Short-term capital gains
on value of post-money IPO 30 September, pre-specified number of tax on unlisted securities if
common share 2013 common shares shares are sold before 30
September 2010
IPO and 16% IRR not On or before 16% Conversion into higher Short-term capital gains
achieved on value of post- September 30, number of common shares tax on unlisted securities if
money IPO common share 2013 to achieve 16% IRR shares are sold before 30
September 2010
Strategic sale 1 October, 16% Similar terms as in the Long-term capital gains
2013 - 30 previous 2 cases tax on unlisted securities
September
2014
Buyback After 30 20% Long-term capital gains
September tax on unlisted securities
2014

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Risk Disclosure

 This is an investment in a company that is not publicly listed on an exchange. The acquisition value
of the shares should not be taken to be indicative of the value of the shares at the time of exit via
either a private placement to a buyer or through selling in the market if the Equity Shares are later
listed on a public exchange.

 No assurance can be given regarding an active and / or sustained trading in the Equity shares of the
company or regarding the price at which the Equity Shares will be trading after listing. No assurance
can be given of finding a buyer for private placement or a public issuance / listing, in which case the
securities acquired could become highly illiquid and unrealizable.

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ANNEXURES

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What are CCPS?

 Compulsorily Convertible Preference Shares (CCPS) are preference shares that will be mandatorily
converted into common shares on a particular date

 Preference shares are similar to common shares but they do not usually have voting rights. They are
similar to debt as they usually have a fixed dividend (similar to fixed interest payments on debt).

 Preference shares are senior to equity but subordinate to debt in case of a liquidity event

 CCPS are quite popular with PE Investors these days

 They offer enhanced participatory role in the company by allowing certain covenants to be imposed
on the company

• For instance, the number of shares into which each preference share can be converted is
decided before the investment is made
• On the conversion date, if the company has met its performance targets, the investor gets
equity stake in the company by converting the preference shares into common shares
• However, if the company does not meet the performance targets as per the covenants, the
investor can convert the preference shares into a higher number of common shares in the
company. This increases the controlling power of the investor in the company.

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About Everstone Capital

 Everstone Capital is an India focused investment manager with dedicated private equity and real
estate funds

 With offices in Mauritius, Singapore, Mumbai, Delhi and Bengaluru, the Everstone team comprises
over one hundred people with significant experience and a strong network of relationships

 Indivision I is a $425 million private equity fund raised in 2006 which focuses on investing in
companies engaged in the provision of goods and services in domestic consumption and enablers of
infrastructure segments

 Some of the portfolio companies of Indivision I include:

• Global Hospitals
• Tikona Digital Networks
• VLCC Healthcare
• Future Media
• Lilliput Kidswear
• Blue Foods
• Percept

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 THANK YOU

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