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Economic Overview & Outlook

Global economy

The aftereffects of the pandemic and the war between Russia and Ukraine, impacted the global supply chain leading to a sharp uptick in inflationary pressures across the globe. In response, Central Banks of various countries increased interest rates to combat inflation. This has resulted in escalated operational and capital costs. There were also challenges from sharp volatility in foreign currency rates, sovereign debt crises and rising costs of food and fuel worldwide. All of this has combined to create certain headwinds for global growth.

The International Monetary Fund (IMF) forecasts that the global economic growth will be lower from an estimated 3.4% in 2022 to 2.8% in 2023, with a slight recovery to 3.0% in 2024. However, the IMF believes the slowdown will not be as severe as previously predicted, due to recovery in demand in the Emerging markets and Developing Economies. The easing of energy costs and the re-opening of China would facilitate faster economic growth in 2024.

Indian Economy

India has surpassed the UK to become the worlds fifth-largest economy, thanks to a strong economic growth registered during the first quarter of fiscal 2022-23. Despite facing repeated shocks from the COVID-19 pandemic, Indias real GDP in Q1 2022-23 was about 4% higher than its corresponding level in 2019-20, indicating a promising start to the countrys recovery post the pandemic. The contact-intensive services sector is expected to be the key driver of growth in 202223, fueled by pent-up demand and widespread vaccination coverage. Furthermore, rising employment, increasing private consumption, and positive consumer sentiment will likely support the countrys GDP growth.

An uptick in the last quarter lifted GDP growth in fiscal 2023. Indias gross domestic product (GDP) growth rose sharply to 6.1% on-year in the fourth quarter of fiscal 2023 compared with 4.5% in the third.

Fourth-quarter growth was primarily driven by investment and net exports, with the latter less of a drag given rising exports and slowing imports. Fixed investment turned in the strongest growth on the demand side while private consumption growth was more subdued on-quarter. Manufacturing and agriculture growth improved on-quarter on the supply side even as services growth remained strong, albeit slowing a tad relative to the previous quarter.

While the growth momentum was strong in fiscal 2023, the current fiscal is expected to bear the lagged impact of rate hikes done by central banks over the past 15 months. External demand is likely to be a bigger hindrance to growth with western advanced economies staring at a sharp slowdown in the coming quarters, whipping up a headwind for exports. While domestic demand will also weaken, hit by rising lending rates, softening inflation and government capex will offer support. Monsoon and El Nino risks remain a swing factor.

Overall, Indias real GDP growth is expected to slow to 5.9% in fiscal 2024 from 7% in the previous fiscal.

Among demand-side segments, the strongest growth was in exports of goods and services (11.9% in fourth quarter versus 11.1% previous quarter). While slowing global trade impacted goods exports, services exports remained strong.

While growth was robust in fiscal 2023, a slowdown is inevitable this fiscal, driven by rising borrowing costs. While central banks aggressively raised policy rates over the past 15 months, their transmission to broader lending rates is taking place with a lag. Rates are expected to peak in the current fiscal, impacting both global and domestic demand.

External demand will weaken more with major advanced economies facing the highest interest rates in over a decade. S&P Global expects United States GDP growth to slow to 0.7% in 2023 from 2.1% in 2022; Eurozone is expected to decline to 0.3% from 3.5%. These economies account for 33% of Indias goods exports.

Hence, lower exports is expected to dampen Indias growth trajectory this fiscal.

While the rise in domestic interest rates is relatively lower than in advanced economies, bank lending rates have reached the pre-pandemic five-year average. This is expected to moderate domestic demand, especially in interest-sensitive segments such as automobiles and housing.The Indian Governments capital spending is expected to receive a boost from various factors, such as tax buoyancy, a streamlined tax system, tariff structure rationalization, and digitization of tax filing. Increased capital spending on infrastructure and assetbuilding projects is expected to drive growth multipliers in the medium term. Additionally, agriculture is gaining momentum with the revival of monsoon and Kharif sowing. The contact- based services sector has also shown promise in boosting growth, with several high-frequency indicators performing well in the period from April to September 2022.

Indias robust democracy and strong partnerships are expected to position the country as one of the top three economic powers in the world within the next 10-15 years. As the worlds fastest-growing major economy, Indias success in overcoming the challenges of the pandemic and driving growth in various sectors bodes well for its future economic prospects.

According to the 2nd Advance Estimates, India is expected to achieve a GDP growth rate of 7% in FY23. The International Monetary Fund (IMF), in its latest World Economic Outlook report, has lowered its forecast for Indias FY24 gross domestic product growth to 5.9% from 6.1%. Despite this, the IMF has acknowledged that India will remain the worlds fastest-growing economy.

Industry Structure & Developments

Good health is the foundation on which a persons happiness and well-being rest. When a nations population is healthy, it automatically means that the people make an important contribution to the economic progress of the country, as they live longer and are more productive. Studies have revealed the significant interlinkages between the economic performance of a country and the health of its population, making investment in health not just desirable, but a priority for societies. It is important that every citizen has access to basic healthcare facilities, an important factor that will influence a better quality of life for the populace. A comparison of the basic health indicators between developed and developing countries clearly show that developed nations lead the way in healthcare provision and utilization in terms of all resources i.e., money, infrastructure, people, education, and products. Developing nations, which have not been able to invest similarly in healthcare infrastructure, are characterized by lower human development.

The primary challenge for developing countries like India, is the improvement of healthcare access across sectors, in terms of both reach and affordability, and the pursuit of universal healthcare to ensure that healthcare needs of the vulnerable and under-privileged sections of the society are addressed. Additionally, coping with modern diseases, public health engineering, disease surveillance and rising healthcare costs present significant challenges for the healthcare industry.

The COVID-19 outbreak resulted in significant disturbances, highlighting the economic significance of good health and the urgency of allocating resources to prevent future epidemics, while simultaneously emphasizing the need for managing such emergencies without causing excessive economic upheaval. It is important to undertake essential measures to ensure sustainable and fair access to high-quality healthcare for everyone. For this to be successful, it is imperative that all stakeholders, including healthcare providers, Governments, investors, and consumers, come together to understand, analyze, and implement the required changes across the ecosystem.

Globally, the healthcare industry is transforming rapidly. Several new health technologies such as wearable tech, telemedicine, genomics, virtual reality (VR), robotics and artificial intelligence (AI) although still nascent, are expected to change the very landscape of this industry. To meet the demands of the future, most of these technologies should be capable of achieving adequate scale.

It is safe to expect that the future of health will focus on wellbeing and prevention rather than treatment. Innovations are already transcending barriers in the way diagnosis and treatments are being provided. Technology will also help to democratize healthcare by lowering costs and breaking geographic hurdles. The increasing pace of technological innovation in healthcare will soon offer a plethora of opportunities for healthcare service providers across the globe.

General Overview on Indias Healthcare Service Landscape

The primary challenge facing the country today is the need to enhance healthcare accessibility and affordability, while also addressing the healthcare requirements of marginalized and disadvantaged populations. The healthcare industry also faces significant challenges in terms of managing disease, public health engineering, disease surveillance, and costs. The COVID-19 pandemic which caused major disruptions brought to the forefront the significance of health both in terms of human potential and the economy. This crisis has underscored the need to invest more resources into high- quality healthcare, prevent future epidemics, and manage such emergencies with minimal economic disruption.

The healthcare sector in India has emerged as a significant contributor to the countrys economic growth and prosperity, generating significant employment and revenue. Today, various demographic changes such as increased demand for modern healthcare facilities, heightened awareness of diseases, growing health consciousness, rising per capita income, changing lifestyles, and shifts in disease patterns have all contributed significantly to the growth of Indias healthcare services industry.

It is also important to note that the healthcare industry in India has transformed from an informal sector to a more formalized one over the years, and there has been a trend towards corporatization. The system has expanded considerably and has achieved significant progress in the treatment and cure of various diseases, thanks to advancements in medical technology.

The presence of world-class hospitals and skilled medical professionals has strengthened Indias position as a preferred destination for medical tourism. The reduced cost of lifesaving drugs and medical devices, the evolved pharmaceutical industry, world-class specialty hospitals in Tier 1 and Tier 2 cities coupled with a large pool of well-trained medical professionals, are other factors that have contributed immensely to the growth of the sector.

The public healthcare infrastructure in India has been unable to expand sufficiently to meet the needs of the vast population, and accessing remote regions of the country has been a persistent challenge. Furthermore, many of these facilities suffer from inadequate staffing, limited access to basic infrastructure and equipment, and a need for improved quality standards and protocols. As a result of these unaddressed issues, the private sector has emerged as the dominant force in Indias healthcare landscape, leveraging its strong fundamentals to seize opportunities that the public sector has been unable to fulfill.

Initially, the private healthcare sector in India comprised of only a few standalone centers primarily located in metropolitan cities, which were recognized for providing top-quality healthcare services across the country. However, due to the positive response from patients and inadequate healthcare infrastructure in many parts of the country, similar centers were established in all major urban areas. The private sector quickly expanded to offer tertiary and quaternary care, introduced state-of-the-art medical equipment and procedures, and embraced new service delivery formats. These hospitals subsequently transformed into Centers of Excellence, and their remarkable success in delivering world- class clinical outcomes began attracting patients from around the world. This successful model was subsequently replicated by other key industry players, who invested significantly in infrastructure, technology, and human resources.

The healthcare sector in India offers both promising prospects and challenges. The substantial disparity between the essential and the present healthcare infrastructure has stimulated a considerable influx of investments into assets like hospitals and other facilities. Currently, healthcare in India offers a distinctive opening for corporations to innovate, differentiate, and earn profits. As a result, it has become a favoured sector for financial and strategic investments.

Government Initiatives are supporting the growth of the Healthcare industry

Governments worldwide strive to offer their citizens high- quality healthcare. To achieve this goal, they undertake various proactive measures such as raising awareness about health-related concerns, establishing robust healthcare infrastructure, and encouraging the uptake of health insurance. These activities are aimed at improving the well-being of the population and are carried out by the government authorities.

Over the years, the Indian Government has been taking necessary initiatives to ensure delivery of quality healthcare services to all at affordable costs. In fact, the Countrys healthcare sector is strongly supported by the Central Government which has been undertaking a commendable work to develop India as a global healthcare hub. The multitude of initiatives to drive the growth of the healthcare sector in the country has been yielding positive results. These initiatives have gone a long way in not only improving overall healthcare access for the general population but have also enhanced the quality of healthcare in the country.

The Government has undertaken various initiatives like Ayushman Bharat and National Digital Health Mission to increase the coverage of and access to healthcare services. Moreover, the Governments emphasis on digitization is anticipated to have multiple benefits, including enabling patients to share their health records with healthcare providers for effective treatment and monitoring. It will also provide easy access to reliable information on the qualifications and fees for services provided by different healthcare facilities, service providers, and diagnostic labs.

Policies and Schemes

Ayushman Bharat

Ayushman Bharat scheme was launched to ensure universal health coverage and provide financial risk protection, assuring quality and affordable essential health services to all individuals. As of April 5, 2022; 117,771 Ayushman Bharat-Health and Wellness Centres (AB-HWCs) are operational in India. The Government is also planning to establish 150,000 Ayushman Bharat Health and Wellness Centres by December 2022.

National Resource Centre for EHR Standards (NRCeS)

Ministry of Health & Family Welfare (MoHFW) established a Centre of Excellence named as National Resource Centre for EHR Standards (NRCeS) at C-DAC, Pune to accelerate and promote adoption of Electronic Health Record (EHR) standards in India

Mission Indradhanush

Aims to improve coverage of immunisation in the country and reach every child under two years of age and all the pregnant women who have not been part of the routine immunisation programme. In March 2021, various states and UTs started implementation of the ‘Intensified Mission Indradhanush 3.0.

Pradhan Mantri Swasthya Suraksha Yojana (PMSSY)

Aims at correcting regional imbalances in the availability of affordable / reliable tertiary healthcare services and also to augment facilities for quality medical education in the country. In the Union Budget 2022-23, Pradhan Mantri Swasthya Suraksha Yojana (PMSSY) was allocated Rs. 100 billion (US$ 1.31 billion)

Pradhan Mantri Surakshit Matritva Abhiyan (PMSMA)

Pradhan Mantri Surakshit Matritva Abhiyan (PMSMA), a programme launched in 2016 to ensure comprehensive and quality antenatal check-ups to pregnant women across India, has crossed the 10 million mark.

The Union Budget 2023-24 has brought about an important change in the healthcare sector. As per the finance ministers announcement, the budget includes provisions for setting up 157 new nursing colleges in co-location with existing medical colleges. This step highlights the Governments emphasis on improving the healthcare system by ensuring an adequate number of frontline medical professionals in hospitals. Moreover, the expansion of nursing colleges will address the shortage of nurses required per bed, which is pivotal to Indias aspirations of being a preferred healthcare destination. Additionally, healthcare providers are now concentrating on developing healthcare infrastructure in Tier 2 and Tier 3 cities.

In addition, the finance minister has declared the Governments objective of eradicating sickle cell anemia by 2047. The initiative, once launched, will facilitate universal screening of 70 million individuals between the ages of 0 and 40 in affected tribal regions.

The augmented funding for the healthcare sector will facilitate the Indian Council of Medical Research (ICMR) in upgrading its facilities. This upgrade will provide an opportunity for the faculty members of both public and private medical colleges to conduct research within these facilities and allow private sector research and development teams to access them as well. The involvement of diverse teams will foster greater cooperation in research and innovation in healthcare. This demonstrates the budgets forward-thinking emphasis on medical research, collaborative research, and research and development, which are essential to improve healthcare delivery.

The healthcare sectors technological advancements were also taken into account in the budget with a focus on Pharma Innovation. The finance minister announced a new program to promote research and innovation in the pharmaceutical industry. Additionally, the Government intends to encourage industry players to invest in research and development in established priority areas, such as innovative technologies in healthcare.

The Indian Healthcare Sector has seen considerable growth through strategic budget allocations and collaborative efforts. The Union Budget 2023-24 emphasizes the Governments concentration on two essential aspects of enhanced healthcare: augmenting the number of skilled medical professionals and investing in research and development. Moreover, the substantial increase in budgetary allocations shows a strong dedication towards building a more effective healthcare system.

Source: News Articles, Union Budget 2023-24

Market Size of Indian Healthcare industry

Currently, the Indian healthcare sector is witnessing remarkable growth, primarily attributed to the improved coverage, services, and augmented expenditure by both the public and private domains. In 2016, the Indian healthcare industry was valued at USD 110 billion, and projected to expand at a CAGR of 22.52%, reaching a size of over USD 372 billion by 2022. This substantial growth potential indicates a vast scope for increasing the accessibility of healthcare services across India, thus presenting abundant opportunities for the healthcare industrys development.

According to the e-Health Market Opportunity Report 2021, the e-health market in India is predicted to generate revenue of $10.6 billion by 2025. The COVID-19 pandemic has opened a host of opportunities for India and the world to accelerate technological advancements in the healthcare industry. With the Governments strong emphasis, India has made significant progress in this field. Considering the countrys immense population and diversity, the sector offers enormous potential and opportunities for growth in the coming years.

Also, the Indian healthcare industry is one of the most knowledgeable and professional industries in the world. The sector is one of the most efficient and cost-effective healthcare delivery systems driven by experienced doctors, specialists and Nurses and well-equipped diagnostics. There is immense scope for enhancing healthcare services penetration in India and ample opportunity for the development of the healthcare industry as a whole.

Conducive policies for encouraging FDI, tax benefits, and favorable Government policies coupled with promising growth prospects are helping the industry attract private equity, venture capital and foreign players. Today, Indian companies are entering into alliances with domestic and foreign companies to drive growth and gain new markets. Going ahead, strong fundamental factors such as rising income levels, ageing population, growing health awareness and changing attitude towards preventive healthcare are expected to boost healthcare services demand.

In 2021, the Indian healthcare industry emerged as the fourth- largest employer, providing employment to around 4.7 million individuals. The Asian Research and Training Institute for Skill

Transfer (ARTIST) announced plans to create around one million skilled healthcare providers by 2022.

The Healthcare Service Delivery Landscape in India

The Healthcare sector in India broadly includes Hospitals, Pharmaceutical Companies & Standalone Pharmacies, Diagnostic Services, Medical Equipment and Supplies, Medical Insurance, Telemedicine Companies, Medical Tourism and Retail Healthcare. The healthcare market functions through the following segments:

As per Front and Sullivan research, the healthcare delivery market, consisting of hospitals and diagnostics centers accounted for a major share of the healthcare pie at 70%, followed by domestic pharmaceuticals at 20% and medical devices market at 10% as of the financial year 2020.

Healthcare delivery may also be classified as primary, secondary and tertiary, on the basis of the complexity of ailment being treated. For instance, a hospital treating heart diseases may be classified as a primary facility if it addresses conditions such as high cholesterol, as a secondary facility if it treats patients suffering strokes, or as a tertiary facility if its deals with cardiac arrest or heart transplants.

Per capita healthcare expenditure has risen at a fast pace

The countrys per capita healthcare expenditure has been increasing due to several factors including higher income, improved access to high-quality healthcare facilities, and increased awareness of personal health and hygiene. Additionally, the wider availability of health insurance has played a crucial role in boosting healthcare spending and this trend is expected to continue and become more pronounced in the next decade.

According to the 2022 Economic Survey, Indias public healthcare expenditure increased from 1.3% of GDP in 201920 to 1.8% in 2020-21 and further to 2.1% in 2021-22. The Government of India has set a target to increase public health spending to 2.5% of the countrys GDP by 2025.

The adequacy of a countrys healthcare infrastructure and personnel is a barometer of its quality of healthcare. The country accounts for nearly a fifth of the worlds population, but has an overall bed density of merely 15, per 10,000 people, with the situation being far worse in rural than urban areas. Indias bed density not only falls far behind the global median of 29 beds, per 10,000 people, it also lags that of other developing countries such as Brazil (21 beds), Malaysia (19 beds), and Vietnam (26 beds).

In recent decades, India has made significant progress in expanding its medical education infrastructure. As of March 2022, the number of medical colleges in the country has grown from 412 in FY16 to 595. Additionally, the number of allopathic doctors with recognized medical qualifications under the I.M.C Act and registered with State Medical Councils or the National Medical Council has risen from 0.83 million in 2010 to 1.3 million as of November 2021.

In January 2021, the PM Cares Fund allocated Rs. 2,016 million (US$ 27.55 million) for the construction of 162 additional dedicated pressure swing adsorption medical oxygen generation plants inside the countrys public health facilities. The Union Cabinet also approved the extension of the National Ayush Mission, which is responsible for the advancement of traditional medicines in India, as a centrally sponsored scheme until 2026 in July 2021.

Even though the country is witnessing rapid expansion in the healthcare sector, the shortage in the medical workforce remains a big challenge. As per World Health Statistics primary data 2021, with a density of 9 physicians and 24 nursing personnel per 10,000 population, India trails the global median of 18 physicians and 39 nursing personnel, falling behind developing countries such as Brazil (23 physicians, 74 nurses) and Malaysia (15 physicians, 35 nurses).

These statistics indicate the alarming gap in healthcare infrastructure in the country and the tremendous growth potential the sector offers.

Region wise doctor and nurse density

Region	States covered for doctors and nurses data	Avg. doctors per 10,000	Avg. registered nurses per 10,000
East India	Bihar, Jharkhand, Odisha, West Bengal, Sikkim, Arunachal Pradesh, Assam, Tripura, Mizoram, Nagaland, Manipur, Meghalaya	4.4	9.2
North India	Punjab, Uttarakhand, Uttar Pradesh, Haryana	5.3	10.4
Central India	Chhattisgarh, Madhya Pradesh	4.5	17.2
West India	Maharashtra, Gujarat, Rajasthan	11.2	26.3
South India	Andhra Pradesh, Karnataka, Tamil Nadu, Kerala, Telangana	16.8	51.4

Note: 17 states under the non-special category given by the Reserve Bank of India (except Goa) along with our key states of study have been considered above. Amongst our key states, doctor numbers for Manipur and Meghalaya are not available, while nurse numbers for Nagaland are not available. Source: National Health Profile 2020, CRISIL Research

Healthcare industry is witnessing varied emerging trends

There is a scarcity of healthcare professionals, particularly in semi-urban, rural, and remote regions, leading to restricted availability of medical services to a significant portion of the population. With the widespread use of smartphones and the increasing penetration of the internet in India, Telemedicine and e-Health are being considered as viable remedies to overcome this issue. Tele-consultations through telemedicine have the potential to save lives and helps prevent travel and expenditure. Additionally, tele-radiology is a developing field, and numerous international hospitals are actively participating in it.

Various evolving technological developments like Artificial Intelligence, Internet of Things, wearables and other mobile technologies have the potential to improve outcomes for people suffering from multiple co-morbid conditions. This is due to the possibility of remote monitoring of health status and delivery of virtual care services through smartphones and artificial data solutions.

Before the COVID-19 outbreak, the health-tech sector was mainly concentrated on creating wearable devices, diagnostic tools, and medication delivery systems, along with aiding the early detection of genetic ailments. Additionally, remote therapy was used to address lifestyle-associated concerns such as stress and anxiety, and post-treatment pain relief. Nevertheless, following the pandemic, new prospects are anticipated to surface in the health-tech industry. The fundamental method of medicine is projected to undergo a significant transformation in the coming years. With India facing a scarcity of proficient medical professionals, AI and an AI equipped Doctor could prove to be a feasible long-term solution, especially for rural and remote regions.

Source: News Articles, NITI Aayog report

Key Characteristics of the Healthcare Industry

A combination of economic and demographic factors is expected to drive healthcare demand in India. This industry in India is broadly characterized by the following:

Rising per capita income and widening of income inequalities:

India has witnessed tremendous economic growth over the last 3 decades. The country has been able to register robust GDP growth and has been consistently featured amongst the fastest growing economies. With the country already witnessing a steady economic growth, the per capita income of its population as well as the economic stability of the expanding middle class Indian, is on the rise. This changing scenario has led to an accompanying demand for quality healthcare, and growing purchasing power for millions of upwardly mobile Indians.

	FY12	FY13	FY14	FY15	FY16
Per-capita net national income (?)	63,462	65,538	68,572	72,805	77,659
On-year growth (%)	2.1	3.3	4.6	6.2	6.7

 

	FY17	FY18	FY19	FY20	FY21AE
Per-capita net national income (?)	82,931	87,828	92,241	94,556	85,929
On-year growth (%)	6.8	5.9	5.0	2.5	(9.1)

AE: Advance estimates

Source: Second advanced estimates of Annual National Income, 2020-21, CSO, MoSPI, CRISIL Research

Due to increasing purchasing power, consumers are demanding and willing to pay for superior healthcare services. However, even as India continues to develop, the country is witnessing a widening of income inequalities. Low per capita income, minimal expenditure on healthcare, and a lower number of doctors coupled with muted insurance penetration in rural areas, account for wide disparity in healthcare offerings between urban and rural areas. Also, the inequality is becoming increasingly apparent even within the same city. People from the different socio-economic groups fall into unique baskets typified by varying healthcare needs. Each of these presents a market in terms of the addressable value proposition.

Changing demographic trends:

The medical industry will see a rise in opportunities for healthcare services in India as a large population of the country becomes a significant target market today. According to the National Health Profile 2021, the proportion of the population between the ages of 15 and 59 in the working population is expected to rise from 60.7 percent in 2011 to 65.1 percent in 2036, indicating that this is a productive demographic group with distinct advantages. This is likely to boost India into the ranks of the worlds most developed economies in the coming decade. This demographic segment demands, and is prepared to spend for modern, high-quality healthcare services for both treatments and preventive care.

While Indias population appears to be young, the percentage of senior citizens has been growing at an increasing rate in recent years and the trend is likely to continue. The rise in this segments population, coupled with higher life expectancy, is yet another point in favour of high-quality healthcare. As a result, socio-demographic aspects in the country are expected to boost the growth for healthcare services in the future.

Under-Served, Under-Consumed

While there has been commendable progress in the last couple of decades by both Private and Public healthcare service providers, the challenge for the healthcare sector in India remains that a large segment of the population remains under-served due to certain geographies which lack credible, quality infrastructure. This scenario is the culmination of decades of under-investment in the healthcare sector. Furthermore, the domestic healthcare delivery infrastructure is highly concentrated in the state capitals or Tier-1 cities largely driven by private sector.

Despite the fact that making healthcare affordable and accessible to all citizens of the country is one of the Governments key focus areas, the country continues to lag far behind the global curve in providing good quality healthcare access across its population.

Transition in disease profile:

India has witnessed an extensive change in the overall disease profile of its population. The share of deaths for communicable, maternal, neonatal, and nutritional diseases decreased to 27.5% in 2016 from 53.6% in 1990 and that of non-communicable diseases increased to 61.8% in 2016 from 37.9% in 1990. This shift in the disease profile has led to an additional need for healthcare services in the country. Non-communicable diseases tend to be of long duration, increasing the need for sustained healthcare services.

Transition in disease profile

	1990	2016
Share of communicable, maternal, neonatal and nutritional diseases	53.60%	27.50%
Share of non-communicable diseases	37.90%	61.80%
Share of injuries	8.50%	10.70%

Source: Health of the Nations States 2017: India Council of Medical Research

Due to increased urbanization, the incidence of lifestyle diseases is anticipated to increase faster than any other segment. Within the lifestyle space, cancer is one of the fastest growing ailments. The prevalence of cancer in India is projected to increase from an estimated 3.9 million cases in 2015 to 7.1 million cases by 2020, according to an Ernst & Young report.

According to CRISIL Research, Non-Communicable diseases (NCDs) have a tendency to increase as income levels rise. By 2030, the World Health Organization (WHO) anticipates a rise in NCDs. CRISIL predicts a surge in demand for healthcare services associated with lifestyle-related diseases such as heart disease, cancer, and diabetes. Orthopedics is an emerging market in India that has the potential for growth. Currently, it constitutes a small percentage compared to NCDs. The orthopedics market can be segmented into four categories: knee, hip, trauma, and spine. Knee replacement has the largest market share, followed by trauma and spine. In comparison to the global trend, hip replacement is still a small market in India compared to knee replacement.

The increasing role of technology in healthcare delivery:

Over the last decade, the health and medical industries have undergone significant transformations. This has been made possible by medical advancements and technological progress. The medical field makes unique discoveries about treatments, data collection, symptom, and disease / cure research, which offers many more clinical options to patients.

Many hospitals in India have identified making investments in technology as a pathway to delivering better clinical outcomes. The timely adoption of advanced technologies has enabled the availability of and supported advancements in robotic surgeries, radiation surgery or radio therapies with cyber knife options, intensity modulated radiation therapy, image guided radiation therapy, transplant support systems, and advanced neuro and spinal options.

Emerging Technologies in Healthcare Delivery

New health technologies such as wearable tech, telemedicine, genomics, virtual reality (VR), robotics and Conversational artificial intelligence (AI) continue to transform the landscape of the Indian healthcare system. India, like many other markets, is on the verge of a "digital health" revolution, with a large number of healthcare companies beginning to adopt digital technologies spanning patient engagement, physician engagement, field force effectiveness, R&D efficiency, and supply chain management.

The healthcare industry is facing a severe shortage of doctors, nurses, and other healthcare workers on a global scale. To overcome this shortage, several reforms have been proposed by countries across the world. Technology is evolving and taking over almost every organization on this planet, and the healthcare industry is no exception.

Scaling up of Medical Value Travel (MVT)

The Indian healthcare industry has grown exponentially by addressing the medical value travel opportunity. India has emerged as one of the most preferred destinations for patients across the globe in seeking medical assistance. This can be attributed to its diverse culture and astounding monuments that have attracted patients from across the globe. These patients come to India for their treatments and explore these tourist spots across the nation. Healthcare costs in India are extremely competitive compared to those in developed countries and other Asian countries. This is especially for expensive and high acuity surgeries like cardiac bypass, solid organ transplants, joint replacements, dental services, cosmetic surgery and bariatric surgery. The cost of travel and accommodation is also low as compared to developed nations. India also attracts medical tourists from other developing nations due to the lack of advanced medical facilities in many of these countries.

Of the total foreign tourist arrivals in India, the proportion of medical tourists grew from 0.11 million tourists in 2009 to 0.7 million tourists in 2019.

According to the Medical Tourism Index 2020-21, India ranks 10th out of the Top 46 countries in the world. Despite the severe impact of the COVID-19 pandemic on the tourism and hospitality industries, the medical tourism sector is estimated to be worth US$ 5-6 billion by 2020.

Affordable and Quality Treatment Makes india a Favoured Destination

1 Ailments (USD)	USA	Korea	Singapore	Thailand	India
Hip Replacement	50,000	14,120	12,000	7,879	7,000
Knee Replacement	50,000	19,800	13,000	12,297	6,200
Heart Bypass	1,44,000	28,900	18,500	15,121	5,200
Angioplasty	57,000	15,200	13,000	3,788	3,300
Heart valve replacement	1,70,000	43,500	12,500	21,212	5,500
Dental Implant	2,800	4,200	1,500	3,636	1,000

Source: CRISIL Research

Over the years, The Indian Government has played a pivotal role in paving the way for these international patients to enter the country and avail their desired medical treatments. It has implemented a number of policies, including the introduction of an e-Medical visa, multiple entry visas, and longer stays as needed for treatment. Furthermore, the Indian Government has been actively requiring wellness centers and Medical Value Travel (MVT) facilitators to be accredited. These initiatives have contributed significantly to building Indias image as a preferred destination for medical tourists.

Indian medical tourism originating countries

Rising Investments in the Indian Healthcare space

The Indian healthcare sector is among the fastest growing sectors with high contribution not only in terms of revenue, but also employment. It includes hospitals, medical equipment and devices, health insurance, telemedicine, clinical trials and medical tourism. Infusion of long-term capital in the healthcare space goes a long way in strengthening the healthcare infrastructure of the country. Demand growth, cost advantages and policy support are some of the factors that have been playing a very important role in attracting FDI in the healthcare sector.

When it came to prioritizing resources, healthcare in India was always given a lower importance, but with the outbreak of the COVID-19 pandemic, all stakeholders realized the importance of prioritizing healthcare, as the pandemic highlighted the countrys lack of preparedness, resources, and infrastructure to fight and overcome the pandemic.

According to the Department of Industrial Policy and Promotion (DIPP), between April 2000-June 2022, FDI inflow for the drugs and pharmaceuticals sector stood at US$ 19.90 billion. In the same period, there was an inflow of US$ 8.09 billion and US$ 2.71 billion for the hospitals and diagnostic centers sector and the medical and surgical equipment industry, respectively.

The Indian healthcare industry has attracted the interest of leading global private equity firms and venture capitalists over the last few years. The strong support of PE funding has fueled the growth of multi-specialty and single-specialty hospitals in India. Many multinational corporations have attempted to expand their presence by forming partnerships and making investments.

The Government of Indias decision to allow 100% FDI in the hospitals sector led to a significant increase in investments from overseas funds. These trends indicate rising investor confidence in the Indian healthcare space and deepen the perception of India as an attractive healthcare investment destination.

Retail Pharmacy Sector

The Indian consumers increasing familiarity with international merchandise, organized pharmacy chains have gained prominence and established a substantial foothold in urban and semi-urban regions. These contemporary retail pharmacy chains have the advantage of being digitized, structured, and technologically advanced, which enables them to monitor medicine inventories and sell completely reliable products. They host well-organized displays that entice customers to browse and inquire about an assortment of healthcare and wellness products.

Such organized retail pharmacy chains account for only around 8 to 10% of the market, with the majority of them concentrated in urban areas. There is still a significant gap between demand and supply for pharmaceutical products, particularly in Tier 2 cities and rural areas. As a result, pharmacy retailers have a huge opportunity to expand their distribution channels across the country.

There has been a transition in the approach towards health which cannot be emphasized enough. There is now a clear pre-pandemic and post-pandemic phase. To this effect, immunity-boosting drinks, foods, and vitamin products have become increasingly popular to maintain optimum health. This increase in demand for better quality healthcare products and focus on wellness is now single-handedly driving the growth of the organised retail pharmacy sector in India.

E-commerce has seen exponential growth across categories as internet penetration and smart phone availability have increased - from apparel to groceries, people have begun purchasing most of their needs via online platforms. E-pharmacies have emerged as a promising sector because of this significant shift in shopping behaviour, as they have managed to provide the convenience of shopping from the comfort of ones own home.

During COVID times, the Central and State Government acknowledged the necessity of E-pharmacies and classified them as an essential service. They also promoted them on the Aarogya Setu App. Pradhan Mantri Bhartiya Janaushadhi Pariyojana (PMBJP), Digital India, Ayushman Bharat, Startup India and National Digital Health Mission (NDHM) are some of the initiatives undertaken by the Government to boost the growth and enhance the ease of doing business in the online pharmacy segment.

When compared to other developed economies, Indias online pharmacy market is still at a very early stage. Digital pharmacies are gaining popularity in Tier 1 and Tier 2 cities, as consumers use technology to bridge the service quality gap. They rely on scale and better distribution networks. E-pharmacies still have a lot of room to grow in Tier 2 and III cities, which can be accomplished by investing heavily on improving logistics channels in these areas.

Growing Health Insurance market to propel demand

Health insurance stimulates demand for healthcare services because the insured pays a premium for the policy and is reimbursed by the insurer if he or she requires treatment due to illness, sickness, or disease. To a large extent, insurance covers an individuals health expenses and lessens his or her burden of healthcare costs, thereby improving his or her appetite to seek high-quality care. Consequently, as the health insurance market expands, so will the demand for healthcare services.

Health insurance coverage has increased from 17% in fiscal 2012 to ~36% in fiscal 2020. As per the Insurance Regulatory and Development Authority (IRDA), nearly 499 million people have health insurance coverage in India (as of fiscal 2020), as against 288 million (in fiscal 2015), but despite this robust growth, the penetration in fiscal 2020 stood at only 36%.

As is evident, the share of Government-provided insurance is greater than that due to insurance policies availed of by individuals not covered under any schemes. Government or Government- sponsored schemes, such as the Central Government Health Scheme (CGHS), Employee State Insurance Scheme (ESIS), Rashtriya Swasthya Bima Yojana (RSBY), Rajiv Arogyasri (Andhra Pradesh Government), and Kalaignar (Tamil Nadu government) account for ~75% of health insurance coverage provided. The remaining is through commercial insurance providers, both Government and private players.

In FY22, premiums underwritten by health insurance companies grew to Rs. 735.82 billion (US$ 9.21 billion). The health segment has a 33.33% share in the total gross written premiums earned in the country. The number of policies issued to women in FY21 stood at 9.3 million with one out of every three life insurance policies in FY21 sold to a woman.

Health insurance coverage is an important determinant of access to healthcare. Today, health insurance has become an important financial management tool for Indians who want to take care of their health. Also, favourable Government initiatives like Ayushmann Bharat are expected to drive the growth of health insurance market during the forecast period. The prevalence of chronic diseases continues to rise on a day- to-day basis. This increase, coupled with increasing public awareness of the benefits of health insurance, has become a key growth driver for the Indian health insurance market.

Retail Healthcare

The concept of ‘Retail in healthcare refers to providing opportunities for clinical consultations closer to home, beyond the confines of a hospital. The fundamental principle of ‘Retail Healthcare is to cater to the healthcare needs of consumers at their doorstep. Currently, patients seek convenience when selecting a healthcare provider, and they increasingly prioritize proximity over distance, preferring shorter wait times, same- day scheduling, and extended hours (including weekends). Consequently, Retail Health is becoming an avenue for delivering quality, convenient healthcare services to numerous consumers and serves as a model for healthcare systems to consider when catering to new and existing patient groups.

Changes in consumer preferences and increased use of technology have successfully influenced the shift to retail healthcare. Retail healthcare starts with preventive care and progresses to the treatment of low-complexity cases. The primary goal of retail healthcare is to provide a variety of high-quality services at reasonable prices in convenient settings. Healthcare providers are designing locally relevant spaces that are tailored to specific needs in order to meet consumers demand for convenience and flexibility. These areas are primarily concerned with vaccinations, patient education, information sharing, specimen collection and reporting, wound dressing and aftercare, injections, and teleconsultations. One of the recent healthcare trends around the world, and in India too, is the emergence of Day-care hospitals. Day-care hospitals are more than an outpatient clinic and less than a full-fledged hospital. Day care hospitals provide comfort and convenience to the patient and family. They also provide access to the expertise and experience of the panel of doctors that a traditional hospital has, but minus the hospitalization.

The Retail Healthcare business includes Primary Care Clinics, Specialized Birthing Centers, Single Specialty Clinics, Primary Health Centers and Diagnostic Chains, apart from Dental, Daycare and Home Healthcare formats. Single specialty healthcare centers operating under the Retail Healthcare delivery format have already experienced growing popularity over the past few years in India. The segment now includes multiple treatment categories in areas such as fertility, maternity, ophthalmology, dental health, dialysis, and diabetic care.

Over the last decade, retail healthcare has undergone significant development worldwide. All sectors encompassed by the Retail Healthcare framework represent a substantial opportunity in the healthcare industry, with considerable unexplored prospects that could enhance Indian healthcare providers outreach into local communities and neighborhoods.

Strengths

Strong Brand Positioning:

During its 40-year history, Apollo Hospitals has pioneered and preserved a strong leadership position in the Indian healthcare industry. Apollo Hospitals is well recognized as Indias leading integrated healthcare provider. This position reflects the companys unwavering focus on clinical excellence, outstanding clinical outcomes and responsiveness to consumer needs. It is steadfast in preserving its position as a leader by embracing innovative cutting-edge technology and clinical protocols, while continuing to invest in diversified verticals. Over the years, the groups trustworthiness has grown exponentially, and it continues to attract a large number of patients, highly skilled clinicians, and staff.

Dominant PAN-india Presence:

Over the years, Apollo Hospitals has created a dominant PAN-India presence that encompasses a diverse range of offerings under the healthcare umbrella. Its current footprint includes of 9,957 beds, 5,541 pharmacies, 2,442 national retail healthcare centers as well as a strong and deep online presence, along with home care.

Apollo Hospitals has established a nationwide network with numerous touch points to help its patients gain easier access. Apollo Hospitals continues to benefit from competitive advantages such as improved customer experience, economies of scale, cost efficiencies, a broader reach, access to a large patient base, and the ability to leverage synergies gained through nearly four decades of providing premium world-class medical services.

The Company has developed newer healthcare delivery models and formats, such as day care and short stay surgery centers, which have aided it in evolving and adapting to global trends while providing a full care continuum value proposition to consumers.

Professional management team and Proficient clinical talent:

Apollos compelling brand image and highly professional working environment continues to attract and retain top clinical and professional talent from India and across the globe. The doctors and medical staff at Apollo Hospitals are not only highly qualified, but also have comprehensive experience in their respective fields. Apollo Hospitals efficient clinical and non-clinical staff are well trained to provide its patients with the best clinical outcomes. The senior management team at Apollo Hospitals has created a strong eco-system that enables and motivates staff to provide superior care.

The doctors at Apollo Hospitals continue to have an enviable track record of success when it comes to performing critical surgeries or medical procedures. Their domain expertise is highly regarded and recognized by patients all over the world. Because of their expertise in the field of medicine, many specialists at Apollo Hospitals continue to receive numerous accolades and awards at various healthcare forums.

Integrated Medical Offerings:

Apollo Hospitals has made significant steps to ensure access to quality care which is not strictly limited to a hospital setting, but which is also available outside of it or in a post hospitalization scenario. Currently, Apollo Hospitals broad spectrum of service offerings successfully encompasses the entire value chain of healthcare service offerings. Apollo Hospitals has been able to provide differentiated services through different entities, which together constitute a fully integrated healthcare ecosystem. It is important to note that each of these healthcare offerings has its own identity and asserts its own special expertise. However, at the core and in ideology, each remains essentially Brand Apollo.

Extensive Technological expertise:

Since its inception, Apollo Hospitals has placed a strong emphasis on continuous improvement and the adoption of newer technologies. The Company has always been proactive in allocating funds to adopt the most cutting-edge medical technologies available and has been able to provide patients with best-in class medical care and clinical outcomes.

Apollo Hospitals has recently introduced Apollo 24/7, a cutting- edge application that provides virtual doctor consultations, integrated medical records, prescriptions, e-pharmacy, and diagnostics, making top-notch healthcare accessible to everyone. Apollo 24/7 is the rapidly expanding digital health ecosystem in this region.

Weaknesses

High burden of Regulatory requirements:

The establishment of a hospital necessitates a plethora of licenses and statutory approvals, which act as a barrier for private players seeking to expand their operations. From a regulatory standpoint, there are numerous requirements from numerous authorities that can be burdensome when compared to global norms such as single window clearance. Simplification of these requirements would be helpful, as would more consultation and understanding between regulatory authorities and healthcare providers. It is critical to recognize that private healthcare service providers cannot be compared to other businesses. Healthcare service providers must be viewed in light of the significant contribution they make to the overall well-being of the community.

Capital intensive industry:

Healthcare remains an industry that demands significant capital infusion. The fundamental requirements for running a medical facility, such as land, construction for specialised interiors, medical equipment is expensive. Clinical staff and trained manpower for hospital management are scarce. The industrys high capital requirements make it difficult to enter or scale up operations. Furthermore, the upkeep and improvement of medical treatment technologies necessitates a significant ongoing expenditure. After a company has managed the initial capital expenditure required to commission a facility, the task of balancing day-to-day expenses with competitive healthcare prices for services becomes difficult. As a result, the basic cost of operating a hospital is quite high, stretching the viability of healthcare providers.

Dissimilar Markets:

With a diverse and growing population, Indias need for quality healthcare services is critical. Even in markets that are relatively close geographically, the characteristics of the market and consumer requirements differ. Each micro-market has its own set of circumstances, including differences in demographics, disease profiles, customer attitudes, seasonal variations, price sensitivity, and so on. Hospitals in two different cities in the same state, and even within the same city, operate under different operating conditions with varying parameters. This necessitates greater customization and monitoring.

In the face of these complexities, significant management oversight is required to maintain clinical standards, balance case mix, ensure adequate volumes, and upgrade technology on a regular basis.

Shortage of skilled medical professionals:

The healthcare services industry employs a large number of people. The calibre of doctors and other healthcare professionals are critical to the organisations success and efficiency. India is a country with abundant workforce given the sheer size of its population. However, for the vast majority of this population, there is a significant gap in the provision of relevant education, as well as a scarcity of competent training institutes for appropriate workforce skilling. As a result, skilled workers are in short supply, including doctors, nurses, and paramedical staff such as lab technicians, radiographers, and therapists. Both in India and abroad, skilled professionals in the healthcare industry have good opportunities. Intense competition among urban healthcare providers has resulted in sharp increases in remuneration for qualified staff. The scarcity of skilled professionals makes it difficult to start and run a profitable healthcare institution in India.

Opportunities

Increased Digitization of Healthcare Solutions:

Digital technology continues to play a critical role in enabling the masses in India to gain access to healthcare. Continuous digitization and the introduction of newer technologies such as telehealth have already broken-down barriers and have established patient-centric healthcare systems. Patients have started to book appointments and choose basic medical needs from the comfort of their own homes. Doctors can access patient records at their fingertips and provide consultations with ease thanks to digital technology. In recent years, technological advancements have opened up new avenues for lowering distribution costs and increasing healthcare penetration. Such solutions will be most successful in extending connectivity to rural and remote areas and providing first-rate care, thereby eliminating the need for patients to travel long distances to urban health center.

Changing Consumer preferences and delivery formats:

The general perception is that a certain segment of patients finds the general hospitals setting to be intimidating and they respond better in a more relaxed atmosphere. For non-critical ailments, patients today prefer visiting a single specialty centers and other healthcare delivery formats. To meet this demand, healthcare providers have started to offer a variety of options such as short-stay centers, single-specialty centers, neighbourhood clinics, and home services. These alternative healthcare delivery formats are economically viable and appealing because they require relatively lesser capital investment, tend to achieve a faster breakeven, and provide a better return profile and appealing because they require relatively lesser capital investment, tend to achieve a faster breakeven, and provide a better return profile.

Preventive Health and Wellness:

There has been a significant increase in health awareness among the people of this country. People are becoming more aware of the importance of healthy living and are making significant efforts to adopt a healthy lifestyle. They understand the significance of detecting a disease at an early stage and preventing it from progressing to a critical stage. This increased awareness has resulted in a promising opportunity in the areas of preventive health and wellness, which includes preventive health checks, diet and nutrition, exercise, and well-being.

Medical Value Travel:

Medical Value Travel (MVT) is a multibillion-dollar industry that is estimated to grow further driven by its numerous benefits that it provides to patients. Indias position as a preferred medical tourism destination has been bolstered as it has world-class hospitals, equipped with cutting-edge technology, skilled medical professionals, and relatively lower treatment costs. Indian hospitals can provide superior services at a lower cost. The assurance of quality healthcare facilities, comparable clinical outcomes and cost-effectiveness are the main factors that have drawn millions of patients from all over the world to India for medical treatment. The Union Governments proactive measures, such as approving the issuance of e-medical visas, have also contributed to the growth of medical value travel in the country.

Underserved and Poorly Served Markets:

There are significant disparities in the quality of healthcare services available in metro cities and large urban areas compared to the rural areas of the country. The rural population of India continues to face access barriers to quality healthcare services. Even those with more resources and financial means must travel to metro / urban areas to receive medical treatment or related health care services. Healthcare service providers who want to expand into semi-urban and rural areas will benefit from a ready market for their products and services. To meet the demand in some of these areas, Apollo Hospitals has already opened hospitals in several Tier 2 and Tier 3 locations. Reach has also been expanded due to the establishment of hundreds of tele-medicine centers across the country. This has enabled Apollo Hospitals pan- India penetration.

Favourable Demographic Profile:

While India continues to have a favourable demographic quotient due to its relatively young population, it also has a large number of elderly citizens in absolute terms. As a result, Indian healthcare providers have an opportunity to meet the healthcare expectations of the young while also meeting the increasing healthcare needs of the elderly. Along with this, the country is seeing a significant increase in disposable income among a variety of groups, including a growing middle class that can afford to pay for quality healthcare. These changing demographics present service providers with an exciting opportunity.

Threats

High cost of resources:

Healthcare service providers are required to deliver healthy return ratios to their shareholders who have invested substantial capital in the Company. The key element to enable these return ratios is improving productivity, efficient cost control and finding ways to improve realisations. Input costs in healthcare, on the other hand, have risen significantly and are expected to rise further in the future as a result of inflation, and increasing competition.

Land, qualified medical personnel, and equipment are resources that are finite in nature and are constantly in high demand. Furthermore, healthcare providers must continuously improve and adopt newer technologies which increases the overall cost. Furthermore, the constant push for lowering prices through regulation or group negotiation strains the hospital finances. The constraint of incurring higher capital and operating costs results in long gestation periods and low returns on investment.

Highly Competitive industry:

The level of competition among both unorganised and organised players continues to remain high. Many entrepreneurs and business houses have entered the healthcare business as a result of the growing demand for healthcare services. Private and foreign investors are increasingly interested in this sector. They plan to invest and venture into the various segments of the healthcare industry. Most of these newer players are offering services at lower prices than established players, increasing the level of competition. In some metros, there are even pockets of overcapacity, and rising competition, stifling the growth and profitability of all players.

Scarcity of Skilled Manpower:

In India, there is a severe shortage of skilled healthcare personnel. On these measures, India lags behind other countries, including other developing nations like Brazil, with only 22 physicians and 74 nurses per 10,000 people. The shortage of doctors, nurses, and paramedics would negatively impact the delivery of healthcare services unless immediate steps are taken to increase the number of doctors, nurses, and paramedics.

Changing Government regulations:

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The Indian Government has taken a number of positive initiatives in recent years, including the National Health Protection Scheme (NHPS) and the Pradhan Mantri Jan Arogya Yojana (PMJAY), which have benefited the Indian healthcare sector. However, because hospitals are exempt from GST, hospitals were unable to use input GST credit on output services, which had a negative impact on health care service delivery costs and operating margins.

An ongoing challenge for Indian healthcare service providers is the possibility of adverse future regulatory interventions by government agencies. This would not be in the interest of strengthening healthcare infrastructure or delivery capability, which is a national priority.

Company Overview

Apollo Hospitals began its journey as the countrys first corporate hospital in 1983.

Dr. Prathap C Reddy was the driving force behind the establishment of this pioneering enterprise and is widely regarded as the architect of modern Indian healthcare. Apollo Hospitals has become a shining beacon of excellence in the private healthcare space since then.

Apollo Hospitals has built a strong foundation in the retail healthcare ecosystem since its inception, diversifying into hospitals, pharmacies, primary care and diagnostic clinics, and a variety of retail health models, firmly establishing itself as Asias leading integrated healthcare service provider. A Global Projects Consultancy Division, Medical Colleges, Medvarsity for e-Learning, College of Nursing and Hospital Management, and a Research Foundation have all been established by AHEL. While being the pioneer in comprehensive Preventive Health Check for many years, Apollo has also launched a personalised 3-year preventive health program ProHealth, which is a unique, end-to-end proactive health management program. To expand the care continuum Apollo launched a digital initiative known as Apollo 24/7, which is a comprehensive digital health platform with e-pharmacy, virtual doctor consultation and diagnostics.

Since the beginning of its journey, Apollo Hospitals has always prioritised clinical excellence, technological adoption ahead of the curve, and forward-thinking research and academics, while being operationally effective and delivering an attractive value proposition for the consumer. Apollo Hospitals has been a trailblazer in introducing and integrating cutting-edge technology as a core component of providing world-class healthcare. This mindset has been instrumental in cementing the companys position as a forerunner in the Indian healthcare industry. The Apollo Proton Cancer Center in Chennai recently opened its doors as the first proton therapy centre in Southeast Asia, bringing access to the gold standard in radiation therapy to 3 billion residents in this part of the world. This is a testament to Apollos unwavering commitment to achieving world-class clinical outcomes and quality of life for its patients.

Over 150 million patients from over 120 countries have put their trust in Apollo Hospitals. TLC (Tender Loving Care), the magic that inspires hope among Apollo Hospitals patients, is at the heart of the companys patient-centric culture.

Apollo Hospitals, being a responsible corporate citizen, has extended the spirit of leadership to include the responsibility of keeping India healthy. Recognizing that Non-Communicable Diseases (NCDs) pose the greatest threat to the country, Apollo Hospitals is constantly educating all Indians on the importance of preventive healthcare as the key to good health. Similarly, the "Billion Hearts Beating Foundation," founded by Dr. Prathap C Reddy, aspires to keep all Indians heart healthy.

Since its inception, Apollo Hospitals has continued to contribute to society by launching numerous social initiatives to help the underprivileged sections of the society and to facilitate healthy development of the society as a whole. Apollo Hospitals launched the Save a Childs Health Initiative (SACHi) which monitors and provides pediatric health care, including congenital heart disease, to underprivileged children. It also launched the Society to Aid the Hearing Impaired (SAHI) and the CURE Foundation, which focuses on cancer care and assists children from financially challenged homes. ‘Total Health is Apollo Hospitals flagship CSR initiative to integrate health and happiness into everyday life. It entailed piloting a novel model of comprehensive health care, which was implemented in Andhra Pradeshs Thavanampalle Mandal. The primary goal of this initiative is to provide "holistic healthcare" for the entire community, beginning with birth and continuing through childhood, adolescence, adulthood, and old age.

The Government of India has frequently recognised Apollo Hospitals unrelenting commitment to providing high-quality healthcare. On several occasions, they have released commemorative stamps to recognise the groups extensive contributions - a first-of-its-kind honour for a healthcare organisation. For example, a stamp commemorating the 15th anniversary of Indias first successful liver transplant performed at Apollo Hospitals was issued. Also, a postal stamp was issued in recognition of the successful completion of 20 million health checks, a pioneering effort to promote preventive healthcare in the country. In 2010, Dr. Prathap C Reddy, Founder and Chairman of the Apollo Hospitals group, received the prestigious Padma Vibhushan Award, Indias second highest civilian award.

Healthcare Services

The Apollo Hospitals healthcare services segment consists of hospitals, hospital based pharmacies, retail health vertical, and projects and consultancy services.

Hospitals

As of March 31,2023 we had a capacity of 9,957 beds in 70 hospitals located in India and overseas. Of the 9,957 beds, 8,544 beds are located in 43 owned hospitals, 305 beds in 11 cradles, 257 beds in 11 day care/ short surgical stay centers and 851 beds are in 5 hospitals operated through operations and management contracts.

	31.03.2023	31.03.2022
Number of owned hospitals at end of period	65	66
Number of owned beds at end of period	9,106	9,060
Number of operating beds at end of period	7,860	7,845
In-patient discharges	540,881	460,152
Adjusted discharges	739,125	652,736
Average length of stay (days) (ALOS) 1	3.41	3.96
Average daily census	5,050	4,990
Bed occupancy rate (%) 2	64%	63%
Average revenue per occupied bed per day (ARPOB) 3	51,668	45,327

1 ALOS refers to the average time spent by a patient under treatment in a hospital. It is calculated by dividing the total number of days a patient spends in the hospital by the total number of admissions or discharges done in a given time period.

2 Bed occupancy rate refers to the proportion of beds used for treatments over any time period and gives an idea about the number of beds occupied in a facility.

3 ARPOB refers to the average revenue realized by a hospital from every occupied bed. ARPOB calculation can be done based on the inpatient revenue and number of days the beds have been occupied

Clinical Excellence

Clinical Excellence is the cornerstone upon which Apollo Hospitals healthcare operations are built. Over the years, the group has consistently delivered the highest standards of clinical outcomes in a variety of specialties. Apollo Hospitals benchmarks itself to leading institutions with the best clinical performance in the world in their respective specialties and establishes internal standards to match or exceed this performance.

To ensure long-term clinical outcomes, the company employs an internal quality management process known as the "Apollo Clinical Excellence" programme, also known as "ACE @ 25." This programme has been implemented throughout the hospital network. ACE @ 25 evaluates performance based on 25 clinical parameters that are critical to achieving the best clinical outcomes.

There have been five revisions of the ACE parameters and their benchmarks since 2008, during the years 2011, 2013, 2015, 2018 and 2023.

The Apollo Hospitals persistent focus on Clinical Excellence has allowed it to continuously assess the quality of care provided to its patients and objectively measure the consistency and success of its healthcare delivery services. It has contributed significantly to the groups illustrious track record, allowing it to achieve high success rates even in the most difficult surgeries in specialties such as transplants, cardiac care, and oncology.

Training and Continuing Medical Education

Apollo Hospitals encourages all of its medical professionals and other employees to participate in ongoing medical education and skill development. In order to improve patient care, the group ensures that professionals and staff are up to date on the latest medical techniques and procedures. Knowledge sharing and the expansion of medical knowledge and literature repositories have been made possible thanks to collaborations with some of the worlds most prestigious institutes.

Academics and Research

Currently, India has become a hub for R&D for International players as it offers clinical research at a relatively lower cost. With over 850 clinical studies completed, Apollo Hospitals is Indias largest clinical site solutions company.

As an academic institution, Apollo Hospitals offers the highest number DNB/FNB programs in the country, under the auspices of the National Board of Examinations (NBE). 1,118 DNB / FNB candidates are currently being trained in 16 Apollo Hospital facilities.

Apollo Hospitals Educational and Research Foundation (AHERF) has conferred Professorships and Associate Professorships on 32 Apollo Hospitals Consultants. Clinical Tutor, Distinguished Clinical Tutor, and Emeritus Clinical Tutor are the Adjunct titles held by 53 Consultants at the moment. 48 seats in 31 specialties have been approved for the Clinical Fellowship.

Accreditations

Eight hospitals in the group have received accreditations from the Joint Commission International, USA, for meeting international healthcare quality standards for patient care and management. JCI is the worlds premier accreditation body for patient safety and provision of quality healthcare. Apart from the Apollo Proton Cancer Centre which recently got JCI accreditation, the hospitals at Chennai, Bengaluru, New Delhi, Hyderabad, Kolkata, Ahmedabad and Navi Mumbai are JCI and NABH accredited. The total number of ‘NABH accredited hospitals in the group is 32.

Strategic Focus Areas

The Company continues to focus on growth while aiming at improving operating efficiency and clinical outcomes simultaneously. The aim is to achieve this through:

1. Driving growth and enhancing reach in the key hospital networks

Apollo Hospitals has established a strong presence in cities such as Chennai, Hyderabad, Kolkata, Bengaluru, New Delhi, Ahmedabad, Mumbai, Pune, Bhubaneshwar, Madurai, and Mysore, among others. By identifying key target geographies to expand footprint, the Company hopes to strengthen its presence not only in its existing clusters, but also to expand its reach in key urban markets where it is not currently present.

Today, Apollo Hospitals has strong presence in all four metropolises of India, namely Chennai, New Delhi, Kolkata, and Mumbai, as well as in major cities like Hyderabad, Bangalore, Ahmedabad, and Lucknow. Apollo Hospitals believes that high-quality tertiary care, such as transplants, robotics, and complex procedures in cardiac, oncology, neurology, and orthopedic specialties, will continue to be in high demand in these major metropolitan cities where it currently operates, and a combination of case mix and payor mix improvement will drive growth and margin expansion in these.

Apollo Hospitals has also systematically strengthened its footprint in Tier II as well as Tier III cities. These Tier II and Tier III markets have a sizeable target population with sufficient spending potential and are largely underserved in terms of healthcare services. When compared to a Tier I city, Apollo Hospitals healthcare centers in these Tier II and Tier III cities have a significantly lower capital cost per hospital bed, thereby delivering healthy ROCEs.

Currently, Apollo Hospitals has established hospitals in Tier II and Tier III cities such as, Bhubaneshwar, Bilaspur, Guwahati, Indore, Karur, Madurai, Nashik, Nellore, Trichy, Visakhapatnam, etc. to name a few. There is considerable headroom for growth in these centers, given the current capacity and operational beds already established.

2. Enhancing emphasis on Centers of Excellence

The group places utmost emphasis on nurturing and enabling growth of its national Centers of Excellence (COEs) which focus on specialties such as Cardiac Sciences, Neurosciences, Orthopedics, Oncology, Transplants, Emergency, Critical Care, and Preventive Health. Each of these COEs have been comprehensively built under the supervision of dedicated Service Line Managers through Clinical Differentiation, Protocols, Outcomes and Benchmarks, Market Share, Talent, Academics, and Research. Building these COEs out as destination centres, will result in a better case mix and thereby a higher margin profile. As occupancy levels improve to optimal levels, such case mix changes and improvements will ensure that top-line growth and revenue quality are fully protected, while still ensuring that Apollo Hospitals retains pole position as the most clinically differentiated healthcare provider.

3. Retail models to drive growth

Since its inception, the Apollo Hospitals Group has invested in a variety of retail healthcare formats. This investment is keeping in line with the groups commitment to taking care closer to the consumer. This has allowed Apollo Hospitals to touch more lives while also enabling easier access to its consumers across the care continuum. Apollo Health and Lifestyle Limited (AHLL), a subsidiary, manages the retail health assets. Healthcare delivery formats like Short-stay surgeries, boutique birthing, and ubiquitous access to clinics and diagnostics services continue to cater to the changing profile of healthcare consumers and, as a result, will be the future growth models. These formats are expected to aid Apollo Hospitals efforts to boost brand recall and market share. The Group has also invested in ensuring that services in all formats are delivered seamlessly. The broader objective is to deepen relationships with Apollo Hospitals consumers across categories - hospitals, pharmacy, clinics, and diagnostics - while also unlocking the potential for loyalty- driven behaviour and lifetime value propositions for consumers.

4. Maintaining focus on life improving procedures and elective surgeries

With increased public health awareness and disposable incomes, there has been an increase in demand for elective or planned surgeries. Apollo Hospitals has established a strong presence in this segment while also maintaining a focus on ‘Centers of Excellence. The hospitals are well- equipped to handle elective procedures such as knee and hip replacements, cosmetic surgeries, and other similar services. The plan for the future is to increase the market share and have a higher volume of such procedures by hiring more specialised surgeons, establishing deep sub-specialised practice, and investing in cutting-edge medical technologies to improve clinical outcomes in these areas.

5. Enhancing capital efficiency and optimization of asset utilization in mature facilities

Apollo Hospitals places utmost focus on stabilizing and compressing time-to-maturity at new facilities. To ensure a superior specialisation mix, specialist consultants have been recruited at Apollo Hospitals COEs, particularly at new hospitals. The phased commissioning of additional beds linked to occupancy levels at new facilities will keep fixed costs low while achieving operational and financial goals. Apollo Hospitals also plans to reduce the average length of stay (ALOS) in its hospitals. Today, new advancements in medical technology, such as the introduction of minimally invasive and robot-assisted surgeries, have significantly reduced surgical trauma and patient recovery time. Increased focus on this area will help the Company reduce the ALOS at its hospitals, allowing them to treat more patients utilizing the existing capacity. It will also result in increased patient turnover rate and revenue per occupied bed per day.

The core of Apollo Hospitals growth strategy is to maximize operating efficiency and profitability across the network. Greater integration, improved supply chain management, and human resource development are the three essentials for increasing efficiencies. The goal is to reduce the cost of expensive drugs and medical consumables such as stents, implants, and other surgical materials by standardizing across the network, optimizing procurement costs, consolidating suppliers, and optimizing use of medical consumables by establishing guidelines for medical procedures.

Finally, to maintain its competitive advantage and increase capital efficiency, the Company continues to develop leaner operations management strategies.

6. Increasing Digital Reach

Apollo Hospitals launched 24/7, a direct-to-patients M-health platform that guides the patient engagement cycle - from scheduling a doctors appointment for consultation, health checks, and diagnostic services, to virtual consults and anytime-anywhere access to electronic health records - to improved accessibility and give patients the flexibility of scheduling a doctor appointment at their own pace.

The groups collaboration with Microsoft to develop and deploy new AI and machine learning models to predict patient risk for heart disease and assist doctors with treatment plans is the first step toward Al-based predictive health across the disease spectrum. The Apollo Hospitals online expert opinion service for Oncology offers accessible and inexpensive access to Tumour Board Experts, 24 hours a day, seven days a week. The group collaborated with Google India to launch ‘Symptom Search, a new feature in its Search offering. These are just a few examples of the innovative and exciting digital work that is being done across the group. These digital initiatives will strengthen brand differentiation and foster longterm consumer relationships.

7. Preventive Health

Apollo Hospitals has always emphasized wellness and recognized the importance of comprehensive preventive health programs in keeping citizens healthy. The organisation was the first in the country to implement the Master Health Check Program and to advocate for tax breaks for health-care costs. As the country continues to be confronted with the challenge posed by Non-communicable Diseases (NCDs), the majority of which are preventable or easily detectable, controlled, or cured through early-stage screening, this critical programme is a cornerstone of the organizations strategy for the next decade.

8. Assured Pricing Plans

Assured pricing plans were introduced to address concerns related to the pricing of surgical procedures. The intrinsic value of the delivered service takes precedence over individual inputs in this policy. Assured Pricing Plans have been implemented for a wide range of surgical procedures. These plans give patients and their families complete peace of mind.

9. Public-Private Partnerships

A close collaboration of private and public partners is required to realize the vision of universal healthcare for all citizens. Today, private players are incentivized to invest and manage operations through public-private partnerships (PPP). PPP will assist in bringing in resources the government needs to make healthcare available, as well as create a sustainable long-term model. It can improve the healthcare system by pooling in the expertise and finances of the private sector with the access and subsidies of the public sector. PPP models in healthcare have proven to be very effective because they leverage each partners unique strengths. For example, in partnership with the Andhra Pradesh Government, Apollo Hospitals manages over 150 Urban Primary Health Centers (e-UPHCs). These centers, in addition to providing primary health care, offer specialized services via connectivity with the Apollo Hospitals Tele-Health Hub. The models are low-cost, can be quickly scaled, and produce world-class results in both population health and specialist support.

Medical Value Travel

Medical Value Travel (MVT) is of strategic importance due to its contribution in generating employment, encouraging cultural exchange, improving the countrys positioning by building ‘soft power, and earning valuable foreign exchange. Patients across the globe seek better quality and affordable health care options, availability of the latest medical technologies and accreditations, facilitation around hospitality services and minimal waiting time. India has been able to successfully emerge as one of the forerunners among all medical tourism destinations. The country has been ranked in the top three destinations in Asia along with Thailand and Singapore, and is the industry leader in medical value travel, having served patients from all over the world. Apollo Hospitals offers cutting edge medical facilities and technologies, and it has attracted a large number of international patients.

In recent years, Apollo Hospitals has increased its global outreach by offering in-person consultations with senior specialists in foreign locations. The group has established several overseas camps to assist patients in connecting with doctors. International patients can easily schedule personal consultations for their treatment in India through the Apollo Hospitals website and dedicated messaging service. Apollo Hospitals consistent strategic steps has provided it with the necessary competitive advantage to gain market share in Indias growing Medical Value Travel segment.

Apollo Hospitals has been providing a wide range of high quality services to patients from over 120 countries, including Preventive Health Checks, Organ Transplantations (kidney, liver, and cornea transplants), Robotic Surgeries, Cancer Treatments, Joint Replacement Surgeries, Cosmetic Procedures, Eye Procedures, Brain and Spine Surgeries, and so on. The hospital units have successfully attracted large number of patients from countries like Pacific Islands, Afghanistan, Bangladesh, Iraq, Kenya, Nigeria, Ethiopia, Oman, Yemen,

Sri Lanka, Uzbekistan, Myanmar and Nepal. The group has entered into various agreements with the Ministries of Health of several countries to treat patients referred by them.

Over the last eight years, the Indian Government has taken numerous steps to strengthen MVT through progressive policy interventions. These initiatives have been helping in improving Indias image as a preferred destination for medical tourists. Initiatives such as facilitating visa on arrival and e-medical visa have made the modalities of admitting foreign patients a lot easier. The Niti Aayog Yojna has identified Medical Value Travel as one of the major growth drivers and a major source of forex earning. Apollo Hospitals has been at the forefront of advocacy in this area, collaborating closely with the Indian Government to ensure the smooth implementation of new policy initiatives. The group has also worked with the Government of Indias Ministry of External Affairs to train African doctors and paramedics. Overall, Apollo Hospitals believes it is well positioned to capitalise on the opportunity created by the countrys growing Medical Value Travel segment.

Largest omni-channel Pharmacy platform in India

On 14th August, 2021, AHELs shareholders approved the slump sale of identified business undertakings into Apollo HealthCo Limited (AHL), including 1) Back-end pharmacy supply (excludes hospital-based pharmacies), 2) Apollo 24:7 digital healthcare platform, 3) Investment in pharmacy retail business (i.e. Apollo Medicals Private Limited), and 4) "Apollo 24:7" brand, the "Apollo Pharmacy" brand and private label brands. AHEL will receive a consideration of Rs. 12.1 billion and will retain a majority shareholding after external capital is raised.

Effective 16th March 2022, the Pharmacy Distribution business along with the Omni channel digital healthcare platform Apollo 24/7 and the Companys equity interest in Apollo Medical Private Limited was transferred to Apollo HealthCo Limited which is a wholly owned subsidiary of AHEL.

Apollo HealthCo Limited, is now the exclusive supplier for APL which operates Indias largest stand-alone pharmacy chain with 5,541 outlets in key locations as of 31st March, 2023, under a long term supply agreement, and has also entered into a brand licensing agreement with APL to license (i) the "Apollo Pharmacy" brand to APL for use in retail sale of products in its front-end stores and (ii) the online pharmacy domain name "www.apollopharmacy.in" to APL for its undertaking and fulfilling of online retail sale orders.

The stand-alone pharmacies under APL offer a wide range of medicines, hospital consumables, surgical and health products and general "over-the-counter" products. Consumers are also offered other value-added services such as home deliveries, prescription refill reminders and loyalty discounts. From fiscal 2018 to fiscal 2023, Apollos Pharmacy Platform has registered a healthy growth of 20% CAGR on revenues. The number of stand-alone pharmacies grew at 13% CAGR from fiscal 2018 to fiscal 2023. The Apollo 24/7 app also offers online pharmacy by routing the fulfillment to APL. The Pharmacy Platform has consistently demonstrated growth in revenues, margins and return on capital employed.

Apollo HealthCo also includes the pharmacy distribution business, with a robust supply chain and a strong nation-wide distribution channel which provides a competitive advantage on purchase-price over the mom-and-pop shops and other regional chains. The private label business has also been enhanced through broadening and deepening the product portfolio. In fiscal 2023, private label generic sales contributed to 15.5% of the total revenues from the Pharmacy Platform. Our Pharmacy Platform will continue to be a strong pillar of Apollos diversified business model and contribute to its financial resilience and diversity given that the front-end retail pharmacy business through our interest in APL, and our own pharmacy distribution business are both experiencing steady growth.

Apollo 24/7

Housed within Apollo HealthCo, our technology platform Apollo 24/7 offers a full suite of distinctive and dedicated digital healthcare offerings that are fully integrated to track a persons complete medical health and wellness journey. From virtual consultations, online pharmacy, and filling prescriptions to using a platform that can leverage on-line and off-line records, to making artificial intelligence-based health predictions in the future, it is available literally 24/7 to a consumer.

Apollo 24/7 has successfully emerged as the fastest growing platform since its launch in June 2020 where it has built a base of 25+ million registered users, e-pharmacy coverage across 19,000 thousand pincodes across India, and a doctor network of 6,000+ own doctors and 6,500+ partnered doctors for online consultations. Today Apollo has the largest omnichannel pharmacy presence (online + offline), in India. The physical pharmacy currently serves 700,000 people per day and delivers 24,000 medicines to peoples homes. Apollo 24/7 (online) delivers over 47,000 medicine orders per day across the country in a seamless fashion. The medicines are delivered at home within a 2-hour delivery window. The program will offer health insurance options, chronic condition management and a well-being companion in the next phase.

The platform also comes with Clinical AI solutions. Going forward, Apollo 24/7 will provide artificial intelligence-based health predictions and become the center of a 360-degree healthcare continuum. This platform will evolve into a fully integrated digital ecosystem which will completely satisfy a consumers healthcare needs across the spectrum.

The partnership with Amazon is expanding the reach of e-pharmacy

On January 28, 2022, Apollo Pharmacies Limited (APL), an associate company of AHEL, entered into a deal to list its pharmacy products on the e-commerce platform of Amazon India. With this deal, Amazon India customers can order pharmacy products across India and get orders delivered by the strong delivery network of Amazon.

Under this engagement, APL will fulfil the demand through its strong back-end of over 5,500 stores, while Amazon will be responsible for customer acquisition and delivery. With this deal, the Company seeks to leverage Amazons reach in the regions where it does not have a strong presence, for example, West India. As a result, this advancement has facilitated the expansion of the companys online pharmacy business, positioning Apollo to emerge as the leading player in online pharmacy delivery within the coming years. This development has also facilitated the Company to entrench better procurement prices and provide operating leverage given limited opex. Moreover, the platform has the potential to push more private label sales.

The intent behind this development has been to achieve USD 1 billion additional revenue in the next three years as well as expand the relationship beyond pharmacy products in the long run. The pilot phase of this non-exclusive deal which involved no infusion of capital by Apollo was rolled out in February 2022, followed by a pan-India roll-out.

Pro Health

Non-Communicable Diseases, including cardiovascular diseases, cancers, chronic respiratory diseases, and diabetes, which account for about 60% of all deaths in India, can be prevented or managed by making appropriate lifestyle changes, if diagnosed early. It is critical to undergo regular health checkups to detect NCDs at an early stage to avoid future health related complications.

At Apollo Hospitals, we value "Care" as much as "Cure". Preventive health and Wellness have been key focus areas for the enterprise since its inception 40 years ago. The Government recognized our efforts by issuing a commemorative stamp upon the completion of 20 million health checks. Based on our experience and learning, we launched Apollo ProHealth which is a proactive health management program. ProHealth, which is first of its kind holistic wellness program, is powered by the Personalized Health Risk Assessment. ProHealth empowers individuals and businesses with actionable health analytics, understanding and eliminating health risks through tailored clinical and lifestyle interventions. The program, also includes a personal Health Mentor as a guide.

We intend to use mobile clinics to raise awareness about these preventive health initiatives among a broad range of people in urban areas. The Samsung-Apollo Mobile Clinic, which is outfitted with cutting-edge technology for advanced NCD screening, is raising awareness about NCDs and also facilitating early detection and preventive screening.

The lessons we have learned from our experience with Covid-19 have underscored the importance of good health in bolstering the immune system, which plays a critical role in combating diseases. Predictive and preventative healthcare tools will aid in the prediction, prevention, and treatment of NCDs, as well as the early detection and mitigation of potential health issues.

Projects S Consultancy

Apollos Global Projects & Consultancy services is the consulting, implementation and operations management arm of the Apollo Hospitals group. With over 30 years of domain expertise in healthcare, the unit has the distinction of being the trusted advisor of investors, Governments and other entities for establishing world-class healthcare facilities or improving the clinical quality and operating efficiencies of existing ones.

The units healthcare consulting assignments across the globe are testimony to its ability to work effectively with the local people, respecting their social, cultural and traditional ways of living. It has worked on establishing and operating healthcare facilities spread across culturally diverse geographies. It has completed over 60+ projects from concept to commissioning, 200+ feasibility studies and commissioned over 2,500 beds over the last 5 years.

Consultancy services can be categorized into:

1. Setting up a Healthcare Facility:

+ Business Planning & Clinical Visioning + Hospital Planning and Design + Medical Equipment Planning and Procurement + Human Resources Planning + Information Technology and Telemedicine + Hospital Commissioning and Start-up Assistance

2. Hospital Operations Management

The Unit manages hospitals for partners. Apollo Hospitals role as a hospital operator is guided by its commitment to:

+ Ensuring that the skill-sets of key clinical and managerial team members are amongst the best

+ Achieving and maintaining accreditation status and international standards of quality

+ Developing a sustainable competitive advantage for the hospital to ensure high levels of quality, customer service and competitiveness.

3. Strategic Consultancy

Strategic exercises to review existing systems and operations of healthcare institutions with the objective of enhancing their performance, are also undertaken.

4. Hospital Training

Apollo Hospitals offers custom-built training programs for medical and administrative staff. These physician training / nurse training / technician training programs focus on building capabilities and skills in specific areas.

5. Hospital Quality Management & Consulting

Hospital Quality Consulting services offers clients unparalleled expertise through training and audit and accreditation services so that people throughout the world can benefit with access to the highest quality of healthcare.

Retail Healthcare - AHLL

Healthcare services portfolio that addresses key consumer megatrends

Apollo Health & Lifestyle Limited (AHLL) was founded as a subsidiary to expand Apollos reach in the retail health space while moving away from a traditional hospital setting. AHLL was created with the goal of bringing healthcare services closer to the home and within the neighborhood, with the goal of serving the community through multiple touch points. The diverse product offerings of AHLL were introduced with the goal of positioning Apollo Hospitals as the familys healthcare partner, with a comprehensive set of clinical capabilities, the expertise of large hospitals, and the accessibility of local care providers. Because of the diverse services provided by AHLL, the group has carved out a niche for itself as a multi-brand national platform with direct contact with patients across the spectrum of medical care.

This model is scalable and replicable, and has the potential to transform the way integrated healthcare is perceived in the country. As healthcare markets grow and evolve, AHLL will play a growing, pivotal role making healthcare more accessible, convenient and consumer-centric.

AHLL clinics are located in 2,442 retail locations across India, providing a unique and independent service to the local community. On a map, these clinics can be found in 25 states and 3 union territories, spanning the length and breadth of the country. Whether its dental care, diabetes management, surgery, or dialysis, the company gives customers the option of seeking specialised care without having to go to a large hospital. The group operates on a hub-and-spoke model, referring patients within the clinics to higher care formats based on need and enabling cross-vertical collaboration with the hospital vertical.

With the goal of touching as many lives as possible, AHLL has grown to become Indias leading Retail Healthcare Services Company. In 2022-23, AHLLs revenues were Rs. 12,311 million across all of its business segments: Clinics, Sugar, Diagnostics, Dentistry, Dialysis, Cradle, Fertility, and Spectra. More than 680 patient touch points have been added to AHLLs network during FY23.

Healthcare services portfolio that addresses key consumer megatrends

AHLLs first offering was Apollo Clinics, which was founded in 2002. Apollo Clinics has established itself as a trustworthy partner for family medicine and primary care in the community. For a long time, it has served as a vital link between patients and Apollo Hospitals. The Apollo Clinic represents a significant opportunity in the private primary care market, which is estimated to be worth more than Rs. 1.18 billion.

Apollo Clinics is well positioned to provide a platform to address future healthcare challenges in India, particularly the growth of non-communicable diseases. Apollo Clinics has owned clinics and franchisees in hospital centric clusters, e.g., Chennai, Hyderabad, Bangalore, Delhi, Kolkata. These act as feeder units for the tertiary care hospitals. Apollo Clinics currently has 343 centres across India.

Apollo Sugar Clinics aims at filling a void in diabetes care by providing tailored, easily accessible and long-term care. Diabetes treatment options are changing on the back of a rapidly changing health care delivery model. Aside from the traditional model of individualised care provided by doctors, digital solutions aimed at monitoring patient lifestyles and remote monitoring of patient vitals are gaining traction. Apollo Sugar, Clinics, with its connected Glucometer devices, holistic long-term care packages, and condition management programmes, is well placed to provide these integrated solutions. Over the years, Apollo Sugar Clinics has actively expanded its footprint. It is currently present in 28 cities across India with 58 centers.

Diagnostics

The Indian diagnostics industry, valued at ~Rs. 730 billion (USD 10 billion) is growing faster than the GDP at 10-12%. This growth is being driven by the increase in prevalence of non-communicable diseases (NCD), higher healthcare spends, preference for evidence-based treatment, increasing consumer awareness for wellness testing, promotion of bundled tests / packages and an ageing population. This fast-growing industry however is highly fragmented with presence of 150-200k labs in the country where standalone labs (largely unorganized) dominate ~73% of out-of-hospital diagnostics market.

By 2026, Indias diagnostics industry is expected to grow at an annual CAGR of 11% to 14% to reach a size of Rs. 1,360 billion (USD 16.5 billion). The urban population of India (~35% of Indias total population) contributes up to 65% of the total revenues of the diagnostics industry.

With the organized sector growing at > 13-15% annual CAGR, the opportunity in retail diagnostics brand is significant

B2B as wail as B2C important for Expansion and sustained growth

+ B2B model allows for rapid increase in volumes through samples collected from hospitals, nursing homes and other such establishments.

+ B2C model ramp-up is gradual, sticky and usually generates higher margins.

Attractive industry dynamics

Steady growth and expansion-led growth in the last few years were supported by low capex (asset light). This coupled with superior EBITDA margin, return ratios and strong cash generating business model have led to shorter break-even.

Consumers get more demanding: Want quality, home collection, online and health packages

Consumers are becoming more attentive to health and wellbeing, giving rise to bundled test offerings and preference towards quality organized players. Demand trends are changing towards home collection and online bookings.

Dnline players and large corporate entrants intensify competition

+ Over the last few years, new entrants like corporate chains, online players/ aggregators, hospital-based labs have started diagnostics via both B2B and B2C channels.

+ A few online/ healthcare players are offering bundled wellness/ chronic routine tests at disruptive pricing (40-75% lower) in Tier 1/2 cities. This has exacerbated pressure on pricing for existing players whose prices were already stagnant for several years.

+ Customer acquisition cost (CAC) remains high and thus discounting by online players is reducing as they have started focusing on improving profitability/ reducing losses as funding is getting scarce.

Organic and inorganic strategies for growth

+ The organic approach enables brand building and is the most preferred approach to increase density through cluster-based expansion in the core market.

+ Inorganic approach allows faster scale-up in new geographies, but it comes at the cost of higher acquisition costs and relatively lower margin.

Our business model at Apollo Diagnostics is focused on building a pathology lab business with a consumer centered approach. The model will be to create a comprehensive network of company owned labs with a frontend franchisee collection centers model; building networks up to Tier 2 and Tier 3 towns in each state.

We aim to bring genetic testing and help patients and families with diagnosis of genetic disorders. It has invested in multiple modern testing techniques, which will make a significant impact on the clinical diagnosis of Genetic medicine.

Apollo Diagnostics has established a widespread network of more than 1,750 touch points across 250+ cities in 25 states and union territories in its seven years of operation. As of March 31, 2023 Apollo Diagnostics operated a network of 97 laboratories, 42 of which were owned by the company, and 55 were Third Party Partner Labs, with a network of over 1,653 collection centers surrounding.

Apollo Cradle is a premium hospital chain for women and children that aims to provide international-standard services in a luxurious setting while providing a memorable experience for the mother and her family for birthing. With the first Apollo Cradle opening in New Delhi in 2004, the Apollo Hospitals group has become a pioneer in establishing boutique birthing hospitals in India. The concept is well accepted in urban markets and is another stride towards the emergence of specialized hospitals. The expert team at Apollo Cradle delivers immaculate maternity, gynecology, neonatal, pediatrics and fertility services from state-of-the-art facilities. Currently, Apollo Cradle operates 9 centres.

Apollo Fertility includes specialised infertility investigation and treatment procedures for both men and women. Apollo Fertility works with an unparalleled commitment to successful outcomes which is backed by Apollo Hospitals rich 40-year legacy of clinical excellence and a network of 17 IVF centers.

The concept of specialty care centers, which is a well-accepted and successful healthcare delivery model in developed countries, is gaining traction in India as well. Short-stay surgeries are conducted across multiple healthcare delivery formats - tertiary care multi-specialty hospitals, nursing homes, single-specialty hospitals, and multiple specialty surgical centers.

Improved patient convenience due to faster treatment and early discharge, lower costs due to lower length of stay, reduced susceptibility to hospital-acquired infections and improved insurance coverage are the various factors driving this demand. Additionally, the model supports lower overhead costs, faster turnaround, and higher theatre and equipment utilization. Due to these reasons, a significant number of short stay centers have been coming up in India.

Today, Apollo Spectra is leading the way amongst the larger chain of hospitals providing short-stay surgical services across departments - Orthopedics, General Surgery, Urology, ENT & Bariatric Surgery. Apollo Spectra is a well-known brand in the field with 25 centers spread across 18 major cities of India.

Apollo Dialysis was incorporated with the vision of providing dialysis treatment in a location that is convenient for the patient. Apollo Dialysis centres have been providing high- quality dialysis services to their patients for many years. With a strong emphasis on treatment outcomes, the group has established 19 dialysis units in the state of Andhra Pradesh (via PPP model), 34 units in the state of Assam (via PPP model), and 18 units in the state of Bihar (via PPP model) with additional SIS and Standalone centers in other regions.

Apollo White Dental has established itself as Indias most trusted dental clinic chain, with 129 centres in 14 states across the country. Its goal is to make world-class dental care available to every Indian. This single specialty vertical offers comprehensive dental care services in all areas, including general treatment, cosmetic dentistry, and implants. Each of these facilities provides the best environment as well as evidence-based, cutting-edge treatments.

Apollo White centers can be found in both hospitals and clinics, as well as standalone facilities.

Financials

Discussion on Consolidated Financial Performance and Results of Operations

The following table presents the summary of results of operations for the years ended March 31,2023 and 2022

1 Particulars (in million)	31.03.2023	%	31.03.2022	%
Operating Revenues	166,125		146,626
Add: Other Income	903		782
Total Income	167,028	100.00	147,408	100.00
Cost of Material consumed	22,838	13.67	26,855	18.22
Purchase of Stock in trade	63,150	37.81	49,613	33.66
Changes in inventory of Stock-in-trade	(245)	(0.15)	(733)	(0.50)
Operative expenses	85,743	51.33	75,735	51.38
Salaries and benefits	21,438	12.83	17,865	12.12
Administration & other expenses	38,448	23.02	31,175	21.15
Financial expenses	3,808	2.28	3,786	2.57
Depreciation and amortization	6,154	3.68	6,007	4.08
Profit before Income Tax - Exceptional & Extraordinary items	11,437	6.85	12,840	8.71
Exceptional items	0	0.00	2,941	2.00
Share of profit of equity accounted investee	(432)	(0.26)	73	0.05
Profit before tax	11,005	6.59	15,854	10.76
Provision for taxation	2,562	1.53	4,770	3.24
Profit after Tax (Incl. Minority Interest)	8,443	5.06	11,084	7.52
Add: Other Comprehensive Income	(133)	(0.08)	(97)	(0.07)
Total Comprehensive Income for the period	8,310	4.98	10,987	7.45
Less: Minority interest	249	0.15	518	0.35
Profit after minority interest	8,061	4.83	10,469	7.10

Revenues

The total operating revenue for FY23 stood at Rs. 166,125 million, and healthcare revenue stood at Rs. 86,768 million. Case mix and pricing improvements aided revenue growth at existing hospitals. The HealthCo business revenues grew by 25% from Rs. 53,610 million to Rs. 67,045 million in FY22.

The number of stores within the network of Standalone Pharmacies was 5,541 in 2023 as compared to 4,529 stores as at March 31,2022.

The following table shows the key drivers of Apollo Hospitals revenues for the periods presented:

Year ended March 31, 2023

Particulars	31.03.2023	31.03.2022	Increase (decrease)	% Increase (decrease)
IP Discharges	540,881	460,152	80,729	18%
Revenue per Inpatient (Rs)	142,247	152,170	(9,923)	(7%)
ALOS	3.41	3.96	(0.55)	(14%)
OP Volume	6,610,993	6,832,470	(221,477)	(3%)
Revenue per bed day (Rs)	51,668	45,327	6,341	14%

Expenses

Salaries and Benefits

Salaries and benefits expense stood at Rs. 21,438 million during 2023 when compared to Rs. 17,865 million in 2022. This increase was a result of annual compensation increases for the employees, plus the increase of employed personnel within the hospitals and pharmacies.

Year ended March 31, 2023

(Rs in million)

Particulars	31.03.23	% of revenue	31.03.22	% of revenue	Increase (decrease)	% Increase (decrease)
Salaries, wages and benefits (including managerial remuneration)	21,438	12.8	17,865	12.1	3,573	20.00%
No. of employees	83,147		71,113

Operative expenses

Material cost for 2023 stood at Rs. 85,743 million which was higher by 13.2%, as compared to Rs. 75,735 million in 2022. The increase in material costs was primarily due to the increase in operating revenue.

Administrative expenses

The following table summarizes the operating and administrative expenses for the periods presented.

Year ended March 31, 2023

(Rs in million)

Particulars	31.03.23	% of revenue	31.03.22	% of revenue	Increase (decrease)	% Increase (decrease)
Repairs and maintenance	3,507	2.10	3,470	2.35	36	1
Rents and leases	823	0.49	774	0.52	49	6
Outsourcing expenses	5,522	3.31	5,096	3.46	425	8
Marketing and advertising	6,397	3.83	3,648	2.47	2,749	75
Legal and professional fees	2,385	1.43	1,515	1.03	871	57
Rates & taxes	415	0.25	286	0.19	129	45
Provision for doubtful debts & Bad debts written off	543	0.33	706	0.48	(162)	(23)
Other administrative expenses	18,858	11.29	15,680	10.64	3,178	20
Total	38,448	23.02	31,175	21.15	7,273	23.3

Depreciation and Amortization

The depreciation and amortization expense stood at Rs. 6,152 million during 2023, as compared to Rs. 6,007 million during 2022. The increase/decrease can be largely attributed to replacement capex done during the year.

Financial Expenses

Financial expenses came in at Rs. 3,808 million during 2023 when compared to Rs. 3,786 million during 2022. The increase/ decrease can be accounted to higher coupon rates payable on the various term loans & credit facilities during the year.

Provision for income Taxes

Provision for taxes during the year ended March 31, 2023 stood at Rs. 2,562 million when compared to Rs. 4,770 million in the previous year ended March 31,2022.

Key Financial Ratios

The significant change (i.e change of 25% or more as compared to the previous financial year) is only with regard to DSCR (which is calculated on a consolidated basis) attributed mainly due to lesser debt servicing required during the year.

Return on Networth ratio stood at 12.93% for the financial year ended 31st March 2023.

1 Consolidated Financial Ratios	FY22-23	FY21-22
Current Ratio	1.30	1.67
Debt Equity Ratio	0.41	0.45
Debt Service Coverage Ratio	11.82	4.48
Intt Service Coverage Ratio	8.93	8.40
Return on equity /Net worth(ROE)	12.93%	13.79%
Inventory Turnover	20.86	22.23
Trade Receivable Turnover	5.48	6.27
Trade Payable Turnover	4.81	5.56
Net Profit Margin (%)	5.08%	5.55%
Operating Profit Margin (%)	12.34%	14.90%

Liquidity

The primary sources of liquidity are cash flows generated from operations during the year. The Company believes that its internally generated cash flows, amounts invested in liquid funds and approved and proposed debt will be adequate to service existing debt, finance internal growth and deploy funds for capital expenditure.

Capital Expenditure

In addition to the continued investments in new hospital facilities, there have also been investments made in new clinics, cradles and dental centers. These investments would assist to not only attract and retain physicians but also get more patient footfalls at Apollo Hospitals centers. During the year gone by, Rs. 308 million capex was incurred for Apollo HealthCo.

Risks and Concerns

Apollo Hospitals is exposed to a broader range of risks and uncertainties than it was earlier due to the multi-fold increase in scale and expanded area of operations since its inception. These internal and external factors can have an impact on the achievement of the organizations goals, whether they are strategic, operational, or financial.

The business environment in which Apollo Hospitals operates is marked by increased competition and market volatility. In the course of business, Apollo Hospitals faces numerous risks. Risks are unavoidable because no entrepreneurial activity can exist without the acceptance of risks and the associated profit earning opportunities.

Apollo Hospitals believes that identifying business sustainability risks and opportunities on an ongoing basis and integrating them into the existing risk management framework is critical. The Group implements processes that continuously raise risk awareness and foster a risk-management culture.

Under the supervision of the Board of Directors, the Senior Management of each business unit practices risk management. Because risks cannot be completely eliminated, adequate measures are taken to mitigate identified areas of significant risk. Furthermore, risk management systems ensure that risks are kept to manageable levels.

Internal Controls

Apollo Hospitals is committed to maintaining a high standard of internal controls throughout its operations. An adequate and synchronized internal control framework deploys a well-designed robust system which allows optimal use and protection of assets, facilitates accurate and timely compilation of financial statements and management reports. Additionally, it also ensures compliance with statutory laws, regulations and company policies.

While no system can provide absolute assurance against material loss or financial misstatement, the robust internal control systems which are reviewed periodically provide reasonable assurance that all company assets are safeguarded and protected. The Internal control system is designed to manage rather than to completely eliminate the risk of failure to achieve business objectives. The system is designed to ensure that all transactions are evaluated, authorized, recorded and reported accurately. The framework strictly adheres to various procedures, laws, rules and statutes. In addition to this, extensive budgetary control reviews form the mechanism for timely review of actual performance with forecasts.

At Apollo Hospitals, the management is responsible for assessing business risks in all aspects of its operations and for implementing effective and efficient processes and controls while ensuring compliance with internal and external rules and regulations. While reviewing the Groups internal controls, sufficient regard is given to the risks to which the business is exposed, the likelihood of such risks occurring and the costs of protecting against them.

Environmental. Social and Corporate Governance (ESG)

Since its inception, Apollo Hospitals has worked relentlessly for the benefit of its patients and society as a whole. The Company holds an unwavering commitment to society and has strived hard every day to serve the interests of the community. Apollo Hospitals believes and places utmost emphasis on the fact that the success of the Company is directly linked to the progress of the people and communities it serves. It is deeply committed to and recognizes the pivotal role it plays in driving sustainable social growth. Keeping these values in mind, AHEL has always made concentrated efforts to strengthen its approach towards Environmental, Social and Governance issues.

Apollo Hospitals is committed and proactive with regards to managing the environmental impacts caused by its operations. The Company has a top priority to ensure the protection and conservation of the environment in which it operates, and this is not limited to the legal aspect of compliance. Employees and patients are at the heart of the Apollo infrastructure and the group is committed to ensuring their safety at all of its operations.

Apollo Hospitals follows the ‘Sustainable Sourcing and Purchase Policy to ensure excellent Environmental, Social and Governance (ESG) practices throughout its value chain. Optimal utilization of resources during their life cycle and their proper disposal, are practices which are given key emphasis by the institution. The Company also ensures that all its suppliers, employees, recyclers and others are well aware of their responsibilities towards the society. The Apollo Framework ensures that all of its employees, regardless of their status (permanent, casual, temporary & contract) undergo safety and skills upgradation training based on their role, domain and individual needs.

Apollo Hospitals abides by set directives which ensures that the interests of all its stakeholders are protected in tandem with the Companys healthy growth. It also believes that there is a strong relationship between a good corporate governance and enhancing long-term shareholder value. The Company does not support and actively discourages practices that are abusive, corrupt, or anti-competitive. The Corporate Governance structure of the Company reflects its value system, which encompasses its culture, policies and relations with its stakeholders. As a part of assessing the risk framework, the Company evaluates, identifies the crucial Environmental, Social and Governance risks and takes responsible steps towards mitigating them. Therefore, the ESG considerations are integrated across the Apollo Hospitals business and built into the policies and principles that govern how the Company operates.

Human Resources

Values defines a Company. Apollo has always been a family, working together, crossing hurdles together, and marking victories together. The Companys core values hold and unite all our people for a common purpose. They exemplify the Apollo culture of which is what makes us one of the leading healthcare providers in the world.

Apollo Hospitals has always given utmost importance to excellence and innovation and continues to place its focus on its most valued resource, its employees. The institution has always understood the importance of having a highly skilled workforce, which is proficiently trained to provide the highest standard of care. The people that work in Apollo Hospitals form the very nucleus of the Group and their actions primarily contribute to the Groups journey towards its vision of touching a billion lives.

In addition to the high level of skills, commitment and professionalism of its people, Apollo Hospitals strongly believes that proper management of human resources is extremely critical in providing high quality healthcare. The Group has therefore built an effective Human Resources department which supports the business in achieving sustainable and responsible growth. Apollo Hospitals has always strived hard in developing its workforce and building the right capabilities in the organization. It continues to focus on progressive employee relations policies, creating an inclusive work culture and building a strong talent pipeline. The Human Resources function contributes to the success of Apollo Hospitals and its employees through leadership, service and excellence in human resource management. The department has been playing an important role in creating a conducive work environment for employees and supports them throughout their employment life cycle.

The Apollo Hospitals family comprises of 83,147 employees as on March 31,2023 (including subsidiaries, Joint Ventures and associates). Together, these diverse employee teams bring their experience, culture and commitment to the work they do every day to improve the health of patients. Cultural integration of the workforce has always been a key focus area and the organizations learning initiatives are designed around assimilation and development of individual and team competencies to create a patient centric culture. Every employee of the Apollo Hospitals family embraces the Groups "Tender Loving Care" philosophy in dealing with patients.

Learning and Development

Investment in continuous learning is an integral component of the HR system which empowers employees to be well- prepared for providing superior patient care. Programs related to Talent Attraction, Talent Development and Talent Management continue to be institutionalized for delivering outstanding patient experience. Training has been extensively used as a potent tool to engage and energize talent. Commitment and competence of employees are key drivers of overall organizational performance and thus every endeavor is made to strengthen organizational culture and retain the best talent.

Rewards and Recognition

Rewards and Recognition is an integral part of the Organizations culture which believes that a satisfied individual contributes more. Consistent efforts are taken by the Company to recognize and reward its employees for their contributions.

Cautionary Statement

Some of the statements in this Management Discussion and Analysis that describe the Companys objectives, projections, estimates, expectations and predictions may contain certain ‘forward looking statements which are within the meaning of applicable laws and regulations. These statements and forecasts involve risks and uncertainty because they relate to events and depend upon circumstances that may occur in the future. There are a variety of factors that may cause real events or trends to vary significantly from those reflected or implied by these forward-looking statements and predictions. Important developments that could impact Companys performance include increased material costs, technology developments, significant changes in the political and economic environment, tax laws and labor relations.