kovai medical center hospital ltd Management discussions

INDIA OVERVIEW

Indias healthcare industry comprises hospitals, medical devices and equipment, health insurance, clinical trials, telemedicine and medical tourism. Healthcare has become one of Indias largest sectors, both in terms of revenue and employment. The industry is growing at a tremendous pace owing to its strengthening coverage, service and increasing expenditure by public as well private players. The adoption of technology has massively transformed the healthcare space in India in the past few decades, with the pandemic further accelerating the trend. Covid-19 also stretched healthcare infrastructure and service delivery to their limits, setting the stage for more investments and the inclusion of advanced technology to combat future pandemics and existing life-threatening diseases.

TechnologyadvancementssuchasArtificial Intelligence (AI), wearables and other mobile technologies, along with

Internet of Things, offer several avenues for investment. Key segments where new opportunities for health technology players in the near future include development of tools to facilitate emergency care and improvements to medical infrastructure, through technology-based optimization. This includes expanding the scope of wearable devices to track health conditions, developing patient-facing mobile health applications as well as greater integration of AI, robots, and blockchain technologies.

The Government aims to develop India as a global healthcare hub. In the Union Budget 2023-24, the government allocated 89,155 crore (US$ 10.76 billion) to the Ministry of Health and Family Welfare (MoHFW). Pradhan Mantri Swasthya Suraksha Yojana (PMSSY) was allocated 3,365 crore (US$ 410 million), Human Resources for Health and Medical Education was allotted 6,500 crore (US$ 780 million), National 29,085 crore (US$ 3.51 billion), Ayushman Bharat - Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) was allotted 7,200 crore (US$ 870 million).

Source: https://www.ibef.org/download/1682315060_Healthcare-Feb-2023.pdf.

Trends in Indian Health Care Sector

1. Medical Robotics

Robots are revolutionizingthe medical world, and mobile robotic applications are one specific use case with major impacts on patient experience. Robots can also be used for rehabilitation and physical therapy, elder-care assistance, autism, and simplifying surgery. In fact, surgical robots comprise the largest component of robotics

2. Digital Health Solutions

India has seen a growing acceptance of telemedicine post the pandemic. From telehealth to home testing and prescription delivery services, digital health companies now offer more convenient and accessible solutions that have revolutionized many patients ability to receive high-quality care and manage their health. Virtual care constituting teleconsulting, telepathology, teleradiology and e-pharmacy is experiencing a stimulusin India. Major hospitals have adopted telemedicine services and entered into a number of Public Private Partnerships. The telemedicine can also help reduce the burden on Indias already strained healthcare system by providing quicker and more efficient access to medical care.

3. DataScienceandartificial

Rising adoption of AI-based applications has enabled people to talk directly to doctors, physicians, and get expertise for the best treatment. AI has been the most revolutionary creation and is expected to have a prominent impact on the evolution of mankind. Data science and AI are currently reigning technologies which have conquered industries around the world owing to the massive explosion in data and the increasing need for businesses to rely on data for major decision making.

4. Healthcare Software services

Healthcare software as a service has become an increasingly popular solution for healthcare organizations looking to improve their efficiency and quality of care. Healthcare providers need solutions records and population health management data. Healthcare software as a service-based solution help healthcare provider manage patient medical records, appointments, and billing information. As healthcare organizations turn towards trusted-third party software providers to focus on patient care.

5. Lifestyle Diseases

With increasing urbanization and problems related to modern-day living in urban settings, currently about 50% of spending on in-patient beds is for lifestyle diseases and this has increased the demand for specialized care. In India, lifestyle diseases have replaced traditional health problems.

6. Expansion to Tier II and Tier III cities in India has seen significant progress in recent years. Several Thedevelopmentofhospitalsin new medical colleges and hospitals have been established in these regions, providing access to quality healthcare to a larger population. To encourage the private sector to establish hospitals in these cities, the Government has relaxed taxes on these hospitals for the first five years.

Revolutionizing Medical Education in India

To improve the quality of life of citizens, access to affordable and quality healthcare services is extremely crucial. Recognizing this, over the last 9 years, the Indian government has taken several initiatives to address this pressing need, such as encouraging the establishment of new medical colleges and AIIMS (All India Institute of Medical Sciences). In just nine years, the number of medical colleges has risen by a staggering 70%, from a mere 387 in 2014 to 660 in 2023, along with an increase in the number of AIIMS from 7 to 22.

India has witnessed a significant increase not only in medical colleges and AIIMS but also in the number of students being enrolled in medication education. Since 2014, there has been a 97% increase in the number of MBBS seats and 110% increase in the number of PG seats. This remarkable growth reflects the governments commitment to provide accessible and quality healthcare services to every citizen and the countrys unwavering resolve to build a healthier nation.

Source: Ministry of Information and Broadcasting, GOI.

SWOT Analysis STRENGTH

1. Extra-ordinary reputation and innovative service

KMCHfromtheveryinception in providing highest quality of care and service to its patients. This is reflected in the continuous patronage received from its patients every year. This has helped KMCH to establish a strong brand image and a leadership position in the health care scenario by its innovative services.

2. Infrastructure and Facilities

KMCH have an adequate infrastructure that provides essential medical care to the needy patients. Infrastructure includes well equipped bio medical devices viz imaging systems, monitoring systems, laboratory instruments, medical implants, prostheses, and surgical tools for accurate diagnosis and correct treatment of diseases.

3. Patient Care

KMCH provides a wide range of services, including emergency care, trauma care, inpatient care, outpatient care, diagnostic services, and preventive care. Hospital employs highly trained and experienced medical professionals to ensure the best possible care. They aim to give each patient personalized care to make them feel comfortable.

4. Accreditation

NABH (National Accreditation Board for Hospitals and Healthcare Providers) accreditation is a program that recognizes hospitals and healthcare providers for providing quality care. NABH accreditation ensures that hospitals and healthcare providers meet certain standards of patient healthcare services are provided in a safe and efficient manner.

Other aspects that add value

superior location or geographic advantage cultural connections

Unique values that drive your organization

Good atmosphere

WEAKNESS

1. Increasing Regulatory requirements

The ever increasing and stringent multiple regulatory requirements to establish a hospital acts as a deterrent to private players envisaging to expand their operations. In India, new establishment have the additional burden like going through multiple authorities and various regulatory requirements contrary to global standards where single window clearance are practiced.

2. Heavy Capital and recurring Cost

KMCH requires large capital investments in land, buildings, medical equipment and in the latest technology to set up new center or expand existing centers to provide quality care. This can include anything from diagnostic imaging Additionally required to have sufficient skilled staff to operate the equipmenttobedsandlinens. hospital, adding burden to the costs.

3. Non-availability of Skilled and Talented Medical Professionals

The attractive opportunities outside India and the increased remuneration care industry creates a high demand for talented and skilled Medical professionals. This creates scarcity and the to recruit/retain the pool of Medical professionals. Healthcareplayershavetospendmoretimeand

OPPORTUNITIES

1. Preventive Health care Program

The public awareness regarding life style diseases and the need for quality living opens new opportunities for preventive health and wellness. General public, especially the working class feel the need for early detection of health issues due to their high pressure, demanding work culture and late hour working consequent to the globalisation stressing the need for preventive healthcare.

2. Healthcare Awareness Program

Healthcare awareness programs helps to increase revenue in hospitals by providing patients with the information they need to make informed decisions about their health. This can include health education campaigns, providing resources for patients to access online, and working with local healthcare providers to ensure that the hospital is providing the best care possible. By providing resources and education to patients, the hospital can increase its revenue by having more patients seeking care at the facility.

3. Medical Value Travel

The medical tourism is estimated to grow significantly in the coming years as more and more International patients are patronizing Indian Health care providers due to its world class hospitals, deployment of latest equipment, technology, employment of skilled and talented medical professionals and lower treatment costs.

THREATS

1. Competition

There is growing demand for Health care services and this has provided opportunities for many entrepreneurs to enter into hospital segment. There is also stiff competition from existing organized and unorganized players. The new players are offering services at a lower price to attract the patients, increasing the level of competition.

2. Shortage of Skilled man power

There is severe shortage of skilled healthcare professionals in India. This has resulted in higher payouts for the talented pool and will be a deterent to service providers, unless government takes serious steps to bridge the gap.

3. Non recovery of the fixed Costs

In the health care industry, fixed costs such as building maintenance, insurance premiums, and salaries for non-clinical staff cannot be fully recovered

4. Common threat

The healthcare industry is a rapidly changing and evolving sector that requires constant innovation and adaptation to keep up with the changes in technology and medical breakthroughs. Healthcare providers must be prepared to face challenges in areas such as patient care, medicalresearch,datamanagement,andcostcontrol.Additionally, healthcare providers must ensure the safety and well-being of their patients by providing quality care and services.

ABOUT KMCH

Kovai Medical Center and Hospital Limited (KMCH) was incorporated under The Companies Act, 1956 and started its commercial operation in June 1990, with a capacity of 200 Bed Hospital in the outskirts of Coimbatore. Nurtured with Indian hospitality and a western mind set, KMCH has grown into a 2,250 bed multi-locational, multi-disciplinary Super specialty hospital, the best and most trusted one in Southern India.

Over its more than three-decades of journey, the hospital has serviced urban and rural patients from Western Tamil Nadu and parts of Kerala. The Main Center and the Medical College Hospital is located very proximate to the city airport.

The cornerstone of KMCH legacy is its unstinting focus on clinical excellence, affordable costs, adoption of technology and academics.

TECHNOLOGY, INNOVATION AND FACILITIES

KMCH is one of the few hospitals in India that has, over the years invested inandefficientlyleveragedcutting-edge technology to facilitate best-in-class healthcare delivery.

Kovai Medical Center and Hospital inaugurated a new treatment option for cancer. The treatment involves taking a needle under ultrasound or CT scan guidance into the centre of the tumour and destroying the tumour cells by freezing it with liquid nitrogen in a closed loop system. An Israeli company, IceCure Medical, has developed the ProSense Cryoablation System. "Around the world, icecure has treated types of cancer. ProSense has several advantages. It is minimally invasive with optimal cosmetic outcomes, enables breast cancer patients and non-cancerous tumours to be treated relatively painlessly and is proven to have benefits not only for breast cancer but for lung, liver, renal and bone cancers. IceCure is the third system in India and the first in South India to be installed.

KMCH Main Center has 24 operation theatres and several modern equipment including the state of the art "Robotic Surgical System" of the "da Vinci. Si", Varian Trilogy Linear Accelerator, the worlds most advanced PET CT scan, 3Tesla MRI, 3rd Generation Dual Source CT Scanner (latest in technology), Endo Bronchial Ultrasound (EBUS), Extra Corporeal Membrane Oxygenation (ECMO) Machines, 4D ultrasound scanner, Bi plane Cath lab, Cardiac Electro Physiology Lab, Bone Mineral Densitometer, Digital Mammography, Various Laser Equipment, Ultramodern Video endoscope operating neuro microscope, Computer assisted navigation for Hip & Knee replacements, ESWL for the removal of urinary stones. In addition to housing some of the worlds most sophisticated equipment, KMCH also boast of exceptional patient care owing to its highly skilled and globally acclaimedteam.Thehospitalhasover300internationallyrenowned full- time clinicians and over 350 postgraduate medical professionals assisting them. With more than 4,500 Technicians, paramedical, patient care and administrative staff the hospital delivers a complete care to the patients. This has facilitated KMCH in fostering a ‘Patient Centric culture - all its systems, people, process are geared towards delivering total care to the patients.

The hospital has pioneered several unique techniques and several super specialty and advanced surgeries are being performed frequently. KMCH has emerged as one of the most successful ‘Multi Organ Transplant Center in the rest of Tamil Nadu. The team at KMCH has successfully accomplished Super Specialty procedures like Uterus tumour surgery, Deep Brain Stimulation, Bilateral Hip & Knee replacement, Kidney Transplant, Liver Transplant, Heart and Lung Transplant, Bone Marrow Transplant, Valve replacement, and advanced spine surgeries.

KMCH continues to be a leader in transplant surgeries which include lungs, kidney, liver, pancreas, bone marrow and cardiac transplants vindicating the effectiveness of an extraordinarily curated and executed transplant program. More recently, KMCH commenced The Center for Advanced Lung Diseases and Transplantation with the induction of senior pulmonologists.

As a responsible corporate citizen, KMCHs passion for a healthy India has enabled it to extend its healthcare services far beyond pure business. KMCH opened a free Paediatric Oncology Ward in KMCH Medical College General Hospital, to cater to the needs of children with cancer, who cannot afford appropriate therapy. KMCH Medical College General Hospital provides outpatientandinpatientservices specialtiesincluding General Medicine, Paediatrics, all Psychiatry, Dermatology, TB and Respiratory Diseases, General surgery, Orthopaedics, ENT, Ophthalmology, Obstetrics & Gynaecology and Dentistry.

The hospital is actively involved in preventive health care too, through its health check-up programs, which are fairly popular in this region with various institutions and corporates subscribing to such health check-up schemes.

OPERATIONAL EXCELLENCE Healthcare

KMCH continues to lead at the forefront of cancer care with multiple initiatives in , Cardio-Oncology , Pediatric -Oncology and Head & Neck Oncology .

In a rare surgical feat at Kovai Medical Center and Hospital, the abnormal growth of uterus tumour was successfully removed in a single-stage operation that lasted five hours. A fifty-three-year-old woman had a tumour of her uterus which extended along her blood vessels and into the heart. This condition called intravascular leiomyomatosis is usually non-cancerous and the patient gets cured by surgery alone. It is thought to arise from a uterine fibroid or from the blood vessels in the uterus and finds its way into the heart by growing through the blood vessels like a cast. Rarely these tumours can be cancerous. Less than 100 such cases have been reported in world literature. Unplanned surgery can be dangerous in these patients because of bleeding during surgery or the tumour clot detaching during surgery and lodging in the lungs which could be fatal.

The specialists from Kovai Medical Center and Hospitals, (KMCH), Coimbatore have successfully saved a two and a half months old girl child with a rare congenital pancreatic disorder by an innovative treatment approach. The girl was brought with recurrent seizure (fits) episodes and severe hypoglycemia (low blood sugar) which could not be diagnosed and treated in many other hospitals. KMCH child specialists team successfully managed the child and after several special tests including PET CT scan, she was diagnosed with a rare disease called " Nesidioblastosis " where the whole of the pancreas secretes insulin hormone in much higher quantity than needed by the body; this leads to severe low blood sugar levels and fits in the child. In most of the cases, if the diagnosis is not made early the child may suffer permanent brain damage or even death.

A female patient aged 55 years presented to our hospital with a large midline swelling in her neck for the past 25 years. size and recently for the past one year the swelling was rapidly The increasing with another swelling in the right side of the neck. The patient had symptoms of breathlessness on exertion. KMCH team diagnosed a large infiltrative thyroid tumor. The tumor deviated the trachea towards the left side, the upper end reached the mandible and the lower end located close to the sternal notch. The tumor was very vascular and was compressing the critical vascular structures The tumor was dissected carefully to preserve parathyroid glands and to clearly identify both recurrent laryngeal nerves. The operation took 180 min and the specimen weighed 530 gms in toto. The patient was discharged after 2 days without any complications.

Medical education

KMCH Medical College admitted its Fourth batch under graduate course, which started in November 2022 due to little delayed holding of NEET. It currently has an annual intake of 150 students in its MBBS degree course. All the seats have been filled up without any vacancy true to KMCH traditions. Pursuing its mission of providing world class patient care, education and training, the KMCH Medical college is developing highly trained, skilled and competent and compassionate medical professionals by creating an environment that provides excellent learning environments with infrastructure and facilities that support student learning and overall growth to become outstanding medical professionals.

Empowered with a dedicated team of healthcare professionals including doctors, nurses and paramedics, the infrastructure includes 750 general beds including 50 ICU beds, 30 emergency beds and 16 operation theatres with state-of-the-art medical equipment like CT scan, MRI, Cathlab, Ultra Sound and Digital X-Ray etc. The Medical College General Hospital offers 24x7 healthcare services to public.

AWARDS, ACHIEVEMENTS

The Hospital continues to receive several accolades, all of which goes on to say that KMCH not only takes care of its patients to the best of its abilities, but also is a role model in the industry. Notable among the many achievements and awards won by KMCH is the "Ranked No 1 Hospital in Coimbatore" by The Week - Hansa Research survey 2022, "The Best Hospital Awards -2022" by The New Indian Express - Financial Express, "Award of Appreciation Transplant Unit" by Transplant Authority of Tamilnadu, "Green Hospital 2023" by Associationof Healthcare Providers of India (AHPI) and "Ranked No.1 Multispecialty Hospital in Coimbatore" by Time Health Survey 2023.

DISCUSSION ON FINANCIAL AND OPERATIONAL PERFORMANCE

Below detailed table presents summaries of Financial Results of Operations for the Year ended 31 March 2022 and 2023. The Company operates on two segments - Healthcare Services and Education Services.

Particulars	2022-23	2021-22
Revenue from Operations	101,974.68	90,532.67
Other Income	1,598.77	1,249.53
Total Income	103,573.45	91,782.20
Medicines & Hospital Consumables	28,284.31	25,627.38
Employee Benefit Expense	17,969.70	15,076.07
Finance Costs	4,015.61	4,323.01
Depreciation & Amortisation	8,912.50	8,542.82
Other Expenses	28,869.34	24,145.09
Total Expenses	88,051.46	77,714.37
Profit Before Taxation (PBT)	15,521.99	14,067.83
Provision for Taxation	3,945.38	3,641.77
Profit After Taxation	11,576.61	10,426.06
Add: Other Comprehensive Income	53.48	(166.75)
Total Comprehensive Income for the year	11,630.09	10,259.31

REVENUE

Total Operating Revenue grew 12.64% from 90,532.67 Lakhs in FY22 to 1,01,974.68 Lakhs in FY 23. Healthcare Services : Inpatient Revenues grew by 4.99 % from 64,404.12 Lakhs in FY 22 to 67,618.04 Lakhs in FY23 and Outpatient Revenue grew by 18.38 % from 23,252.09 Lakhs in FY 22 to 27,526.06 Lakhs in FY 23. Increase in Revenue is primarily attributable to increase in Surgeries, Inpatient and Outpatient Volumes.

Education Services : This is the fourth year of reporting on Education Services consequent to the commencement of KMCH Institute of Health Sciences & Research (KMCH Medical College). Revenues under education segment increased from 2,783.52 Lakhs in FY 22 to 6,711.99 Lakhs in FY 23, which also includes income from Allied Health Sciences and Diplomate of National Board courses.

Below Table shows the key drivers of revenue for the periods presented year ended 31^st March 2023.

Particulars	2022-23	2021-22	Increase/ (Decrease)	% Increase/ (Decrease)
Inpatients (Nos.)	90,124	72,395	17,729	24.49
Inpatients Revenue( in Lakhs)	67,618.04	64,404.12	3,213.92	4.99
Outpatients (Nos.)	10,99,537	8,14,689	2,84,848	34.96
Outpatients Revenue ( in Lakhs)	27,526.06	23,252.09	4,273.97	18.38
KMCH IHSR (No. of Students)	600	450	150	33.33
AHS Courses (No. of Students)	736	756	(20)	(2.65)
Income from EducationalInstitutions ( in Lakhs)	6,711.99	2,783.52	3,928.47	141.13
Other Operating Income( in Lakhs)	118.59	92.94	25.65	27.60
Total	1,01,974.68	90,532.67	11,442.01	12.64

KMCH IHSR KMCH Institute of Health Sciences and Research

AHS Allied Health Sciences Courses

Particulars	2022-23	2021-22
Bed Capacity at the end of the Period (In Nos.)	2,097	1,854
Operating Beds at the end of the Period (In Nos.)	1,925	1,715
Inpatient (In Nos.)	90,124	72,395
Outpatient - New & Review (In Nos.)	10,99,537	8,14,689
Bed Occupancy Rate	55.18%	48.66%
Average Length of Stay (In Days)	4.30	4.21
Average Revenue per occupied bed (in )	17,442	21,144

EXPENSES

MEDICINES AND HOSPITAL CONSUMABLES

During the year ended FY 23, Cost of Medicines and Hospital Consumables increased from 25,627.38 Lakhs in FY 22 to 28,284.31 Lakhs in FY 23. Increase of 10.37% is in line with the growth in operating

EMPLOYEE BENEFITS EXPENSE

Employee Benefits 15,076.07 Lakhs in FY 22 to 17,969.70 Lakhs in FY 23. Increase is due to enhanced employee strength and increment given to existing employees.

FINANCE COSTS

Finance Costs reduced from 4,323.01 Lakhs in FY 22 to 4,015.61 Lakhs in FY 23, a reduction 307.40 Lakhs. This decrease in Finance Costs is due to prepayment and regular repayment of principal loan during the FY 23.

DEPRECIATION AND AMORTIZATION EXPENSE

Depreciation and Amortization Expenses has increased from 8,542.82 Lakhs in FY 22 to 8,912.50 Lakhs in FY 23, an increase of 369.68 Lakhs. Additional Medical Equipment bought and buildings capitalized during the year are other reasons for increase in Depreciation Expense.

OTHER EXPENSES

Table below summarizes the operating and other Administrative Expenses for the year ended 31^st March 2023.

	Year ended 31.03.2023		Year ended 31.03.2022
Particulars	in Lakhs	% of Revenue	in Lakhs	% of Revenue	Increase/ (Decrease)	% Increase/ (Decrease)
Stores, Dietary, Power & Fuel	3,845.27	3.77	3,296.41	3.64	548.86	16.65
Professional & Consultancy Fees	15,434.38	15.14	13,053.21	14.42	2,381.17	18.24
Hospital Upkeep Expenses	2,381.76	2.34	1,849.17	2.04	532.59	28.80
Marketing & Advertising	624.88	0.61	443.20	0.49	181.68	40.99
Repairs & Maintenance	2,148.31	2.11	1,903.42	2.10	244.89	12.87
Rent	3.26	0.00	51.49	0.06	(48.23)	(93.67)
Other Administrative Expenses	4,431.48	4.35	3,548.19	3.92	883.29	24.89
Total	28,869.34	28.32	24,145.09	26.65	4,724.25	48.78

KEY FINANCIAL RATIOS

Key Financial Ratios are detailed in Note No. 53 of Notes to Financial Statements.

LIQUIDITY

Primary Sources of Funds are Cash Flows generated from Operations as well as Borrowings. It is expected that internally generated Cash Flows will be adequate to service existing debt, fund internal growth and deploy funds for all Capital Expenditure.

RISK MANAGEMENT

In a rapidly changing business environment with dynamic customer requirements, business risks are constantly evolving. As a result, there is significant variation in the emerging risks landscape across businesses. On account of multi-fold increase in scale and the expanded area of operations, your company gets exposed to a wide range of both internal and external risks and uncertainties.

These internal and external factors may affect achievement of the companys objectives whether they are strategic, operational or financial. Risk managements objective is to assure that uncertainty does not deflect the Companys progress from its envisioned business goals.

The Company Risk Management approach is towards striking a balance between managing risks and capitalising opportunities. Its response to identified risks includes acceptance, avoidance, transfer and given towards ring-fencing the organisation from major risks that are likely to have a lasting impact on the Company profitability and sustainability.

CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis describing the health care sectors objectives, projections, estimates, expectations and predictions contain "forward looking statements" within the meaning of applicable laws and regulations. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that may or may not occur in the future. Actual results might differ materially from those either expressed or implied.