economic outlook
Global economy
In its latest World Economic Outlook report, released in April, IMF had
projected the global growth to fall from 3.4% in 2022 to 2.8% in 2023, before settling at
3% in 2024. Advanced economies are expected to see an especially pronounced growth
slowdown, from 2.7% in CY 2022 to 1.3% in CY 2023. With economic activity slowing,
especially in manufacturing, medium-term growth prospects globally could remain weak, and
higher inflation could require more monetary policy tightening. 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.
IMF also stated that the global economy has shown some resilience
despite successive shocks in recent years and the rapid rise in interest rates. The global
growth inspite of the challenges of Russia-Ukraine war, Global supply chain issues and
aftereffects of the pandemic has still remained in positive territory, supported by strong
labour markets and robust demand for services.
Indian Economy
Indias real GDP (Gross Domestic Product) grew by 7.2% in FY2023, as
compared to the expansion of 9.1% in FY2022 as per National Statistical Office (NSO).
Despite the GDP growth moderating to the previous year, India remains one of the fastest
growing economies among major global players. However, in a year which saw growth
decelerating across the world with recessionary expectations building up, the Indian
economy still exhibited resilience, underpinned by robust domestic consumption demand and
well supported by the Governments push on infrastructure buildup in various parts of the
economy.
Recently, India became the worlds fifth largest economy by overtaking
the United Kingdom. Now, the United States, China, Japan, and Germany are the only nations
with economies larger than Indias.
The RBI has projected Indias GDP growth at 6.5% for FY24 and has
predicted inflation to be at 5.4% for FY24. The Repo rate has been maintained at 6.5% by
RBI in its Aug 2023 policy meet after doing six consecutive rate hikes of 250 basis points
in FY23.
Industry Structure and Developments
Indian Domestic pharma Industry
The Indian pharma industry has grown from USD 35.41 billion in FY18 to
USD 49.78 billion in FY23 and as per report by CareEdge Ratings, the domestic
pharmaceutical industry would likely reach US$ 57 billion by FY25. Globally, Indian pharma
industry has a strong footprint in the generics segment. The pharma exports and domestic
market contribute equally to the overall Indian pharma Industry.
The Indian pharmaceutical business experienced a compound annual growth
rate (CAGR) of 6-8% from FY18 to FY23, mostly due to an 8% increase in exports and a 6%
increase in the domestic market. The Indian pharmaceutical market grew by about 5% in
FY23, reaching US$ 49.78 billion. The local market expanded 7% year-over-year, while
exports only increased by a meagre 3%.
Indian Health tech startup ecosystem - a Surge in Funding and
Investment
The Indian health tech startup ecosystem has witnessed a surge in
funding and investment. Investors are drawn to Indian health tech startups for various
reasons.
First and foremost, the Indian market is expanding, and this influx of
funding is paving the way for startups with the necessary resources to scale their
operations, develop robust technologies, and expand their reach. India has a population of
about 1.4 billion people, with a rising number of individuals accessing healthcare.
Second, the Indian government is aggressively spending on healthcare. The Ayushman Bharat
Pradhan Mantri Jan Arogya Yojana, a national health insurance program, is one of several
efforts introduced by the government to increase access to healthcare. Third, India has an
extensive reservoir of talent. Fourth, the startup ecosystem in India is flourishing.
The Indian health tech startup ecosystem is still in its growing
stages, but it is fast expanding. Investors recognize the potential of the Indian market
and are putting their money into businesses that are discovering new solutions to
problems.
Key factors attracting Investors eye towards health tech startup:
Technological advancements and market potential:
Health tech startups in India are leveraging their strong IT expertise
to develop innovative healthcare technologies, such as telemedicine platforms, health
monitoring devices, AI-based diagnostics, and health information systems. Rural India is
home to approximately 65% of the countrys population, creating a sizeable unexplored
market for health tech businesses. As smartphone usage and internet access increase in
rural regions, the possibility of using technology and digital solutions to reach
underserved people is rising.
Rise in chronic diseases:
The prevalence of chronic diseases such as diabetes, heart disease, and
cancer are increasing in India. These disorders are frequently expensive to treat and can
result in long-term incapacity or death. Remote patient monitoring and telemedicine are
two examples of health tech firms providing innovative products and services to assist
individuals in managing chronic conditions.
Telemedicine:
Telemedicine has emerged as a game changer in rural healthcare,
involving the distant diagnosis and treatment of patients using telecommunications
technology. Health-tech entrepreneurs are creating platforms and apps that allow patients
in rural locations to consult with doctors in the cities. Patients are no longer needed to
travel large distances and may obtain prompt medical advice and medicines from the comfort
of their own homes or villages.
Affordable and scalable solutions:
Investors are attracted to health tech startups that offer affordable
and scalable solutions. These startups can deliver healthcare services for a fraction of
the cost of traditional techniques by harnessing technology. Furthermore, the scalable
structure of digital platforms enables them to reach many consumers simultaneously,
maximizing their influence.
Availability of skilled talent:
India has a big pool of highly talented engineers and scientists
well-versed in cutting-edge technology. This reservoir of skills is an invaluable resource
for health tech startups.
Health data analytics and artificial intelligence:
The healthcare business creates a large quantity of data, which may be
used to get valuable insights for improving patient outcomes. Health tech startups use
data analytics and artificial intelligence to analyze patient data, detect patterns, and
diagnose accurately. These technologies can help forecast disease outbreaks, optimize
resource allocation, and improve preventative treatment in remote locations. The potential
of AI in healthcare presents an attractive investment opportunity for those looking to
invest in the future of rural healthcare.
Government initiatives and support:
The Indian government understands the need to harness technology to
enhance healthcare services, particularly in rural regions. Increased investment in health
tech startups has been facilitated by initiatives such as the National Health Policy and
the Digital India campaign. The governments assistance creates a favorable regulatory
framework and financial opportunities, encouraging investors to invest in this area.
e-pharmacy gaining traction in market
The e-pharmacy market was valued at INR 50.71 Billion in 2020. It is
estimated to reach INR 458.14 Billion by 2026, expanding at a compound annual growth rate
(CAGR) of ~44.99% during the 2021-2026 period as per Report Ocean
In the recent years, e-pharmacy emerged as a better and more convenient
approach that addressed the issues faced by the consumers and provided superior customer
solutions over its physical counterparts.
The market is categorized into two segments chronic and acute therapy.
In 2020, the chronic therapy segment dominated the market, accounting for 63.42% of the
revenue. It is expected to dominate during the forecast period. However, its market share
is likely to decline to 53.92% in 2026. The acute therapy segment is forecast to achieve
promising growth during the forecast period. Its market share is anticipated to increase
from 36.58% in 2020 to 46.08% in 2026, expanding at a CAGR of 50.56% during the 2021-2026
period.
Consumers with chronic conditions require long-term treatment, and
thus, have repeated need for medication. People prefer e-pharmacy platforms, owing to the
availability of a wide range of medicines at discounted prices. Customers may increasingly
prefer these platforms for managing acute ailments such as common cold in the coming
years.
The market has gained traction in recent years because of increased
penetration of the internet and smartphones, prevalence of lifestyle disease and
government initiatives. Discounts impacting profitability, data breaches and cybercrime
and bottleneck in supply network are a few of the factors that impedes its development.
Furthermore, the digital-enabled collaboration between online and
offline pharmacies will be the way forward to provide the best customer-patient
experience. Such is the only way to co-drive value for consumers. For instance, tie-ups
with local pharmacies could offer last-mile delivery by allowing offline vendors to expand
their bases. Such a model will also provide consumers with easier access to both online
and offline pharmacies to choose from based on their requirements, availability and price.
Indian Diagnostic Market Outlook
According to research firm Edelweiss, the domestic diagnostic industry
is estimated at $9 billion (around Rs 67,500 crore) and is expected to grow at a
compounded annual growth rate (CAGR) of 10 per cent over the next half a decade.
Additionally, growing healthcare awareness among the population related to early disease
diagnosis and treatment is expected to fuel the market growth over the next few years.
Also, India is emerging out as a medical tourism hub and a lot of medical tourists are
visiting the country for getting their treatment done on account of availability of cost
effective and better treatment options. This in turn is expected to positively influence
the market growth through FY2027.
The growth in the industry is largely volume-driven and is highly
fragmented. That is, dominated by a few large (organised) players and various small and
regional players. Analysts point out that 80-85% of the industry is unorganised or
dominated by regional players.
So far, higher life expectancy and changes in lifestyle, a
health-conscious population, and improvement in testing services, could directly
contribute to the growth of the companies in the diagnostics industry.
While all the indicators appear to be positive for the industry, it has
pricing pressure. That is, the players in the diagnostics industry cannot take advantage
of the pricing. Their services are offered at a steep discount considering the
competition, particularly from small regional players.
The diagnostics industry has two categories - pathology (offered by all
and accounts for nearly 58% of the revenue in the industry) relates to testing of all
major illnesses. And radiology (which accounts for 42% of revenue in the industry) relates
to imaging diagnoses such as x-rays, CT scans and Ultrasound.
SASTASUNDAR DIGITAL HEALTHCARE NETWORK
The Sastasundar Digital Healthcare business forms substantial part of
its business.
The subsidiary company, Sastasundar Healthbuddy Limited has entered
into the strategic partnership deal of B2C E-pharmacy (Sastasundar Marketplace) with
Flipkart Group, wherein the SastaSundar mobile APP and the website have been renamed as
FlipKart Health+. Consequent to the transaction, Sastasundar Healthbuddy Limited holds
24.9% of equity share capital of Flipkart Health Limited (formerly Sastasundar Marketplace
Limited) and 75.1% of equity share capital is held by the Flipkart Group. This partnership
will help us to participate in the significant opportunity of Digital healthcare in India
and which will also help us to manage our risks appropriately.
The subsidiary company, Sastasundar Healthbuddy Limited is engaged in
the wholesale business to support the Seller Pharmacy Network of Flipkart Health+ (earlier
SastaSundar.com). The Company is managing the supply chain of medicine and wellness
products through its PAN India warehouses to sellers on Flipkart Health+.
For B2B operations, the step down subsidiary company, Retailer Shakti
Supply Chain Private Limited is operating digital platform in the name of
RetailerShakti.com and RetailerShakti APP for medicine, wellness products and FMCG
products. The operations are now PAN India and it leverage Digital Technology to expand
data-driven efficient Supply Chain. The RetailerShakti supplies products to retail
pharmacies and local kirana stores.
Another vertical of healthcare is Diagnostic business. The Company has
separate step down subsidiary called Genu Path Labs Limited to operate its diagnostic
business. The Company is focussing on Eastern India initially for its diagnostic vertical.
OPPORTUNITIES & THREATS
Opportunities
1. The partnership with Flipkart group will help us to participate in
the significant opportunity of Digital healthcare in India and which will also help us to
manage our risks appropriately. Flipkart health shall leverage Flipkarts strength of
large consumer base and digital tech capabilities.
2. With the Strategic Partnership with Flipkart group, we shall have
the opportunity to work for cash flow, customer experience and community wellbeing.
3. We are working to expand and grow network of seller pharmacies
across PAN India.
4. We have an opportunity to solve one of the biggest problems of
India, i.e., consistent access to affordable healthcare.
5. We have this opportunity to operate as a national distributor for
international supply chain.
6. This is the occasion for us to continue to strengthen digital
technology to expand data-driven efficient supply chain and appropriately leverage
customer base and capital to grow.
7. The traction in building D2C brand presents scope to establish Genu
Path Labs as D2C brand.
Threats
1. We operate in the domain of healthcare which is highly regulated,
and therefore any adverse regulation may affect our growth.
2. We operate with a high technology backbone and therefore data
security is a threat.
3. We are subject to the risk of changes in technologies and/or the
introduction of new technology, which calls for the need of constant technological
upgradation.
outlook
The Indian healthcare sector is expected to grow significantly in the
upcoming years. Rising income levels, an ageing population, growing health awareness and a
changing attitude towards preventive healthcare is expected to boost healthcare services
demand in the future. The low cost of medical services has resulted in a rise in the
countrys medical tourism, attracting patients from across the world. Moreover, India has
emerged as a hub for R&D activities for international players due to its relatively
low cost of clinical research. The Government also aims to develop India as a global
healthcare hub.
The Companys strategic partnership with Flipkart group with will help
us to participate in the significant opportunity of Digital healthcare in India and which
will also help us to manage our risks appropriately. Looking at the potential growth in
pharmacy, diagnostic and wellness and the positive growth in use of digital medium, the
managements outlook is positive.
risks and concerns
1. We work in a highly regulated environment, and therefore, any
adverse regulatory changes possess a risk.
2. We carry the risk of mindless competition primarily based upon heavy
discount on the back of capital. Recent years have also marked advent of online portals
and web aggregators into parts of the diagnostic business value chain. In order to
establish rapid salience, the new entrants are not shy of utilizing pricing as a marketing
tool.
3. We carry the risk of a digital base and therefore, exposure to data
security threats.
4. We are operating in a highly-competitive and fragmented industry and
our business, financial condition and results of operations may be adversely affected if
we are not able to compete effectively.
5. We carry the risk of changes in technologies and/or the introduction
of new technology could reduce demand or failure of our equipment, information technology
and other technological systems.
financial performance
The segment wise consolidated financial performance on year to year
basis is given below:
(Rs. In Lakhs except for EPS)
| Revenue |
FY 2022-23 |
FY 2021-22 (Restated) |
| Financial Services |
74.03 |
835.62 |
| Healthcare Network |
1,03,907.81 |
62,307.20 |
| Other Income |
2,363.88 |
1,163.19 |
| Total Revenue |
1,06,345.72 |
64,306.01 |
| EBITDA before exceptional item |
(2,032.32) |
(3,702.30) |
| EBIT before exceptional item |
(2,852.07) |
(4,117.92) |
| Share of Profit/(Loss) of associates and joint ventures
accounted for using equity method |
(8,489.82) |
(518.61) |
| Profit/ (Loss) before exceptional item and Tax |
(11,428.65) |
(4,800.15) |
| Exceptional Item |
(796.45) |
1,15,748.53 |
| Profit/ (Loss) before Tax |
(12,225.10) |
1,10,948.38 |
| Profit/ (Loss) after Tax |
(9,946.92) |
86,511.22 |
| EPS |
(22.70) |
197.04 |
Details of significant changes in key financial ratios along with
explanation
In compliance with the requirement of the SEBI (Listing Obligations
& Disclosure Requirements) (Amendment) Regulations, 2018, the key financial ratios of
the Company along with explanation for significant changes (i.e., for change of 25% or
more as compared to the immediately previous financial year will be termed as significant
changes), has been provided hereunder:
| SI Particulars No. |
FY 2022-23 |
FY 2021-22 |
| 1 Debtor to sales (in days) |
- |
- |
| 2 Inventory to Turnover Ratio (in Months) |
- |
- |
| 3 Interest Coverage ratio |
- |
- |
| 4 Debt Equity ratio* |
- |
- |
| 5 Operating profit Margin (%) |
- |
- |
| 6 Net Profit Margin (%) |
- |
- |
| 7 Return on Net Worth (%) ** |
0.2% |
(0.2%) |
| 8 EPS- Basic and Diluted |
0.20 |
(0.12) |
* There is no borrowing in the Company.
** The changes in Return on Net Worth has been recorded on account of
extraordinary exceptional items recorded in the previous year.
internal control systems and their adequacy
Your company has adequate Internal Audit and Control system across all
businesses. The internal control systems provide, among other things, reasonable assurance
of recording transactions of operations in all material respects and of providing
protection against significant misuse or loss of company assets. Your company believes in
the conduct of its affairs in a fair and transparent manner by adopting the highest
standards of professionalism, honesty, integrity and ethical behaviour. The internal
processes have been designed to ensure adequate checks and balances at every stage.
Internal audit is conducted to assess the adequacy of our internal controls, procedures
and processes, and the Audit Committee of the Board reviews their reports. Policy and
process corrections are undertaken based on inputs from the internal auditors.
human resources
Your company was able to grow last year only because of the employees
of the company and their hard work. The group employed a total 1,111 employees in the last
year. Your company also utilizes independent contractors and temporary personnel to
supplement our workforce, if required. The relation of the employees with your company is
considered good.
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