Aashka Hospitals Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS

The overall economic development and increasing population have propelled the healthcare sector to become one of Indias largest sectors, both in revenue generation and job creation.

The healthcare industry in India continues to play a crucial role in the nations economic framework, making substantial contributions to growth and employment across diverse sectors such as hospitals, medical devices, clinical trials, telemedicine, medical tourism, health insurance and medical equipment.

The Indian Government is further strengthening the healthcare sector by undertaking structural and sustained reforms and has been announcing conducive policies for encouraging FDI. The Aatmanirbhar Bharat Abhiyaan packages include several short - term and longer - term measures for the health system, including Production - Linked Incentive (PLI) schemes for boosting domestic manufacturing of pharmaceuticals and medical devices. Additionally, India is working towards becoming a hub for spiritual and wellness tourism, as the country has much to offer in Ayurveda and Yoga.

The sector has undergone significant transformations in recent years, fuelled by technological advancements, policy reforms and growing investments. With a population exceeding 1.4 billion, India faces unique challenges in providing accessible and affordable healthcare to its citizens. However, it also presents immense opportunities for innovation and growth.

Despite these advancements, challenges persist, including disparities in healthcare access between urban and rural areas, inadequate infrastructure and the need for skilled healthcare professionals. Nevertheless, with continued efforts towards innovation, collaboration and policy reforms, the Indian healthcare sector is poised for healthy growth and improvement in the coming years.

OPPORTUNITIES AND THREATS

In recent years, the Indian healthcare sector has witnessed several trends fostering its expansion, elevating it to become one of the nations largest service sectors. The overall size of the industry is estimated to be $372 Billion with a CAGR of 22% (2016 - 2022). (Source: Niti Aayog)

Indias healthcare industry is predicted to sustain robust demand, propelled by an ageing population, a surge in lifestyle diseases, increasing affordability leading to better access to quality medical care and greater penetration of medical insurance.

The focus has shifted from curative aspect to preventive health and well-being under the ambit of holistic healthcare. The long-term goal of the government is to raise its public healthcare spending to 2.5% of GDP by 2025 under the National Health policy 2017 from the current 2% of the GDP.

Medical tourism is expected to be one of significant growth drivers for Indias Healthcare Sector. India offers a significant cost advantage globally along with best-in-class clinical outcomes. Low health-insurance penetration is one of the major impediments to the growth of the healthcare delivery industry in India, as affordability of quality healthcare facilities by the lower-income groups remain an issue. Health insurance coverage has increased from 17% in Fiscal 2012 to approximately 38% in Fiscal 2022. As per the Insurance Regulatory and Development Authority, more than 520 Million people have health insurance coverage in India (as of Fiscal 2022), as against 212 Million (in Fiscal 2012), but despite this robust growth, the penetration in Fiscal 2022 stood at only 38%.

There will be ongoing reforms in healthcare policy and regulation to address gaps in the system, improve quality of care, and promote patient safety. Greater emphasis will be placed on healthcare data privacy, medical device regulation and standards for healthcare delivery.

The hospital sector in the country has emerged sharper in the aftermath of the COVID pandemic. The evolving industry environment and the opportunities for growth have led to an increasing interest by investors, private equity players, other corporate and healthcare players for investment in the sector. This has also led to consolidation opportunities in the industry highlighting the need to gain size and scale in order to draw higher operating leverage. At the same time, the market environment is competitive and regulatory uncertainties remain.

In the aftermath of the covid wave, there is an increase in realisation that Indias tier II and tier III cities lack good quality healthcare infrastructure and present an opportunity for private healthcare players to expand in these cities. FY 24 has seen a number of large corporate chains having expanded their presence in such cities both organically and inorganically and local and regional players gaining prominence in the healthcare landscape in the country.

Overall, the healthcare industry in India is on a trajectory of growth, driven by technology, innovation and a commitment to improving healthcare access and outcomes for all segments of the population.

OUTLOOK

The global economy in FY 2024 and FY 2025 is projected to experience moderate growth, influenced by the recovery from the COVID-19 pandemic, geopolitical developments, and policy shifts in major economies. The World Bank and International Monetary Funds (IMF) have projected global Gross Domestic Product (GDP) growth at approximately 3.0-3.5% for this period. Key factors include the stabilization of supply chains, fluctuating commodity prices, and varied economic policies across regions.

India is poised for robust economic growth in FY 2024 and FY 2025, with GDP growth expected to be in the range of 6-7% for FY 2024 and potentially accelerating to 6.5-7.5% in FY 2025. This growth trajectory is supported by strong domestic demand, government policy initiatives, and a favourable global economic environment.

The IMF projects Indias GDP growth to be around 6.1% in FY 2024, with potential acceleration in FY 2025. This growth is driven by strong domestic demand, recovery in investment, and robust industrial activity. The Reserve Bank of India (RBI) supports this projection, estimating FY 2024 GDP growth at 6-6.5%, based on strong domestic demand, increased government spending on infrastructure, and a recovery in industrial activity. For FY 2025, the RBI expects GDP growth to remain robust, potentially accelerating to 6.5-7.5%, driven by structural reforms, technological advancements, and continued investment in key sectors.

The Indian healthcare industry is one of the largest and fastest-growing sectors in the country, driven by a combination of increasing population, rising income levels, changing disease profiles, and advancements in technology. The sector encompasses hospitals, medical devices, clinical trials, outsourcing, telemedicine, medical tourism, health insurance, and medical equipment. The Indian healthcare market is expected to grow to USD 372 billion by 2025, expanding at a compound annual growth rate (CAGR) of around 22% from 2016. The hospital industry in India is expected to grow significantly, with the market size projected to reach USD 132 billion by 2023, expanding at a compound annual growth rate (CAGR) of 16- 17%. This growth is expected to be driven due to rising income levels, increasing prevalence of chronic diseases, growing health awareness, and advancements in medical technology.

RISKS AND CONCERNS

Risks are an unavoidable and integral part of any enterprise. Efficient management of business risks is a key factor that determines growth, profitability and at times, even survival. In the last few years, the healthcare industry in India has been witnessing increased consolidation even among the larger players. Further, Government intervention, by way of an active regulatory regime, be it in terms of price control or capping of margins on medicines and implants has been stepped up. State and Central Healthcare coverage schemes are also impacting industry margins.

At Aashka Hospitals, we continue to strive for a focused approach on risk identification, management and mitigation. We are documenting operational risks and concerns at the unit level as well as the strategic and financial risks at the enterprise level in the form of a robust risk register. The aim is to improve responsibility accounting and bring the right stakeholders to focus on appropriate risk mitigation and monitoring measures at various levels within an organisation.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The internal control system has been designed to commensurate with the nature of business and complexity of operations and is monitored by the management to provide reasonable assurance on the achievement of objectives, effectiveness and efficiency of operations, reliability of financial reporting and compliance with applicable laws and regulations. The Company has institutionalized a robust process and internal control system commensurate with its size and operations.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATION PERFORMANCE

During the year under review, total earnings has been Rs 2,287.39 Lakhs as compared to Rs 1,894.47 Lakhs in the previous year. Profit of the Company after tax stood at Rs 235.78 Lakhs as compared to Losses of Rs 256.91 Lakhs in the previous year.

HUMAN RESOURCE

The primary objective of any human resource management is to ensure the availability of competent and willing workforce to the organisation as well as to meet the needs, aspirations, values and dignity of individuals / employees and having due concern for the socio - economic problems of the community and the country. During the year, your company focused on these objectives keeping mind the disastrous Covid Pandemic that has engulfed the entire world.

During the period under review, the company had 248 employees on roll.

DETAILS OF SIGNIFICANT CHANGES (I.E. CHANGE OF 25% OR MORE AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR) IN KEY FINANCIAL RATIOS, ALONG WITH DETAILED EXPLANATIONS THEREFOR

Sr. No. Particulars	FY 2023 - 24	FY 2022 - 23	Remarks
1. Debtors Turnover Ratio	3.92	2.58	There was a change of 51.72% due to decrease in trade receivables
2. Inventory Turnover Ratio (Only Pharmacy)	8.57	7.58	-
3. Interest Coverage Ratio	1.98	0.14	There has been increase of 1278% in Interest Coverage, as the Profitability has been increased
4. Current Ratio	0.65	0.80	-
5. Debt Equity Ratio	0.09	0.17	There has been reduction of 47.89% in the Debt Equity ratio due to repayment of Borrowings by the company
6. Operating Profit Margin (%)	25.17	47.78	The Company has turned profitable during the Current Year against Losses in Previous Year.
7. Net Profit Margin (%)	10.31	(13.56)	The Company has turned profitable during the Current Year against Losses in Previous Year.
8. Return on Net Worth	5.16	0.29	There has been increment of 1693% on Return on Net Worth due to higher profit in Current Year