Artemis Medicare Services Ltd Management Discussions

(A) INDUSTRY STRUCTURE & DEVELOPMENT

Overview

The Indian hospital industry stands at the forefront of the nations evolving healthcare ecosystem, pivotal in addressing the increasing demand for quality medical services. As the country progresses towards economic prominence and hospitals increasingly become the nexus of clinical innovation and patient care excellence, the sector is experiencing a paradigm shift marked by substantial investments by the private sector, capacity expansions, rapid modernisation and technological upgrades. Key trends shaping the industry include the rise of multi-specialty and super-specialty hospitals, public-private partnerships and the growing presence of corporate hospital chains. Technological integration through robotic surgeries, telemedicine and AI-driven diagnostics enhances clinical outcomes and operational efficiency. On the demand front, the surge in medical travel, rising disposable incomes and urbanisation significantly contributing to the expansion of hospital sector across urban and tier-2/3 cities. Together, these dynamics position the Indian healthcare industry as a critical enabler in the countrys journey toward a healthier and more prosperous future.

The global hospital industry, a cornerstone of the multi- trillion-dollar healthcare economy, is undergoing a significant transformation fuelled by technological innovation, demographic transitions and rising global health demands. While North America and Western Europe have traditionally led the way with advanced infrastructure and high healthcare spending, emerging economies, particularly India, are playing an increasingly influential role in shaping the future of global healthcare. India strides to position itself as a key player through its robust network of multi-speciality hospitals and growing reputation in medical travel and clinical excellence. The countrys hospitals are embracing cutting-edge technologies, cost-effective healthcare solutions and digital healthcare solutions to deliver world-class care at scale.

However, despite this progress, challenges persist. Emerging markets face systemic issues, including uneven access to care between urban and rural regions, shortages of skilled healthcare professionals, infrastructure gaps and regulatory complexities. Additionally, out-of-pocket expenditure remains high and healthcare financing mechanisms are still evolving. Addressing these challenges will be critical for the worlds most populated country, India, to fully realize its potential as a global healthcare hub and to ensure that advancements in the healthcare industry translate into equitable and sustainable health outcomes for all.

Indias healthcare ecosystem has witnessed accelerated evolution in the post-pandemic era in delivering healthcare services across the preventive, curative and rehabilitative spectrum. As India steadily advances towards becoming the third-largest economy globally, the hospital segment is poised for robust growth, fuelled by a confluence of demographic, economic, technological and policy-driven factors. With increasing healthcare awareness, growing disease burden and rising aspirations for quality care, hospitals have become the primary interface between patients and the healthcare system. From primary and secondary care to complex tertiary and quaternary treatments, hospitals are evolving into integrated care centres that not only offer curative services but also focus on preventive and rehabilitative care. The industry is undergoing a significant transformation, driven by capacity expansion, operational upgrades, rising medical insurance penetration and adoption of advanced clinical technologies and government initiatives focused on building an evolutionary healthcare economy in India.

The Indian hospital industry is highly fragmented, with a diverse mix of government hospitals, not-for-profit institutions, standalone private facilities and large corporate hospital chains. While public hospitals account for a significant share of inpatient volumes, private hospitals are known for their quality of service, especially in urban centres. Rising incomes, urbanisation and demographic shifts - particularly a growing elderly population - fuel the demand for specialised and continuing care. On the supply side, Tier-I cities are home to well-established tertiary and quaternary care centres. The proliferation of corporate hospital chains, strategic expansions into tier-2 and tier-3 cities and increasing public-private partnerships are enhancing access and affordability. Technological disruption through AI-assisted diagnostics, electronic health records (EHR), robotic surgeries and tele-ICUs is boosting clinical efficiencies and patient outcomes. Government programs such as Ayushman Bharat and initiatives to build healthcare infrastructure through new AIIMS and other superspeciality centres further strengthen the hospital network nationwide.

The Indian healthcare industry is poised for sustained longterm growth and hospitals will remain at the core of this expansion, especially with an increased focus on value- based care, digital health solutions and integrated service delivery models. Global investors view India as a strategic healthcare destination, given its cost-effective treatment offerings, skilled medical professionals and growing medical travel appeal. The emergence of India as a medical value travel hub is complemented by its growing domestic patient base, creating a dual-growth engine for hospitals. As the sector matures, emphasis on clinical excellence, cost competitiveness and scalable operating models will define the next chapter of Indias hospital industry evolution.

Market Size

The hospital sector, one of the major contributors of the total healthcare market, continues to be the backbone of Indias healthcare delivery system and is projected to grow significantly in the coming years. Valued at around US$ 110 billion in 2023, the Indian hospital industry is expected to surpass US$ 220 billion by 2027, supported by rising demand for inpatient and outpatient services, increasing lifestyle-related ailments and expanding healthcare infrastructure across urban and semi-urban regions.

The sector is experiencing strong investor interest, both globally and domestically, driven by favourable demographics, rising medical travel and improving insurance penetration. The Government of India has allowed 100% FDI under the automatic route in hospital infrastructure, encouraging investment in greenfield and brownfield projects. Between April 2000 and September 2024, cumulative FDI inflows in healthcare and diagnostic centres reached US$ 11.9 billion, while medical and surgical equipment attracted US$ 3.73 billion. Indias hospital sector attracted US$ 1.5 billion in FY24, representing 50% of the total healthcare FDI inflows, reflecting strong confidence in the sectors long-term potential and strategic importance in Indias growth story.

(B) OPPORTUNITIES AND THREATS Opportunities

The Indian healthcare industry is entering a high-growth phase, driven by favourable demographics, economic expansion, evolving disease patterns and increasing public- private collaboration. Several structural and emerging trends present significant growth potential:

a. Rising Healthcare Awareness and Expenditure: Postpandemic, healthcare has become a key priority. Urbanisation, lifestyle changes and rising income levels have increased per capita health spending. Although Indias total health expenditure is still at 3.8% of GDP, the growing awareness of citizens to give priority to healthcare essentials - such as preventive healthcare, better nutrition and insurance coverage - signals a strong market potential.

b. Accelerated Insurance Penetration: Rising treatment costs and awareness of financial risk protection have accelerated the adoption of health insurance. The expanding base of health insurance coverage - currently at ~38% - is improving access to organised healthcare. With ~33.3% of gross written premiums now coming from the health segment and government schemes like PMJAY covering over 500 million individuals, the insurance segment is expected to drive both demand and revenue stability across healthcare services.

c. Infrastructure Expansion and Inorganic Growth: Indias vast underserved population offers long-term opportunities for greenfield development, brownfield expansion and strategic acquisitions. The hospital segment, particularly, is seeing high investor interest with rising FDI inflows and increased participation from global healthcare operators and institutional funds. Asset-light models, joint ventures and tier-2/3 city penetration are critical diversification strategies, which will help increase the penetration of healthcare market.

d. Medical Value Travel (MVT): India continues to be a preferred medical travel destination due to its affordability, clinical expertise and advanced technology infrastructure. Government-backed programs like Heal in India and Ayush Visa implementation are expected to boost the market to ~US$13 billion by 2026, with further scope in wellness and elective care services.

e. Government Support and Public-Private Partnerships (PPP): Policies like Ayushman Bharat, the National Health Mission and the Production Linked Incentive (PLI) schemes for medical devices and pharmaceuticals foster infrastructure development and capacity expansion. PPPs in diagnostics, primary care and emergency services are creating avenues for scalable impact and innovation.

f. Digitisation and Telehealth Adoption: Indias rapidly evolving digital ecosystem - powered by AI, ML, IoT, telemedicine, wearable devices and Electronic Health Records (EHRs) - is transforming healthcare delivery. Government initiatives like the Ayushman Bharat Digital Mission (ABDM) are creating a unified health data infrastructure, facilitating continuity of care and improving operational efficiency.

g. Rise of Home and Tele-healthcare: The shift towards home-based care - fuelled by ageing demographics, lifestyle diseases and convenience-driven behaviour - enables new business models in home ICUs, chronic care monitoring and digital therapeutics. Startups and established players are leveraging e-commerce and app-based delivery to meet rising demand.

h. Preventive and Wellness-Oriented Healthcare: Noncommunicable diseases (NCDs) will cost the nation around US$ 4.6 trillion by 2030, accounting for over 55% of Indias disease burden. Consequently, there is a growing focus on preventive care through early screening, diagnostics, lifestyle management and wellness programs. Corporate wellness, urban health clinics and mobile health units offer scalable avenues for engagement.

i. Emerging Opportunities in Data and AI-Driven

Healthcare: Healthcare analytics, patient data integration and predictive modelling transform decision-making across clinical, financial and operational functions. Using AI in diagnostics and patient triaging is improving outcomes while lowering costs.

j. Globalisation of Indian Healthcare Services: India is becoming a back-office and innovation centre for global healthcare companies. Outsourcing medical billing, clinical research and remote diagnostic services positions India as a key player in international health services value chains.

k. Regulatory Reforms and Fast-Tracking Approvals: Recent moves toward simplifying licensing, digital health regulation and faster approvals for medical devices and digital platforms enhance the ease of doing business. With its continued alignment with global standards, India is becoming more attractive to multinational healthcare companies and investors.

Threats

While the long-term outlook for the Indian healthcare industry is promising, several macroeconomic and operational factors could affect sustained growth and scalability:

a. Infrastructure and Access Disparities: Indias healthcare infrastructure remains highly fragmented, especially in rural and remote areas. Lack of adequate hospital beds, diagnostics and primary care facilities hinders service access and puts pressure on tertiary centres of the metro cities.

b. Affordability Constraints and High Out-of-Pocket Spend: Despite insurance growth, a large portion of the population continues to pay for healthcare out- of-pocket, leading to financial vulnerability. High treatment costs, particularly in private facilities, limit access for the lower and middle-income segments and often force them to forego necessary medical treatment.

c. Shortage of Skilled Workforce: India faces a significant deficit in trained healthcare personnel - doctors, nurses, paramedics and technicians. This is compounded by uneven distribution, brain drain and outdated training curricula, creating operational challenges in scaling services.

d. Intensifying Competition and Margin Compression: The influx of new players, including corporate hospital chains, startups and foreign entities, is intensifying competition. This may lead to pricing pressure, higher marketing spending and talent acquisition costs, impacting profitability and differentiation, especially for mid-sized and independent hospital chains.

e. Regulatory and Compliance Burden: Hospitals operate under a complex regulatory environment covering clinical safety, biomedical waste, insurance and pricing. Frequent policy changes and overlapping authorities can create operational friction, compliance costs and delay expansion plans.

f. Cybersecurity and Data Privacy Risks: As healthcare digitizes, it becomes more vulnerable to data breaches, cyberattacks and misuse of patient information. Ensuring robust IT infrastructure, encryption and data protection is becoming crucial in maintaining trust and regulatory compliance.

g. Fragmentation and Standardisation Challenges: The sector is fragmented across multiple care providers, formats and regions. The lack of standardised clinical protocols, data formats and interoperable systems hampers coordinated care, benchmarking and value- based delivery models.

h. Preparedness for Public Health Crises: The COVID-19 pandemic exposed gaps in the countrys public health system, emergency response and pandemic readiness. Strengthening primary care, critical care capacity and health surveillance systems is essential for future resilience.

i. Volatility in Raw Material and Equipment Supply Chains: Dependence on imports for critical medical equipment, devices and raw materials (e.g., APIs) exposes the industry to global supply chain disruptions, pricing fluctuations and geopolitical risks.

j. Rising Operational Costs and Capital Intensity:

Hospitals are capital-intensive businesses requiring continual investment in infrastructure, technology and compliance. Rising real estate costs, energy bills and administrative overheads further compress margins, especially in urban centres.

(C) COMPANYS OVERVIEW - SEGMENT-WISE PERFORMANCE

Artemis Hospital, a unit of Artemis Medicare Services Limited, located in Sector 51, Gurugram, was established in 2007 as a cutting-edge, multi-specialty healthcare institution. It is the first hospital in Gurugram to be accredited by both the Joint Commission International (JCI), USA and the National Accreditation Board for Hospitals & Healthcare Providers (NABH), reflecting its adherence to globally benchmarked standards of quality and patient safety. Conceived as one of Indias most advanced medical facilities, Artemis offers deep clinical expertise across a wide range of high-end medical and surgical disciplines, supported by a comprehensive suite of inpatient and outpatient services.

In line with our expansion strategy, the Company inaugurated its third tower towards the end of Q2FY25, which will be operationalised in a phased manner to meet the growing demand from its expanding customer base. The Company also achieved significant milestones, including reaching its highest-ever ARPOB (Average Revenue Per Occupied Bed) and strong EBITDA margins, enabled by economies of scale and continued focus on operational and financial excellence. With respect to our other operational units, the Company is strategically concentrating its efforts on the consolidation and business growth of its asset-light centres, intending to nurture them towards full maturity and optimal performance.

Artemis continues strengthening its position as a preferred destination for Medical Value Travel. The Companys industry-leading revenue contribution from international patients reinforces its reputation as a trusted centre for high-quality, globally benchmarked care and remains a key contributor to overall financial performance.

To support its next growth phase, the Company has raised Rs. 330 Crores from International Finance Corporation (IFC) by issuing Compulsorily Convertible Debentures. This strategic capital infusion will accelerate the development of large-format hospitals in the quaternary and superspeciality care segments, with a focus on brownfield and greenfield expansion across Delhi NCR and Tier 2 cities.

Furthering our strategic expansion, the Company has entered into a long-term Operations & Management and Medical Services Agreement for a 300+ bed super-speciality hospital in Raipur. The facility is expected to become operational in FY26 and will significantly enhance the Companys presence in Central India, further diversifying its geographic footprint.

Demonstrating its commitment to innovation in healthcare delivery, the Company has launched advanced, technology- enabled physiotherapy services through a strategic partnership with Abhinav Bindra Targeting Performance (ABTP). This initiative is designed to deliver personalised, high-performance rehabilitation solutions, setting new benchmarks in physiotherapy and patient recovery outcomes. We are also upgrading our Hospital Information System (HIS) to a state-of-the-art platform designed to streamline workflows through real-time access to patient information, while enhancing data management, billing and analytics. In addition, we have introduced measures to enhance the patient experience within the hospital, including the implementation of a complaint and feedback system. These initiatives aim to boost operational efficiency, elevate the quality of patient care and facilitate seamless communication across all hospital departments.

As we advance, the Company remains focused on expansion and brand strengthening, with continued efforts to increase bed capacity and improve patient care. In parallel, we are also actively exploring the integration of Artificial Intelligence (AI) powered technologies to drive clinical and non-clinical excellence in areas such as diagnostic accuracy, treatment outcomes, operational efficiency and overall patient engagement.

Lastly, the Company continues assessing organic and inorganic growth opportunities to scale operations and strengthen market leadership. With a balanced approach that integrates asset-heavy and asset-light models, Artemis is well-positioned to sustain its growth momentum while maintaining an unwavering commitment to clinical excellence and superior patient care.

Artemis Hospital upholds the highest standards of clinical excellence across a broad spectrum of specialities. It is the first hospital in Gurugram to be accredited by the Joint Commission International (JCI), USA, for five consecutive terms - an achievement that underscores its commitment to world-class healthcare. It is also the first hospital in North India to be certified by the National Marrow Donor Program (NMDP), USA and houses the regions first M6 Cyber Knife system, with over 1,000+ successful procedures to date.

Pioneering in advanced medical technologies, Artemis was the first to introduce Masimos Clinical Surveillance System and launch a dedicated Robotic Knee Replacement Surgery Program. These innovations complement its current robotic infrastructure, including the state-of-the-art Da Vinci Surgical System. The hospital has also recently upgraded its MRI and CT facilities to enhance diagnostic precision.

Renowned for its exceptional track record, Artemis consistently delivers high success rates in complex procedures such as organ transplants, cardiac surgeries and oncology treatments. Its unwavering focus on clinical quality drives a culture of continuous assessment, ensuring the highest standards of patient care and consistent healthcare outcomes.

Artemis is dedicated to the ongoing professional development of its medical and support staff by regularly equipping them with the latest advancements, techniques and best practices in healthcare. Furthermore, we strive to foster knowledge-sharing within the wider medical community through externally conducted Continuing Medical Education (CME) programs, led by our highly experienced clinicians.

Artemis Hospital has been accredited by the Joint Commission International (JCI), USA for adhering to global standards in patient care and hospital management. It is also accredited by the National Accreditation Board for Hospitals & Healthcare Providers (NABH) and the National Accreditation Board for Testing and Calibration Laboratories (NABL) and has earned the Green OT certification from Bureau Veritas. These esteemed accreditations affirm that Artemis operational protocols are in line with internationally recognised best practices.

The Indian healthcare industry stands at a transformative juncture, emerging as a focal point of national development and global interest, particularly in the wake of the COVID-19 pandemic, which underscored the criticality of resilient healthcare systems. The renewed emphasis on healthcare as a fundamental right rather than a privilege has reshaped policy priorities and catalysed large-scale investments in both infrastructure and innovation. The convergence of economic resilience, a supportive regulatory environment and a growing middle class willing to invest in quality care continue to attract significant domestic and international investments. With healthcare demand rising steadily, India is increasingly becoming a strategic hub within the Asia-Pacific region, accounting for approximately 26% of its healthcare deal value at around US$14 billion in 2024, reinforcing its leadership position in regional healthcare investment activity.

The sectors future will be shaped by technological innovation, digitisation and the shift toward value- based care. Government initiatives like the Ayushman Bharat Digital Mission are laying the foundation for a more integrated and accessible healthcare system. With expanding medical infrastructure, increasing private sector participation and a strong digital health push, India is well- positioned to become a global leader in affordable, high- quality healthcare delivery.

While the Indian healthcare industry holds significant growth potential, it continues to face several structural and operational challenges that could impact its trajectory. One of the foremost concerns is the regulatory environment, which, despite recent reforms, still presents complexities regarding licensing, pricing regulations, accreditation norms and compliance standards. The absence of a uniform regulatory framework across states creates inconsistency and delays, especially for private players looking to expand across geographies. As competition intensifies - both domestically and from peer nations - favourable and streamlined policies will be pivotal in ensuring ease of doing business and sustaining investor confidence.

Another pressing concern is the capital-intensive nature of the sector. Building and operating healthcare infrastructure - particularly hospitals and diagnostic centres - requires substantial upfront investments, long gestation periods and ongoing operational expenditures. In parallel, the shortage of skilled healthcare professionals, including doctors, nurses and paramedics, poses a significant barrier to expanding access and maintaining quality care, especially in tier II and rural markets. Furthermore, the increasing reliance on digital health technologies and data analytics necessitates continuous upgrades in IT infrastructure, cybersecurity protocols and workforce training, which adds to cost pressures.

Indias aspiration to become a global hub for medical value travel (MVT) also brings the need to deliver internationally benchmarked healthcare outcomes consistently. Inadequate healthcare infrastructure in certain regions, variability in service quality and delays in adopting global best practices may impact Indias positioning against competing destinations. As such, industry stakeholders must navigate these challenges with resilience and agility while working closely with the government to address structural issues, incentivize innovation and promote longterm sustainability.

The Companys internal control system remains sound and practical, contributing to the integrity of its financial statements and the overall enhancement of stakeholder value. During the financial year under review, comprehensive control measures were implemented, and their operational effectiveness was regularly assessed through systematic monitoring and review processes. These controls were further subjected to independent evaluation by the Internal Audit function, which reported no material deficiencies in either the design or execution of the procedures.

The financial performance of the Company is given separately in Boards report.

At Artemis, our human resource strategy is rooted in the conviction that our people are our most valuable asset. We are dedicated to nurturing talent with a long-term perspective, aiming to create a sustainable and future-ready workforce. Our approach emphasizes providing industryleading opportunities for professional and personal development while cultivating a culture of collaboration, innovation, continuous learning and focused execution. As of March 31, 2025, Artemis employed 2,077 permanent employees.

Following are Key Financial Ratios computed on Standalone basis:

Significant changes in Ratios (i.e. 25% or more as compared to the immediately previous financial year)

(J) DETAILS OF ANY CHANGE IN RETURN ON NET WORTH AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR ALONG WITH A DETAILED EXPLANATION THEREOF

CAUTIONARY STATEMENT

The above statements are perceived by the Directors based on the current scenario and the data available as on date. Any extraneous developments and force majeure conditions may have an impact on the above perceptions.