Company Overview About Dr Agarwals
Founded in 1957, and registered in 1994 as a Company, Dr Agarwals Eye
Hospital is a leading chain of eye hospitals with predominant presence in Tamil Nadu.
Under the able leadership of Dr. Amar Agarwal, the Company has been a pioneer and leader
in the Indian Ophthalmology market with an established market position, healthy brand
recall in the eye care segment. It offers comprehensive services in the eye-care segment
including Cataract, Glaucoma, Laser Correction, Cornea and Refractive, Retina, and Squint
among others. It has presence in multiple locations in Tamil Nadu, Rajasthan and Kerala.
Economic Outlook
Global Economy
With the pandemic wreaking havoc on the global economy for the most of
2021 and 2022, healthcare played a critical role. But with the World Health Organisation
declaring victory over COVID, and with large number of Indian population vaccinated with
either single or double dose, and also booster dose, we can safely say its time to look
ahead. However, due to the Russia-Ukraine war, rising inflation in the United States and
around the world, and decreased consumer purchasing power, FY2023 presented its own set of
economic issues.
As a result, the global economy, which grew at 3.4% in FY22, is
expected to rise at 2.8% in FY23 before stabilising at 3.0% in FY24, a ccording to IMF1
forecasts. So, the current evolution of the global economy is determined by the
global financial situation and impact of geopolitical shifts.
Indian Economy
India appears to be more resilient than other economies around the
world. Due to a lower base in FY21, the Indian economy grew at a 9.1% annual rate in FY22.
However, it is predicted to expand by 6.5% in FY23. Global disturbances would have an
impact
on the Indian Economy in the forthcoming period. However, there are
expectations that the economy will grow at a 6.0% annual rate in FY24.2
The RBI is constantly taking steps to reduce the inflation, and the
signs will be visible as and when data for subsequent quarters is released. The same can
also be witnessed from the de-growth in the Wholesale Price Index (WPI) in April 2023.
The passage of time demonstrates that health and education are the two
foundations that guide humans to their goals in life. The Indian governments vision of
becoming a $5 trillion economy, the tremendous growth of the Indian middle class, rising
per capita income, and increased healthcare awareness are just a few of the many factors
that are supporting the growth of the Indian population, both financially and in terms of
lifestyle.
Following the COVID pandemic, the Indian populations attitude towards
healthcare and personal hygiene changed dramatically. And this, combined with economic
development, has resulted in the healthcare sector becoming one of Indias largest and a
priority sector.
The present size of the Indian healthcare market is predicted to be
over $372 billion (FY22), which has grown at a CAGR of 22% since 2016. As of 2021, it
employs about 4.7 million people and is the fourth largest employer in the country, with
nearly 2.7 million jobs generated in last 5 years (over 500,000 jobs every year).3
The Indian government is bolstering its healthcare spending, as
reflected in the budget allocation. Government spending on healthcare has increased
bydouble digits in recent years, and the government intends to boost it to 3% of Gross
Domestic Product (GDP).3
Indian Healthcare Industry
In addition to the above, the government is working hard to provide a
positive and conducive climate for the private sector to contribute to the healthcare
business through FDI, tax breaks, and favourable policies. The government has also
introduced the PLI scheme under the Atmanirbhar Bharat Abhiyan to stimulate local
pharmaceutical and medical device manufacture.
Increased demand in the hospital segment can also be witnessed from
private players aiming to expand into tier 2 and tier 3 cities. All these factors make the
Indian healthcare market attractive for investment.
Indian Eye Care Industry
Out of 10 blind people in the world, 3 are expected to be from India.
And as many as 8 out of 10 people go blind in India due to untreated cataract, which in
fact is a treatable condition. Similarly, more than a crore Indians suffer from Glaucoma
(which can also be treated), of which 12.5% lose their eyesight - primarily because more
than 90% of the cases go undiagnosed.4
The Indian Eye Care Industry is valued at $1.4 billion4.
This industry is characterized by very few corporatized players (hold 5-6% of market
share) who can bring best medical and operational efficiencies to the table. This leaves
an exponential upside on growth levers. And with the increasing use of screens and ageing
Indian population, Eye Care is the need of the time.
Key Performance Indicators
Financial Performance
The company saw a robust growth in FY23. The top line consistently grew
at 33% from 201.21 Cr to 267.89 Cr. The revenue growth along with consistent cost
control measures, has reflected down on to EBITDA with 30% growth from 58.94 Cr to
76.46 Cr. In the capital markets, the company saw a significant 25% increase in market
capitalization.
Operational Performance
The total number of patients served showed a robust yearly growth of
26% in FY23. Cataract - the biggest contributor to the revenue - showed a yearly revenue
growth of ~37% in FY23. Other streams of revenue including refractive, opticals, and
retina have also shown considerable growth over the previous year.
As planned expansion strategy, the Company opened a new centre in Kochi
(Kerala). Furthermore, the Company is confident of establishing a strong presence in
existing Kerala markets before expanding further in the region. In line with mission to
reach more and more patients and serve the lower connected areas of the country, company
started operating 3 vision centres under the brand of "Dr Agarwals Eye Clinic"
(erstwhile 20:20 Eye Care) in Chengalpattu (Chengalpattu District), Gudiyattam (Vellore
District),
and Sankarankovil (Tenkasi District).
SWOT Analysis
Strengths
1. The Company has displayed a resilient rebound following the COVID-19
pandemic, consistently achieving growth in both revenue and EBITDA, while maintaining a
positive trend in profit generation.
2. The company is guided by an exceptionally capable team of promoters
who possess an ideal blend of clinical expertise and managerial proficiency.
3. With a proven history of therapeutic accomplishments in the field of
ophthalmology, the Company is in a favorable position to broaden its reach and attract a
larger patient population.
Weakness
1. The ongoing concern lies in the Companys reliance on
ophthalmologists, given the relatively small numbers of approximately 25,000
ophthalmologists and 45,000 optometrists in India, which is significantly lower compared
to the countrys vast population.
2. The Companys reliance on the economic, social, and political
well-being of specific regions is heightened due to the concentration of branches in those
areas. The same is being addressed by expanding into newer markets.
Opportunities
1. The healthcare industry has witnessed a significant policy impetus
from governments and individuals, especially in the aftermath of the COVID outbreak. This
momentum will act as a catalyst for enhanced opportunities.
2. Supported by state-of-the-art technology, the organization boasts a
seasoned team of doctors who deliver contemporary eye-care services.
3. Drawing from valuable insights gained from both successes and
challenges faced by peers, the Company is actively mitigating risks and leveraging its
knowledge.
4. With these factors in mind, the Company foresees a prosperous future
not only in the field of ophthalmology but also within the broader healthcare industry.
Threats
1. The Companys operations are concentrated in specific geographic
locations, with limited expansion amidst intense competition.
2. The global financial crisis and ongoing conflicts have led to the
collapse of several economies, reigniting concerns about their potential impact on the
overall business landscape.
Human Resource
In the post-COVID era, the dynamic market landscape has underscored the
paramount significance of the human resources team in the organization, especially in
terms of talent acquisition and retention.
Throughout the year, the company has fostered a harmonious, enabling,
and mutually beneficial relationship. It effectively harnesses its human resources to
achieve success, stability, and growth. Detailed descriptions of the advancements in the
field of Human Resources are provided in the "Particulars of Employees" section
of the Directors Report.
Internal Control Systems and Their Adequacy
The organization has implemented a robust system of internal controls,
meticulously designed to offer reasonable assurance in maintaining accurate accounting
controls, monitoring operations, safeguarding assets against unauthorized use or losses,
complying with regulations, and ensuring the reliability of financial reporting. These
controls have been thoughtfully implemented to provide the necessary safeguards and
reasonable assurance.
Risk and Mitigation
a) Competition intensity and new entrants to the market: There are
numerous competitors entering and capturing the market by providing comparable services
with antiquated technology. This can have a substantial effect on a companys bottom line.
Risk Mitigation: The company has never
compromised its ability to conduct high-end surgeries and acquiring
state-of-the-art technology because it believes that quality is the only consideration
over time.
b) Pace of obsolescence of technology and treatment methods: The Eye
Care segment utilises a variety of equipment that must be continuously tested and
monitored for obsolescence.
Risk Mitigation: Utilising a dedicated R&D function, the company
develops near-term and incremental enhancements, as well as step-change improvements to
existing products and processes, resulting in minimal obsolescence.
c) Materials Risk: The non-availability of high- quality materials
could delay service delivery to clients.
Risk Mitigation: Due to high volumes and prompt payments, the company
consistently acquires its materials directly from the manufacturer.
d) Labour deficit and loss of key staff members,
including medical personnel: The businesss
qualitative and quantitative performance could be compromised by a lack
of essential / skilled physicians.
Risk Mitigation: The organisation has been consistently recruiting and
training physicians and enhancing its capabilities.
e) Increasing compliance and regulatory impediments: The evolution of
the global regulatory environment has led to heightened regulatory scrutiny, which has
raised the minimum standards that must be maintained. This demonstrates the alignment of
corporate performance objectives with regulatory compliance requirements.
Risk Mitigation: The company realises that regulatory requirements can
be difficult at times and will endeavour to comprehend evolving regulatory standards in
order to better its decision-making process and incorporate these into the business plan
in which it works.
Cautionary Statement
The goals, aspirations, or projections of the company may be considered
forward-looking within the context of the securities laws and regulations that are now in
effect. It is possible that the actual results will be significantly different from those
represented in the statement. The global and domestic business climate, changes in
government rules and tax laws, economic developments inside the country, and other factors
such as litigation and the like are important elements that could influence the operations
of the company.
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