Dr Agarwals Health Care Ltd Management Discussions

Company Overview

We are Indias largest eye care chain by facilities and capacity, supported by a hub-and-spoke model for operational efficiency and consistent care. Our comprehensive services include cataract, refractive and specialty surgeries; consultations, diagnostics and non-surgical treatments; and retail opticals, contact lenses, accessories and eye care pharmaceuticals.

Our network comprises 236 eye care facilities across India and Africa. We have performed 2,82,326 surgeries and served 24,33,173 patients during the reporting period.

Our total income amounted to H 1,757 Crores, reflecting a 27.6% year-on-year increase, while EBITDA stood at H 502 Crores, marking a 23.6% growth. Our medical workforce includes 2,680 professionals, including 831 doctors and 1,849 paramedics.

Indian Healthcare Delivery Market Poised for Robust Growth in the Medium Term

Indias healthcare delivery industry is projected to grow from H 6.3 Lakhs Crores in FY2024 to H 9.1-9.3 Lakhs Crores by FY2028, at a CAGR of 9-11%. Growth is driven by strong fundamentals, rising awareness and affordability, and increased government focus. Structural factors such as lifestyle-related ailments, medical tourism, higher incomes and changing demographics further fuel demand.

Segmentation of the Indian Healthcare Delivery Market by Single Specialty and Multispecialty Hospitals

Indias healthcare delivery market comprises single-specialty and multi-specialty hospitals. Multi-specialty accounts for 55-65% of the private and trust-based market, while the share of single-specialty is ~35-45%. In FY2024, the market of single-speciality healthcare hospitals was valued at H 1.5-1.9 Lakhs Crores.

Multi-Specialty Hospitals: y Offer a wide range of medical specialties under one roof, enabling integrated and holistic care y Designed to manage complex, multi-system conditions and comorbidities efficiently y Benefit from economies of scale in infrastructure, diagnostics, and staffing y Attract a larger, more diverse patient base due to breadth of services y Enable internal referrals and cross-specialty collaboration, improving patient retention y Support round-the-clock emergency and critical care services

Growth drivers for multi-hospitals facilities include coordinated care, advanced infrastructure, and strong referral networks, enabling long-term, sustainable expansion.

Single Specialty Hospitals: y Focus exclusively on a specific illness or type of ailment y Infrastructure, operations and budgets are tailored to the needs of that condition y Require lower capital expenditure (capex), making them capex-light, scalable and replicable y Offer specialised expertise and superior clinical protocols for high-quality outcomes y Invest in dedicated medical equipment not typically found in general hospitals y Preferred by patients for focused care and consistent quality y More agility in decision-making with fewer management complexities y Better positioned to adopt advanced technologies Growth drivers for single specialty hospitals include a patient-centric model, clinical focus, cost efficiency, and scalability through standardised protocols and streamlined operations. Strong brand equity, network expansion, and investment in advanced technology further enhance their ability to deliver consistent, high-quality care.

a. Indias eye care industry is projected to reach a market size of H 55,000 65,000 Crores by FY2028, growing at a CAGR of 12 14% from FY2024. While eye care currently represents 6% of Indian healthcare delivery market, it remains one of the fastest-growing segments due to rising demand and significant untapped potential.

According to IAPB, India has the worlds highest number of visually impaired people, with nearly one in every five affected. The high prevalence of eye disorders drives a growing need for medical intervention, making eye care an integral part of the domestic health care system.

b. Key Growth Drivers

y Demographics and Income:

Rising income levels, growing per capita NNI, ageing population

y Disease Burden:

Increasing prevalence of myopia, cataract, glaucoma, and other eye disorders

y Policy and Coverage:

Government schemes like NPCB&VI and Ayushman Bharat, expanding health insurance penetration

y Market Trends:

Growth in medical tourism, rising awareness of eye health, and lifestyle-related vision issues y Industry Enablers:

Value-added services, strong brand equity, wide network presence, SOP-driven care, and comprehensive treatment offerings

y Untapped Potential:

Indias lower cataract surgery rates compared to global averages indicate significant headroom for growth

Surgical Interventions: y Cataract Surgery y Retina Surgery y Refractive Surgery y Glaucoma and Cornea-Based Surgery

Non-Surgical Services y Routine check-ups and screenings y Early identification of key eye disorders that may require surgery y Post-surgical recovery through regular monitoring and follow-up care

d. Market Structure

Indias eye care market comprises a mix of organised eye care service chains and standalone hospitals and clinics. Split of Indias eyecare market (in value) by eyecare service chains and standalone eye hospitals/ clinics (FY2024E)

Primary Eyecare Facilities: y Initial point of contact for early detection of conditions like cataract and refractive errors y Services include eye examinations, diagnosis, treatment for maintaining healthy vision, and more y Refer complex cases to secondary and tertiary care facilities for further treatment

Secondary Eyecare Facilities: y Are handled by ophthalmologists and offer cataract, simple glaucoma surgeries, and other minor surgical procedures y Offer other non-surgical treatments and refer complex cases to tertiary care facilities

Tertiary Eyecare Facilities: y Manage the full spectrum of eye-related diseases. y Conduct research and provide training to secondary eyecare facilities

f. Key Entry Barriers for the Eyecare Industry

The Indian eye care industry poses high entry barriers due to capital-intensive infrastructure, limited specialist talent, entrenched brand loyalty, and complex regulatory compliance.

B. Indias Eyewear Market*

The domestic eyewear market is expected to grow at a CAGR of ~13% between FY2025 and FY2030P, expanding nearly 1.5 times faster than the overall Indian retail market and 3 times faster than the global eyewear market. The market is projected to grow from ~H 78,800 Crores in FY2025 to ~H 1,48,300 Crores by FY2030P Prescription eyeglasses dominate the segment, contributing ~73% of the market by value, followed by sunglasses and contact lenses.

Growth is being driven by rising refractive errors among children and teenagers, lifestyle changes and increasing awareness of refractive errors across cities.

a. Total Income:

Total income surged by 27.65% to H 1,757.02 Crores in FY2025, up from H 1,376.45 Crores last year, driven by growth in operating revenue and other income.

b. Revenue From Operations: i. Revenue from operations grew by 28.44% to H 1,711.00 Crores for FY25, from H 1,332.15 Crores in the previous year, led by:

1. Revenue from sale of services stood at H 1,346.23 Crores in the reporting year, compared to H 1,045.77 Crores in FY2024, primarily driven by: (i) income from surgeries reaching H 1,116.82 Crores from H855.19 Crores, due to higher surgical volumes at existing facilities, along with incremental revenue from newly opened and acquired facilities. Additionally, growth was supported by a focus on attracting out-patient cases at our primary facilities, improved referrals to our secondary and tertiary facilities, and a shift toward high-end surgeries;

(ii) income from consultations totalled H 86.84 Crores from H 77.00 Crores; (iii) income from treatments and investigations reached H 142.41 Crores from H 113.38 Crores, led by higher revenues at existing facilities, driven by marketing and business development efforts and contribution from new facilities; and

(iv) income from annual maintenance contract stood at H 0.16 Crores from

H 0.20 Crores

(v) patient volumes reached 24,33,173, from 21,28,655 last year, and surgeries performed rose to 2,82,326 from 2,20,523 over the previous year

2. Revenue from sales of products stood at H 358.38 Crores in FY2025 from H 281.90 Crores in FY2024, primarily due to: (i) Higher sales of opticals, contact lenses and accessories, which surged to H216.21 Crores from H 173.95 Crores, supported by increased volumes, improved order conversions, as well as improved average order value and contributions from new and recently acquired facilities; (ii) sales of pharmaceutical products reaching H139.07 Crores from H104.73 Crores, owing to higher volumes and the greater contributions from existing and new facilities. This was partially offset by a slight decline in revenue from the sale of advanced vision analysers (AVAs) and Trial Lenses to H3.10 Crores from H3.22 Crores;

3. Other operating revenue stood at H6.39 Crores during the reporting year, up from H4.48 Crores last year, primarily due to an increase in clinical research activities.

c. Other Income: i. Other income rose to H46.02 Crores in FY2025 from H44.30 Crores last year, primarily due to increase in: (i) liabilities no longer required (written back) increased to H9.01 Crores from H4.41 Crores, mainly owing to overdue trade payables;

(ii) miscellaneous income came in at H5.85 Crores from H4.18 Crores; (iii) Interest on Income Tax refund increased to H1.89 Crores from H0.42 Crores. It was partially offset by decrease in: (a) profit on redemption of current investments which (includes net gain/(loss) arising on financial assets designated as FVTPL) to H17.13 Crores from H24.67 Crores; (b) interest income on financial assets carried at amortised cost - bank deposits to H3.99 Crores from H5.14 Crores; and (c) net gain on foreign currency transactions and translation to H1.87 Crores from H2.47 Crores

d. Total Expenses: i. Total expenses rose by 28.99%, reaching H1,594.15 Crores in FY2025 compared to H1,235.88 Crores in FY2024, driven by higher costs across stock-in-trade purchases, inventory changes, consumables, consultancy fees, employee benefits, finance, depreciation and other operational expenses.

e. Purchases of Stock-In-Trade: i. Purchases of stock-in-trade increased by 23.36% to H173.73 Crores from H140.83 Crores, due to increased sales of (i) opticals, contact lenses and accessories (H85.47 Crores from H63.41 Crores); (ii) pharmaceutical products (H80.01 Crores from H68.34 Crores); (iii) clinical items and equipment (H7.80 Crores from H8.92 Crores); and (iv) food items (remained unchanged at H0.45 Crores).

Stock-In-Trade and Work-In-Progress: i. Inventories of finished goods, stock-in-trade and work-in-progress witnessed a net increase of H12.81 Crores during FY2025, due to surges in inventories of (i) opticals, contact lenses and accessories (H16.14 Crores at the beginning of the year to H24.39 Crores at the end of the year); (ii) pharmaceutical products (H9.07 Crores at the beginning of the year to H13.82 Crores at the end of the year); and (iii) clinical items and equipment held for trading (from H0.19 Crores at the beginning of the year to H 0 at the end of the year). In comparison, we experienced a net increase of H5.36 Crores during FY24, primarily due to increases in our inventories of (i) opticals, contact lenses and accessories (H 12.72 Crores at the beginning of the year to H16.43 Crores at the end of the year); and (ii) pharmaceutical products (H 7.56 Crores at the beginning of the year to H 9.07 Crores at the end of the year) partially offset by a decrease in clinical items and equipment held for trading (H0.05 Crores at the beginning of the year to H0.19 Crores at the end of the year).

Other Consumables: i. Consumption of surgical lenses, including other consumables, increased by 37.96% (reaching H226.46 Crores during FY2025 compared to H164.15 Crores last year), driven by higher patient volumes and surgeries performed, which in turn, required increased volumes of surgical lenses and other consumables.

h. Consultancy Charges for Doctors: i. Consultancy charges for doctors rose by 21.08% to H246.81 Crores in FY2025, up from H203.85 Crores last year. This increase was supported by doctors salary increments, higher variable pay linked to our revenue growth, the full-year effects of our doctors incentive plan (active from November 2022 to December 20, 2024), and costs associated with engaging additional doctors for new facilities opened during the reporting year and the full year effects of facilities that we opened last year. This year, we engaged 831 doctors, compared to 667 doctors engaged in the previous year.

i. Employee Benefits Expense: i. Employee benefits expense surged by 34.61% to H326.87 Crores this year from H242.83 Crores last year, due to higher salaries and bonuses (H290.02 Crores this year, compared to H214.78 Crores last year), following employee increments and headcount growth to 3,438 from 2,772 (excluding doctors and paramedical staff). The increase reflects hiring additional senior and middle management personnel for the newly opened facilities during FY2025 and the full year effects of those opened in FY2024. Additionally, contributions to provident and other funds reached H17.83 Crores this year from H14.04 Crores last year, in line with higher provisions for statutory benefits and increments offered to employees.

j. Finance Costs: i. Finance costs increased by 13.77% to H108.79 Crores from H95.62 Crores, due to increases in (i) interest expense (interest on term loan from banks reached H31.36 Crores from H31.30 Crores); (ii) interest expense (interest on deferred consideration stood at H 28.92 Crores from

H 23.66 crores. Interest on deferred consideration comprises the interest on deferred liabilities associated with acquisitions, which are charged to our profit and loss statement as an expense in accordance with Ind AS; and (iii) interest on lease liabilities (H47.58 Crores from H37.75 Crores). These was partially offset by decreases in (i) interest expense (interest on debentures to H0 during FY2025 from H2.52 Crores during FY2024 due to the refinancing of debentures discussed above); and (ii) interest expense (interest on others to H0 during FY2025 from H0.31 Crores during FY2024).

k. Depreciation and Amortisation Expenses: i. Depreciation and amortisation expense increased by 35.43% to H230.74 Crores for FY2025 from H170.37 Crores in FY2024, due to increases in (i) depreciation on tangible assets (H88.92 Crores from H62.65 Crores, driven by additions to leasehold improvements and medical equipment during the year); (ii) depreciation of right-of-use assets (H78.13 Crores from H64.60 Crores due to the addition to buildings and lease arrangements constituting right-of-use assets upon the setting up of 52 facilities during FY2025; and (iii) amortisation of intangible assets (H63.69 Crores from H43.12 Crores, primarily due to additions to non-compete and customer relations during

FY2025).

l. Other Expenses: i. Other expenses increased by 31.57% to H292.38 Crores this year, from H222.22 Crores last year.

Marketing expenses, the largest component of other expenses, increased to H47.32 Crores from H36.14 Crores due to expenditure on television commercials and increased expenses on digital marketing initiatives. Key components of other expenses that increased were (i) hospital maintenance charges and security charges

(H34.83 Crores from H28.87 Crores due to the addition of new facilities); (ii) power and fuel expenses (H24.17 Crores from H19.47 Crores due to increases in operations at our existing and newly added facilities during the reporting year); (iii) business promotion and entertainment expenses (H24.06 Crores from H19.68 Crores due to the expansion of operations at existing and newly added facilities this year); and (iv) repair and maintenance - others (H11.22 Crores from 10.06 Crores), due to higher maintenance costs of our existing and newly opened facilities). These increases were partially offset by decreases in our Rates and Taxes expenses to H1.58 Crores from H2.20 Crores.

m. Tax Expenses: i. Our total tax expense surged to H49.51 Crores, compared to H45.52 Crores in the previous year, due to increased current tax expense reaching H39.25 Crores from H27.76 Crores, driven by higher PBT of H159.85 Crores, up from H140.57 Crores. Additionally, we experienced a decrease in deferred tax expenses to H10.26 Crores from H17.76 Crores during FY2024. Our effective

tax rate (which represents total tax expense expressed as a percentage of PBT for the relevant year) was 30.97% and 32.38% for FY2025 and FY2024, respectively.

n. Profit for the Year: i. Consequently, our profit for the year increased by 16.09% to H110.34 Crores, up from H95.05 Crores last year.

D. Risk Management a. Robust risk management framework overseen by the Board addresses risks to our business b. Risk categories include operational, regulatory, medical, strategic, HR and financial risks c. The Risk Management Committee (RMC) sets detailed risk management policies, determines risk appetite and establishes relevant frameworks. Risks are classified as medical and non-medical, with dedicated senior management personnel appointed as risk officers. Regular RMC reviews cover the risk register, heat map and mitigation plans for high/critical risks. Mitigation strategies include avoidance, transfer, control, or acceptance d. Policies and systems undergo periodic reviews to stay relevant. While no existential threats are identified, the Board monitors material risks like litigation, fire incidents and regulatory changes

E. IT and Digital Infrastructure a. We operate on a common, integrated technology platform that offers our doctors and paramedical staff seamless access to patient data across our network, including clinical diagnosis, surgical history, and payment records. This data enhances operational efficiency across facilities b. We use cloud-based, third-party licensed infrastructure to integrate data across our facilities. Our in-house Management Information

System (MIS) addresses key IT requirements c. The integrated technology platform tracks business data, operational adherence, management visibility on key data points, patient volumes, waiting times, inventory management; it also helps us maintain medical records by the applicable clinical regulatory framework, including under arrangements with the CGHS, ECHS, TPAs and other government and corporate entities and agencies with which we are empanelled as an eye care service provider. d. Further, our data storage on cloud-based infrastructure helps medical and non-medical teams across our facilities fetch patient data remotely. Our enterprise resource planning, supported by a Business Intelligence tool, enables our management to visualise business-related information and support decision-making. We also use a licensed technology platform for managing our finance, HR and payroll functions.

F. Human Resource Management a. As of March 31, 2025, our workforce comprises 6,118 employees, including 831 doctors and 1,849 paramedical staff. b. We strengthen our integrated HRM systems to enhance recruitment, training, upskilling and retention of high-quality doctors and paramedical staff. We partner with medical institutions for hiring entry-level professionals, while also leveraging agencies and internal referrals to attract experienced talent. c. We offer continuous learning opportunities, including upskilling programmes in surgical techniques, medical education, fellowships in ophthalmology, curated seminars, R&D and academic programmes, and more. We also explore collaborations in clinical research, including alliances with key suppliers of high-end medical equipment and consumables such as intraocular lenses. d. To support retention and performance, we offer performance-based compensation linked to individual and facility-related outcomes. Our strong clinical track record and commitment to continuous professional development, enabling us to attract top-tier medical talent.

G. Internal Control System a. We have established robust internal financial controls across our facilities to ensure financial discipline and ethical conduct. These include a well-defined governance structure with delegated authority, a financial management system that ascertains accurate and transparent reporting, and a group-wide Code of Conduct. Internal audits are conducted by independent firms and findings are regularly reviewed by our Audit Committee and Board of Directors, maintaining ongoing oversight and compliance.

*Reasoning is not given to in key financial ratios during the year in which there is no significant change (i.e. change of 25% or more as compared to the previous financial year).