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Fortis Healthcare Ltd Management Discussions

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Fortis Healthcare Ltd Share Price Management Discussions

SECTION I

Indian Healthcare Sector

A. Overview

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.

1960 1980 1990 2000 2010 2015 2020 2030P

Source: Crisil

The sector has undergone significant transformations in recent years, fueled 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.

In response to the COVID-19 pandemic, Indias healthcare infrastructure witnessed rapid adaptations. The country ramped up its healthcare facilities, including the establishment of temporary hospitals and increased production of medical supplies. Furthermore, telemedicine emerged as a crucial tool for remote healthcare delivery, bridging the gap between patients and healthcare providers, especially in rural areas.

In recent years, the sector has witnessed remarkable expansion, driven by factors such as improved coverage,

service quality enhancements and substantial investments from both public and private entities. Government initiatives aimed at increasing healthcare spending and enhancing infrastructure have further propelled the industrys growth trajectory.

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.

The Indian healthcare industry has sustained its robust growth momentum, propelled by several key trends.

Despite the challenges posed by the COVID pandemic and other socioeconomic factors, the industry has remained resilient, reaffirmingits status as one of the largest service sectors in the country.

Looking ahead, continuous progress in medical technology combined with a growing focus on preventive care and wellness programs is anticipated to drive the expansion and diversification of Indias healthcare industry. The sectors ability to withstand challenges and adapt, positions it well for ongoing growth and innovation, presenting attractive prospects for investors, stakeholders and healthcare practitioners.

B. Current Landscape and Key Highlights

Indias rapidly expanding healthcare sector has emerged as a prominent driver of the economy. The surge in healthcare demand is propelled by a blend of economic and demographic dynamics.

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)

I ndias healthcare industry comprises hospitals, medical devices and equipment, pharmaceuticals, health insurance, clinical trials, telemedicine and medical tourism.

The industrys expansion can be attributed to several factors including an aging population, a growing middle class, an increasing prevalence of lifestyle diseases, increasing insurance penetration, public-private partnerships and the adoption of digital technologies like telemedicine.

? The Indian healthcare sector experienced a surge in investments with over $4 billion inflows in 2023. Private equity (PE) investments surged by 9-10%, a significant increase from the pre-COVID-19 eras 2% and last years 5%.

? The governments plan to increase healthcare spending to 2.5% of GDP by 2025.

? There is a decrease in the percentage of healthcare spending paid out of pocket by individuals, from 62.6% in FY 2015 to 47 1% in FY2020 (Source: Ministry of Health) %

? The Indian government is expected to increase partnerships with private healthcare providers to improve access to healthcare services, particularly in rural and underserved areas

? Greater adopitin of digital health solutions such as electronie medical records (EMRs), mobile health apps and remote patient monitoring systems.

? The adoption of telemedicine, which has been accelerated by the COVID-19 pandemic is projected to grow at a CAGR of 31% between 2020 and 2025.

(Source: CNBC, Ministry of Health, Niti Aayog)

Key Highlights:

Expansion of Telemedicine Services: Telemedicine continues to witness significant growth with more healthcare providers adopting digital platforms to offer remote consultations and medical advice, especially in the wake of the COVID-19 pandemic.

Advancements in Health Tech: The healthcare technology sector sees rapid innovation with developments in artificial intelligence, wearables and health monitoring devices aimed at improving patient care and treatment outcomes.

Increased Government Spending: The Indian government allocates higher budgets for healthcare focusing on infrastructure development, disease control programs and improving access to essential medicines and treatments.

Focus on Mental Health: There is a growing recognition of mental health issues leading to increased efforts to destigmatize mental illness, expand mental health services and integrate mental health into primary healthcare initiatives. Organisations like The Live Love Laugh Foundation and The National Institute of Mental Health and Neurosciences (NIMHANS) conduct nationwide mental health awareness campaigns, reaching over 50 Million individuals through educational programs, workshops and online resources.

Rise in Health Insurance Coverage: More individuals opt for health insurance coverage driven by increasing awareness of the financial risks associated with healthcare expenses and the availability of customized insurance products.

Expansion of Healthcare Infrastructure: The construction and expansion of hospitals, clinics and diagnostic centers continue to meet the rising demand for healthcare services, particularly in tier 2 and tier 3 cities.

Healthcare Digitisation Initiatives: The National Digital Health Mission (NDHM) gains momentum, aiming to create a comprehensive digital health ecosystem, including electronic health records, telemedicine and health registries.

Innovative Healthcare Delivery Models: New healthcare delivery models emerge, such as home healthcare services, community health centers and mobile health clinics, catering to diverse healthcare needs and improving accessibility.

Medical Education Reforms: Reforms in medical education focus on enhancing the quality of healthcare professionals through curriculum updates, skill development programs and promoting research and innovation in medical institutions.

Public-Private Partnerships (PPPs): Collaboration between the public and private sectors strengthens, facilitating investment in healthcare infrastructure, technology adoption and implementation of healthcare programs to address key healthcare challenges effectively.

Indian healthcare delivery market poised for robust growth.

The Indian healthcare delivery industry is expected to post a healthy growth rate of ~11.3% CAGR between FY23 and FY27, driven by long term structural factors, strong fundamentals and increasing affordability.

Indias Healthcare Delivery Market

? Government Healthcare Services

? Private Healthcare Services

In the overall healthcare delivery market, the in-patient department is projected to constitute nearly 70% of the total value, with the

remainder being catered by the out-patient department. (Source: Crisil)

C. Government Policies and Key Initiatives

The government continues to play a critical role in the sector with its focus on creation of facilities in rural India for primary healthcare and ensuring availability of diagnostics, funding medical insurance to the low-income population (through Ayushman Bharat), driving penetration of generic medicines (through Jan Aushadhi centers) as well as funding R&D in medical technologies and diagnostics in various labs and through ICMR.

Key Highlights:

• Indias healthcare landscape is evolving with significant investments in infrastructure development.

• The Union Health Ministry has been allocatedRs.90,659 Crores in the interim Budget for FY 2024-25, an increase of 12.6% overRs.80,518 Crores in the Budget (revised estimates) for FY 2023-24, highlighting the governments prioritisation of healthcare expenditure.

• Ayushman Bharat insurance scheme will now cover all ASHA (Accredited Social Health Activist) and Anganwadi workers and helpers.

• The government plans to set up more medical colleges by utilising existing hospital infrastructure and will form a committee to examine the issues and make relevant recommendations.

• Out of Rs.90,659 Crores,Rs.87,657 Crores has been allocated to the Department of Health and Family Welfare whileRs.3,002 Crores to the Department of Health Research.

• AYUSH ministrys budget has increased by 23.7% toRs.3,713 Crores, and centrally sponsored schemes receiveRs.87,657 Crores.

Ecosystem for Digital Health at a National Level

Focus on preventive healthcare along with the introduction of the U-WIN platform*

Emphasis on enhancing countrys mental health

Establishing additional medical colleges by utilizing existing hospital infrastructures

Streamlining and enhancing the effectiveness of healthcare services for mothers and children

Futuristic focus on medical research, collaborative research and R&D

*The U-WIN portal is the programme to digitise Indias Universal Immunisation Programme (UIP). The portal captures vaccination status, maintains an electronic registry of routine immunisations.

• Efforts extend to preventive healthcare with initiatives like cervical cancer vaccination and comprehensive maternal and child health programs.

• Upgradation of Anganwadi centers under Saksham Anganwadi and Poshan 2.0 aims for better nutrition delivery and early childhood development.

• Focus on biotechnology research with an increased allocation of Rs.1,100 Crores and a new scheme for sustainable manufacturing.

• The budget allocation for centrally sponsored schemes has been increased fromRs.77,625 Crores toRs.87,657 Crores.

? Among these centrally sponsored schemes, the budget allocation for the National Health Mission has been increased fromRs.31,551 Crores in FY 2023-24 toRs.31,967 Crores in 2024-25 and the allocation for Pradhan Mantri Jan Arogya Yojna (PM-JAY) hiked fromRs.6,800 Crores toRs.7,500 Crores.

• The allocation for National Digital Health Mission has been increased from Rs 200 Crores to Rs 250 Crores.

• Maternal and child health: Schemes for maternal and childcare to be brought under comprehensive program for synergy in implementation.

• U-WIN platform for managing immunisation and intensified efforts of Mission Indradhanush to be rolled out throughout the country.

(Source: Ministry of Health and Family Welfare)

D. Key Growth Drivers of the Indian Healthcare Industry

I ndias 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.

Key Growth Drivers

a. Government Policies to Improve Healthcare Coverage: 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.

b. Continuing demand supply gap for quality healthcare services and healthcare infrastructure:

India currently has 1.3 hospital beds per 1,000 population. There is also a shortage of skilled health workers, with 0.65 physicians per 1,000 people (the World Health Organisation standard is 1 per 1,000 people) and 1.3 nurses per 1,000 people.

India would need an additional 3 Million beds to achieve the target of 3 beds per 1,000 people by 2025. Furthermore, another 1.54 Million doctors and 2.4 Million nurses will be required to meet the growing demand for healthcare in India. (Source: PwC Research)

c. Opportunity from medical tourism: 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.

Source: Anand Rathi Research

The government has set a target of achieving $12 Billion in revenue from medical tourism by 2026 and has initiated several efforts through the Heal in India program to establish India as a hub for medical tourism. (Source: Anand Rathi Research)

These efforts include forming a National Medical and Wellness Tourism Board, introducing a specialized medical visa category accessible to citizens of 165 countries, and offering financial assistance of Rs.0.6 Million to medical tourism service providers through market development assistance (MDA).

d. Increasing Health Awareness to Boost Hospitalisation

Rate: Majority of healthcare enterprises in India are more concentrated in urban areas. With increasing

urbanisation (migration of population from rural to urban areas), awareness among the general populace regarding presence and availability of healthcare services for both preventive and curative care is expected to increase.

e. Growing Health Insurance Penetration: 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%.

f. Lower Healthcare Spend: India overall (public + private) healthcare spend is 3.8% of GDP vs 17% in case of US. This works out to be USD 73 per person annually on health care vs USD 10,600 in case of US.

Source: PL Equity Research on Indian Healthcare

• Low public spending and limited penetration of health insurance has led to out-of-pocket expenditure accounting for ~63% of total healthcare which is one of highest in the world and well above global average of 22%.

Out-of-pocket expenses as % of Healthcare expenditure

g. I ncreasing burden of Non-Communicable Diseases:

Non-communicable diseases (NCDs) encompass a vast group of diseases such as cardiovascular diseases, cancer, diabetes and chronic respiratory diseases. NCDs contribute to around 38 Million (68%) of all the deaths globally and to about 5.9 Million (60%) of all deaths in India. The majority of NCD deaths occur in low and middle-income countries such as India, which is undergoing an epidemiological health transition owing

to rapid urbanisation, which in turn has led to an overall economic rise, but with certain associated flipsides.

E. Digital Transformation

The Indian government and private sector stakeholders have supported the development of technologically advanced medical devices in addition to digital infrastructure. Increasing smartphone and Internet penetration and initiatives like the government-run National Digital Health Mission are collectively responsible for the accelerated pace of health systems digitisation in India.

The MedTech market in India, which comprises mainly of medical equipment, life sciences and in-vitro diagnostic technology, was valued at around $10.4 Billion in 2020 and is projected to grow at a CAGR of 37% to reach $50 Billion by 2025. (Source: IBEF)

Meanwhile, the use of digital healthcare technologies, including Artificial Intelligence (AI) and telemedicine has increased significantly with investments reaching nearly $57 Billion in 2021. Examples of digital transformation in the healthcare industry include telemedicine, AI-assisted medical devices, blockchain for electronic health records and cloud-enabled data management platforms.

Additionally, Indias virtual or remote healthcare industry will be crucial going forward. According to a market research report, remote healthcare global market is expected to be around $57.1 Billion by 2030. A significant factor that will help its growth will be the use of AI.

Management Discussion & Analysis (Contd.)

I n the coming years, the healthcare space is likely to be affected by 5G. With the help of 5G, everything can be done in a distributed manner, including robotic surgeries, extensive healthcare management in rural areas as well as virtual health education and health research.

KEY TECHNOLOGY TRANSFORMATION TRENDS

F. Indian Diagnostic Sector

The diagnostics industry is pegged to grow between 8% to 10% from FY23 to FY28P.

Source: CRISIL

The diagnostics sector is classified primality in to two segments: pathology and radiology. Pathology, constituting a significant 56% portion of the market, revolves around the examination of tissues, cells, and bodily fluids. This segment encompasses various tests, with clinical chemistry holding

the highest market share. On the other hand, radiology constituting 44% of the market, leverages a spectrum of imaging modalities to diagnose and treat ailments, spanning from conventional X-rays and ultrasounds to advanced technologies like CT-scans and MRI.

Prescriptive diagnostic services dominate the market, comprising 85% of the sector, while preventive diagnostic solutions contribute 15%. Notably, outpatient department diagnostics command a significant share of 57%, with inpatient department diagnostics making up the remaining 43%.

The market comprises of 3 types of providers viz. standalone centres, hospital-based centres and diagnostic chains taking 44%, 38% and 18% of the market respectively. Standalone lab centres operate on a small scale and are usually owned and operated by a single entity. They are made up of unorganised players. These centres are being acquired by regional and national level diagnostic chains.

Remote health and virtual care becoming mainstream: Telemedicine accounted for 30% of all patient visits during the pandemic, and digital health platform transactions increased by three times.

Increased Focus on Big Data & Analytics: Numerous healthcare organizations are progressivelv puttina resources and investment into clinical data analytics for analysing patient data.

Growth of AI/ML and analytics: AI and advanced analytics is enabled by digitalisation, which makes it easier to anofvze things like predictive analytics, telemedicine, precision medicine, population health analytics and so on.

Robotics in healthcare: Robots aid healthcare professionals in completing routine tasks more efficiently, freeing up their time to concentrate on other crucial duties.

Leveraging Blockchain: Providers are developing novel solutions that make use of the emerging blockchain technology to enhance the performance, security, and transparency of healthcare data sharing.

Cloud Technology: Patients and healthcare professionals now have access to cloud technology, which has grown significantly. More cloud data stenters are needed for the training and operation of Al and machine learning tools, which are growing in number.

E-Pharmacies: E-pharmacies in India will serve 70 million households by FY 25, according to the industry body FICCI, as internet use and digital awareness rise.

The diagnostic industry is expected to grow by CAGR of 8-10% in next five years.

Source: CRISIL & Defining the future of Diagnostics report by Praxis Global Alliance Emerging Trends in the Diagnostics Sector

The diagnostics industry is undergoing significant transformations, paving the way for a future marked by promising advancements that will revolutionize disease diagnosis and management practices. These trends encapsulate a diverse array of developments, spanning from evolving clinical requirements and heightened competition to shifting patient behaviours and technological breakthroughs.

Evolving Clinical Needs and Diagnostic Trends:

Personalised Medicine Advancements in genetic testing empower tailored treatments based on individual patient biology, leading to enhanced therapeutic outcomes.

Point-of-Care Testing:

Rapid diagnostic solutions administered directly at the point of care facilitate prompt treatment. decisions, potentially boistering long-term prognosis.

Early Disease Detection Adoption of early screening methods has proven pivotal in improving treatment efficacy, particularly in identifying and managing cancer cases at nascent stages.

Holistic Healthcare Approaches

The emphasis on functional medicine underscores the importance of uncovering the underlying causes of diseases, offering more profound solutions for chronic ailments.

Specialized Diagnostics Precision medicine and molecular diagnostics provide highly specific insights into patients conditions, facilitating targeted and effective treatment strategies.

Intensifying Market Competition:

• Entrance of New Players: Pharmaceutical firms, hospitals, telehealth providers, and online aggregators are venturing into the diagnostics arena, driving innovation and fostering competitive pricing.

• Government Support: Public investments aimed at fortifying diagnostics capabilities in the public health network are enhancing accessibility and affordability of diagnostic services nationwide.

Emergent Business Models:

• Lean Operational Models: Employing cost-effective infrastructure and cutting-edge imaging technologies to optimize diagnostic services in tier 2/3+ cities.

• Remote Diagnostic Services: Conducting health evaluations and diagnostic tests beyond traditional clinical settings, including home-based or mobile clinic setups.

• Segmented Diagnostic Service Delivery: Diversifying diagnostic service provision across specialized components such as customer-facing interactions, sample logistics and laboratory processing.

• Financial Facilitation: Increasing health insurance penetration and the proliferation of corporate wellness initiatives are driving demand for diagnostic services.

Evolving Patient Dynamics:

• Enhanced Convenience: The rise of online booking platforms and doorstep sample collection services is making diagnostic testing more accessible and convenient for patients.

• Preference for Reliability: Patients gravitate towards established service providers perceiving them as more dependable and trustworthy.

• Preventive Healthcare Focus: Growing awareness regarding preventive care is driving an uptick in self-tests and wellness evaluations.

• Patient-Centric Enhancements: Healthcare providers are prioritising improvements in patient experiences by offering personalized care and attractive service packages.

Streamlining Supply Chain Operations:

• Enhanced Transparency: Deployment of delivery management software is amplifying visibility within the diagnostics supply chain, resulting in heightened patient satisfaction.

• Automation and Reliability: Automation initiatives are bolstering the reliability of diagnostic services while concurrently reducing turnaround times.

Leveraging Technological Innovations for Growth:

• Customer-Centric Digital Solutions: Diagnostics firms are harnessing digital tools to elevate customer experiences, facilitating online bookings and streamlined appointment scheduling.

• Integration of AI Systems: AI-driven image processing technologies are augmenting the accuracy and efficiency of diagnoses across radiology and pathology domains.

• Investment in Robust IT Infrastructure: Substantial investments in robust IT systems are fostering operational efficiency and process optimisation within diagnostics enterprises.

G. FUTURE OUTLOOK

Indias healthcare sector is extremely diversified and is full of opportunities in every segment. As competition grows, businesses seek to explore current trends for a positive impact on their operations.

Healthcare continues to sustain its significant role in the economy in the upcoming years, driven by anticipated policy changes, governments resolve to increase access to its citizens to affordable good quality healthcare and innovations and investments that will shape the industrys trajectory and influence economic expansion. The rising emphasis on digital health solutions, telemedicine and other technological breakthroughs in healthcare has created fresh opportunities for progress and creativity. The government intends to raise the budget allocation for public health spending to 2.5% by 2025, a move expected to be advantageous considering the substantial demand for tertiary care and specialty hospitals.

In the years to come, healthcare delivery in India is anticipated to be driven by technological advancement and the increasing adoption of digital health by both providers and patients. This transformation will be shaped by a change in mindset, advancements in technology, the development of infrastructure, government incentives, and other factors. Noteworthy government initiatives like the Ayushman Bharat Digital Mission (ABDM) and e-Sanjeevani serve as foundational pillars for the establishment of a digitized healthcare ecosystem. Meanwhile, numerous private entities are piloting with

digital technologies such as robotics, telehealth, artificial intelligence, 5G and more, aiming to offer technology- enabled care to their clientele.

The diagnostics sector is poised for further growth and transformation driven by a convergence of technological advancements, shifting market dynamics and evolving patient needs. The segment has started to witness signs of normalcy and stabilisation in the post COVID era with lessened competitive intensity relative to what was being witnessed in the past 2 years.

As we look ahead, we anticipate a future characterized by innovation, strategic expansion and a steadfast commitment to enhancing patient care.

Technological Advancements: The integration of advanced technologies such as artificial intelligence (AI), machine learning (ML), Internet of Things (IoT), and blockchain will revolutionize healthcare delivery. These technologies will streamline processes, improve diagnosis accuracy, enhance patient care, and facilitate remote monitoring.

Expansion of Health Insurance Coverage: Government initiatives like Ayushman Bharat and increasing awareness about the importance of health insurance will lead to a significant expansion of health insurance coverage across the population. This will ensure financial protection against healthcare expenses and encourage more people to seek timely medical care.

Proactive and Integrated System: The future of health will be driven by proactive and integrated system of health where transformational technologies like AI, quantum computing, cloud storage, virtual reality will play a pivotal role. Next-generation sequencing (NGS) has enabled scientists and researchers to better understand the genetic mechanisms linked to conditions in areas such as womens health or in diseases like cancer and inherited disorders. More importantly, these advances have given rise to improved diagnostics for early intervention and monitoring treatment response, ensuring patients get the best therapies possible.

Critical Role of Private Players: Private healthcare players will continue to play a critical role in the industry as they continue to provide healthcare services to more than 70% of the countrys rural population and 80% of the urban population. In addition, private healthcare players will continue to invest towards addition of

new bed capacity, bringing in new high end medical infrastructure, expanding their presence and uplifting the overall healthcare services in the country by adopting new technologies; all to further strengthen the overall patient experience and reach and provide good clinical outcomes.

Rise of Healthcare Startups: The Indian healthcare startup ecosystem will continue to thrive with innovative solutions emerging in areas such as telemedicine, digital diagnostics, health analytics and personalized medicine.

Infrastructure Development: Investments in healthcare infrastructure, including the development of hospitals, clinics, diagnostic centers and healthcare IT systems will accelerate to meet the growing demand for quality healthcare services.

Healthcare Policy Reforms: 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.

I n 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.

SECTION II

A. About Fortis Healthcare limited

Fortis Healthcare is one of the largest healthcare services providers in India with 28 hospitals (including JVs and O&M facilities), 4,500+ operational beds (including O&M beds) and ~420 diagnostics centres as of March 31, 2024. The Company offers a full spectrum of integrated healthcare services ranging from clinics to quaternary care facilities and a wide range of ancillary services.

The Fortis Group employs ~23,400 people (including Agilus) who share IHHs vision of becoming the Indias most trusted healthcare network. We draw strength and synergies from our partnership with our parent company IHH Healthcare to deliver world-class patient care and clinical excellence.

i. Hospital Business

Revenue from Hospital business stood atRs.5,686 Crores compared toRs.5,107 Crores reported during the corresponding year. Hospital business revenues contributed 82% to the total consolidated revenue in FY24 as compared to 81% in FY23. Hospital business EBITDA for FY 24 was atRs.1,077 Crores compared toRs.900 Crores reported for FY23.

The growth in hospital business was led by 10.8% growth in ARPOB atRs.2.22 Crores compared toRs.2.01 Crores. The occupancy levels stood at 64.7% in FY24 as compared to 67.1% in FY23 owing to an increase in the operational beds by ~175. The Companys focus specialties comprising oncology, gastroenterology, neurosciences, renal sciences, orthopaedics and cardiac sciences grew 13% YoY and contributed 62% to the total hospital revenues as compared to 61% in FY23.

FY24 has been a period of transformative growth and strategic advancement for Fortis Hospitals. Against the backdrop of a rapidly evolving healthcare landscape in India, we have remained steadfast in our commitment to deliver quality care with a focus on margin improvement to drive sustainable value for our stakeholders.

At Fortis, our commitment to excellence in specialised care has been unwavering. Throughout the year, our Key CoEs, including Cardiac Sciences, Oncology, Neurosciences, Gastro, Orthopedics and Renal Sciences have served as beacons of clinical excellence, delivering world-class healthcare services and pioneering groundbreaking treatments in their respective fields.

Note:1Cardiac Procedures include Cardiac Surgery, Angiography, Angioplasty and other Cardiology procedures.

2 Transplants include Kidney, Liver and Bone Marrow Transplants

3 Robotic Surgeries include Cardiac, Urology, Oncology, Gynae, Ortho and General Surgery

Our commitment to delivering high-quality care begins with our people. Over the past year, we have ensured that we possess the necessary skill sets to meet the evolving healthcare needs of our patients. Through strategic recruitment and talent development initiatives, we intend to reinforce our position as a destination for world-class healthcare professionals.

In an era where technological innovation is reshaping the healthcare landscape, Fortis continues to remain at the forefront of clinical advancement by investing in cutting-edge technologies. The acquisition and implementation of state-of-the-art platforms such as Gamma Knife, Robot, Holmium Laser, etc. have empowered our clinical teams to offer precision-based treatments.

Our pursuit of digital transformation is ongoing, as we strive to harness the power of technology to drive innovation and efficiency across all facets of our operations. We have successfully implemented Electronic Medical Records (EMR) for OP module across three units in the first phase of EMR rollout. Oracle fusion phase-2 roll-out covering the Key Modules of HR, SCM & Finance has been successfully delivered this year.

In response to the growing demand for our services, Fortis has expanded its capacity by adding 246 beds to our existing infrastructure. This also included the commissioning of a new 70 bed facility in Ludhiana, Punjab making it the Companys second facility in the city and the fourth in the state of Punjab. This expansion not only allows us to accommodate more patients but also reaffirms our commitment to providing accessible and high-quality healthcare services to our communities. As part of our Portfolio rationalisation strategy, we have divested the Chennai based Malar and Vadapalani unit this year for a cumulative sale consideration of approx.Rs.280 Crs.

I n line with our strategy towards building a high- performance organisation, we worked towards enhancing people capabilities and competencies. In our endeavor towards building and nurturing talent, we launched leadership development programs for different categories of employees. We launched Employee Engagement Survey that received a

resounding response with 96% participation and our eNPS saw a significant positive increase of 33%.

Fortis has undertaken a comprehensive approach to ESG, focusing on optimising energy consumption, water usage, and bio-medical waste management. This multifaceted approach ensures a holistic strategy for environmental sustainability. This program has yielded impressive results, achieving a group-level reduction of 2.1% in per occupied bed energy consumption in the first year alone and an impressive annual reduction of 8.5% in total water consumption at a group level.

In conclusion, this year has been marked by significant progress and achievements, underscoring Fortiss commitment to excellence, innovation and patient- centered care. As we embark on the next phase of our journey, we remain steadfast in our dedication to delivering exceptional healthcare services and driving sustainable growth for the benefit of our patients, stakeholders and communities.

ii. Business Strategy

At Fortis, we are dedicated to delivering exceptional healthcare services while continuously evolving to meet the dynamic needs of our patients and communities. Our strategic approach centers around four pillars, each designed to drive sustainable growth and enhance patient outcomes:

Clinical Excellence and Quality Care:

At Fortis, clinical excellence and quality care stand as our highest priorities. We are committed to prioritising patient safety, outcomes and satisfaction by investing in comprehensive training and development for our clinical staff and nurturing a culture of continuous improvement. Through unwavering adherence to rigorous quality standards, we remain committed to upholding our reputation as a trusted provider of superior healthcare services. We will bolster the key Centers of Excellence (CoEs) in identified units by further enhancing clinical programs, upgrading infrastructure and recruiting clinicians.

Capacity Expansion:

To meet the growing demand for healthcare services, our focus would be on expanding our capacity

through strategic investments in infrastructure. This includes the addition of new facilities as well as the enhancement of existing facilities. In FY 24-25, we plan to increase our capacity by adding approximately 700 beds which will include approximately 300 beds of our new hospital at Manesar, with significant capacity addition planned at our larger facilities including Anandpur, BG Road, Faridabad, Shalimar Bagh, Nagarbhavi and FMRI. Over the next few years plans are afoot to expand the current existing bed capacity by almost 50% and potentially reach close to 6,000 beds. In addition, as part of our inorganic growth strategy, we continue to look at acquisitions opportunity in our key geographic clusters - NCR, Mumbai, Bangalore, Kolkata and Punjab.

Enhance Occupancy:

We aim to expand our patient base and increase the utilisation of our healthcare services by implementing targeted marketing campaigns to leverage up-country markets, strengthening physician referral networks, enhanced corporate engagements, patient outreach initiatives and exploring new markets both domestic and international. Through strategic partnerships and community engagement efforts, we will strive to become the provider of choice for individuals seeking high-quality healthcare services.

Cost Optimisation:

Efficient resource utilisation and cost management are critical to our long-term success. We will focus on identifying opportunities for operational efficiencies, streamlining processes, and leveraging technology to reduce administrative burdens and optimise resource allocation. By implementing cost- effective practices across all facets of our operations, we will try and ensure sustainable profitability while maintaining our commitment to affordability and accessibility. Furthermore, alongside exploring new avenues, we persist in driving enhanced CBU compliance and inventory optimisation.

In summary, we will attempt to traverse the path of a Balanced Growth Strategy where the clusters with capacity constraint must strategically balance between optimising existing resources and

investing in new capacity. On the other hand for the clusters with available capacity, the focus lies on maximising growth through efficient resource utilisation, ensuring that optimal occupancy rates are maintained.

iii. Digital Initiatives

As we navigate the constantly changing landscape of healthcare, our steadfast dedication to excellence propels our Digital Transformation Journey forward. This journey underscores our commitment to leveraging technology to enhance patient care, optimise operations and cultivate sustainable growth.

We have commenced a phased deployment of Electronic Medical Records (EMR) across our facilities. This transformation fundamentally alters how patient data is captured, managed, and accessed, empowering our clinicians with real-time insights, fostering seamless care coordination, and enhancing patient safety and outcomes.

Our Virtual Tumor Board initiative brings together multidisciplinary teams of specialists to collaborate on intricate cases, overcoming geographical barriers. This pioneering platform facilitates prompt diagnosis, personalised treatment planning, and enhances patient outcomes and quality of life.

Introducing a digital Patient Discharge System has streamlined the discharge process, reducing administrative burdens and enriching the patients experience. Our Patient Delight Management System empowers patients to provide feedback, enabling us to identify areas for improvement and promptly address concerns. By fostering a culture of continuous feedback and enhancement, we elevate patient satisfaction and loyalty.

Establishing a Centralised Call Centre for all seven units of Delhi-NCR and four units of Mumbai serves as a pivotal hub for patient inquiries, appointment scheduling and support services. This centralised system guarantees consistent and efficient communication, elevating accessibility, responsiveness and overall service quality. Integrating CRM with the call center enables comprehensive tracking of every lead, call and conversation, effectively reducing patient leakage.

We have enhanced our Mobile App (myFortis) with features like modality booking, home sample collection, provisional billing, etc., empowering patients with greater control over their healthcare journey. These enhancements reinforce our commitment to patient-centric care delivery. Notably, this fiscal year has seen a remarkable ~42% year-on-year growth in bookings through our mobile applications and a 27% year-on-year increase in revenue from digital channels.

As we embark on our Digital Transformation journey, our vision is to become a digital-first company, driving efficiency and excellence across all facets of our organisation.

iv. Medical Strategy and Operations Group (MSOG)

As one of the leading, accredited, private healthcare chains in India, Fortis continued to drive its core value of Patient Centricity in all aspects of service delivery. It has been our constant effort to pursue highest standards in patient care while aiming to achieve the best outcome for each patient. Our systems-based approach demands continuous monitoring and evaluation of healthcare services, thereby enabling greater transparency and clinical success.

Clinical Governance:

Our clinicians, through their collective wisdom and experience guide the organisation on medical matters. The Fortis Clinical Governance framework enables Senior Clinicians to come together, collaborate, share global best practices and thereby pursue Evidence Based Medicine.

As the apex medical body at Fortis, the FMC comprises of senior eminent clinicians; provides guidance to the executive on medical matters. The FMC has been an active group providing invaluable insights and recommendations on improving quality and patient safety initiatives.

Under the clinical governance framework, the specialty councils form an important pillar to realise the full potential of vast clinical expertise at Fortis. Specialty Councils are forums where our highly respected clinicians come together and interact with each other. As domain experts, members

of specialty council share globally recognised, evidence-based practices towards formulating Fortis protocols. A Specialty Council acts as a platform for strengthening collaborative links between clinicians of a particular specialty and harness their expertise. Together, they provide direction to respective specialty and augment medical programs.

Clinical Excellence:

In our pursuit of Clinical Excellence, we continuously strive for achieving highest standards in patient care. While Quality would "conform our services to requirements", Patient Safety practices lead to "prevention of harm".

? Quality and Patient Safety

Quality and Patient Safety Patient Safety indicators can assess the performance of healthcare services while representing opportunities for improvement in the delivery of care. Fortis has been tracking Quality and Patient safety indicators across its network hospitals since 2013 through centrally designed Clinical Excellence Scorecard (CESC). The indicators have been chosen based on the following criteria of:

s Importance s Scientific acceptability s Feasibility s Usability

s Minimal overlap with other quality indicators

? Antimicrobial Stewardship (AMS)

Fortis Healthcare was among the first to institutionalise Antimicrobial Stewardship (AMS) program. It is an effort to measure and improve how antibiotics are prescribed by clinicians and used by patients. Improving antibiotic prescription and their use is critical to effectively treat infections, protect patients from antibiotic misuse and in combating antibiotic resistance.

Fortis is running a coordinated AMS program to address the increasing challenge of antimicrobial resistance.

Key initiatives include:

s Antibiograms (an overall profile of antimicrobial susceptibility to antibiotics) are prepared for each hospital and shared with clinicians for their reference, encouraging them towards rational use of antimicrobials. Thereby, enabling efforts to reduce antimicrobial resistance especially for multidrug- resistant organisms.

s Pan Fortis guideline for Empiric Antibiotic therapy for BSI, LRTI, UTI for both OPD and IPD patients.

s Monitor and evaluate use of restricted

antibiotics. Research initiatives submitted to ICMR on CODAR, AMS research proposal.

s Compliance with surgical prophylaxis

ensuring appropriate choice of antibiotics

and adherence to timing/ type/ dose.

s Awareness drives for public and patients on social media.

s Drug Resistance Index (DRI)

The DRI is a single, composite measure or index, reflecting the relationship between antimicrobial resistance and antimicrobial

consumption. As a monitoring tool, the Drug Resistance Index (DRI) can assess the effectiveness of the Antimicrobial Stewardship

(AMS) program. For the past 8 years, Fortis has been calculating its own Drug Resistance Index, using it as a monitoring and analysis tool for antimicrobial consumption at our hospitals.

Clinical Outcomes:

It is widely accepted that measurement of Clinical Outcomes promotes transparency and informed decision making for patients. In India, Fortis has been a pioneer and at the fore front of this global initiative. We are among the first private healthcare service delivery chains to measure; report and publish outcomes for various clinical procedures. As part of the Steering Committee at International Consortium for Health Outcomes Monitoring (ICHOM) for designing the coronary artery disease (CAD) Standard Set, Fortis has been instrumental in promoting evidence-based medicine.

These are the globally agreed upon, evidence based measurable changes in health, function or quality of life that result from patient care. The standardised outcome measures enable comparison across health settings along with structured, evidence-based learning. Reporting, monitoring and evaluation of outcomes provides an opportunity to assess and improve quality of patient care.

At present, Fortis reports and monitors multiple clinical outcomes, namely: Coronary Artery Disease [Coronary Artery Bypass Graft (CABG), Percutaneous Coronary Interventions (PCI)], Organ Transplants (Kidney; Liver), Total Knee Replacement (TKR), Endoscopic Retrograde

Cholangio pancreatography (ERCP), Radiation Oncology, Obstetrics and Gynaecology (Hysterectomy, Caesarean section), Laparoscopic Cholecystectomy.

URL: https://www.fortishealthcare.com/clinical-outcomes-fortis-healthcare

Percutaneous Transluminal Coronary Angioplasty

(N-89600) 2016 - 2024 Benchmark

Emergency CABG failed procedure

0.063% 1.2%*

Vascular complication at puncture site requiring intervention (Beyond simple compression)

0.076% 1.1%*

Acute vessel occlusion requiring emergency re-intervention

0.197% -

Post procedure Neurological Stroke

0.101% 0.284%**

Post procedure Renal failure requiring Hemodialysis

0.341% -

Any bleeding event requiring transfusion/internation (within 72 hours)

0.353% 4.0%*

Delayed vascular complication at puncture site

0.070% -

Readmission with Acute Myocardial Infarction within 30 days

0.172% -

Mortality during same hospital admission

1.877% 1.7%*

References: *US National Registry Data 2013 **Cleveland Clinic Outcomes Report 2014

Coronary Artery Bypass Graft

(N = 29041) 2016-2024 Benchmark

Use of Let Internal Thoracic Artery graft

83.24% 74.20%*

Need for a bail out Intra-Aortic Balloon Pump (IABP)

4.42 -

Perioperative Myocardial Infarction

0.42% 0.96%**

Post procedure Neurological Stroke

0.40% 1.30%

Need of Re-exploration surgery

1.68% 3.90%

Deep Sternal Wound Infection

0.32% 0.30%

Predicted Mortality % (using EuroSCORE II)

3.10% -

Observed Mortality %

2.34 -

References: STS Annual Report 2019 * Cleveland Clinic Outcomes Report 2014 ** Texas Heart Institute 2014

Nursing:

Nursing integrates the art and science of caring and focuses on protection, promotion and optimisation of health and human functioning; prevention of illness and injury; facilitation of healing; and alleviation of suffering through compassionate presence.

With a count of more than 6,400 Nursing forms the largest workforce at Fortis and their Induction plays a critical role in Job Readiness. Tailor made nursing induction modules enable them to quickly adapt to unfamiliar environment. This multidisciplinary approach is job oriented, structured & simulation based.

New Nurses Induction Plan is termed VIROHAN which means to start strong. It includes program SPANDAN which focuses on enhancing care related focused Communication.

Electronic Medical Records (EMR):

An Electronic Medical Record (EMR) is a digital collection of health-related information of an individual that can be created, gathered, managed and consulted by authorised clinicians and

Accreditations:

care provider staff within a health care organisation.

In association with Acibadem Technology, Turkiye, Fortis has embarked up on its digital journey to implement Cerebral Plus EMR application. This would enable interoperability across its network hospitals; automate access to information and streamline clinicians workflow. Timely access to patient data would further improve clinician decision making and delivery of patient care.

Medical Technology and Infrastructure:

Globally, the medical technology landscape is evolving rapidly with technology playing an important strategic role in health care service delivery. Innovative and effective use of medical technology proves vital in saving lives while making healthcare more accessible and affordable.

Fortis continues to optimise its investment in upgrading hospital infrastructure and medical technology. Our hospitals are equipped with state-of-the-art technology to augment medical programs and support Clinicians.

Four Fortis Hospitals are accredited by Joint Commission International (JCI) while 26 hospitals have been accredited/ certified by NABH.

Fortis

Accreditations

JCI NABH

HCO/

SHCO

NABH

Entry

Level

NABH

Blood

Bank

NABH

Nursing

Excellence

NABL Ethics

Committee

Total

Accreditations

4 23 3 9 17 17 14 87

B. About Agilus Diagnostics Limited ["Agilus"] (Fortiss

diagnostics business subsidiary)

i. Key Business Highlights

For the financial year 2023-24, Agilus reported net revenues of Rs.1,372 Crores compared toRs.1,347 Crores reported during the Financial Year 2022-23, a growth of 2%. The COVID revenue as a % of total revenue has declined from 4.4% in FY23 to only 0.3% in FY24. On the contrary, our non-covid business has grown fromRs.1,284 Crores in FY23 toRs.1,366 Crores in FY24, a 6% growth. The Company operating EBITDA before one off expenses (primarily rebranding costs and provisioning related to certain government business) for the year stood at 268 Crore, representing a margin of 19.5% compared to a margin of 17.7% during the previous financial year.

The business served a total of over 16.4 Million patients during the year, compared to 16.6 Million during FY23. Through these patients (Accessions), it undertook 40 Million tests during the year compared to 39 Million tests performed in FY23.

I n an endeavor to go closer to the customer and provide services at their doorstep, we have increased our total number of touchpoints to more than 3,900. Our B2C:B2B mix is 53:47 in FY24 compared to 54:46 in FY23. The business continued to have a well-diversified geographical mix with no overdependence on any region, allowing it to capitalise on the pan-India network optimally. Regional FY 2023-24 revenue contributions were 33% from the North, 21% from the West, 29% from the South, 14% from East, and 3% from International. Our preventive portfolio also went up by 14% in FY24

compared to the previous financial year. From a product stand point, the revenue contributions are 36% from specialised testing, 54% from routine tests and 10% from our wellness portfolio.

ii. Business Strategy

Retail Network Expansion

Our strategic emphasis on expanding our retail network has significantly improved access to our diagnostic services. Through strategic collaborations and geographical diversification, we have successfully expanded our presence to encompass over 1000 towns and 30 states and union territories, establishing a comprehensive PAN India network with equal distribution of centres.

Over the past year, Agilus has augmented its outreach by incorporating more than 680+ customer touch points and acquiring 2,200+ pickup points. Currently, our network includes 420 labs, 3,900+ customer touch points, and 13,500+ pick-up points. Despite facing challenges such as the brand transitions during the year, we have effectively grown our retail network, supported by below-the-line (BTL) activities and residential welfare association (RWA) activations.

International Business

APAC is expected to be one of the fastest-growing region for diagnostics owing to the increasing initiatives taken to improve healthcare infrastructure. The growing development in the field of cancer treatment, utility of advance molecular genomics and cytogenetics is likely to enhance the demand for clinical laboratory services in the region, thereby augmenting the market significantly in APAC.

The International operations of the Company includes state-of-the-art labs in Dubai (100% Subsidiary), Nepal (50:50 Joint Venture) in Kathmandu and Biratnagar, Afghanistan (Franchisee Lab), and Kazakhstan (Franchisee Lab). Agiluss international network consists of more than 50+ collection centres and 800+ pick-up points spread across the SAARC region, Sub-Saharan Africa, Southeast Asia, CIS, Gulf and the Middle East. These centres send samples in a temperature-controlled environment to Agilus Diagnostics Reference labs in India, which process the samples and provide

reports in real-time using our efficient IT system and robust logistics network. Alongside laboratory services, we also assist our international clients and partners in the planning and implementation of laboratory management services, with complete IT support through our indigenously developed lab management software - CLIMS.

In FY25, we plan to continue our focus on growing our organic and inorganic business in Asia Pacific, the Middle East, CIS, and Africa through network expansion. One of our endeavours will be to introduce highly specialised and advanced tests to our international clients and reinforce our relationship with doctors through well curated CMEs (continuous medical education programs) in Africa and Middle East market. We also plan to set up O&M (Operate and manage) labs in Oman and Bangladesh and acquire new clients for our outsourcing business in Nigeria, Kenya, Ghana, Oman, Kuwait, Mauritius, Indonesia, Sri Lanka and Uzbekistan. Additionally, we will introduce Digital Pathology services in Ghana, Kenya and Bangladesh.

Brand Initiatives

FY 2023-24 was an exceptional year for branding and marketing. We rebranded our 28-year-old legacy brand as Agilus Diagnostics. The name is derived from the words "agility" and "us," and literally means "We are agile." The new brand appeals to our new age customers who seek innovation, an improved customer experience, as well as accuracy and credibility. We revamped our brands logo and colours, as well as created a new identity.

agilus ?>

** diagnostics

We needed to take some inventive actions to deliver the brand change messaging to our patients and doctors. Our ATL awareness campaign began with print media in May 2023 and was sustained till the end of financial year in March 2024. We began the print campaign with national dailies and

swiftly expanded to include regional dailies in the newspaper mix. We covered a pan-India audience as well as all of our major vernacular consumers in Bengal, Karnataka, Delhi NCR, Mumbai, Maharashtra, MP, Chhatisgarh, Jaipur, Tamil Nadu, Punjab, Haryana, Jammu and Assam.

We also collaborated with residential community management platforms like MyGate, No Broker Hood and Apna Complex for hyperlocal brand awareness. We collaborated with these platforms and conducted 1000+ health camps in their most premium societies.

2023 was also the year of Mens Cricket World Cup in India. Riding on the popularity of cricket, we used this big-ticket event in October & November to reach more than 50 Crore audience within two months in a cost-effective manner by showcasing our brand logo in every action replay of every world cup match telecasted on TV. This provided us both reach and frequency at an enormous scale.

On the digitial side of the brand, in FY24, our mobile app was installed by 4 Lakhs new customers and our current month active userbase stands at 2.2 Lakhs users per month. Additionally, our website www.Agilusdiagnostics.com was visited by over 35 lakh unique users. UI/UX of the Agilus website & mobile App was improved to enhance the user experience and customer adaptability of the digital mediums.

Brand Agilus was promoted across digital platforms (Youtube, Meta platforms, Google and other digital partners) - These digital campaigns generated a combined reach of more than 100 Cr + reach.

This year, Agilus Diagnostics won 12 Industry awards for Outstanding Pathology Services, Excellence in High-End Diagnostics, Excellence in Home Healthcare Services, and Customer Experience. These awards were curated by prestigious platforms like Economic Times, Voice of Healthcare, India Health & Wellness Council, and eHealth. Our brand PR efforts led to more than 500+ media mentions and coverages across financial, mainline, regional, online, and trade media publications.

iii. Information Technology

We maintained a steadfast focus on API-based integrations with our partners to facilitate the exchange of Pathology Test Orders and Patient Results as well as integration with our service support partners. Notably, one such integration was established with Pathpresenter for Digital Pathology Solution.

Agilus has consistently prioritised data security and privacy, implementing various measures to safeguard sensitive patient data. This effort has included the implementation of robust security protocols and the adoption of advanced technologies.

In line with our commitment to excellence, Agiluss Mumbai and Gurgaon IT Systems at Datacenters were re-audited for ISO 27001:2013, ensuring continued adherence to international standards for information security management.

Recognising the importance of business continuity, a robust contingency plan was developed for CLIMS, which includes the establishment of a highly scalable and secure disaster recovery setup on the Oracle Cloud Infrastructure. This setup enables us to effectively mitigate the impact of various scenarios.

iv. Research and Development

The Company in FY 2023-2024 maintained its focus on diagnostic advancements, process efficiency, cutting edge technologies and futuristic areas such as Genomics. This years major focus was to develop and launch multi-pathogen panels for syndromic testing of infectious diseases, oncology and genetics. We launched 12 new molecular tests and panels targeting women health and ophthalmological infections were. Our genomics portfolio experienced continued growth for reproductive medicine, oncology and rare disorders panels. Advanced fourth generation sequencing technology i.e. Nanopore was adopted successfully for conducting comprehensive infectious disease panel targeting bacteria, fungi and antimicrobial drug resistance genes.

Our R&D team continued its focus on clinical research studies, co-marketing projects, contract validations and collaborations. Under clinical research and co-marketing studies, feasibility of 26 studies was concluded; unique study pertaining to novel biomarker i.e. nitric oxide analysis in diabetic cases was awarded to Agilus. Agilus participated in MCGM funded study pertaining to TB Whole Genome Sequencing in low socio-economic region of Mumbai.

Along with commercial services, this year R&D team also progressed on collaboration with Public institutes for contract validation of diagnostic kits/technologies. R&D Division is now part of ICMR TB Diagnostic consortium. Through this association, R&D team will be supporting ICMR group in validating newer TB diagnostic tests and technologies. Also parallel efforts for registering R&D division as Evaluation Center for Medical Devices and Diagnostics under CDSCO were undertaken. Documentation process has been concluded, final registration is awaited.

Apart from upcoming futuristic high-end segments, we continue our parallel focus on chronic and lifestyle diseases categories, preventive healthcare and specialised portfolio i.e. Autoimmune diseases, transplant immunology and genetics.

v. Quality & Compliance

Agiluss Quality Assurance team remains dedicated to safety, training, and regulatory compliance. We utilise a three-circle approach: internal selfaudits, QA team audits and external agency audits (NABL, CAP, etc.). In FY 2023-24, we upheld accreditation across our labs, transitioning some to ISO 15189:2022. We expanded our lab network and ensured certifications for TB Drug Resistance

Testing, ISO 9001:2015, and ISO 27001:2013 renewals. Brand transitions and name changes for all accredited labs were smoothly managed. Our team conducted audits for clinical trials and ensured timely completion of test validations. Weve implemented ISO 15189:2022 standards and conducted comprehensive training initiatives nationally and internationally.

vi. Academic Achievements

Agilus Diagnostic Ltd is the first diagnostic laboratory to offer a one year Fellowship program to doctors in India that imparts applied knowledge of molecular pathology in cancers, genetic disorders and infectious diseases under the aegis of Maharashtra University of Health Sciences (MUHS), Nashik.

I n FY 2023-24 there was 8 communique including two issues of Pulse, Agilus medical case reports journal, and 6 issues of Udaan, Agilus employee newsletter. Our doctors published more than 25 scientific research papers in indexed peer-reviewed journals.

C. Financial and Operational Performance of the Company - Consolidated Performance, Hospitals and Diagnostics business Performance and KPIs

For the financial year 2023-2024, the Company reported a consolidated revenue from operations of Rs.6,893 Crores compared toRs.6,298 Crores reported for FY 202223. Revenue from Hospital business stood atRs.5,686 Crores compared toRs.5,107 Crores reported during the corresponding year. Agilus Diagnostics, the diagnostic business of the Company, reported gross revenues of Rs.1,372 Crores compared toRs.1,347 Crores in the previous financial year. Considering elimination of inter-company revenue (within the group), net revenue of Agilus was atRs.1,207 Crores compared toRs.1,190 Crores in FY 2022-23.

Revenue (? Crores)

FY 2022-23 FY 2023-24 % Change

Total Consolidated Income*

6,359 6,931 9.0%

Revenues from operations

6,298 6,893 9.5%

Hospital Business**

5,107 5,686 11.3%

Diagnostic Business (Gross)

1,347 1,372 1.8%

Diagnostic Business (Net)

1,190 1,207 1.4%

(*Total consolidated income is net of inter-co elimination and includes other income of f 38.3 Crores in FY 2023-24 and f 61.7 Crores in FY 2022-23)

(**Hospital Business includes P&L of international entities also)

The consolidated EBITDA of the Company stood atRs.1,306 Crores compared toRs.1,163 Crores for the previous corresponding year. EBITDA margin of the Company stood at 18.9% in FY 2023-24 versus 18.5% reported in FY 2022-23. Hospital business EBITDA for FY 2023-24 was atRs.1,077 Crores compared toRs.900 Crores reported for FY 2022-23. EBITDA margin of the hospital business stood at 18.9% in FY 2023-24 versus 17.6% in FY 2022-23.

The diagnostic business of the Company reported EBITDA of Rs.229 Crores compared toRs.263 Crores reported in the previous corresponding year. EBITDA margin of the diagnostic business stood at 16.7% (basis gross revenue) compared to 19.5% for the year FY 2022-23.

Consolidated Profit after tax for FY 2023-24 stood atRs.645 Crores compared toRs.633 Crores reported in the previous financial year. PAT includes an exceptional gain of Rs.16.0 Crores in FY 2023-24 pertaining to the reversal of impairment in an associate company and profit related to the divestment of Chennai facilities andRs.73.6 Crores in FY2022-23 which pertains primarily to the reversal of impairment in an associate company.

With respect to the balance sheet, the Company maintained a comfortable liquidity position with net debt of Rs.264 Crores as on March 31, 2024 versusRs.340 Crores as of March 31, 2023 (net debt to equity of 0.03x vs 0.04x, respectively). Gross debt of the Company stood atRs.859 Crores as on March 31, 2024 versusRs.703 Crores as of March 31, 2023. Net Debt to EBITDA stood at 0.17x for the year FY 2023-24 compared to 0.30x for FY2022-23 (basis Q4 annualised EBITDA).

EBITDA (? Crores)

FY 2022-23 FY 2023-24 % Change

Consolidated EBITDA

1,163 1,306 12.3%

EBITDA Margin

18.5% 18.9%

Hospital Business**

900 1,077 19.7%

EBITDA Margin

17.6% 18.9%

Diagnostic Business

263 229 (12.8%)

EBITDA Margin (basis gross revenue)

19.5% 16.7%

(**Hospital Business includes P&L of international entities also)

Key Performance Indicators (Hospitals)

FY 2022-23 FY 2023-24 Key Performance Indicators (Diagnostics) FY 2022-23 FY 2023-24

Occupancy

67.1% 64.7% No of Accessions (in Million) 16.6 16.4

Average revenue per occupied bed (? Crores)

2.01 2.22

Average length of stay (days)

4.38 4.28 Average real. per accession (?) 808 836

OPD Footfalls (in Million)

2.78 2.80 Tests performed (in Million) 39.1 40.0

IPD Discharges (in Million)

0.25 0.25 Average real. per test (?) 344 342

D. Human Resources

Reimagine HR was the theme for HR function in the Year 23-24 and it indeed was immensely rewarding with some best-inclass outcomes of the initiatives taken towards talent acquisition, engagement, retention, employee satisfaction, capacity & Capability building, employee health and wellbeing. Efficacy of effectiveness is evident through the facts that:

a) We improved our eNPS (employee promotor score) scores by 33% from last year. This is a true reflection of acceptance of shift in our personalised approach for key employee groups. We use ESOMAR standards compliant (Data protection & privacy), internationally acclaimed third-party platform for this survey.

b) Overall Annualised Attrition improved by 4.5% in absolute terms, majorly owing to 5.7% improvement for Nursing category. Both are best outcomes of last 4 years.

c) Reimagined Fresh talent pipelines from TISS, IHMR and ISB to boost our management talent in operational domains.

d) To meet the challenge of shortfall in skilled front-line talent, Fortis Apprentice Program, one of the biggest skill development programs in the Healthcare space, was a huge success having been adopted by 21 units with 1626 apprentices on boarded.

e) Our new vision for professional development is embodied in the Fortis Future Operational Leadership Development Program, which provides a clear pathway for nurses to acquire the skills, knowledge, and mindset necessary for operational leadership roles. 13 nurses & hospital technicians were selected for the two phased program which includes an Executive P. G. Diploma in Hospital Administration (EPGDHA) or Post Graduate Diploma in Healthcare Quality Management (PGDHQM) from Tata Institute of Social Sciences (TISS) followed by 24 months on job experience and exposure opportunities.

A shift in technology adoption through implementation of ERP - a key differentiator of our agile design thinking and a longterm value perspective, went live as per plan. A heightened consciousness towards self-service, anytime access and availability of relevant data for decision making through mobile app are the key highlights of the HCM platform.

At Fortis we believe that all our employees should FLOURISH both in their personal & work life. Our flagship employee wellness program Your Wellbeing is Important for Our Well Being supports employees to learn ways to enrich their own wellbeing and also create a culture of wellness at work. Our belief that well-being extends beyond physical health, to be our best selves, focus on all mutually interdependent dimensions of wellbeing including physical, intellectual, emotional, social, spiritual, occupational, financial, and environmental drives our approach. This year we continued strengthening our mental wellbeing initiatives by providing employees access to mental health resources & on ground support, 94 Skill building programs were attended by 1800 people leaders across Fortis & also launched a comprehensive employee financial wellbeing program on employee financial education and awareness to accelerate the employees financial wellness journey which was attended by 4500 employees across the organisation.

Sustainability and DEIB (Diversity, Equity, Inclusion, and Belonging) are closely interconnected and mutually reinforcing concepts. 2023 saw initiating our journey by formulating a DEIB strategy which focusses on building solid foundations across all diversity dimensions to create a workplace where diversity, equity, inclusion and belonging are not just values but lived experiences for all employees.

Understanding the key role of leaders in engaging with DEIB efforts and championing inclusivity at all levels we worked on defining & identifying inclusive leadership behaviors and principles for all Fortis leaders. Over 200 leaders attended the Building an Inclusive Workplace as a Leader program which aimed to impart understanding of models for inclusive leadership.

Upskilling is a valuable investment for employees, empowering them to thrive in their current roles, catalyze professional growth, stay ahead of industry trends and remain competitive in evolving professional landscapes. In 2023 we focused on building technical & job specific skills for key functions such as Sales & Marketing, Pharmacy, Digital Marketing, Patient Experience, Contractual Nursing GDA in collaboration with government agencies, premium academic institutes and external consultants.

E. Internal Control Systems and their Adequacy

At Fortis Healthcare Limited, the internal control system has been designed to correspond to the size and complexity of the operations and the incremental changes made. The management believes that internal controls are the prerequisite for effective governance and efficient execution of business plans within a framework of checks and balances. Management is committed to ensuring an effective internal controls environment, commensurate with the size and complexity of the business, which assures compliance with internal policies, applicable laws and regulations, ensures reliability and accuracy of records, promotes operational efficiency, protects resources and assets, helps to prevent and detect fraud, errors and irregularities and overall minimises the risks.

The Company has a well-established internal controls framework comprising a set of policies, procedures and systems, instrumental in enhancing the efficiency and effectiveness of business operations, reducing risks and costs, and improving decision-making and accountability. The financial controls are evaluated for operating effectiveness through managements ongoing monitoring and review process.

An independent and empowered Internal Audit Function with support from highly skilled resources (including external audit firms) carries out risk-based internal audits of the Companys operations. Chief Internal Audit & Risk

Officer directly reports functionally to the Audit Committee and administratively to the Managing Director & CEO of the Company. Key internal audit findings are presented to the Audit Committee at its quarterly meetings.

FORWARD LOOKING STATEMENT

Except for the historical information contained herein, statements in this discussion which contain words or phrases such as will, would, indicating, expected to etc., and similar expressions or variations of such expressions may constitute forward-looking statements. These forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. These risks and uncertainties include, but are not limited to, our ability to successfully implement our strategy, future business plans, our growth and expansion in business, the impact of any acquisitions, our financial capabilities, technological implementation and changes, the actual growth in demand for our products and services, cash flow projections, our exposure to market risks as well as other general risks applicable to the business or industry. The Company undertakes no obligation to update forward looking statements to reflect events or circumstances after the date thereof. These discussions and analysis should be read in conjunction with the Companys financial statements included herein and the notes thereto.

References

• Investment Opportunities in Indias Healthcare Sector, NITI Aayog

• I BEF report on Healthcare Sector, February 2023 & December 2023

• Prabhudas Lilladher Equity Research report

• IRDA Annual Report - 2020-21

• Anand Rathi Research Report, April 2024

• CRISIL Report, September 2023

• Praxis Global Alliance Report, February 2024

• Market Research, Equity Reports, Web Articles, Press & Media Reports and Others

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