Fortis Malar Hospitals Ltd Management Discussions

<dhhead>MANAGEMENT DISCUSSION & ANALYSIS (FY 2025) </dhhead>

SECTION I

Indian Healthcare Sector A. Overview

The Indian healthcare sector has been a key contributor to the country’s economic development, driving substantial growth in both revenue and employment. The industry plays a pivotal role in the nation’s economic framework, contributing significantly to growth and employment across diverse sectors, including hospitals, medical devices, clinical trials, telemedicine, medical tourism, health insurance, and medical equipment.

The healthcare sector has undergone significant transformations in recent years, fuelled by technological advancements, policy reforms, and increased investments. This growth has been further driven by expanded coverage, improved service quality, and substantial contributions from both public and private sectors. Government initiatives to boost healthcare spending and enhance infrastructure have also played a crucial role in accelerating the industry’s momentum, positioning it for continued progress in the years ahead.

Healthcare has become one of India’s largest sectors, both in terms of revenue and employment. The industry is growing at a tremendous pace owing to its strengthening coverage, service and increasing expenditure by public as well private players. The surge in healthcare demand is propelled by a blend of economic and demographic dynamics.

The Indian Healthcare industry continued its healthy growth and the overall size of the industry is estimated to reach US$ 372 Bn with a CAGR of 22% (FY 2016 – FY 2022). The Indian healthcare market, which was valued at US$ 110 Bn in 2016 is now projected to reach US$ 638 Bn by FY 2025 (Source: Niti Aayog, IBEF). India’s healthcare industry comprises hospitals, medical devices and equipment, pharmaceuticals, health insurance, clinical trials, telemedicine and medical tourism. The key highlights include: Expansion of Telemedicine Services, Advancements in Health Tech, Focus on Mental Health, Rise in Health Insurance Coverage, Expansion of Healthcare Infrastructure, Healthcare Digitisation Initiatives and Medical Tourism.

The government continues to play a crucial role in the sector with its focus on the creation of facilities in rural India for primary healthcare, ensuring the availability of diagnostics, funding medical insurance for the low-income population and senior citizens through initiatives like Ayushman Bharat. These efforts are pivotal in addressing the healthcare challenges in India, especially amidst growing demands for better medical services and infrastructure. The government allocated _ 37,227 Crores to the National Health Mission (NHM), constituting 37% of the budget, with the aim of achieving universal access to equitable, affordable, and quality healthcare services that are accountable and responsive to people’s needs.

India’s healthcare industry is expected to sustain strong demand, driven by an ageing population, improved affordability facilitating access to quality medical care, government policy reforms, and medical tourism.

Key Growth Drivers a. Government Reforms to enhance Healthcare Coverage: The focus of the government has shifted from curative aspect to preventive health and well-being under the ambit of holistic healthcare. This had led to increase in healthcare initiatives and budget allocated to the overall sector.

b. Persistent Gap in Demand and Supply for Quality Healthcare Services and Infrastructure: India currently has 1.5 hospital beds per 1,000 people. There is also a shortage of skilled healthcare workers, with 0.7 physicians and 1.7 nursing personnel per 1,000 people, compared to the global median of 1.7 physicians and 3.8 nursing personnel per 1,000 people.

c. Significant opportunity from medical tourism: In FY 2024, India’s medical tourism market was valued at US$ 7.7 Bn and is projected to grow to US$ 14.3 Bn by FY 2029. The country is rapidly emerging as a leading destination, with an estimated ~7.3 Mn visitors in FY 2024, drawn by its affordable, high-quality healthcare services and advanced medical technology.

d. Growing Health Insurance Penetration: Low health-insurance penetration is one of the major impediments to the growth of the healthcare industry in India, as affordability of quality healthcare facilities by the lower-income groups continues to be a challenge. As per the Insurance Regulatory and Development Authority, nearly 573 Mn people have health insurance coverage in India (as of Fiscal 2024), as against 288 Mn (in Fiscal 2015), but despite this robust growth, the penetration in Fiscal 2023 stood at ~41%. The penetration is expected to increase to 45-50% by Fiscal 2026.

e. Demographics: During FY 2015-20, as per World Bank estimates, Elderly population (65 years +) was the fastest growing population segment in India with 2.6% growth while overall population growth was at 1%. The elderly population is expected to rise the fastest, followed by Adult (20-65 years), followed by the Young (< 20 years). As of FY 2011, nearly 8% of the Indian population was of 60 years or more, and this is expected to surge to 12.5% by FY 2026 which is likely to increase the demand for the sector in the coming years.

Developments in information technology have helped create systems that ensure faster and more reliable services. For example, Electronic Health Records are designed to manage detailed medical profiles and histories of patients, while Clinical Decision Support Systems are software supported by large databases to assist doctors in making decisions related to the diagnosis of patients. Additionally, mobile-based applications assist both doctors and patients.

The rise of telemedicine has revolutionized healthcare delivery by allowing patients to consult with doctors remotely. This trend has been accelerated by the COVID-19 pandemic and continues to grow, offering convenience, and expanding access to healthcare, especially in rural or underserved areas.

Hospitals are looking at opportunities to deploy Al and advanced analytics to improve their efficiency and minimize human error. For example, A large hospital chain has partnered with Microsoft to create disease risk score application programme interface for assigning risk score to patients.

Robotic surgery or robot-assisted surgery have started gaining recognition and enhances operational efficiency by reducing human error and improving precision.

Blockchain technology is being explored to enhance data security, interoperability, and patient privacy. By creating secure, immutable records, blockchain ensures that medical records are not tampered with and can be easily accessed by authorized parties, improving the accuracy and efficiency of care.

The shift to cloud computing is enabling healthcare organizations to store and access massive amounts of data in real time. Big data analytics is being used to identify patterns in patient data, predict trends, and inform public health decisions, while cloud-based systems allow for easier collaboration across healthcare providers.

With awareness on healthcare increasing, people have started adopting wearables and sensors that keep a track of the vitals of the user. Wearables and sensors also store data related to the user’s historical health records and sends out alerts in case of any irregularities.

In the coming years, healthcare sector in India is expected to be primarily shaped by technological advancements and the growing adoption of digital health solutions by both providers and patients. This transformation will be fuelled by shifts in mindset, advancements in technology, infrastructure development, government initiatives, and more. Key government programs, such as the Ayushman Bharat Digital Mission (ABDM) and e-Sanjeevani, are laying the groundwork for a digitised healthcare ecosystem. At the same time, private sector players are exploring digital technologies like robotics, telehealth, AI, and 5G to offer technology-driven care to their patients.

As declared in the previously published annual report of FY 2024 and the note 26 forming part of the Consolidated Financial Statements for the period ended March 31, 2025, the Company had divested its business operations to MGM Healthcare Private Limited on February 1, 2024 via a Business Transfer Agreement (BTA). Post the slump sale transaction, the Company ceases to have any business operations. Currently, the management of the Company has no visibility of commencing any new business operations in the future and the Company’s management and Board of Directors, in consultation with its legal advisors/ merchant bankers, is evaluating various corporate restructuring options for the future possible course of actions for the Company and is progressing with the finalisation of plan.

From a financial perspective, post declaration of dividends totalling Rs. 42.5 per share, comprising _ 40 per share declared on April 12, 2024 and Rs. 2.5 per share declared on 17th May 2024, the Company’s cash and cash equivalent and other bank balances are sufficient to settle its obligations as and when they fall due. Based on the current cash position and projected cash flows, the Company believes that it would be able to meet its financial obligations for the foreseeable future such as ongoing expenses for running the Company, resolving medico legal cases, VAT appeals, GST appeal and Income tax appeal which are being contested and managing any warranties/indemnities claim associated with the sale of the Company’s business operations. The key financial ratios and their variance thereof have been tabled in the note 38 forming part of financial statements for the year ended March 31, 2025. The aforesaid details should not be construed in any manner as admission of any liability or breach as any such financial exposure in respect of the above aspects and those associated with the sale of the Company’s business operations are currently estimated and assessed by management as remote.

The Company divested its business operations on 1st February 2024, and as such the employees were also transferred to MGM Healthcare. There was no employee on the payroll of the Company as on March 31, 2025.

The Company has maintained internal controls framework comprising a set of procedures and systems and instrumental in reducing risks and costs. The financial controls are evaluated for operating effectiveness through management’s ongoing monitoring and review process. The internal audit program is managed by an Internal Audit function directly reporting to the Audit & Risk Management Committee of the Board.

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. The Company undertakes no obligation to update forward looking statements to reflect events or circumstances after the date thereof.

- Investment Opportunities in India’s Healthcare Sector, NITI Aayog

- IBEF report on Healthcare Sector, November 2024

- IRDA Annual Report - 2023-24

- CRISIL Report, August 2024

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