Gian Lifecare Ltd Management Discussions

Global Economy

Compounding the damage from the COVID-19 pandemic, the Russian invasion of Ukraine has magnified the slowdown in the global economy, which is entering what could become a protracted period of feeble growth and elevated inflation, according to the World Banks latest Global Economic Prospects report. This raises the risk of stagflation, with potentially harmful consequences for middle- and low-income economies alike.

Global growth is projected to slow from an estimated 6.1 percent in 2021 to 3.6 percent in 2022 and 2023-24. This is 0.8 and 0.2 percentage points lower for 2022 and 2023-24 than projected in January. It is expected to hover around that pace over 2023-24, as the war in Ukraine disrupts activity, investment, and trade in the near term, pent-up demand fades, and fiscal and monetary policy accommodation is withdrawn. As a result of the damage from the pandemic and the war, the level of per capita income in developing economies this year will be nearly 5 percent below its pre-pandemic trend.

Among emerging market and developing economies, growth is also projected to fall from 6.6 percent in 2021 to 3.1 percent in 2023-24—well below the annual average of 4.8 percent over 2011-2019. The negative spillovers from the war will more than offset any near-term boost to some commodity exporters from higher energy prices. Forecasts for 2023-24 growth have been revised down in nearly 70 percent of EMDEs, including most commodity importing countries as well as four-fifths of low-income countries

Indian Economy

The Indian economy has fully recovered to the pre-pandemic real GDP level of 2019-20, according to the provisional estimates of GDP released on May 31, 2023. Real GDP growth in FY 2023-24 stands at 8.2%, as compared to 7.2 per cent in 2022-23. These figures are associated with stronger growth momentum, indicating increased economic demand. The investment rate in the fourth quarter increased to its highest level in the previous nine quarters. Moreover, capacity utilisation in the manufacturing sector rose in the fourth quarter, as against the third quarter, implying a build-up in demand, which is consistent with the growth objectives of the Indian economy.

Future capital spending of the government in the Indian economy is expected to be supported by factors such as tax buoyancy, streamlined tax system, thorough assessment and rationalisation of the tariff structure and digitisation of tax filing. In the medium term, an increase in capital spending on infrastructure and asset-building projects is set to increase growth multipliers. Furthermore, revival in monsoon and Kharif sowing helped the agriculture sector gain momentum.

India has emerged as the fastest-growing major economy in the world, and is expected to be one of the top three economic powers globally over the next 10-15 years, backed by its robust democracy and strong partnerships.

Indias gross domestic product (GDP) has touched the $3.95 trillion-mark in 2023-24, up from around $2 trillion in 2014. The government is also focusing on renewable sources to generate energy, and is planning to achieve 40% of its energy from non-fossil sources by 2030.

According to the McKinsey Global Institute, India needs to boost its rate of employment growth and create 90 million non-farm jobs between 2023 and 2030 in order to increase productivity and economic growth. The net employment rate needs to grow by 1.5% per annum from 2023 to 2030 to achieve 8-8.5% GDP growth between this period. Indias current account deficit (CAD), primarily driven by an increase in the trade deficit, stood at 1.2% of GDP in 2021-22.

Exports fared remarkably well during the pandemic and aided recovery when all other growth engines lost steam in terms of their contribution to GDP. Going forward, the contribution of merchandise exports may waver as several of Indias trade partners witness an economic slowdown. According to Mr. Piyush Goyal, Minister of Commerce and Industry, Consumer Affairs, Food and Public Distribution and Textiles, Indian exports are expected to reach US$ 1 trillion by 2030.

Industry and Company Outlook

There is considerable slowdown in growth, moderating inflation and uncertain outlook. However your company will continue to strive for meaningful growth, focusing as always on superior credit quality, a balance portfolio mix and efficient cost management in order to sustain profitability.

Indias healthcare sector has been growing at a compound annual growth rate (CAGR) of 22%5 driven by several factors including population demographics, a growing middle class, higher earnings, greater health awareness and an increase in lifestyle disorders. The increasing prevalence of non-communicable diseases (NCDs), making up 50% of the disease burden and 60% of total deaths in India6, is creating a demand for advanced healthcare services. The Indian healthcare market is expected to reach USD 367 billion by 2023. Due to digitisation, innovation and novel hybrid business models that incorporate conventional and technology companies, the sector has experienced substantial growth over the last five years. The pandemic also sparked a long-lasting change in behaviour towards personal hygiene, health insurance, fitness and nutrition, as well as health surveillance and physical examinations.

Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (AB-PMJAY), which was allocated H 7,200 cr in FY24 (12% more than H 6,412 cr in 2022-23), highlights the governments focus on extending the AB-PMJAY health coverage to more than 400 million additional people who are not currently covered under any government or private health insurance scheme.

Rising insurance coverage, the growth of telemedicine and government initiatives like e-health, tax benefits and incentives have also contributed to the development of Indias healthcare market. Investments of over USD 200 billion are expected in medical infrastructure by FY 2024, resulting in improved healthcare facilities nationwide.

In the recently released Union Budget 2023-24, the Government has encouraged the deployment of Artificial Intelligence (Al) in research and innovation in India. This targeted focus on the Al sector, which has strong connections to diagnostics has the potential to bring about substantial changes in the industry.

The governments initiative to establish three Al centres of excellence in leading Indian institutions will contribute to the development of sustainable healthcare solutions. Considering the critical role of Al research in diagnostics, these centres will aid in the creation of indigenous products for the industry

The Indian government has undertaken numerous initiatives to ensure universal healthcare coverage and insurance for its citizens through Ayushman Bharat - Pradhan Mantri Jan Aarogya Yojana (AB-PMJAY). The AB-PMJAY scheme aims to provide benefits to an estimated 500 million beneficiaries, granting each family up to H 5 lakh each year to cover hospitalisation expenses. The programme is recognised as the one of the largest government-funded healthcare initiative and has been allocated H 7,200 crore in the India Budget 2023-24. The government has taken various steps to kick start investment. Policy rate cuts by Reserve Bank of India and improving business sentiment could also support revival in investment.

Your company is fully aware that the opportunities in the diagnostic sector will be many and diverse in nature. While this provides impetus for our sustainable growth, your company is also duly careful that from amongst the multiple choices of attractive businesses available we always make the right choice. Your companys business model and its risk management policies and mechanisms are being constantly reviewed and upgraded to insure this.

The outlook for the healthcare and diagnostic market in India appears promising with strong revenue growth projected for the upcoming years. It offers attractive margins and has room for expansion. Specialised tests and pathology are driving growth. The industry is fragmented however, it presents opportunities for new business models. Medical device manufacturers have also uncovered growth prospects in India. With considerable capital expenditure for cutting- edge diagnostic facilities, the nation has also emerged as one of the foremost locations for high- end diagnostic services, serving a larger section of the populace. Future demand for healthcare services is anticipated to increase due to factors such as improved income levels, an ageing population, rising health awareness and shifting attitudes towards preventive healthcare.

Risks and concerns

Risks to a varying degree, is inevitable in all business transactions in an organization which is in financial services. Your company, being in one of the most competitive business has to manage various risks. These risks include Credit risk, Liquidity risk, Interest rate Risk and operational risk hence, strong risk management capabilities are critical for a growing company operating in a rapidly changing environment.

In certain situations, diagnostic testing is becoming more accessible to a wider population. Point-of-care testing is gaining popularity due to its affordability and convenience. While the Companys established testing infrastructure provides comprehensive and reliable diagnostic outputs, it recognises the potential of integrating such technologies into its service delivery framework. The Company is actively exploring ways to incorporate these advancements to enhance its offerings and improve the patient experience. At the test menu level, a dedicated team of specialists plays a crucial role in evaluating and advising on new developments. This diligent approach ensures that the Company stays at the forefront of technological advancements in the field of diagnostics, providing accurate diagnoses and trend analysis for patients. The integration of advanced diagnostic tools and techniques allows for improved patient care and reinforces the Companys position as a trusted provider of accurate and reliable diagnostics. Further, we are actively managing the risks, emanating from Technology also. To that end, weve deployed cutting edge cyber security technologies using defence indepth model. Further, we periodically perform the cyber security assessments across our IT ecosystem to evaluate the control effectiveness. In addition to that, we follow industry reputed Information Security Mgmt System such as ISO 27001.

The Company has been expanding its laboratory network to meet the growing demands of existing and emerging sampling requirements. This includes establishing patient touch points through franchisee partnerships, integrating home collection services, and continuously evaluating and introducing new tests to its portfolio. These initiatives ensure that the Company remains agile, adaptable, and well-positioned to meet the demands of its customers while maintaining a competitive edge in the diagnostic sector.

The diagnostics industry in India is subject to existing regulations and guidelines set forth by the Central Government and State governments. These regulations ensure that the industry adheres to specific standards and practices, thereby safeguarding the best interest of patients. In times of seasonal outbreaks or pandemics, the Government may intervene to protect public health.

The Company leaves no stone unturned to ensure compliance with all applicable regulations. As the Company is part of a largely unorganised industry, it is aware of the unique challenges that may emerge due to sudden changes in regulations. However, its well-established infrastructure and robust operational capabilities position it favourably to navigate such changes and restore normalcy faster

The diagnostics industry in India is predominantly unorganised, presenting a significant opportunity for businesses to enter the market. The industry has witnessed the emergence of online portals and web aggregators, who have integrated themselves into certain aspects of the diagnostic business value chain. To gain traction faster, these new players are not hesitant to leverage pricing as a marketing strategy. In response to the intense competition, the Company has adopted a comprehensive approach that focuses on brand building and network expansion. By prioritising the delivery of high-quality services, it has managed to differentiate itself from industry peers. Additionally, the Company has made consistent investments in digital technologies, which has enabled it to create a distinct identity in the market.

The Risk Management committee reviews and manages the risks at periodic intervals.

The risk management framework of the company continue to be driven by the following fundamentals:> Identification of key risks faced by the company

> Evaluating the probability of their occurrences and their impact

> Set an appropriate balance between risk and reward in order to maximize shareholder return

> Set tolerance limits and established adequate review mechanisms to monitor control the risks.

> Incorporate robust reporting mechanism and adoption of appropriate mitigation processes

The company manages credit risks through stringent credit norms established through several years of experience in this line of business and continues to follow the time-tested practices of personally assessing every borrower, before committing to a credit exposure. This process ensure that the expertise in lending operation acquired by the company over the period is put to best use and acts to mitigate credit risk. Liquidity risks and interest risk arising out of maturity mismatch of assets and liabilities are managed through regular monitoring of the maturity proceeds.

Human Resource Management

The company continues to give priority to its human assets. The company provides a fair and equitable work environment to all its employees. The company is working continuously working to create and nurture an atmosphere which is highly motivated and result oriented.

Financial performance

The financial performance of the company for the year under review is discussed in detail in the Directors Report.

By Order of the Board of directors

For Gian Life Care Limited

Place:- Kanpur