GPT Healthcare Ltd Management Discussions

Indian economic review1

Despite a sluggish global economy, the Indian economy maintained its positive growth trajectory in the year under review. The country is the third largest economy in the world in terms of purchasing power parity, trailing just behind the US and China. It is also ranked at fifth in terms of market exchange range. Strong domestic demand, supported by effective government policies, facilitated real GDP surge of 8.2% in FY 2023-24. Additionally, an increase in investments in public sector, a robust banking sector, impressive performance of industrial and service sectors, rising credit demand and decline in inflation have been some of the key contributors to economic expansion in FY 2023-24.

Outlook

With the Reserve Bank of India (RBI) demonstrating increasing confidence in its ability to control inflation, it is expected to anchor all the expectations regarding inflation. It is anticipated to cultivate an environment conducive to making long-term spending and investment decisions. As countries are aiming to diversify their supply chain, India is steadily emerging as the preferred manufacturing hub.

Looking forward, the Indian economy is poised to reach a valuation of USD 5 trillion in FY20283, outpacing other economies due to its sizable domestic market and growing export prospects.

Healthcare sector in India4

The evolution of Indias healthcare sector has ensured patient safety, high quality healthcare and controlled costs. Owing to a myriad of factors, especially low-cost medical treatments, advanced technology and easy accessibility, India is one of the topmost destinations for medical tourism.

Furthermore, the domestic demand for quality health services is on the rise. A burgeoning population, rising disposable income of the middle-economic class and effective Government initiatives have reduced healthcare expenses and increased the availability of quality healthcare services.

Healthcare service in East-India

The eastern and north-eastern regions of India have rapidly developed the healthcare infrastructure under the Ayushman Bharat scheme, transforming primary and sub health centres into Ayushman Bharat-Health and Wellness Centres (AB-HWCs). While West Bengal dominates the sector, other states such as Mizoram, Tripura and Kerala excel in health indicators and healthcare spending. According to National Institution for Transforming India (NITI) Aayogs Health Index Report, Sikkim ranks 12th.

Government Initiatives

Various government initiatives have bolstered the growth of the Indian healthcare sector. For instance, the National Health Mission (NHM), established in 2013, integrates the National Urban Health Mission (NUHM) and the National Rural Health Mission (NRHM) to enhance primary healthcare infrastructure and services.

In 2018, the Government launched Ayushman Bharat, its flagship healthcare initiative, which included Health and Wellness Centres (HWCs) and the Pradhan Mantri Jan Arogya Yojana (PMJAY). While HWCs provide a plethora of services, including primary healthcare services, PMJAY provides health insurance covering secondary and tertiary care hospitalisation up to H 5 lakhs for each household annually.

Company Overview

GPT Healthcare Limited is a leading healthcare provider with a strong presence in East India, known for its strategically located, full-service hospitals. The Company excels in speciality healthcare services, supported by state-of-the-art infrastructure and a professional management team. GPT Healthcare is committed to their growth, operational efficiency and delivering quality patient care.

GPT Healthcare has a strong foothold in regional, under-penetrated and densely populated areas of East India.

The Company operates a range of diversified speciality hospitals across various locations and provides full service offerings, ensuring better returns on capital.

GPT Healthcare benefits from professional management, experienced leadership and talented medical professionals.

With state-of-the-art infrastructure, processes and clinical excellence, the Company ensures economic efficiency and a strong value proposition for all stakeholders.

With one of the highest ROCE (30.2%) and ROE (25.7%) in the Industry, the Company demonstrates strong cash generating abilities . It has also become net debt free post receiving proceeds from the IPO.

The healthcare industry is highly competitive, with numerous established players and new entrants vying for market share.

Rapid advancements in medical technology require continuous investments and adaptation, posing a threat if not managed effectively.

The ability to attract and retain skilled medical professionals is crucial as competition for top talent is fierce.

Due to the array of services offered by the hospital, coupled with its collaborations with specialist consultants, GPT Healthcare possesses market potential to attract a growing number of patients and foster synergies across various verticals.

Due to the increasing number of patients from neighbouring countries, medical tourism is experiencing a hike, giving the Company a position to leverage on this opportunity.

The government has taken up initiatives for the betterment of north-east and east India healthcare, which can be leveraged by the Company.

GPT Healthcare with its lower ARPOB compared to other domestic hospitals, presents an opportunity to tap into the underserved healthcare market. This approach has enabled the company to establish a strong foothold in the region, providing accessible healthcare services to a large patient base.

GPT Healthcare aims to enhance its existing hospitals by adding new facilities and resources. This will strengthen the Companys capabilities and improve the quality of care provided to patients.

The Company plans to expand its presence in the neighbouring markets, with a particular focus on the eastern region. This strategic move will enable the Company to tap into new customer segments and increase its market share.

To achieve break-even and maintain financial stability, GPT Healthcare will prioritise agile and asset-light growth strategies.

Embracing digitisation is an important strategy for GPT Healthcare. The Company aims to implement digital solutions to enhance the customer experience, improve service delivery and increase operational efficiency.

Financial analysis

The Company is projected to deliver a robust financial performance, with revenue from operations (growing at a CAGR of 5.91%) over FY 2021 to FY 2024. The Companys PAT has increased from H 3,914.17 lakhs in FY23 to H 4,778.50 lakhs in FY24.

EBITDA growth has increased from 21.83 % in FY23 to 22.97% in FY24. The growth in hospital revenue has also increased from 6.99% in FY23 to 11.34% in FY24.

Ratio

Risk and Concerns

The Board at GPT Healthcare Limited holds the responsibility for overseeing risk management and internal controls. This includes a focused commitment in establishing the Companys risk tolerance, consistently evaluating and tracking key risks and scrutinising reports generated by internal auditors regarding internal controls and risk assessments.

Human resource

GPT Healthcare prioritises investing in its people and human resources and fostering an organisational culture. The team at GPT Healthcare has been instrumental in the Companys growth and innovation over the years. In FY2024, the Company prioritised developing a vibrant, diverse and engaged workforce. Fair and ethical business procedures were developed by the Company, with a focus on integrity and trust to build a happy and productive workplace. The Company has a competent talent pool comprising 1,886 employees as of March 31, 2024.

Corporate Social Responsibility

The Company has undertaken several CSR initiatives, allocating a total of Rs 92.86 Lakhs in FY 2023-24. The Company dedicated H 30.26 Lakhs to healthcare initiatives aimed at eradicating hunger, poverty and malnutrition while promoting preventive healthcare in North 24 Parganas, West Bengal.

Additionally, Rs 50 lakhs was utilised to support educational endeavours, including special education in South 24 Parganas, West Bengal. Rs 2.60 Lakhs was spent on animal welfare in Kolkata, West Bengal. Furthermore, Rs 10 lakhs was committed to ensuring environmental sustainability and ecological balance in South 24 Parganas, West Bengal.

GPT Healthcare strictly adheres to the Companies CSR Rules and the Companies Act of 2013, with a CSR policy aimed at fostering inclusive and sustainable development, highlighting its commitment to being a conscientious corporate entity.

Health Service Executive

The services, operations and facilities of the business are governed by a number of health safety and environmental laws, regulations, government-mandated operating procedures and environmental recommendations. Specific policies have been implemented by the Company to address issues such as waste water discharge, workplace conditions and the creation, handling, storage, transportation, treatment and disposal of hazardous or toxic biomedical materials. These policies are in accordance with Industry Regulations and Policies requirements.

Cautionary statement

The management discussion and analysis report containing your Companys objectives, projections, estimates and expectation may constitute certain statements, which are forward-looking within the meaning of applicable laws and regulations. The statements in this management discussion and analysis report could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operation include changes in governmental regulations, tax regimes, economic developments within India and other incidental factors.