Healthcare Global Enterprises Ltd Management Discussions.

The following discussion of our financial performance and results of operations should be read together with the Audited Financial Statements, the notes and significant accounting policies thereto and the reports thereon, on the Financial Statements.

Our Management accepts responsibility for the integrity and objectivity of these financial statements, as well as for various estimates and judgments used therein. The estimates and judgments relating to the operations and financials have been made on a prudent and reasonable basis, so that the financial statements reflect in a true and fair manner, the form and substance of transactions, and reasonably present our state of affairs, profits/ loss and cash flows for the year. Investors are also requested to note that this discussion is based on the consolidated financial Statement of the group.

Healthcare Market

Indian Healthcare sector has become one of the largest sectors both in terms of revenue and employment generated. The sector comprises of hospitals, nursing homes, medical devices and equipment providers, labs and pharmacy operators, clinical trials and research firms, medical value travel providers, health insurance companies and new-age technology providers in form of telemedicine, electronic medical records, artificial intelligence based solutions etc. and lakhs of trained doctors, nurses, paramedical, support and administrative workforce. The healthcare sector has been experiencing growth due to growing needs of the population and the sectors increased coverage, services and increasing expenditure towards infrastructure by public as well private players.

The healthcare delivery system in India is categorised into two major components - public and private. The public healthcare system is essentially managed by the government and comprises of limited secondary and tertiary care institutions in key cities along with basic healthcare facilities in the form of primary healthcare centres (PHCs) in rural areas. On the other hand, the private sector provides majority of secondary, tertiary and quaternary care institutions with a major concentration in metros and growing presence across tier I and tier II cities.

Also India is one of the most cost competitive quality healthcare provider compared to its peers in Asia and Western countries and the cost of surgery and procedures in India is about one-third to one-tenth of that in the US or Western Europe. In terms of quality and accessibility of healthcare India ranks 145th among 195 countries. There is immense scope for enhancing healthcare services penetration in India, thus presenting ample opportunity for development of the healthcare industry.

Indian healthcare sector is projected to grow at a CAGR of 22% during 2016-2022 to reach $372 billion in 2022 from $110 billion in 2016.1 This growth will primarily be driven by factors such as growing health awareness, increasing per-capita income, increasing penetration of health insurance, increasing instances of lifestyle diseases and an ageing population. Additionally, technological advancements such as continuing development of mobile technology which will enhance the delivery of healthcare through telemedicine; making it affordable and will attract more patients as the treatment for major surgeries in India costs less than the cost in a developed country.

Moreover, supportive government policies and initiatives encouraging FDI, tax benefits, coupled with promising growth prospects will help the industry attract private equity, venture capitals and foreign players investment.

Indian healthcare is largely dominated by the private sector. Given the enormity of capital requirement and constrained public funding, there is a significant need for private capital to bridge the funding gap. Private capital is now coming from different source including existing hospital chains, business houses, local doctors/entrepreneurs, international strategic players and PE investors. The private sector has emerged as a vibrant force in Indias healthcare industry.

Majority of the secondary, tertiary and quaternary healthcare institutions are run by the private sector. The sector is expected to continue growing backed by large investments by private sector players that will contribute not only in stimulation of economic growth but also to generate employment.

Investment in the healthcare industry has been rising globally owing to several immutable long-term trends: an aging global population, a rising incidence of chronic diseases, an expanding demand for quality services and healthcare as a safe haven. Also, due to the recent outbreak of Covid-19, the sector is expected to experience further growth from public as well as private players.

Especially, in India, there are several dedicated private capital investors deploying substantial capital across services, health-tech and other relevant areas, few public market investors have also created healthcare focused funds to participate in this industry. With the emerging trends of investment and consolidation in healthcare, the sector will experience strong growth.

Recent Government Policies on Indian Healthcare Sector

The government of India has made tremendous capital investment for advanced diagnostic facilities for its citizens. Pradhan Mantri Jan Arogya Yojana (PMJAY) was launched in September 2018, aiming to provide health insurance worth RS 5,00,000 (US$ 7,124.54) to over 100 million families every year, and is already implemented in several states.

Under the Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (PMJAY), nearly 1.5 lakRs 2 primary health centers will be transformed as health and wellness centers by 2022. These centers will be equipped to provide treatment and care for several diseases such as high blood pressure, diabetes, cancer, and old age-related illnesses. The program has been allocated RS 6,429 core (US$ 919.87 million)3 under Union Budget 2020-21.

The Pradhan Mantri Swasthya Suraksha Yojana (PMSSY) was allocated RS 3,000 crore (US$ 429.25 million) under Union Budget 2020-21. Also, RS 65,012 crore (US$ 9.30 billion) and RS 2,100 crore (US$ 300.47 million) has been allocated to the Ministry of Health and Family Welfare and the Department of Health Research, respectively.

The governments expenditure on the health sector has grown to 1.6% of the GDP in FY 2019-20 from 1.3% in FY16. The government has a target to increase its public health spending to 2.5% of the countrys GDP by FY 2024-25. And healthcares share of GDP is expected to rise by 19.7% by 2027.

Digital transformation of healthcare sector

The governing board of National Health Authority (NHA) has approved the integration of existing public health schemes with Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB PM-JAY). Under the new structure, all government health programmes such as the flagship Ayushman Bharat and tuberculosis treatment scheme will be integrated with the National Digital Health Mission (NDHM), and beneficiaries will be issued unique health IDs to avail these healthcare programs.

With an investment of RS 144 crores, the NDHM will be led by the NHA with an aim to create a digital healthcare ecosystem. The database will incorporate digital health IDs, unique identifiers for doctors and health facilities and include personal health records of patients.

The centralized healthcare system is also anticipated to promote development of healthcare facilities and enhance demand for better services. Further, interoperability of both schemes will be highly beneficial for patients from remote areas with limited access to healthcare facilities. The portability of PM-JAY is also anticipated to be a boon for a large section of the Indian population. The mission, in its first phase, will be piloted in Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, Daman and Diu, Lakshadweep, Ladakh and Puducherry. This initiative would result in the creation of a common, national health ecosystem.

Oncology

Global Overview

The rapid spread of cancer may result in the disease emerging into the single most hurdle to tackle public healthcare burden in the coming years. The pressure is therefore intensifying to research and develop newer and more effective therapies and treatment as well as models that meet the diverse requirements of delivering high quality care and outcomes in an affordable way. The entire global healthcare sector is constantly working towards finding improved treatment options, towards a better quality of life and longevity for patients.

There is an urgent need for developing newer ways to target cancers diversity and evolution. The key factors that are responsible for the growth of the oncology/cancer drugs market are surge in cancer research, rise in geriatric population worldwide, and increase in number of collaborations between pharmaceutical companies. In addition, rise in healthcare expenditure worldwide is expected to boost the market expansion.

Going forward, targeted therapies will witness huge gains for their better prognosis. Targeted therapies revolve around identifying major pathways responsible for the disease and its progression and administering specific drugs targeting these pathways. Targeted therapies have lower side effects and are more effective than conventional therapies.

The United States and Europe represent large markets worldwide with a combined share of 68%4 of the healthcare market. China ranks as the fastest growing market with a CAGR of 11.2% owing to the massive strides taken by the country in developing affordable next-generation therapies. An exciting future with new discoveries currently awaits cancer therapies througRs 2025 despite all the challenges involved.

The U.S. Food and Drug Administration granted accelerated approval to a new paradigm in the development of cancer drugs that are ‘tissue agnostic.

Another globally accepted treatment is immunotherapeutic drugs, which are targeted therapeutics that have high specificity for cancer cells. Cancer immunotherapy drugs have captured nearly 50% of the overall oncology drugs market and generated about $75 billion in 2019. They are forecasted to surpass $115 billion in 20236 It is also projected to become the oncology treatment of choice by 2026 with an estimated 60% of previously treated cancer patients likely to adopt immunotherapy. Multiple treatment lines, combination therapy and the opportunity for repeat treatment are likely to be the key drivers of fast growth.

The rising incidence and prevalence of numerous cancers globally is the reason why every economy in the world is contributing to the innovation of new and improved treatments. The cancer therapeutics space was worth over $100 billion by December 2019.

India Outlook

According to a World Cancer Report by World Health Organization, India had an estimated "1.16 million new cancer cases in 2018. The finding of the report also estimated that that one in 10 Indians will develop cancer during their lifetime and one in 15 will die of the disease. Cancer is the second leading cause of death in India.

Of the total cases, the six most common types of cancer cases in India were for breast cancer (162,500 cases), oral cancer (120,000 cases), cervical cancer (97,000 cases), lung cancer (68,000 cases), stomach cancer (57,000 cases), and colorectal cancer (57,000). Together, these account for 49% of all new cancer cases.

Availability of LINACs

Region /Country Number of LINACs(2015) LINACs per MillionPopulation Cancer Prevalence perLINAC Cancer Incidence perLINAC
US 3,818 11.9 1,572 419
UK 323 5.0 3,096 929
China 986 0.7 6,288 3,144
India 342 0.3 7,310 3,216

STATUTORY REPORTS

Crude annual incidence rate of all cancers together in the states of India, 1990 and 2016

Different types of cancers in India, 1990-2016

Types of cancers, 1990 Types of cancers, 2016

1 Cervical cancer 1 Breast cancer
2 Stomach cancer 2 Lip and oral cavity cancer
3 Lip and oral cavity cancer 3 Cervical cancer
4 Breast cancer 4 Stomach cancer
5 Pharynx cancer other than nasopharynx 5 Lung cancer
6 Lung cancer 6 Pharynx cancer other than nasopharynx
7 Colon and rectum cancer 7 Colon and rectum cancer
8 Oesophageal cancer 8 Oesophageal cancer
9 Leukaemia 9 Leukaemia
10 Larynx cancer 10 Prostate cancer
11 Brain and nervous system cancer 11 Larynx cancer
12 Non-melanoma skin cancer 12 Liver cancer
13 Pancreatic cancer 13 Gallbladder and biliary tract cancer
14 Gallbladder and biliary tract cancer 14 Ovarian cancer
15 Liver cancer 15 Non-Hodgkin lymphoma
16 Non-Hodgkin lymphoma 16 Brain and nervous system cancer
17 Prostate cancer 17 Pancreatic cance
18 Ovarian cancer 18 Non-melanoma skin cancer
19 Hodgkins lymphoma 19 Thyroid cancer
20 Nasopharynx cancer 20 Bladder cancer
21 Thyroid cance 21 Uterine cancer
22 Bladder cancer 22 Kidney cancer
23 Uterine cancer 23 Nasopharynx cancer
24 Kidney cancer 24 Multiple myeloma
25 Multiple myeloma 25 Hodgkiris lymphoma
26 Testicular cancer 26 Malignant skin melanoma
27 Mesothelioma 27 Testicular cancer
28 Malignant skin melanoma 28 Mesothelioma

Source: Lancet Oncology Journal

ANNUAL REPORT 2019-20

A compelling reason for cancer investment even in low and middle- income states is that, without accessible treatment capacity, patients and families will try to find funds to cover the costs. But the results are often as debilitating to finances as the disease can be to the body. In China, even after insurance pay-outs, cancer poses "an unmanageable financial burden" for 78% of families; in Vietnam, more than half of patients need to use up half of total household income to fund treatment; in India, 40% of patients have to borrow or sell assets to afford care

In the last two decades, India has been one of the worlds best performing emerging economy, which has grown by more ~7% annually in most years. This development of the economy has given rise to multiple socioeconomic changes, with an increasing risk of non-communicable diseases, including cancer, and significant disparities in access to cancer prevention and control services.

According to the WHO report, global cancer rates could rise by 60% over the next 20 years unless cancer care is ramped up in low and middle-income countries. The middle-income countries offer less than 15% of comprehensive cancer treatment services through their public health systems. India would be no different in this aspect.

The patterns of cancer are dominated by a high burden of tobacco-related head and neck cancers, particularly oral cancer, in men and of cervical cancer in women in India. These cancer types are associated with lower socioeconomic status. Moreover, the burden of cancer types, such as breast cancer and colorectal cancer, associated with overweight and obesity, lower levels of physical activity, and sedentary lifestyles is increasing and these cancer types are associated with higher socioeconomic status.

Around 80% of the worlds smokers live in low and middle-income countries. In addition to this, 64% of the worlds daily smokers live in only 10 countries and more than 50% of the worlds male smokers live in three countries: China, India, and Indonesia. In India, currently there are 164 million users of smokeless tobacco, 69 million smokers, and 42 million smokers and chewers. Of the total cancer patients, more than 90% of the patients with oral cancer have low or lower-middle socioeconomic status. Moreover, tobacco-related cancers account for 34-69% of all cancers in men, and constitute 10-27% of all cancers in women in most regions in India.

Key Drivers of Cancer Incidence

As per National Health Profile 2019 data, common cancer cases have increased significantly between 2017 and 2018, which are mainly from the lifestyle habits with the likes of smoking, drinking, lack of exercise, unhealthy eating and use of tobacco in any form of smoking, sniffing or chewing. Another main reason for rising cancer is the increasing lifespan, and it has also been found out that about two-third of the increase is due to longevity.

The Cancer Treatment Cost in India mainly depends on the type of cancer treatment options, etc where if the treatment cost is compared with other developing countries, then India is the most reasonable country in terms o offering reasonable cancer treatment packages.

Even though the cost of cancer treatment in India is significantly lower than other countries, high quality cancer care is still inaccessible to a large proportion of the Indian population with patients having to travel outside their towns to avail of cancer treatment.

Additionally, the profile of cancers in the country are also changing, and are becoming similar to that seen in more urbanised and higher income societies. According to GLOBOCAN 2018 data, there were 11,57,294 new cancer cases in India in both men and women, with 7,84,821 deaths and 22,58,208 people living with cancer (within 5 years of diagnosis). The top 5 cancer that affect Indian population are Breast, Oral, Cervical, Gastric and Lung cancers, where Breast Cancer is one of the leading diseases in India and along with that Oral cancer is also a major concern as out of 3 lakh cases detected annually, where 86% are from India only. The main risk to develop oral cancer is through consumption o tobacco and alcohol.

Fertility

With 1.3 billion people, India is the worlds second most populous country. As per the United Nations, the country will outnumber china (1.4 billion) in population after 2022. The only hindrance to this is that, young Indians are unable to procreate. As per the UN, the fertility rate of Indians has declined significantly by more than 50% from 4.97 to 2.227 and is further expected to decline to 2.1 by CY 2025-30 and to 1.86 by CY 2 0 45-508. But the fertility rate of 2.2 is generally considered as the fertility replacement level. If the fertility rate goes below this number the population rate will definitely decline.

Over the last few years, Infertility has emerged as one of the most common health issues that many young couples have been facing. According to many clinicians and health experts, sedentary lifestyles with minimum physical activity, rising stress level and irregular sleep pattern are few of the reasons that are causing infertility, thus forcing them to opt for artificial ways of conceiving. Infertility at present, affects about 10% to 14% of the Indian population, with higher rates in urban areas where one out of six couples is impacted, according to the Indian Society of Assisted Reproduction. About 27.5 million couples are known to actively trying to conceive suffer from infertility in the country. The outcome of infertility will have its effect on different aspects of the life of the individual and nation.

To treat infertility primarily there are two methods Intrauterine Insemination (IUI) and In-Vitro Fertilization (IVF). In vitro fertilization (IVF) process involves fertilization of egg cells by sperm outside the body, in a laboratory dish, and then implanting it in a womans uterus. It is a type of assisted reproductive technology which is used to treat fertility or genetic problems to assists with the conception of child.

Due to low awareness toward this technique in the society, IVF market in India is significantly underpenetrated relative to the potential demand. Despite this, the India IVF services market is projected to reach $1.453 billion9 by 2026, registering a CAGR of 14.7% during 2018-26. Moreover, rise in the prevalence due to increase in risk factors, such as obesity, stress, polycystic ovarian syndrome (PCOS), sexually transmitted infections, endometrial tuberculosis, and other medical conditions, are expected to bolster market growth.

Today, with the advancement of science and technology, Assisted Reproductive Technology (ART) has made great strides in the forty years since the birth of the first IVF baby. Other than treating female infertility cases, advanced ART techniques such as Magnetic Activated Cell Sorting (MACS), intracytoplasmic sperm injection (ICSI), and DNA Fragmentation Index (DFI) testing can also help with Male infertility cases.

Age and Education affects fertility levels

Total Fertility Rate (TFR) indicates the average number of children to be born per woman during her reproductive period. Womens age and education are extremely important factors that have impacted fertility levels in the country. Fertility in all age groups (reproductive age group of 15-49 years) is higher in rural than in urban areas. It reaches the peak in the age group of 25-29 and declines thereafter. Various studies also indicates that women who were graduates and above, TFR was 1.7. While for those educated up till Class 12 and below primary level education, TFR is 1.8 and 2.9 respectively. With increase in education level, TFR witness a gradual decline.

Overall fertility has dropped below replacement rate in about half the states

Above replacement

• At replacement

• Below replacement

Note: Data available only for bigger states

Risk factors leading to high prevalence of infertility
1 PCOS PCOS incidence in India reported to range between

4% to 23% Mean global prevalence rate of 5% to 10%

2 Endometrial Tuberculosis Endometrial TB causes endometrial and tubal damage resulting in infertility ^ ? Prevalence is estimated to be

18% among infertile women in reproductive age in India vis-a-vis 1% in the USA

3 Obesity Prevalence of obesity in men has increased from 17% (2010) to 20% (2014) Increased from 11% (1998) to 25% (2014) in women
4 Tobacco Tobacco prevalence in India estimated at 17% Approaching the levels of use in the UK (21%) and the US (19%)
5 Alcohol Overall alcohol consumption per capita increased from 3.6 liters in 2005 to 4.3 liters in 2010
6 STD High prevalence of STDs Estimated to range between 10 - 34%

Company Overview

HCG is a leading provider of tertiary and quaternary healthcare services focused on cancer and fertility specialties. Under the "HCG" brand, we operate one of the largest private cancer care networks in India in terms of the total number of cancer treatment centers scale, presence as well as in terms of revenues and new patient registrations.

Our Business

The Company is the largest provider of cancer care in India under the "HCG" brand. It owns and operates comprehensive cancer diagnosis and treatment services (through radiation therapy, medical oncology and surgery). As of March 31st, 2020, our HCG network consisted of 22 comprehensive cancer centers, including our center of excellence in Bengaluru, and 1 center in Africa. Each of our comprehensive cancer centers offers, at a single location, comprehensive cancer diagnosis and treatment services (including radiation, medical oncology and surgical treatments). Our freestanding diagnostic centers and our day care chemotherapy center offer diagnosis and medical oncology services, respectively.

We follow a multidisciplinary approach to cancer care across our HCG network, wherein specialist physicians from various disciplines collaborate to provide the best course of treatment for each patient. This allows us to share and develop best practices, build clinical expertise and adopt standardised protocols for diagnosis and treatment, thereby improving the quality of our cancer care services. We believe that as a result, we are able to better serve our patients and ensure consistent clinical outcomes.

In our HCG network, our specialist physicians adopt a technology- focused approach to diagnosis and treatment. For instance, we use advanced technologies, including molecular pathology and molecular imaging for accurate diagnosis and staging of cancer, which enable us to decide upon the appropriate course of treatment for each patient. We believe that owing to the relationships we enjoy with such medical technology vendors and pharmaceutical and biotechnology companies and our involvement with them in the areas of research and development, we have been able to introduce in India and adopt across our HCG network the latest advances in technology relatively early. For instance, we were among the first healthcare providers in India to standardise molecular diagnostics technologies, including genomic testing and molecular imaging, including 128 slice PET-CT scans in the diagnosis and staging of cancer, as well as to introduce high intensity flattening filter free mode radiotherapy, stereotactic radiosurgery and robotic radiosurgery, in the treatment of cancer in India. We were also the first healthcare provider in India to perform computer assisted tumour navigation surgery. We believe this gives us a distinct advantage relative to our competitors in delivering high quality and standardised cancer care to our patients. We also utilise targeted nuclear medicine therapies as well as advanced radiation treatments to minimise side effects and improve the outcome of treatments. By ensuring that we adopt these diagnostic and treatment technologies throughout our HCG network, we are able to provide consistent quality of care to all patients. through the adoption of a centralised drug and consumables formulary, we are able to lower the overall cost of drugs and consumables. We believe that our business model is scalable and when combined with efficient utilisation of resources, it enables us to operate within a competitive cost structure.

We believe that our current model of providing speciality healthcare in India can be replicated in other underserved healthcare markets internationally. We have partnered with CDC to establish a network of speciality cancer centres in Africa, similar to our cancer care network in India. Pursuant to this partnership with CDC, we completed acquisition of Cancer Care Kenya, a leading dedicated cancer care center located in Nairobi in July 2017. We believe that our planned network will cater to the increasing unmet demand for cancer care in Africa due to which, a large number of cancer patients travel outside the region to avail quality cancer care, including to our comprehensive cancer centers in India.

Cancer Care Kenya Limited (CCK) a leading cancer centre in Nairobi, Kenya, which we acquired in FY2018, is ramping up well. CCK started operation in 2010 and is the first private comprehensive cancer centre in the country. CCK treats over a thousand patients annually including over two hundred patients from other African nations. CCKs team includes internationally trained radiation, medical and surgical oncologists, physicists, radiation technicians and oncology nurses. There are over 250,000 new cancer incidences each year in Eastern Africa - resulting in a huge and growing unmet need for advanced cancer care. Thousands of patients travel overseas for treatment, due to the lack of access to advanced cancer care. HCG has been treating patients from Africa in India for several years now, and have been enthused by the positive results and the strong response from the medical community in these countries. To ensure the best clinical outcomes and maintain continuity of care for medical tourism patients, we have successfully established advanced treatment options in the region through CCK and have made high quality cancer care accessible to patients across Africa.

Milann is the leading provider of fertility treatment under the brand "Milann". It owns and operates comprehensive reproductive medicine services including assisted reproduction, gynaecological endoscopy and fertility preservation. Milann has been Ranked No. 1 in India and first in the South India region continuously for 3 years in the fertility segment in the Times Health All India Critical Care Hospital Ranking Survey 2018. (Source: All India Critical Care Hospital Ranking Survey 2017, All India Critical Care Hospital Ranking Survey 2017, published on Times Health, Times of India on December 16, 2016).

HCG acquired 50.10% equity interest in BACC Healthcare Pvt Ltd in 2013 which operates fertility centers under the Milann brand. During the previous year,right to shares for balance 49.90% has been acquired and we have received extension of time for making the payment till Oct2020. We operate eight Milann fertility centers across Bengaluru, Delhi, Chandigarh and Ahmedabad as on March 31, 2020.

BACC Healthcare Pvt Ltd. is led by a team of qualified and experienced fertility specialists. Its founder, Dr. Kamini Rao has a successful track record of over 25 years of providing fertility treatments. Our Milann fertility centers provide comprehensive reproductive medicine services, including assisted reproduction, gynaecological endoscopy and fertility preservation; and follow a multidisciplinary and technology- focused approach to diagnosis and treatment. Our Milann network also operates on a model similar to our HCG network, wherein the various Milann fertility centers aim to provide medical services following established protocols with a focus on quality medical care across diagnosis and treatment.

Precision Diagnostics

Strand Life Sciences Private Limited is an integrated speciality diagnostics company with end to end capabilities in precision medicine through proprietary analytics, clinical research, access to the HCG biorepository, genomic technologies, assay development and validation and a network of laboratories offering a broad menu of tests. HCG entered into a business transfer agreement, with Strand Life Sciences in January 2018, providing for a business combination of its Triesta Sciences business unit ("Triesta Sciences"), with Strand Life Sciences. Pursuant to the business transfer agreement, the Company has transferred its Triesta unit on slump sale basis for a consideration aggregating to 38.2 % stake in Strand Life Sciences. Strand is a Joint Venture of the Company.

Strand, established in 2000 as a spinoff from the Indian Institute of Science, is one of the pioneers in the bioinformatics space and leader in genomic testing for cancer and inherited diseases in India. Strand has over 200 engineers and scientists and provides cutting-edge diagnostic solutions and its customers include leading global life science and technology companies, research labs, as well as oncologists, paediatric specialists, geneticists and hospitals.

Triesta Sciences, which, prior to the business transfer, operated as the diagnostic unit of the Company and offers a one- stop solution for oncology diagnostics, Genomics (Next Generation sequencing based diagnostics), biomarker and transnational research, laboratory services, and clinical research services for several hospitals across India with a focus on innovation, quality and accuracy for better diagnosis and prognosis of Cancer.

Strand is a leader in offering bioinformatics solutions and offers proprietary data analytical engines for research and clinical applications for genomic testing. Strand also provides hospital laboratory management services by way of establishing and operating laboratory within the hospital premises. We also provide clinical reference laboratory services in India with specialization in oncology, rare diseases and reproductive health and its offerings include molecular diagnostic services and genomic testing. Strand central reference laboratory is located in Bengaluru and is accredited by NABL in India, as well as by CAP for quality assurance of laboratory tests performed. Additionally, Strand offers research and development services to pharmaceutical and biotechnology companies in the areas of clinical trial management and biomarker discovery and validation and is led by a team of specialist onychopathologies, molecular biologists and clinical researchers.

The bioinformatics vertical of Strand covers the entire range of high- throughput data, including Microarrays, Mass Spectrometry, Next-Generation Sequencing, Microscopy etc. and has over ~24,000 citations in research publications for tools built by Strand.

As part of clinical diagnostics, Strand offers precision tests like Rare disease Diagnosis, Inherited Cancer Risk Analysis, Tumour Mutation Analysis for Precision Treatment, Liquid Biopsy Analysis for Precision Treatment, Response Monitoring, and Early Detection of Relapse, in addition to an entire gambit of traditional tests. The Precision Medicine Laboratory is the first NGS CAP Lab in South Asia and scored 100% in Proficiency Testing for both Germline cancer risk and Somatic tumour profiling while other labs, most in the US and Europe, ranged from 85-100%.

The specialised diagnostics market is one of the fastest growing segments within the Indian diagnostic industry and is expected to be over US$ 700 million by 2020. We believe that Strand is well- positioned to leverage the opportunities in bioinformatics, clinical reference laboratory services and research services on account of its strong capabilities and business strengths.

In December 2018, Strand acquired the India medical diagnostics business of Quest Diagnostics, the worlds leading provider of diagnostic information services. With this acquisition, Strand gains North India presence and marquee clientele that includes leading hospital chains, corporates and pharmaceutical clients to their portfolio and moves forward towards becoming Indias leading specialized diagnostics company with offerings across oncology, genomics, and precision medicine. In FY20, software tools built by Strand were cited in >1100 new peer reviewed publications. Also the largest retrospective analysis of multi-gene sequencing for the diagnosis of neurological disorders in India was published in the Journal of Neurology. Preliminary encouraging results were obtained from proof of concept study using saliva to detect oral cancer non invasively.

HCG operates four multi-speciality hospitals, three under "HCG" brand in Ahmedabad, Bhavnagar and Rajkot, all in the state of Gujarat and one under Operations and Management contract in Hubli in the state of Karnataka.

HCG Multispeciality in Ahmedabad, Bhavnagar and Rajkot are tertiary care hospitals with 118, 39 and 120 beds respectively, as of 31 March 2020. These hospitals provide comprehensive inpatient and outpatient treatments. Their key specialties include cardiology, neurology, orthopaedics, gastroenterology, urology, internal medicine and pulmonary and critical care. Suchirayu Health Care Solutions Limited, in Hubli, managed by us, is a multi-speciality tertiary hospital. With 110 operational beds and capacity to go to 250 beds, the hospital offers state of the art facilities and infrastructure in the region. We own 18% stake in Suchirayu Health Care Solutions which is the entity that owns the hospital infrastructure and assets, acquired for a nominal amount.

Extension of Jaipur cancer center, colocated to offer some Multispeciality services is being re-evaluated currently, we do not foresee any further Multispeciality hospitals to be added to our network in the future.

Hospital Network

Existing HCG cancer centers in India

As of March 31, 2020, we operate a network of 22 comprehensive cancer centers across nine states in India and 1 center in Nairobi, Kenya. AH of these centers are owned and operated by the Company, with some of the centers in joint-venture with oncologists or healthcare groups where majority ownership is with the Company. The following table sets out our existing comprehensive cancer centers as on the date of this report and their facilities and service offerings:

Facilities and Services

Location of the comprehensive cancer center Commencement of Operation (calendar year) Number of Beds3 Number of RT- LINACs Number of Operation theatres8 Number of PET- CT scanners Laboratory
Karnataka Cluster
Bengaluru - Double Road 1989 51 1 4 - Yes10
Shimoga1 2003 52 1 3 - Yes11
Bengaluru - Kalinga Rao Road2 2006 225 37 7 2 Yes10
Bengaluru - MS Ramaiah Nagar 2007 22 1 1 1 Yes11
Hubli 2008 70 1 2 1 Yes11
Gulbarga 2016 85 1 3 - Yes10
Gujarat Cluster
Ahmedabad1 2012 101 2 4 1 Yes10
Baroda1 2016 69 1 3 1 Yes
Bhavnagar Oncology 2018

-12

1 3 - Yes
East India Cluster
Ranchi 2008 84 1 2 - Yes
Cuttack 2008 116 2 3 1 Yes10
Kolkata1 2019 88 1 2 14 Yes10
Maharashtra Cluster
Nasik1 2007 77 1 3 1 Yes
Borivali1 2017 104 1 5 1 Yes10
Nagpur1 2017 115 1 4 1 Yes10
South Mumbai 2019 32 27 2 1 Yes10
Nashik Phase II1 2018 75 2 5 - Yes
Andhra Pradesh Cluster
Vijaywada 2009 705 2 4 - Yes10
Ongole 2012 196 1 2 - Yes
Vishakhapatnam 2016 88 1 2 1 Yes10
Others
Chennai 2012 35 1

-9

- Yes11
Jaipur 2018 45 1 3 1 Yes10

Notes

1. Operated through our Subsidiary.

2. Our comprehensive cancer center located at Kalinga Rao Road in Bengaluru is our center of excellence.

3. Number of beds includes ICU beds (as applicable).

4. We utilize PET-CT of our partner.

5. In addition, we have 120 self-care beds at our center in Vijaywada.

6. In addition, we have 61 self-care beds at our center at Ongole.

7. Includes a WBRRS system and Cyber Knife.

8. Includes major and minor operation theatres. Major operation theatres are used to perform complex surgeries and minor operation theatres are used to perform minor surgical procedures.

9. Surgical services are provided by our partner.

10. Laboratory services are provided by our

Investee company Strand Life Sciences.

11. Laboratory services are provided by our partner.

12. The overall bed capacity of the hospital is 73 beds.

As of March 31, 2020, we also had three freestanding diagnostic centers, of which one is located in Chennai and one each in Mangalore and Vijaywada, respectively. Our freestanding diagnostic centers are equipped with PET-CT scanners and provide radiology and diagnostic services. We established some of these centers under partnership arrangements. Our hospital in Kolkata commenced launch of operations as comprehensive cancer center including Bone-Marrow Transplant (BMT) facilities. This is one of the only private comprehensive cancer care in the region and provides access to high quality care to a large population who were otherwise travelling long distances for accessing cancer care

South Mumbai hospital was also fully operationalised in the year, offering comprehensive cancer care services. South Mumbai is one of the most advanced new cancer centers with substantial investment in radiation technology upfront. Not only does this center offer Radixact Tomotherapy,

but we have also launched the 1st Cyberknife in Western and Central India (across Maharashtra, Goa, Gujarat, Madhya Pradesh) at this center, which is HCGs 2nd Cyberknife overall across the network. Thus the new hospitals launched and operationalised in FY20 provide advanced and high-quality care targeting higher-economic segment located in attractive micro-markets within the large metro cities of Kolkata and Mumbai.

HCG cancer centers under development in India

New Centers

As on the date of this report we are in the process of establishing 2 new comprehensive cancer centers in India, which are under development. We expect these centers to commence operation by end of calendar year 2021 and 2022.

The table below sets out details of our comprehensive cancer centers under development in India as on the date of this report and their facilities and service offerings:

Facilities and Services
Location of the comprehensive cancer center Number of Beds Number of RT- LINACs Number of Operation Theatres3 Number of PET- CT Scanners Laboratory
Kochi 100 1 5 1 Yes
Gurgaon 85 1 3 1 Yes

Milann Centers

The following table sets out our existing Milann fertility centers as of March 31, 2020 and their facilities and service offerings:

Location Year Number of Beds IVF Endoscopy Operation Theatre Embryology Laboratory Neonatal ICU
Shivananda Circle, Bengaluru 1989 38 Y Y Y Y
Jayanagar, Bengaluru 2010 26 Y Y Y Y
Indiranagar, Bengaluru 2012 6 Y Y Y -
MSR Nagar, Bengaluru 2015 6 Y Y Y -
Delhi 2016 4 Y Y Y -
Chandigarh 2016 3 Y Y Y -
Ahmedabad 2018 6 Y Y Y -
Whitefield, Bengaluru 2018 6 Y Y Y -

Milann new center in Whitefield launched to strengthen presence and market share in Bengaluru region achieved break-even and continued to ramp-up. Milann center in Ahmedabad was restructured for strategic reasons

Risks & Concerns:

Risks are integral part of any enterprise. Efficient management of business risks is a key factor that determines growth, profitability and at times, even survival. In the last few years, the healthcare industry in India has been witnessing increased consolidation even among the larger players. Further, Government intervention, by way of an active regulatory regime, be it in terms of price control or capping of margins on medicines has been stepped up. State and Central Healthcare coverage schemes are also impacting industry margins. The risks that might impact our business, prospects, financial condition and results of operations, inter-alia includes:

a) Our results of operations in any given period can be influenced by a number of factors, many of which are outside of our control and may be difficult to predict, including political and economic conditions, the timing of opening and the number of new centres, changes in the competitive landscape in which we operate, government policies which may affect the pricing of our medical services, the operation of medical equipments, the licensing and operation of our centres and hospitals and the licensing of our medical staff, delays in executing our growth strategies due to a number of factors, delays in project execution resulting in significant time and cost overruns, delays or failure in receiving government approvals, unavailability of human and capital resources, or any other risks that we may or may not have foreseen etc.

b) The success of our business is dependent on our ability to maintain our relationships with our partners, to identify suitable partners and acquisitions targets and to undertake new partnership arrangements and acquisitions. We may be unable to continue to operate our centres and hospitals if there are any conflicts or disputes with our partners or if our partnership arrangements are not renewed at the end of their respective terms. Dr. Kamini Rao, who holds 49.90% equity interest in BACC Healthcare Private Limited (BACC), has exercised the put option with respect to her shareholding in BACC. While the Company is taking steps to address matters relating to leadership succession and transition in Milann, a non-timely implementation could adversely affect our business, financial condition and results and operations.

c) Our patients include patients who pay for their medical expenses themselves and patients who are beneficiaries of third-party payer agreements. If we do not receive payments on time from our payers, our financial condition, cash flows and results of operations may be materially and adversely affected. We make provisions for disallowances and doubtful trade receivables in our financial statements on account of the probability of not being able to collect the amounts billed to third party payers, based on our actual experience of disallowances and collection from each category of payers. Provisions for disallowances reduce our revenue from operations and provisions for doubtful trade receivables increase our expenses and thus reduce our profitability.

d) We face intense competition from other healthcare facilities. If we are unable to compete effectively, our business and results of operations may be materially and adversely affected. Our ability to effectively compete with our competitors is dependent on our ability to achieve high success rates in diagnosis and treatment and reduce risks and side effects in providing cancer care and fertility treatment, enhance the brand image and marketability of our "HCG" and "Milann" brands, increase new patient registrations across our HCG network, attract and retain specialist physicians, physicians and other skilled persons etc.

e) We are highly dependent on our promoters, key clinicians, partners and the members of our senior management team, including some who have been with us since the establishment of the first cancer centre in our HCG network, to manage our current operations and to meet future business challenges. The loss of the services of our senior management or key management personnel, including our senior specialist physicians and physicians, or if we are unable to find a suitable replacement for them, could seriously impair our ability to continue to manage and expand our business.

f) We may not realise the value of our goodwill or other intangible assets. We expect to engage in additional transactions that will result in our recognition of additional goodwill or other intangible assets. We evaluate on a regular basis whether events and circumstances have occurred that indicate that all or a portion of the carrying amount of goodwill or other intangible assets may no longer be recoverable, and is therefore impaired. Under the current accounting rules, any determination that impairment has occurred, would require us to write off the impaired portion of our goodwill or the unamortised portion of our intangible assets, resulting in a charge to our earnings. We have written off goodwill in the past, and any future write-off could have a material adverse effect on our financial condition and results of operations.

g) Currently, our Company conducts a portion of its operations through its subsidiaries. Further, a portion of our Companys assets is held by, and a part of its earnings and cash flows is attributable to, our subsidiaries. If earnings from our subsidiaries were to decline, our Companys earnings and cash flows would be materially and adversely affected. We cannot assure you that our subsidiaries will generate sufficient earnings and cash flows to pay dividends or otherwise distribute sufficient funds to enable our Company to meet its obligations, pay interest and expenses or declare dividends.

h) We rely on the financing arrangements with various banks and financial institutions to bridge the gap between cash flow from operating activities and investing activities (including put options of the partners). We cannot assure that the banks and financial institutions would fund us as per the planned timelines, and this could adversely affect our results of operations and financial condition.

We have revitalised our Risk Management framework with a detailed exercise aimed at a better and updated understanding of all our operational, financial, regulatory and strategic risks. Please refer to the section on Enterprise Risk Management forming part of the Management Discussion and Analysis Report to read more on the Risk Management framework.

Financial and Operating Highlights

Overview

FY2019-20 has been one of the toughest years in history of HCG, which started with unexpected margin cap on oncology drugs by the government, which not only impacted our revenues and margins negatively, but also allows patients who have affordability and capability to pay, gaining unfair benefit out of these caps and taking away the flexibility of ‘cross-subsidy to the needy patients, which is paramount for hospitals like HCG to offer consistent quality across different socio-economic segments of the population. HCG adopted the following measures to mitigate the negative impact from these drug margin caps, to some extent:

1. Supply-chain management initiatives including centralization, reduction of inventory, logistics and other related costs

2. Changes in mix of drugs being carried as part of HCG formulary

3. Initiatives to enhance package rates with services offsetting some of the drug price/margin impact while ensuring the cost of treatment to the patient remains within reasonable levels

HCG is constantly looking at improving the efficiency of its procurement and supply-chain towards matching patient needs and affordability while ensuring optimum

At the end of the year, the world witnessed the biggest medicaland economic distruption in recent history in form of COVID-19 pandemic breakout. HCG has also been impacted substantially by this, especially on account of fall in occupancies and procedures across hospitals. We witnessed substantial COVID impact on business operations across regions:

- Delay, postponement and/or cancellation of oncology, multispecialty and fertility procedures

- Reduction in footfalls of patients in Outpatients Department (OPD) impacting consultations, treatments and future registration volumes

- Complete shutdown of international travel resulting in cancellation of planned treatments of international patients At the time of this report we were seeing recovery at some of the hospitals but there is continued uncertainty on business on account of the increasing cases and lockdowns being implemented from time to time across various regions where HCG has presence.

Overview of Key Regions

Number of centers in Karnataka remained as 7, with no new center launched or in development for this region. Strong adoption of daVinci technology continues at our center of excellence in Bangalore, with over 376 CK radiosurgery procedures completed in the year. The number of beds operated in the Karnataka cluster remained the same at end of FY 20 at 615 as compared to 632 beds in FY 19. Karnataka cluster strategy of focusing on procedure and payer mix enhancement has resulted in Revenues increased from 3490 million in FY 19 to 3645 million in FY 20. ARPOB increased by 4.7% to 36.442/ day on the back of change in payer mix in the current year. With completion of expansion on pan-India basis as well as improving ramp- up in other geographies, share of Karnataka region as a percentage of total revenues for HCG Centers (excluding Fertility) continues to reduce proportionately, and was at 36% in FY 20 as compared to 38% in FY 19.

During the year under review, Gujarat cluster had 5 operational centers and operated 508 beds. Rajkot center launched in FY19, had ramped up to achieve break-even in Q3- FY20. The Bhavnagar center which was expanded to provide radiation treatment and offers comprehensive cancer care services in FY19 achieve strong scaling-up with good profitability. Baroda center, launched in May 2016, has continued to grow well having achieved break-even last year. While the revenue of the cluster has shown an increase of 13.8% to 3,037 million, the ARPOB is at 35,367/ day. We continue to strengthen our position in state of Gujarat with share of revenues of HCG Centers from this cluster at 30% in FY 20 and we remain positive about this region.

We had launched Phase II with addition of over 92 beds in Nashik in previous fiscal and is now arguably one of the largest private cancer care hospital in a non-metro region with advanced technology and comprehensive offerings. Our centers in Borivali in Mumbai and in Nagpur, both among the largest new centers launched in the last few years, are continuing to ramp up in volumes and revenues.

South Mumbai center was fully operationalised in FY20, and is one of the most advanced new cancer centers with substantial investment in radiation technology upfront. Not only does this center offer Radixact Tomotherapy, but we have also launched the 1st Cyberknife in Western and Central India (across Maharashtra, Goa, Gujarat, Madhya Pradesh) at this center, which is HCGs 2nd Cyberknife overall across the network. South Mumbai center is focused on advanced and high-quality care targeting higher-economic segment located in attractive micro-markets within Mumbai city.

Overall Maharashtra cluster clocked revenue of RS 1,390 million during FY20 as against revenue of RS 1,239 million in FY19.

Going forward, with a strength of about 368 beds across 4 centers in this region we are looking to dominate this region as one of the largest private oncology players in the state of Maharashtra. We continue to strengthen our position and scale, with share of revenues of HCG Centers from this cluster increasing from 9% in FY 18 to 14% in FY 20 and remain extremely positive about this region.

Currently we have Cuttack and Ranchi as the two mature centers in the East India cluster. These centers have seen good traction and we closed the year with revenues of RS 826 million in FY 20 as compared to RS 642 million in FY 19 which is an increase of 28.7% over the last fiscal. This was primarily on account of increase in the clinical team and increased business promotion expenses to strengthen our position further in the geography as well as expansions. Our new center in Kolkata, which commenced OPD services in Q4-FY19 had commenced full-service offerings in FY 20. As a comprehensive cancer center, including offering of Bone-Marrow Transplant (BMT) procedures, this is one of the only private comprehensive cancer care centers in the region to provide access to high quality care to a large population who are travelling long distances (including to Delhi and other states) for accessing advanced cancer care.

During the year under review, Andhra Pradesh cluster had 3 operational centers and operated 177 beds. The Vishakhapatnam center continues to ramp up well and is emerging as a leading center in the region. The revenues of the cluster have shown an increase of 16.1% to 782 million. With consolidation of our operations with our partner in Vijayawada last year, the center has ramped-up with increased profitability. We continue to strengthen our position in state of Andhra Pradesh, with share of revenues of HCG Centers from this cluster increasing to 8% in FY 20 as compared to 7% in FY 19 and remain positive about this region.

During the year, Milann business recovered their revenues as well as showed improved profitability as compared to previous year. Milann centers in Bangalore clocked higher revenues, primarily on account of improved digital marketing initiatives as well as ramp up of new center in Whitefield. Our Whitefield center has achieved operational break-even and continues to ramp-up well, with overall profitability of the Bangalore business showing improving trends. At the time of this report, Milann was in process of restructuring its Ahmedabad center for strategic reasons. Milann continues to be one of the leading IVF brands in India with strong focus on clinical excellence, training and education as well as one of the largest number of successful pregnancies and babies delivered in the last two decades. During Fiscal Years 2020 and 2019, our Milann fertility centers registered 5,481 and 5,688 new patients and performed 2,195 and 2,045 IVF procedures, respectively. Our Milann fertility centers also offer training programmes for fertility specialists and embryologists.

The financial statements of HealthCare Global Enterprises Limited and its subsidiaries, joint venture and associate (collectively referred to as "HCG" or the Company) are prepared in compliance with the Companies (Indian Accounting Standards), Rules, 2015 of the Companies Act, 2013 and Indian Accounting Standards (Ind AS).

The discussions herein below relate to consolidated statement of profit and loss for the year ended March 31, 2020, consolidated balance sheet as at March 31, 2020 and the consolidated cash flow statement for the year ended March 31, 2020. The consolidated results are more relevant for understanding the performance of HCG.

In accordance with the Companies (Indian Accounting Standards), Rules, 2015 of the Companies Act, 2013, HCG started following the Indian Accounting Standards (Ind AS) for preparation of its financial statements from April 1, 2016.

Significant accounting policies used for the preparation of the financial statements are disclosed in the notes to the consolidated financial statements.

Rs in million

Particulars

For the fiscal year ended March 31, 2020

Growth vis a vas FY19

For the fiscal year ended March 31, 2019

REVENUE (In millions) % of Revenue In % (In millions) % of Revenue
Revenue from operations
Income from medical services 10,076.3 91.4 13.7% 8,865.5 89.9
Income from sale of medical and non-medical items 729.7 6.6 -1.8% 743.3 7.5
Other operating revenue including government grant 150.4 1.4 -15.5% 177.9 1.8
Total Revenue from Operations including government grant 10,956.4 99.4 12.0% 9,786.7 99.2
Other income 69.7 0.6 -6.0% 74.1 0.8
Total Revenue 11,026.1 100.0 11.8% 9,860.8 100.0
EXPENSES
Purchases of medical and non-medical item 2,363.5 21.4 6.7% 2,214.9 22.5
Changes in inventory 35.1 0.3 -223.3% -28.5 -0.3
Employee benefits expense 2,080.3 18.9 12.7% 1,845.2 18.7
Finance costs 1,376.5 12.5 96.9% 699.1 7.1
Depreciation and amortisation expense 1,484.5 13.5 74.5% 850.9 8.6
Other expenses 4,755.6 43.1 5.6% 4,503.2 45.7
Total Expenses 12,095.5 109.7 19.9% 10,084.8 102.3
Loss before tax and exceptional items -1,069.4 -9.7 377.6% -223.9 -2.3
Exceptional Items - - - -
Share of (loss) of equity accounted investees -123.22 -1.1 -109.9 -1.1
Loss before tax -1,192.6 -10.8 -333.8 -3.4
TAX EXPENSE
(1) Current tax 24.55 0.2 -11.0 -0.1
(2) Deferred tax 37.34 0.3 -14.0 -0.1
Net tax expense 61.89 0.6 -25.0 -0.3
Loss after tax before share of profit/ (loss) of minority interest -1,254.5 -11.4 -308.8 -3.1
Share of minority interest -187.6 -1.7 -60.8 -0.6
Loss for the year -1,067.0 -9.7 -248.0 -2.5

Revenue

Our total revenue increased by RS 1,165.2 million (11.8%) as compared to Fiscal Year 2019 to RS 11,026.1 million in Fiscal Year 2020. This increase was primarily due to an increase in revenue from operations.

Revenue from operations

The revenue from operations increased by RS 1,169.6 million, or by 12%, from RS 9786.7 million in Fiscal Year 2019 to RS 10,956.4 million in Fiscal Year 2020. This was primarily contributed by an increase in ARPOB, revenue from additional facilities in existing centers and from new centers commenced. During the Fiscal Year 2020, Our Maharashtra, Gujarat and Karnataka clusters contributed additional revenues of RS 151 million, RS 369 million and RS 155 million respectively compared to Fiscal Year 2019. Our new centers, Baroda,

Bhavnagar and Rajkot in Gujarat, HubLi and Gutbarga in Karnataka, Visakhapatnam in Andhra Pradesh, Borivali, Nagpur and South Mumbai in Maharashtra and KoLkata in West BengaL and Jaipur in Rajasthan were the main contributors to the revenue growth. Revenue from our fertiLity centers was higher by 58 million during the fiscal year 2020 at RS 701.6 million during the year.

Other operating revenues

Our other operating revenues including Govt. grants was 150.4 million during fiscaL year 2020 as compared to RS 177.90 million in Fiscal Year 2019. Other operating income primarily consists of Income from Training and from other operationaL arrangements and the EPCG Income.

Other income

Our other income decreased by RS 4.41 million, or by 5.95%, from RS 74.1 million in Fiscal Year 2019 to RS 69.7 million in Fiscal Year 2020. Reduction in other income was primariLy due to Lower misc income in FY 20.

Expenses

Our total expenses increased by RS 2010.7 million, or by 19.9%, from RS 10,084.7 miLLion in FiscaL Year 2019 to RS 12,095.5 million in Fiscal Year 2020. The company has adopted IND AS 116 during the FY 2020 which has Led to an increase in Finance cost and Depreciations cost for the year. Increase in employment cost and other operating expenses is in line with the business growth.

Cost of consumption

Cost of consumption comprises of our expenses reLated to purchases of medicaL and non-medicaL items and changes in inventories of medicaL and non-medical items. Cost of consumption reLated to usage of drugs, medicaL and non-medical consumable items increased by RS 212.3 million, or by 9.7%, from RS 2186.4 million in Fiscal Year 2019 to RS 2398.7 million in Fiscal Year 2020.

Cost of consumption as a percentage of our total revenue decreased from 22.2% in FiscaL Year 2019 to 21.8 % in FiscaL Year 2020. This was primarily due to savings generated on account of centralisation of our procurement functions and our efforts in implementing a centralised formuLary of drugs and consumabLes.

Employee benefits expense

Our empLoyee benefits expense increased by RS 235.1 million, or by 12.7%, from RS 1845.2 miLLion in FiscaL Year 2019 to RS 2080.3 miLLion in FiscaL Year 2020. This increase was primarily due to additions of new centers - comprehensive cancer centers at BorivaLi as weLL as new center being managed by HCG at Kolkata and Jaipur.

Finance costs

Our finance costs increased by RS 677.2 million, or by 96.9%, from RS 699.1 million in FiscaL Year 2019 to RS 1,376.3 miLLion in Fiscal Year 2020 This increase is primariLy due to adoption of the new accounting standard IND AS 116 which become appLicabLe from 1st Apr 2019.

Depreciation and amortisation expense

Our depreciation and amortisation expense increased by RS 633.6 miLLion, or by 74.5%, from RS 850.9 miLLion in

FiscaL Year 2019 to RS 1484.5 miLLion in FiscaL Year 2020. This increase is primariLy due to adoption of the new accounting standard IND AS 116 which become appLicabLe from 01 ApriL 2019 and capitaLization of new centres in Mumbai and KoLkatta which became fully operational in current fiscal year.

Other expenses

Our other expenses increased by RS 252.4 miLLion, or by 5.6%, from RS 4503.2 miLLion in FiscaL Year 2019 to RS 4755.6 miLLion in FiscaL Year 2020. The increase in other expenses is Lower as compared to other years due to rentaLs cost being repLaced with Depreciation and Interest cost as a resuLt of adoption of new accounting standard IND AS 116 reLated to Leases. Other expenses Like medicaL consuLtancy charges, fueL and water charges, housekeeping and security expenses were in Line with our business growth.

Other expenses, as a percentage of revenue, have decreased from 45.7 % in FiscaL Year 2019 to 43.1% in FiscaL Year 2020 for reason mentioned above. Other key expense line items include:

Description Fiscal Year 2020 % of Total Revenue Fiscal Year 2019 % of Total Revenue
Medical consultancy charges 2,450.7 22.2% 2,113.8 21.4%
Rent 70.5 0.6% 563.2 5.7%
Repairs and maintenance: 349.0 3.2% 257.4 2.6%
Power, fuel and water 332.6 3.0% 288.2 2.9%
House keeping and security 281.9 2.6% 236.7 2.4%
Lab charges 385.0 3.5% 371.0 3.8%
Advertisement, Publicity & Marketing 193.3 1.8% 121.9 1.2%

Medical consultancy charges increased by RS 336.9 miLLion or by 15.9% from RS 2113.8 million to RS 2450.7 million in fiscal year 2020 due to opening of new centers and hence growth in numbers of patients treated.

Our Rent including Lease rental reduced from RS 563.2 million in fiscal year 2019 to RS 70.5 million in fiscal 2020. The company had adopted IND AS 116 wef

1st ApriL 2019 reLated to Leases which resuLted in change in accounting treatment of rentaL expenses.

Our repairs and maintenance expenses increased by RS 91.6 miLLion from RS 257.2 million in fiscal year 2019 to to RS 349.0 million in fiscal year 2020.As a % of revenue, the same was at 3.2% in fiscaL year 2020 when compared to 2.6% in fiscal year 2019.

Our power, water and fuel expenses increased by RS 44.4 million from RS 288.2 million in fiscal year 2019 to RS 332.6 million is fiscal year 2020. The effective increase year on year was 15.4% over previous year.

Our house-keeping and security expenses increased by RS 45.2 million or by 19.1% from RS 236.7 million in fiscal year 2019 to RS 281.9 million in fiscal year 2020. However, as a % of revenue the same was at 2.6% in 2020 as compared to 2.4% in 2019.

Loss before tax and exceptional items

Our loss before tax and exceptional items was H (1069.4) million in Fiscal Year 2020 as compared to a loss before tax amounting to H (223.9) million in Fiscal Year 2019.

Share of (loss) of equity accounted investees

Our investments in HealthCare Global Africa Private Limited, held by HCG (Mauritius) Private Limited as well as investment in Strand Life Sciences are accounted under equity method as per Ind AS 28 ‘Investment in Associates and Joint Ventures have resulted in loss of RS 123.2 million in the current fiscal year.

Tax expense

We recorded current tax of 24.6 million and deferred tax of 37.3 million in Fiscal Year 2020 as a result of which total tax expense for FY 20 was 61.9 million. We recorded current tax credit tax of 11.0 million and deferred tax credit of 14.1 million in Fiscal Year 2019 as a result of which net tax credit for FY 19 was 25.0 million.

Loss after tax before share of profit/ (loss) of minority interest

Our loss after tax before share of profit/ (loss) of minority interest was RS 1254.5 million in Fiscal year 2020 as compared to a loss of RS 308.8 million in fiscal year 2019.

Share of profit/ (loss) of minority interest

Minoritys share of loss was RS 187.6 million in Fiscal Year 2020 as compared to a loss of RS 60.8 million in Fiscal Year 2019. This was primarily on account of increased share of loss contributed by new units operationalized during the year where HCG has majority stake.

Loss for the year

As a result of the foregoing, our net loss for the year was (RS 1067.0) million in Fiscal Year 2020 as compared to a net profit/(loss) amounting to (RS 248.0) million in Fiscal Year 2019.

ASSETS

Rs in million

As at March 31,

Particulars 2020 2019
Non-current assets
Property, plant and equipment 9,271.1 8,515.4
Capital work in progress 460.9 1,526.3
Goodwill 1,093.4 1,093.4
Right of Use Asset 5,776.2 -
Other intangible assets 320.1 93.3
Investments in equity accounted investees 267.6 384.4
Financial assets
- Investments 73.5 106.1
- Loans receivable 515.9 367.3
- Other financial assets 292.9 217.5
Deferred tax assets (net) 261.4 268.6
Income Tax assets (net) 817.8 553.9
Other non-current assets 413.7 679.7
Total non-current assets 19,564.5 13,805.9
Current assets
Inventories 232.6 2677
Financial Assets
- Investments
- Trade receivables 1,856.6 1,568.9
- Cash and cash equivalents 317.5 205.2
- Bank balance other than cash and cash equivalents above 2.7 3.5
- Loans 54.4 142.1
- Other financial assets 203.9 242.5
Other current assets 299.5 299.7
Total current assets 3,037.8 2,729.6
Total assets 22,531.7 16,535.5

We had property, plant and equipment amounting to RS 9271.1 million as at March 31, 2020 and RS 8515.4 million as at March 31, 2019. Our property, plant and equipment assets primarily consist of medical equipment, buildings, land, leasehold improvements, furniture and fixtures and vehicles.

Increase in our property, plant and equipment assets is primarily on account of additions to medical equipments, lab and data processing equipments, leasehold improvements, furniture and fittings and office equipments in relation to commencement of operations of our comprehensive cancer centers at Borivalli, Nagpur and Kolkatta.

Our Capital Work-in-progress of RS 460.9 million as of March 31, 2020 was primarily on account of new projects which are under development that include comprehensive cancer care centers in Privat in Delhi.

We had goodwill amounting to RS 1,093.4 million as of March 31, 2020 and RS 1,093.4 million as of March 31, 2019. Our goodwill comprises payments made to our partner for securing exclusive rights to operate a center, and pertains to acquisitions of our Milann fertility centers, HCG Medi-Surge and City Cancer Center in Vijayawada.

The Company had adopted the new accounting standard IND As 116 pertaining to Leases which become effective from 1st April 2019. As a result, of this adoption, all long term rental agreements where reworked based on committed tenure and a new Asset Right-to-Use was created amounting to 5776.2 million during the year. The corresponding liability was created as "Lease liabilities" under "Non current liability" and "current liability".

Our Investments in equity accounted investees primarily consist of investments made in Healthcare Global Africa Private Limited amounting to RS 219.0 million as well as Strand Life Sciences Private Limited amounting to RS 48.6 million

The increase in our other intangible assets from RS 93.3 million as of March 31, 2019 to RS 320.1 million as of March 31, 2020 was primarily on account of software licenses for ERP (SAP) and Hospital Information Systems (HIS).

We had non-current investments of RS 73.5 million as of March 31, 2020 and RS 106.1 million as of March 31, 2019. We had non-current loans amounting

RS 515.9 million primarily on account of Inter Corporate Deposit of RS 105 million and security Deposit of 420.9 as of March 31 2020.

We had other non-current financial assets of RS 222.2 million as of March 31, 2020 and RS 217.5 million as of March 31, 2019. This primarily comprises of Term Deposits amounting to RS 165.0 million as on March 31, 2020.

Our Deferred Tax Assets decreased to RS 261.4 million as of 31 March 2020 from RS 268.6 million as of 31 March 2019. Our income tax assets increased to RS 817.8 million as of 31 March 2020 from RS 553.9 million as of 31 March 2019 which is primarily on account of TDS from our customers pending assessments and refunds in our holding company and our subsidiaries.

We had other non-current assets amounting to RS 413.7 million and RS 679.9 million as at March 31, 2020 and 2019 respectively. The decrease is on account of decrease in our capital advances by RS 82.3 million and decrease in prepaid expenses by RS 183.7 million.

We had outstanding net trade receivables amounting to RS 1856.6 million and RS 1568.9 million as at March 31, 2020 and 2019 respectively. We made provisions for doubtful trade receivables amounting to RS 411.2 million and RS 378.8 million as at the end of March 31, 2020 and 2019 respectively. Our trade receivables comprise receivables from government payors, corporate bodies, insurers and patients who pay directly to us.

We had loans amounting to RS 54.4 million as of March 31, 2020 as against RS 142.1 million as of March 31, 2019. The decrease in loans was primarily on account of inter corporate deposits of RS 105 million which moved from current to non-current. We had other current financial assets of RS 203.9 million as of March 31, 2020 as against RS 242.5 million as of March 31, 2019 and other current assets of RS 299.5 million as of March 31, 2020 as against RS 2997 million as of March 31, 2019. Our other current financial assets primarily comprise of unbilled receivables amounting to RS 155.7 million and Term Deposits amounting to RS 64.9 million, while other current assets consist of advance to vendors amounting to RS 183.9 million, prepaid expenses of RS 62.4 million.

Liabilities and Indebtedness

Liabilities

The following table sets forth the principal components of our liabilities as at March 31, 2020 and 2019

Liabilities

Rs in million

As at March 31,
Particulars 2020 2019
Non-current liabilities
Financial Liabilities:
- Borrowings 5,296.1 5,169.1
- Lease Liabilities 6,091.7 -
- Other financial Liabilities 623.7 228.4
Provisions 72.8 56.4
Deferred tax liabilities 69.8 39.7
Other non current liabilities 422.3 346.8
Total non-current liabilities 12,576.5 5,840.4
Current liabilities
Financial Liabilities:
- Borrowings 936.6 499.9
- Lease Liabilities 215.0 -
- Trade payables 1,535.7 1,527.5
- Other financial liabilities 2,653.6 3,049.9
Other current liabilities 304.5 322.8
Provisions 90.5 72.8
Income tax liabilities (net) 21.7 0.3
Total current liabilities 5,757.5 5,473.1
Total liabilities 18,334.0 11,313.5

A significant portion of our liabilities comprise of non-current borrowings. We had non-current borrowings amounting to RS 5296.1 million and RS 5169.1 million as at March 31, 2020 and 2019 respectively.

Our other non-current financial liabilities as at March 31, 2020 was 623.7 million from 228.4 million as at March 31, 2019. The increase in non-current financial primarily on account of classification of written put option of MediSurge to non-current.

Our other noncurrent liabilities primarily comprise of Deferred Government grant RS 422.3 million as of March 31, 2020

We had outstanding trade payables amounting to RS 1,535.7 million and RS 1,527.5 million as at March 31, 2020 and 2019 respectively. These primarily comprised payables towards purchase of drugs, consumables, various services including medical consultancy charges, legal and professional fees, housekeeping charges and security charges.

We had other current financial liabilities amounting to RS 2,653.6 million and RS 3,049.9 million as at March 31, 2020 and 2019 respectively. These primarily comprised current maturities of long-term debts amounting to RS 926.3 million and RS 910.0 million, Supplier factoring facility

of RS 443.5 million and 289.15 million, and payable on purchase of fixed assets amounting to 116.0 million and 319.5 million as at March 31, 2020 and 2019 respectively. There was also an amount of 481.8 million in fiscal year 2019 towards put option of MediSurge which has been classified to non-current in fiscal year 2020.

Our other current liabilities amounted to RS 304.5 million and RS 322.8 million as at March 31, 2020 and 2019 respectively. This was primarily comprised of advance from customers amounting to RS 154.7 million and RS 210.4 million and Statutory remittances amounting to RS 109.1 million and RS 73.9 million as at March 31, 2020 and 2019 respectively.

Liabilities

Rs in million

As at March 31,

2020 2019
Secured loans
- Term loans from banks 3,438.8 2,405.5
- Term loans from other parties 1,610.3 1,615.9
- Vehicle Loans 4.1 6.3
- Working capital loans 905.4 299.9
Total secured loans 5,958.5 4,327.6
Unsecured loans
- Deferred payment liabilities 1,117.9 1,481.3
- Long term maturities of Finance Lease obligations - 563.7
- From Other parties 51.4 6.4
- Loan from Related parties 31.2
- Loans repayable on demand from Banks - 200.0
Total unsecured loans 1,200.5 2,251.4
Total borrowings 7,159.0 6,579.0
Total borrowings represented by:
Long-term borrowings 5,296.1 5,169.1
Short-term borrowings 936.6 499.9
Current maturities of long-term borrowings (included in other current liabilities) 926.3 910.0
Total 7,159.0 6,579.0

To fund our working capital and capital expenditure requirements, we have entered into various loans and facility agreements with various financial institutions. As at March 31, 2020, we had RS 7159.0 million of indebtedness outstanding. All of our indebtedness outstanding as at March 31, 2020 was denominated in Indian Rupees except for U.S.$ 10.58 million and Euros 3.85 million in outstanding loans taken from various equipment vendors.

Summary of cash flow statement:

Particulars For the Fiscal year ended March 31, 2020 For the Fiscal year ended March 31, 2019
Net cash flow generated from operating activities 1,301.4 985.0
Net cash flow used in investing activities -1,013.8 -2,382.0
Net cash flow generated from/(used in) financing activities -584.3 835.1
Net cash flows used for the year -296.7 -561.8

in trade receivables by RS 325.8 million and an increase in inventories by RS 35.1 million. There was also an outflow of 140.7 million on account of changes in loans and other financial assets. After adjusting for changes in working capital and a net income tax payment amounting to RS 267.1 million, our net cashflow generated from operating activities was H

1301.4 million for the fiscal year ended in March 2020.

Cash flow used in investing activities

For the fiscal year ended March 31, 2020, our net cash flow used in investing activities was RS 1013.8 million. This reflected payments for property, plant and equipment including margin money deposits amounting to RS 1078.1 million primarily relating to our completed projects like Borivali, Nagpur and our recently completed comprehensive cancer care centers in Nashik Phase II, Jaipur and Kolkata.

Cash flow generated from operating activities

For the fiscal year ended March 31 2020, we had loss before tax of H (1192.6) million and our operating profit before working capital changes was

RS 1795.0 million. Our cash generated from operations after adjusting for changes in working capital was RS 1568.5 million. This reflected cash inflow on account of an increase in trade and other payable by RS 181.7 million; and cash outflow on account of an increase

Cash flow used in financing activities

For the fiscal year ended MarcRs 31, 2020, our net cash flow used in financing activities was RS 584.2 million. This was primarily on account on Interest paid amounting to RS 1145.2 million including interest on lease liabilties which was partially offset by proceeds from net borrowings RS 322.3 million and issue of equity shares amounting to RS 203.2 million

For the fiscal year ended March 31

Key Ratios 2020 2019
Ratio- Leverage
Debt/Equity 1.7 1.3
EBIDTA/Interest * 1.3 1.9
Ratio Profitability
Operating Profit Margin % ** 16.2% 13.4%
Net Profit Margin % -9.7% -2.5%
Return on equity % -24.9% -5.0%
RoCE % 1.8% 4.3%
Ratios Operations
Inventory Turnover Ratio 9.6 8.6
Current Ratio 0.5 0.5
Ratio - Per Share
EPS -12.1 -2.8
P/E -6.2 -76.5
Market Capitalisation/Total Revenue*** 0.6 1.9

* EBIDTA includes other income

** Operating profits includes other income and income from govt. grants

*** Based on closing share price as on March 31st 2020 on NSE

Notes to key ratio:

1 Return on Equity: PAT/Average

Shareholders Equity

2 RoCE: EBIT/Average Capital

Employed

3 Inventory Turnover Ratio: COGS/ Average Inventory of FY 19 and FY 20

4 Current Ratio: Current Assets/

Current Liabilities

5 EPS: PAT post minority interest/Nos. of diluted shares outstanding

6 P/E: Closing share price as on March 31st 2020 on NSE/EPS

7 EBIDTA/Interest: FY 20 includes Intererest on lease liability due to adoption of IND AS 116, hence not comparable to FY 19

Credit Rating:

The long-term credit rating of HCG for FY 20 has been maintained at A (-) by ICRA. (associate of Moodys Investors services) ‘A Rating for Instruments signifies adequate degree of safety regarding timely servicing of financial obligations. The outlook on the long term rating has been revised to Stable.

Internal Control System and Their Adequacy

At HCG, management has the overall responsibility to design, implement and monitor an effective process and control environment that is aligned to the inherent risk profile of the organization. Management is responsible for the identification, evaluation and management of significant risks. The Company has institutionalized a framework to focus on key risks that might impact achievement of business objectives. The framework entails a structured process to identify, assess and monitor the risks and initiate suitable mitigation strategies for effective risk management. The Board monitors exposure to these risks with the assistance of various committees and senior management.

The internal control framework is designed to manage and mitigate the risks faced by the Company. The company has designed and implemented an entity level control framework setting the control philosophy and principles which guide the organization policy and operating process framework.

The organizational role, responsibility and accountability structures with appropriate performance oversight processes are defined and aligned to provide an enabling environment to the business units and functions to operate as per the design control environment. Review and oversight procedures are designed to monitor effective adherence as per design.

The internal control system is commensurate with the nature of business, size and complexity of operations and has been designed to provide reasonable assurance on the achievement of objectives in effectiveness and efficiency of operations, reliability of financial reporting and compliance with applicable laws and regulations.

As a part of overall governance mechanism around financial reporting and as stipulated under the Companies Act, 2013, Internal Controls over Financial Reporting (ICoFR) framework have been institutionalized. The adequacy and operating effectiveness of the internal controls affecting financial reporting is assessed by the management.

The internal control framework is supplemented with an internal audit program that provides an independent view of the efficacy and effectiveness of the process and control environment and supports a continuous improvement program. The internal audit program is managed by an Internal Audit function with direct reporting to the Audit and Risk Management Committee of the Board.

The scope and authority of the Internal Audit Function is derived from the Audit Charter approved by the Audit and Risk Management Committee of the Board. The Internal Audit function develops an internal audit plan to assess control design and operating effectiveness, as per the risk assessment methodology.

The Internal Audit function provides assurance to the Board and management that a system of internal control is designed and deployed to manage key business risks and is operating effectively.

Management provides action plans to address the observations noted from the internal audit reviews and action plans are monitored towards resolution under the supervision and guidance of the Audit and Risk Management Committee.

The Audit and Risk Management Committee reviews the adequacy and effectiveness of the Companys internal control environment and monitors the implementation of internal audit observations.

ENTERPRISE RISK MANAGEMENT

HCG operates in a business environment that is characterized by increasing competition and market uncertainties. It is exposed to a number of risks in ordinary course of business. This is inevitable, as there can be no entrepreneurial activity without the acceptance of risks and associated profit opportunities.

Accordingly, risk management activities at HCG are not aimed at eliminating all risks in their entirety, but rather at helping to identify and assess the risks the company encounters in its daily business. This allows the company to manage the risks in an efficient manner to take informed decisions, to exploit the opportunities available and thereby enhance the value of the company and its stake holders.

Risk Management Framework:

The Risk Management framework has been developed and approved by senior management in accordance with the business strategy.

The key elements of the framework include Risk Strategy, Risk Structure, Risk Portfolio, Risk Measuring & Monitoring and Risk Optimizing. The implementation of the framework is supported through criteria for risk assessment and categorization, risk escalation matrix, Risk forms & MIS.

The overall objective of risk management process is to optimize the risk-reward relationship.

Risk Categorization:

Risk Categorization into different buckets help to prioritize risks, within an entity. It assists management in ensuring that they have captured all categories of organizational risks, not just traditional, financial hazards.

Risk Measuring and Monitoring

A risk review involves the reexamination of all risks recorded on the risk assessment repository to ensure that the current assessments remain valid and review the progress of risk reduction actions.

Risk Communication and Escalation need to be embedded in the culture of an organization to make it effective. At HCG, the Board of Directors drive the Risk Management Process through its Audit and Risk Management Committee by adopting the following communication and escalation procedure:

Employees continuously identify needs to update/modify the risks and escalate them to their respective Unit/Functional Head.

The respective Unit/ Functional Head or designated personnel collate the identified risks/ modifications and forward the same to the respective Risk Coordinator for collation and escalation to Risk Management Committee. Standard forms for identification/ modification/ deletion of risks are used for this purpose.

The Risk Coordinator collates the risks and forwards the same to the Risk Management Committee on a periodic basis. The Risk Management and Steering Committee (RMSC) is responsible for reviewing and validating the risks/ modifications for all departments. The RMSC categorizes and rates the risks (using the risk appetite). Risk Owners for each risk are identified and approved by RMSC.

Risk Owners may be at any level in the organization depending on the nature and categorization (e.g. strategic, operational, compliance or reporting) of the risk.

Designated Risk Coordinator updates the Risk Assessment Repository on the basis of the approvals obtained from the RMSC.

RMC provides half yearly updates to the Chairman & Board of Directors for key risks, their assessment and status of action plans for mitigating these risks.

The escalation of key risk information will assist in ensuring that significant risks identified at the line level are available for consideration in the context of the overall operations of the business.

Risk Management Organization

A robust organizational structure for managing and reporting risks is a prerequisite for an effective risk management process. The organization structure needs to be supported by clearly defined non - overlapping roles and responsibilities which are communicated and understood.

In order to ensure that this policy is followed in letter and spirit, a Risk Management and Steering Committee (RMSC) is constituted comprising of Key personnel nominated from the following departments:

• Operations

• Finance

• Compliance

• Legal

• Procurement & Pharmacy

• IT

• HR

QUALITY CONTROL AND AUDIT

Monitoring the quality of our patient care is one of our prominent focus. We take action to identify and eliminate the recurrence of any unexpected or adverse incidents. As part of that, we embrace patient feedback, self-examination and peer review. We use these benchmarks to help us deliver high quality patient care in a safe environment and look at ways to continually improve our patient experience.

We review and publish our inpatient services performance against a number of important measures including hygiene, infection rate and patient satisfaction. We use these benchmarks to help us deliver high quality patient care in a safe environment and look at ways to continually improve our patient experience.

We are subject to various internal and external audits, incident reporting and feedback monitoring processes. Internal audits are carried out by members of our staff at each cancer center on a half-yearly basis. Our internal audits are based on standard requirements set out by NABH and may impose corrective and preventive actions, as necessary, for any non-compliance with such requirements.

The quality department of each cancer center reviews all feedback received from patients daily and takes measures to appropriately address such feedback. Incident reports are collected and analysed by the quality departments weekly and appropriate remedial measures are undertaken.

External audits are carried out by NABH at our center of excellence in Bengaluru and at HMS. External audits by NABL and CAP had been carried out at Triesta central reference laboratory. External audits by NABH, NABL and CAP are based on the standards set out by these bodies and are voluntary. The external accrediting bodies also set out certain quality standards, which are monitored by our internal quality departments and a monthly report of quality indicators is presented to our corporate quality team, which oversees the quality functions of our Company. Further, our internal quality teams document the policies and procedures mandated by the accrediting bodies. The accrediting bodies verify these policies and procedures. Our corporate quality team also develops specific quality indicators to monitor clinical outcomes based on documented clinical procedures.

In addition to the above, HCG has also developed case specific clinical protocols for the majority of the oncology cases that we see in the HCG Network. This standardization has helped us in achieving optimum level of care in all units without having to compromise.

Each cancer center also has other committees which are responsible for quality control, such as hospital infection control committees, pharmacy and therapeutics committees, employee grievances committees and ethics committees.

From time to time, AERB also conducts audits at our cancer centers relating to quality assurance of radiation equipment, radiation safety measures taken by our cancer centers, any changes in the representations made by our cancer centers while obtaining the AERB approval and the adequacy of the skills and number of manpower and resources at each cancer center.

We also have a quality management system structured as per the

ISO9001:2008 guidelines for quality management systems across our Milann fertility centers. The key quality assurance practices at our Milann fertility centers include standardised treatment and management protocols, service delivery by experts in reproductive medicine, globally accepted medical equipment, regular calibration and maintenance of key equipment, quality control processes such as standardised processes for tests and audits.

Our Milann fertility centers undertake weekly clinical audits aimed at enhancing clinical outcomes, patient safety and care. The clinical audit process reviews and evaluates medical management in line with clinical and scientific best practice standards, clinical success rates, possible causes and courses of action for unsuccessful outcomes, quality metrics for clinical, embryology and laboratory outcomes and policies and action plans for continuous quality improvement.

Employee surveys are carried out twice a year by the human resource departments of each cancer center and the results of such surveys are shared with the quality departments and the management team of each cancer center for remedial measures.

CLINICAL EXCELLENCE

Clinical excellence is the core premise around which our healthcare operations are structured. Our Group continues to deliver the highest standards of clinical outcomes across all our business verticals. Our standardised clinical protocols for diagnosis and treatment of cancer patients have allowed us to manage the large volume of patient cases across our HCG network with successful clinical outcomes. The five-year survival rate for breast cancer patients at our HCG network is comparable to U.S. benchmarks. (Source: Delivering World-Class

Health Care, Affordably, published on Harvard Business Review by Vijay Govindarajan and Ravi Ramamurti, dated November 2013). We believe that we are able to attract and retain highly skilled specialist physicians due to our reputation for clinical excellence, our technology-focused approach, the exposure and experience we provide in relation to clinical best practices and the training programmes we offer for their ongoing development. We believe that the abilities and expertise of our team of specialist physicians differentiate us relative to our competitors.

Department of Clinical excellence at HCG has been instrumental in synergizing the clinical functions at all HCG hospitals. This department under quality and strategy aims to improve the quality of clinical care and usher in uniform standards of care across all HCG centers. This has been facilitated through a systematic change in people, process, and function. Credentialing and privileging have been synergized with the functions and quality indicators of each department thereby ushering a sense of accountability. Identifying training needs and skill development has ensured improvement at the people level. At the process level upgradation of medical record departments, registry, implementation of uniform documentation practices across centers, clinical audits and deficiency monitoring has helped set high standards of clinical practice. Mapping our own clinical outcomes and constantly evolving HCG treatment guidelines has paved way for standardization of clinical pathways and improvement in the functioning of the departments. Research leveraged with genomics has ushered in an era of precision medicine at HCG. Biorepository specimens and the accompanying clinical repository is a treasure trove for novel drug targets and discovery. The department of clinical excellence strives towards an improvement in clinical care and health of the patients transcending beyond oncology. The vision is to make peoples lives better than what they had before a cancer diagnosis using caring hands, clinical expertise, and high-end technology.

The Department of Clinical Excellence facilitates:

• Implementation of Uniform documentation standards

• Implementation of Uniform treatment protocols and clinical pathways

• Centralized Cancer registry

• Centralized Clinical repository

• Centralized Biorepository

• R&D activities and Investigator Initiated Trials

• Documentation of outcomes

• Development of clinical audit standards across departments

• Developments of clinical forms

HCG was the host institution to the Second International Cancer Congress (ICC-2017), the largest conglomeration of oncologists in the country. The second chapter of the Indian Cancer Congress (ICC) 2017 at the Clarks Convention Centre in Bengaluru. The aim of the conference, jointly organized by its four major national oncology partners and the Government of Karnataka, was to provide a platform and spread cancer awareness through various initiatives. The theme of the conference was Insight, Innovation, and Integration. The conference also saw active participation from Ministry of AYUSH in launching the National Integrative Cancer program (ICAP). The conference was a scientific treat with around 5000 delegates and several hundred international speakers, discussing and sharing advances in various aspects of cancer Care. The conference saw an active participation from HCG Oncologists in coordinating various specialty symposia and presenting several research publications.

HUMAN RESOURCES MANAGEMENT - EMPLOYEE RELATIONS AND DEVELOPMENT

The Human Resources (HR) department at HCG is driven by the mission to help HCGians realize their potential - to develop, grow and achieve their purpose, build the right culture and capabilities to enable us to serve our patients and to make HCG the best place to work for passionate, innovative people who want to make a difference.

We believe that we are able to attract and retain highly skilled specialist physicians due to our reputation for clinical excellence, our technology - focused approach, the exposure and experience we provide in relation to clinical best practices and the training programmes we offer for their ongoing development. We believe that the abilities and expertise of our team of specialist physicians differentiate us relative to our competitors. Several of our specialist physicians have received accolades and awards in recognition of their contribution to their respective fields of medicine.

Our senior management team has extensive experience in the management of healthcare businesses. We believe the experience, depth and diversity of our management team, complemented by the clinical expertise and relationship base of our physician Promoters, is a distinct competitive advantage in the complex and rapidly evolving healthcare industry in which we operate.

In order to maintain the quality of care we offer to our patients; our physicians and other medical staff must pursue a rigorous programme of continuing education. We offer a wide range of health education sessions and seminars on-site at our centers and hospitals to our physicians and medical staff, as well as to healthcare professionals outside our network of centers and hospitals. The sessions are led by expert physicians and other healthcare professionals from our network of centers and hospitals, who have firsthand knowledge of the latest clinical developments and research. We believe that these sessions provide an important forum to discuss recent developments to improve patient care and teach our physicians and medical staff new skills. In addition, we believe that they also provide an important opportunity for us to showcase the capabilities of our centers, hospitals and physicians and allow our physicians to grow their referral networks.

We also offer physicians the opportunity to consult with each other on challenging cases and treatments. For example, at our weekly tumour board discussions, we discuss selected complex cases from across our HCG network. This allows knowledge sharing and enables us to develop best practices and protocols which are implemented across our HCG network. We also evaluate the clinical activities of each center and hospital as part of our annual evaluations to ensure that high quality treatments or services are provided to patients.

Furthermore, we have a dedicated learning and development department, which continuously monitors the learning and development activities and ensures that a high quality of service is provided to our patients, thereby improving patient satisfaction. Our learning and development department provides continuing education for quality improvement to our employees. It identifies areas in which training is required, and develops an employee development plan for each employee, pursuant to which employees are provided various skill enhancement trainings.

At our center of excellence in Bengaluru, we offer a Diplomate of National Board medical residency programme for radiation oncology, medical oncology and pathology, in affiliation with the National Board of Examination.

In addition, we offer various certificate medical and nursing courses on oncology, a paramedical course on advanced radiotherapy technology, a laboratory research course and various other medical and non-medical courses for our employees.

Our Milann fertility centers also offer a post-graduate fellowship programme in reproductive medicine services to fertility specialists, in affiliation with the National Board of Examination. Additionally, our Milann fertility centers offer training programmes in IVF for fertility specialists and embryologists.

We believe that these education and training programmes are critical capabilities that we have and these enable us to develop an in house trained team of specialist physicians.

FORWARD LOOKING STATEMENT

Except for the historical information contained herein, statements in this discussion contain contains certain "forward-looking statements". These forward-looking statements generally can be identified by words or phrases such as "aim", "anticipate", "believe", "expect", "estimate", "intend", "objective", "plan", "project", "will", "will continue", "will pursue" or other words or phrases of similar import. Similarly, statements that describe our Companys strategies, objectives, plans or goals are also 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 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.