Krishna Institu. Management Discussions

Indian healthcare sector on a robust growth trajectory:

The Indian healthcare delivery market is estimated to reach ~Rs 5tn in value terms by FY22-end, with growth being contributed by a low base and pent-up demand from deferred treatments in FY21. The in-patient department (IPD) is likely to account for nearly 70% (in value terms) and out- patient department (OPD) the balance. Moreover, with renewed impetus from schemes like Pradhan Mantri Jan Aarogya Yojana (PMJAY) and the governments sharpened focus on healthcare, the sector is expected to grow at 15-17% CAGR to Rs 7.67trn in FY25.

Immense scope for growth:

The Indian hospital industry has grown over the years driven by an increase in per capita income, rising awareness on diseases and their impact, and changing lifestyles. However, the rate of growth is much lower compared to global standards primarily because of limited government participation and inadequate number of qualified healthcare professionals. To meet the needs of its 1.3 billion people, India needs to develop its healthcare infrastructure quickly and efficiently.

Opportunity for private sector players:

Opportunity for private sector players: The government has limited resources to drive growth in the hospital sector and hence, it is encouraging the participation of private players through PPPs. It is also creating a favourable environment by boosting medical tourism and implementing schemes such as Ayushman Bharat and National Digital Health Mission. Private participation in the healthcare sector is estimated at 58% in FY21 and projected to jump to 66% by FY22 and to 73% by FY25.

Pandemic hurts hospital sector:

Hospitals saw a drop in patient footfalls during the COVID- led lockdown as elective surgeries were deferred and revenue flow from medical tourism - both domestic and international - stopped. Though there was an opportunity in the form of coronavirus treatment, the upside was limited because of small margins. This impacted hospital cash flows. However, this was just a temporary blip with the sector likely to see robust growth in the medium term.

Emerging technologies to change industry landscape:

India will go through a ‘digital health revolution with introduction of technologies such as wearable tech, virtual reality, telemedicine, robotics and artificial intelligence. Many healthcare companies have started adopting these technologies, which in turn will improve patient engagement, field force effectiveness and supply chain management.


Significant need for expansion of hospitals

Healthcare sector to bounce back after a temporary slowdown due to COVID-19.

The healthcare sector reeled under the impact of COVID-19 in FY21, growing from Rs 2.5trn to Rs 4.3trn - only at an 11-13% CAGR over FY16-FY21. However, growth is likely to bounce back in FY22 to Rs 5trn due to pent-up demand as patients were delaying elective surgeries and movement was restricted during the lockdown. Also, the government is coming up with policies such Ayushman Bharat; hence, the overall healthcare industry is projected to grow from Rs 5trn to Rs 7.7trn - a CAGR of 15-17% between FY22 and FY25.

Hospital industry generates highest revenues in healthcare sector

The healthcare sector comprises various industries such as hospitals, diagnostics, pharmaceuticals and medical devices. As per CRISL Research, in FY20, the hospital industry had the highest revenue contribution towards the healthcare sector at 61%, followed by domestic pharmaceuticals at 20%, diagnostics at 10%, and medical devices at 9%.

Healthcare expenditure - India languishes

According to the Global Health Expenditure Database compiled by the World Health Organisation (WHO), Indias expenditure on healthcare was 3.5% of GDP in 2018. In terms of healthcare spending (percentage of GDP) as of 2018, India trails not just developed countries such as the US and UK, but also developing countries like Brazil, Nepal, Vietnam, Singapore, Sri Lanka, Malaysia, and Thailand.

India lacks adequate beds, healthcare professionals

The adequacy of a countrys healthcare infrastructure and personnel is a barometer of its quality of healthcare. India accounts for nearly a fifth of the worlds population, but has an overall bed density of merely 15, with the situation far worse in rural than urban areas. Indias bed density not only falls far behind the global median of 29 beds per 10,000 people, but also lags that of other developing countries such as Brazil (21 beds), Malaysia (19), and Vietnam (26), as of 2018.

Moreover, there is a paucity of qualified healthcare professionals. At 9 physicians and 17 nursing personnel per 10,000 people, India trails the global median of 17 physicians and 39 nursing personnel. Even on this parameter, India lags other developing countries like Brazil and Malaysia.

Healthcare services highly concentrated in urban areas

Existing hospital beds and hospitalization services have a high level of concentration in urban areas, which in turn impacts the accessibility and affordability of these services in rural areas. While in the public sector, 61% of beds are present in urban areas, the proportion jumps to 80% in case of the private sector. On an aggregate level, 72% of total beds are in urban areas while only 28% in rural.

Dominant presence in southern region

The availability of healthcare services is unevenly distributed across India. Most hospitals are present in the southern and central part of India while most hospital beds in southern India. Also, the quality of healthcare services and infrastructure in southern India is considered to be far superior to other regions of India. This has significantly boosted medical tourism to states such as Kerala, Karnataka and Tamil Nadu. Hence, there lies ample scope for hospital players to develop and expand to Indias other regions.

Private sector participation critical to ease pressure on public sector Public hospitals, that offer healthcare at negligible cost, are overstretched. Thus, they need support of the private sector to share the burden. These private hospitals generally offer healthcare at higher costs to sustain themselves and maintain healthcare quality.

Private sector players have a strong backing from the government to drive growth in the healthcare sector; this can be seen by (a) a favourable investment environment with 100% FDI allowed in the hospital sector, and (b) adoption of the public-private partnership (PPP) model to increase reach in rural areas. Thus, in the coming years, the private sectors share in overall healthcare market would increase significantly.

High dependence on private players for IPD & OPD treatments

As per the NSS 75th round survey, in rural areas, 45.7% of IPD treatments were carried out in government hospitals while the rest 54.3% in private hospitals. In case of urban areas, 35.3% and 64.7% of IPD cases were treated at government and private hospitals respectively.

For OPD treatments, dependence on the private sector is higher as there are various private clinics in India which operate independently, and generally offer most treatments. In rural areas, there are some informal providers as well, which are able to treat some minor ailments. Exhibits 10-11 show the percentage breakup in both rural and urban areas for OPD and IPD cases.

Average medical expenditure in private hospitals very high vis-a-vis public hospitals

While the all-India average medical expenditure per hospitalisation case in public hospitals is low at Rs 4,452, the same for private hospitals is as high as Rs 31,845. Despite higher costs, most people depend on private hospitals for treatment as these largely meet service quality needs and demands. Lower expenditure by government or public sector on healthcare facilities is a key demand enabler for private sector healthcare services. Overall, government contribution has been ~30% of total healthcare expenditure in India, with the remaining 70% coming from private players.

Payment modes in Indian healthcare

Government schemes accounted for 27% health expenditure in India in 2018. The contribution of PMJAY, the national public health insurance fund of the Government of India, was low and accounted for less than 5% of the total healthcare expenditure. 73% was privately funded. Out of this 73%, approximately 62.7% was out-of-pocket expense and the remaining 10% was funded by insurance.

Hospital Industry - Broad Structure

Primary care

Primary care facilities are outpatient units that offer basic, point-of-contact medical and preventive healthcare services, wherein patients come for routine health screenings and vaccinations. These primary care centres also act as feeders for secondary care/ tertiary hospitals, where patients are referred to for treatment of chronic/serious ailments.

Secondary care

There are two types of secondary care hospitals - general and specialty care. General hospitals treat common ailments and have 50-100 in-patient beds, a tenth of which are allocated to ICUs. Specialty care hospitals typically have a strength of 100-200 beds, of which 15% are reserved for critical care units.

Tertiary care

Tertiary care hospitals provide advanced healthcare services, usually on referral from primary or secondary medical care providers. They can be further classified into single-specialty and multi- specialty. The single-specialty hospitals specialize in a particular type of treatment like cancer or cardiology while multi-specialty hospitals offer various medical services under one roof and treat complex cases like multi-organ failure and other high-risk cases.

Exhibit 14: Key differences between the three levels of care

Basis of differentiation Primary Care Secondary Care Tertiary Care
Type of services Only medical services Medical & surgical services Complex surgical services
Type of patients Only outpatients Outpatients & inpatients Primarily inpatients
No. of beds 0 beds 50-200 beds 200+ beds
Investment required Low Medium High
Complexity of ailment Low Medium High
Source: Equirus

Indian Hospital Industry - Key growth drivers

Exhibit 15: Key drivers

Rising per capita GDP Improvement in life expectancy and changing demographic profilez Rise in non-communicable diseases
Increase in health insurance penetration Favourable government policies Boost in medical tourism

a. Rising per capita GDP = higher disposable income to access healthcare services Indias per capita GDP is rising, which eventually leads to more demand for healthcare services. From FY17-FY20, per capita GDP grew at a 4.7% CAGR; however, it saw an 8.2% yoy decline because of the COVID-19 induced lockdown. This indicator is expected to normalize in FY22 with a rebound likely, in turn increasing the populations spending capability.

b. Improving life expectancy, changing demographic profile

With improving life expectancy, Indias demographic profile is also witnessing a change. As of 2011, nearly 8% of Indias population was of 60 years or more, and this is expected to surge to 12.5% by 2026. Higher vulnerability of this age group to health-related issues will boost demand for healthcare-related services.

c. Non-communicable diseases on an uprise

While communicable diseases have been declining, non-communicable or lifestyle-related diseases have been rising in India. This provides ample scope for healthcare services in the country as NCDs tend to be of longer duration, increasing the need for such services.

d. Higher health insurance penetration to allow greater access to quality healthcare

Health insurance propels the demand for healthcare services as insurance policies partly cover health expenses, eventually reducing the healthcare cost burden and encouraging an individual to undergo treatment. As per IRDAI, health insurance coverage has risen from 17% in FY12 to 36% in FY20. Also, with the PMJAY scheme and other growth drivers, insurance coverage in India is expected to increase to 46% by FY25. Therefore, a likely increase in the health insurance market will drive demand for healthcare services.

e. Government policies to improve healthcare coverage

The government has raised its healthcare budget for FY22 to Rs 2,238.5bn, keeping in line with its goal to raise its healthcare spending to 2.5% of GDP by 2025 under the National Health Policy, 2017. This policy was formed with an aim to deliver quality healthcare services to all at affordable costs and it is the worlds largest Government-funded healthcare programme. It has also undertaken various initiatives like Ayushman Bharat and National Digital Mission to increase the coverage of healthcare services.

The Ayushman Bharat scheme seeks to comprehensively strengthen the healthcare system, right from primary to tertiary care. This scheme provides healthcare assurance of Rs 0.5mn per family (on floater basis) to nearly 107.4mn families. As of Nov20, nearly 14mn treatments had taken place under Ayushman Bharat since its inception in Sep18. More recently, nearly 32,000 patients have received treatment for coronavirus under the scheme.

The National Digital Health Mission (NDHM) aims to create a management mechanism to process digital health data and facilitate its seamless exchange; develop registries of public and private facilities, health service providers, laboratories and pharmacies; and support clinical decision making as well as offer services like telemedicine. NDHM has the potential to make the health system more evidence based, transparent and efficient. Digitisation push by the government will not only enable patients to share their health profiles with providers for treatment and monitoring purposes, but also access accurate information about the credentials and pricing of services offered by various health facilities, providers, and diagnostic laboratories. It is anticipated that over the next 10 years, an incremental economic value of over US$ 200bn can be unlocked for the health sector through rigorous implementation of the NDHM.

f. Medical tourism has gained momentum in India

India is emerging as a major medical tourist destination, given the relatively low cost of surgery and critical care in the country. Most key medical procedures are performed at cheaper rates in India vis-a-vis developed and some developing countries. India is also an attractive destination due to its presence of technologically advanced hospitals with specialised doctors and facilities. As per the Ministry of Tourism, of the total foreign tourist arrivals in India, the proportion of medical tourists grew from 2.2% (0.11mn tourists) in 2009 to 6.4% (0.6mn) in 2019.

The government has also constituted a National Medical and Wellness Tourism Board which will provide financial assistance of Rs 6,00,000 to medical tourism service providers under market development assistance (MDA) to develop medical tourism in India.

Exhibit 18: Country-wise cost of key treatment procedures (in $)

Ailments US Korea Singapore Thailand India
Hip replacement 50,000 14,120 12,000 7,879 7,000
Knee replacement 50,000 19,800 13,000 12,297 6,200
Heart bypass 144,000 27,900 18,500 15,121 5,200
Angioplasty 57,000 15,200 13,000 3,788 3,300
Heart valve replacement 170,000 43,500 12,500 21,212 5,500
Dental implant 2,800 4,200 1,500 3,636 1,000


Accreditation of Hospitals

Accreditation of Hospitals is carried out by the National Accreditation Board for Hospitals and Healthcare Providers ("NABH"). It is a constituent board of Quality Control of India and is also a member of International Society for Quality in Health Care.

While accreditation is a voluntary process, it becomes mandatory for hospitals to get it done for empanelment purposes under the Central Government Health Scheme.

Other accreditations which are international in nature include the International Organization for Standardization ("ISO"), Joint Commission International ("JCI"), and Trent Accreditation Scheme ("TAS").

National Accreditation Board for Testing and Calibration Laboratories ("NABL") in India does the accreditation for Diagnostic centers. International accreditation is provided by agencies such as the Asia Pacific Laboratory Accreditation Cooperation and the International Laboratory Accreditation Cooperation.


Advancements in IT healthcare are undergoing a rapid transformation. With the advent of 5G, AI, and blockchain technologies, Hospitals will be able to deliver quality care even in remote locations. More importantly, it will help Hospitals improve the delivery process, improve efficiencies, and help in faster and more advanced clinical care.

Electronic Health Records:

Designed to access patient records, Electronic Health Records maintain individual patient history right from lab tests, OP records, medications, and radiology reports, among others. These help the doctor access data at a click of a button. It can help set reminders, generate customizable records, etc.

Blockchain and AI:

By optimizing workflows, blockchain and AI has the potential of providing significant savings to Hospitals. And by ensuring data remains secured, only authorized parties will be able to access the data. AI is helping analyze tons of patient data to come up with better diagnose of critical illnesses like cancer, thereby offering hope to millions.

Radiology Information System:

All digital records of medical images like MRI, X Ray, Ultrasounds, etc can be accessed by doctors from multiple locations. Radiology Information System helps the doctor to access the reports in real time without the need to go a fixed system.

Clinical decision support system:

A database designed to store and access complete patient info, CDSS helps the doctor in taking informed decision for the treatment of his patient. These have detailed notes on all types of ailments right from their symptoms to treatment options. Since they are open-ended in nature, new emerging information can be added on a real-time basis.

Mobile Applications:

A lot of new-age Apps for patients have seen the light of the day in recent times, these Apps helps in locating doctors, take online/offline appointment, booking diagnostic tests, order medicine among many other things. Many Apps today are helping patients with reminders for their dosages and prompting patients for timely checkups.


With an intent to provide healthcare in remote locations, Telemedicine plays a very vital role. Usually done with the help of video conferencing, the patient is examined by the doctor with the help of a healthcare worker who is physically present at the remote location for assistance. For patients requiring regular care, this is a boon. Plus, it also aids in catching a potential disease at a symptom stage and can be called to the hospital for detailed examination.

Robotic Surgery:

Robotic surgeries have gained prominence in recent times. They help in better precision in surgery for doctors and also help the patient by reducing his hospital stay. They help in reducing blood loss, operating time in few cases and better outcomes. Many surgeries today are performed with the help of Robotics such as bypass surgery, colorectal surgery, gastrointestinal surgery, neurosurgery and orthopedic surgery, among others.

Wearables and sensors:

Smartwatches today are helping people keep track fo their vitals, steps taken, pulse rate, etc, thereby helping the user live a healthy life. They help in nudging the user to take action by providing reports on a daily basis.


In-Patient department revenue forms a major part of Hospitals revenue:

Out of the two revenue streams - OPD and IPD, the bulk of revenue is provided by IPD. Typically it ranges from 70 - 75% of total revenue. OPD on the other hand contributes to 75% of the total volumes of patients in a hospital. The contributions may vary depending on ailment mix, patient mix, and services offered.

IPD revenue contributors are Surgeries and Diagnostics:

Depending on the pricing and offerings, to a very large extent, surgeries and diagnostics contribute towards a major part of the overall revenues. As opposed to patients who require non-surgical treatment (referred to as medical), surgical patients generate more revenue. The high margins on consumables have come down post the capping by Government on items such as stents and knee implants. These have in turn rationalized the costs incurred by the patient. Most of the top hospitals have in-house diagnostic services which help them achieve economies of scale and deliver good margins.

Other important items for monitoring:

Occupancy levels: For hospitals to break even, occupancy levels play a major role. Higher fixed costs like beds, medical infra, buildings, etc. are a huge burden for any hospital. A 60% to 70% occupancy is the average seen in most top hospitals. Among the factors affecting the occupancy levels few of them are most critical like accomplished doctors, strong word of mouth, good care, and brand image.

Average length of Stay (ALOS):

The shorter the ALOS, more the utilization and hence more patients can be treatment at the same time. Top hospitals have managed to keep shorter ALOS to ensure they can keep up with the demand of more patients.

Average Revenue per Operating Bed (ARPOB):

Daily revenue being generated by an occupied bed can be generated. This is the average in-patient revenue per occupied bed.


Affordable pricing:

We strive to offer our quality healthcare services at affordable prices, regardless of the markets, specialty or service type. We have successfully implemented our affordable pricing model in our hospitals in both Tier 1 and Tier 2-3 markets.

Ability to attract, train and retain high quality doctors, consultants and medical support staff.

We maintain our standard of high quality healthcare by consistently employing a diverse pool of talented doctors, nurses and paramedical professionals. Our multi-disciplinary approach, combined with our affordable cost for treatment, a high-volume tertiary care model, and our focus on teaching and research, has helped us attract and retain high quality doctors and other healthcare professionals.

We have taken significant efforts to create a culture that nurtures our medical talents and encouraged our doctors to become stakeholders in the KIMS hospitals where they work. Since inception in 2000, we have retained over 80% of our doctors. Our doctors have been involved in the growth of our hospitals by actively participating in the equity ownership in our Company and Subsidiaries.

Track record of strong operational and financial performance

We have consistently delivered strong operational and financial performance through strong patient volumes, cost efficiency and diversified revenue streams across medical specialties. We have achieved healthy profitability in both Tier 1 and Tier 2-3 markets by identifying markets with significant underserved healthcare demand and delivering quality healthcare services at affordable prices, which in turn drives patient volumes.

Disciplined approach to acquisitions resulting in successful inorganic growth

We have a successful history of identifying, executing and integrating acquisitions. We have a disciplined, low-leverage approach to acquisitions that has enabled us to maintain our affordable pricing model as we have grown in both Tier 1 and Tier 2-3 markets. From Fiscal year 2017 to Current Fiscal 2023, we have acquired 7 hospitals (including 3 units of Sunshine Hospitals). We have encouraged doctors at the hospital we acquire to stay with us, participate in the equity ownership of the hospital and contribute to the hospitals future growth.

Experienced senior management team with strong institutional shareholder support

We benefit from an experienced senior management team which has made significant contributions to our growth and has a long and proven track record in the healthcare services industry. We believe that a professionally managed team with a commitment to patient care and ethical standards enables us to operate our facilities efficiently while at the same time providing quality affordable healthcare to our patients.

Government regulations:

Intense regulatory approvals, which involves numerous licenses, for starting a hospital is a huge barrier for private players. The Government has recently started capping the prices of drugs and consumables (stents, implants, etc.), while being good for the patients, can at the same time have impact on returns over a longer period of time.

Diverse market condition:

Disease profiles, payor mix, changing demographics among others are different from market to market. Price sensitivity is another important factor. Getting the right mix of doctors and achieving operational efficiencies require tremendous effort from the management on an ongoing basis and can get very challenging.

Availability of good medical and technical talent:

Skilled medical manpower is a humongous challenge for India. Talented doctors, nurses, and technicians are forever in demand and can be poached by the competition. Paying a disproportionate amount of salary can dent the profitability of the hospital in the long run.

Digital revolution:

Access to technology with unprecedented adoption of online services like telemedicine, online lab tests, and ordering medicines among others have opened up new vistas of revenue for hospitals. The opportunity to provide quality remote care and the ability to access patient records at their fingertips will go a long way in making healthcare more accessible.

Focus on preventive wellness:

Post-COVID era, the focus on preventive health and wellness has seen a significant awareness among the masses on the importance of staying fit and eating healthy. As a result, people are investing in regular diagnostic check-ups which is helping them in identifying symptoms at an early stage and thereby helping them get timely care.

Underserved markets:

Huge potential exists in Tier 2 and Tier 3 cities across India for providing quality and affordable healthcare. KIMS Hospitals have demonstrated their capabilities in successfully running profitable hospitals in such cities. Going forward, we would be further expanding our footprints replicating our affordable care playbook in the underserved markets.

Intense Competition:

The Healthcare space has seen new interest from many large corporates as well as private equity players. The majority of the new hospitals by new entrants are in already overcrowded markets and this has led to undercutting of prices and will lead to potential unfair trade practices. These can affect the profitability of established players in the short run. In the long run, however trusted players with strong brand equity will continue to prosper.

Government regulations:

GST implementation had an adverse impact on operating margins as hospitals could not utilize the input GST credit. Added to this, the pricing caps on key drugs and consumables have dented margins. The danger of further regulations will continue to be a threat to the healthcare sector.


The financial statements of Krishna Institute of Medical Sciences and its subsidiaries joint venture and associate (collectively referred to as "KIMS" 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, 2022, consolidated balance sheet as at March 31, 2022 and the consolidated cash flow statement for the year ended March 31, 2022. The consolidated results are more relevant for understanding the performance of KIMS.

In accordance with the Companies (Indian Accounting Standards), Rules, 2015 of the Companies Act, 2013, KIMS 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.


Our total revenue from operations increased by 3,208.9 million (24.1%) as compared to Fiscal Year 2021 to 16,508.3 million in Fiscal Year 2022. This increase is primarily attributable to increase in inpatient volumes by 17.3% and outpatient volumes by 22.1% in Fiscal Year 2022 compared to Fiscal Year 2021. Increase in revenue is also driven by case mix improvement

Income from operations

For the Fiscal year 2022, income from hospital services increased by 1,939.1 million (21.9%) as compared to Fiscal Year 2021 while income from Pharmacy increased by 1,248.5 million (29.3%) as compared to Fiscal Year 2021 All our facilities including the new facilities at Ongole, Vizag, Ananthapur and Kurnool have shown year on year increase in revenue. During the Fiscal Year 2022, our Telangana cluster contributed to a total revenue of 11,214 million (30% increase over Fiscal year 2021) while our AP cluster contributed 5,645 million to total Revenue (17% increase over Fiscal year 2021)

Other Operating Income

Other operating income primarily consists of income from sale of food and beverages amounting to 129.7 million during fiscal year 2022 as compared to 105.7 million in Fiscal Year 2021. Our other operating revenues including income from academic courses and other hospital income amounting to 68.8 million during fiscal year 2022 as compared to 71.5 million in Fiscal Year 2021.

Other income

Our other income increased by 101.0 million from 101.7 million in Fiscal year 2021 to 202.6 million in Fiscal Year 2022 Increase in other income is primarily on account of interest income on bank deposits and write back of liabilities no longer required during the fiscal year 2022.


Our total expenses increased by 1626.6 million or by 15.3% from 10,610.9 million in Fiscal Year 2021 to 12,237.4 million in Fiscal Year 2022. Increase in total expenses is majorly due to increase in cost of consumption by 662.2 million and increase in employee benefits by 417.0 million which is in line with revenue increase

Cost of consumption

Cost of consumption comprises of our expenses related to Purchase of medical consumables, drugs and surgical instruments and changes in inventories of medical consumables, drugs and surgical instruments. Cost of consumption related to usage of drugs, medical consumable and instruments increased by 848.6 million from 2826.4 million in Fiscal Year 2021 to 3675.0 million in Fiscal Year 2022. Cost of consumption as a percentage of our total revenue remained constant at 21.3% in Fiscal Year 2022 and 21.6% in Fiscal 2021.

Employee benefits expense

Our employee benefits expense increased by 417.0 million, or by 18.9%, from 2,202.1 million in Fiscal Year 2021 to 2619.1 million in Fiscal Year 2022. Employee benefits expense as a percentage of our total revenue declined from 16.4% in Fiscal Year 2021 to 15.7% in Fiscal 2022.

Finance costs

Our finance costs decreased by 164.6 million, or by 50.7%, from 325.0 million in Fiscal Year 2021 to 160.3 million in Fiscal Year 2022. This decrease is primarily due to reduction of interest expenses on account of closure of major outstanding loans during the current Fiscal Year

Depreciation and amortisation expense Our depreciation and amortisation expense increased by 31.4 million, or by 4.5% from 695.4 million in Fiscal Year 2021 to 726.7 million in Fiscal Year 2022. This increase is primarily attributable to additional depreciation arising from fixed assets capitalization during the current Fiscal Year.

Other expenses

Our other expenses increased by 680.6 million, or by 15.1%, from 4,499.1 million in Fiscal Year 2021 to 5,179.7 million in Fiscal Year 2022. Other expenses, as a % to revenue has declined from 33.6% in Fiscal Year 2021 to 31.0 % in Fiscal Year 2022.

Increase in other expenses is mainly on account of increase in medical consultancy changes which in line with increase in revenue. Medical consultancy charges as % to total revenue has declined from 19.7% for Fiscal Year 2021 to 18.0% for Fiscal Year 2022.

Other key expense include:
Description (INR Mn) Fiscal Year 2022 %to Total Revenue Fiscal Year 2021 % to Total Revenue
Consultancy charges 3,007.1 18.0% 2,634.6 19.7%
House keeping expenses 472.9 2.8% 400.9 3.0%
Power and fuel 258.3 1.5% 243.1 1.8%
Catering and patient welfare expenses 194.3 1.2% 159.7 1.2%
Repairs and maintenance 505.2 3.0% 443.6 3.3%
Travelling and conveyance 72.9 0.4% 29.6 0.2%
Advertisement and publicity 111.5 0.7% 91.8 0.7%

Our house-keeping expenses increased by 72.0 million or by 18.0 % from 400.9 million in fiscal year 2021 to 472.9 million in fiscal year 2022. As a % of revenue the same was at 3% in 2022 as compared to 2.8% in 2021.

Our power and fuel expenses increased by 15.2 million from 243.1 million in fiscal year 2021 to 258.3 million is fiscal year 2022. The effective year on year increase in 6.2% from previous Fiscal Year.

Our catering and patient welfare expenses increased by 34.6 million from 159.7 million in fiscal year 2021 to 194.3 million is fiscal year 2022. The increase is in line with the revenue growth. Catering and patient welfare expenses as % to revenue has remained constant at 1.2% in Fiscal year 2022 compared to Fiscal Year 2021.

Our repairs and maintenance expenses increased by 61.6 million from 443.6 million in fiscal year 2021 to 505.2 million in fiscal year 2022. Repairs and maintenance expenses as a % to revenue decreased from 3.3% in Fiscal Year 2021 to 3.0% in Fiscal Year 2022.

Travelling and conveyance expenses increased by 43.4 million from 29.6 million in Fiscal Year 2021 to 72.9 million in Fiscal Year 2022. Expenses as % of revenue has also increased from 0.2% in Fiscal Year 2021 to 0.4% in Fiscal year 2022 due to easing of COVID related travel restrictions in the current Fiscal Year compared to previous Fiscal Year where travel was restricted due to COVID regulations.

Our advertisement and publicity expenses increased by 19.7 million from 91.8 million in fiscal year 2021 to 111.5 million is fiscal year 2022. Advertisement and publicity expenses as % to revenue has remained constant at 0.7% in Fiscal year 2022 compared to Fiscal Year 2021.

Profit before share of profit of Joint Venture and tax Profit before share of profit of Joint Venture and tax was 4,473.4 million in Fiscal Year 2022 as compared to a profit before tax amounting to 2,790.2 million in Fiscal Year 2021.

Share of profit of a Joint Venture, net of tax

Our investments during the Fiscal Year 2022 in Sarvejana Healthcare Private Limited (Sunshine Hospitals) is accounted under equity method as per Ind AS 28 ‘Investment in Associates and Joint Ventures have resulted in profit of 95.1 million. Sunshine Hospitals has become our subsidiary from April 2022.

Tax expense

We recorded current tax of 1,141.6 million, deferred tax of 1.7 million and adjustment of tax related to earlier year of (12.6) million in Fiscal Year 2022 as a result of which total tax expense for Fiscal Year 2022 was 1,130.6 million. We recorded current tax of 778.4 million and deferred tax of (33.0) million and adjustment of tax related to earlier year of (10.0) million in Fiscal Year 2021 as a result of which total tax expense for Fiscal Year 22 was 735.4 milllion.

Profit for the year

As a result of the foregoing, our profit for the year is 3,438.0 million in Fiscal year 2022 as compared to a profit of 2,054.8 million in fiscal year 2021.

Assets (INR Mn)
Particulars As at March 31,
2022 2021
Non-current assets
Property, plant and equipment 7,705.2 7,706.3
Capital work-in-progress 207.6 92.4
Goodwill 847.8 847.8
Other intangible assets 317.6 247.4
Right-of-use assets 1,181.5 509.3
Investments in a Joint Venture 3,324.8 -
Financial assets
(i) Loans - -
(i) Other financial assets 395.6 192.2
Deferred tax assets (net) 32.15 29.3
Non-current tax assets (net) 174.7 103.7
Other non-current assets 952.6 121.1
Total non-current assets 15,139.5 9,849.6
Current assets
Inventories 364.3 240.9
Financial assets
(i) Trade receivables 1,286.4 1,098.2
(ii) Cash and cash equivalents 256.3 521.3
(iii) Bank balances other than (ii) above 1,644.3 2,323.1
(iv) Loans - -
(iv) Other financial assets 281.0 257.6
Other current assets 101.7 70.9
Total current assets 3,934.0 4,511.9
Total assets 19,073.5 14,361.5

We had property, plant and equipment amounting to 7,705.2 million as at March 31,2022 and 7,706.3 million as at March 31, 2021. Our property, plant and equipment assets primarily consist of medical equipment, buildings, land, leasehold improvements, furniture and fixtures, electrical equipment, computers and vehicles.

Slight decrease in our property, plant and equipment assets is primarily on account of depreciation of 610.2 million during the fiscal year 2022. We also had an addition of 609.2 million in new assets during the year.

Our Capital Work-in-progress of 207.6 million as of March 31, 2022 was primarily on account of construction of second block at Nellore, construction of nursing hostel at Ongole, advance for leasehold premises at Kondapur and construction of guest house at Hyderabad.

We had goodwill amounting to 847.8 million as of March 31, 2022. It includes internally generated goodwill amounting to 314.2 million and goodwill arising during acquisition amounting to 533.6 million.

We had other intangible assets amounting to 317.6 million as at March 31, 2022 and 247.4 million as at March 31, 2021. Our other intangible assets consist of Software, brand, noncompete and customer contracts. Increase in other intangible assets was primarily on account of capitalization of Hospital Information System (HIS) software.

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 re- worked based on committed tenure and a new Asset Right-to-Use was created. The ROU value was 1181.5 million as on March 31, 2022. The corresponding liability was created as "Lease liabilities" under "Non-current liability" and "current liability".

Our Investments in joint ventures comprise of investments made in Sarvejana Healthcare Private Limited (Sunshine Hospitals) amounting to 3,324.8 million We had other non-current financial assets of 395.6 million as of March 31, 2022 and 192.2 million as of March 31, 2021. This primarily comprises of security deposits amounting to

382.2 million and deposits with remaining maturity more than 12 months amounting to 12.7 million as on March 31,2022. Our Deferred Tax Assets increased to 32.2 million as of March 31, 2022 from 29.4 million as of March 31, 2021. Our income tax assets increased to 174.7 million as of March 31, 2022 from 103.7 million as of March 31,2021 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 952.6 million and 121.1 million as at March 31,2022 and 2021 respectively. The increase is majorly on account of increase in our capital advances by 849.4 million

We had inventory amounting to 364.3 million and 240.9 million as at March 31,2022 and 2021 respectively. Inventory majorly comprises of medical consumables, drugs and surgical instruments

We had outstanding net trade receivables amounting to 1,286.4 million and 1,098.2 million as at March 31, 2022 and 2021 respectively. We made provisions for doubtful trade receivables amounting to 403.9 million an 411.9 million as at the end of March 31, 2022 and 2021 respectively. Our trade receivables comprise of receivables from government payors, corporate bodies, insurers and patients who pay directly to us.

We had other financial assets amounting to 281.0 million as of March 31,2022 as against 257.6 million as of March 31,2021. Other financial assets majorly comprises of unbilled revenue amounting to 152.3 million and security deposits amounting to 98.6 million as on March 31,2022

Liabilities and Indebtedness Liabilities

The following table sets forth the principal components of our liabilities as at March 31,2022 and 2021

(INR Mn)

Particulars As at March 31,
2022 2021
Non-current liabilities
Financial liabilities
(i) Borrowings 1,376.6 1,846.0
(ii) Lease liabilities 886.6 433.4
(iii) Other financial liabilities 3.9 5.6
Provisions 170.5 160.6
Other non-current liabilities - 12.4
Deferred tax liabilities (net) 379.4 358.3
Total non-current liabilities 2,817.0 2,816.3
Current liabilities
Financial liabilities
(i) Borrowings 233.7 858.6
(ii) Lease liabilities 68.4 25.6
(iii) Trade payables 1,295.3 1,318.7
(iv) Other financial liabilities 168.9 161.3
Provisions 103.4 104.9
Other current liabilities 278.7 227.1
Current tax liability (net) 1.7 87.0
Total current liabilities 2,150.1 2,783.3
Total liabilities 4,967.1 5,599.6

We had non-current borrowings amounting to 1,376.6 million and 1,846.0 million as at March 31,2022 and 2021 respectively. Our non-current Lease Liability stood at 886.6 million as on March 31,2022 as against 433.4 million as on March 31,2021 Deferred tax liability stood at 379.4 million as on March 31, 2022 compared to 358.3 million as on March 31,2021 We had outstanding trade payables amounting to 1,295.3 million and 1318.7 million as at March 31, 2022 and 2021 respectively. These primarily comprised of payables towards purchase of drugs, consumables, various services including medical consultancy charges, legal and professional fees, housekeeping charges and security charges.

Current borrowings amount of 233.7 million and 858.6 million as at March 31,2022 and March 31,2021 respectively. Current borrowings mainly comprise of current maturities of long term borrowings amounting to 216.0 million and working capital loan amounting to 15.1 million as on March 31,2022 Our current Lease Liability stood at 68.4 million as on March 31,2022 as against 25.6 million as on March 31,2021 We had other current financial liabilities amounting to 168.9 million and 161.3 million as at March 31, 2022 and 2021 respectively. These primarily comprised of employee related payables amounting to 140.6 million and short term capital creditors amounting to 14.8 million

Provisions amounted to 103.4 million and 104.9 million as at March 31, 2022 and 2021 respectively. Provisions comprised of provision for employee benefits pertaining to gratuity and compensated absences

We had other current liabilities amounting to 278.7 million and 227.1 million as at March 31, 2022 and 2021 respectively. These primarily comprised statutory dues payable amounting to 111.6 million and contract liability amounting to 135.1 million

Summary of cash flow statement

(Amt in mn)

Particulars For the Fisal Year ended March 31, 2022 For the Fisal Year ended March 31, 2021
Net cash flow generated from/ (used in) operating activities 3,240.3 3,559.7
Net cash flow generated from/ (used in) investing activities -4,115.2 -3,541.8
Net cash flow generated from/ (used in) financing activities 610.0 98.2
Net cash flows generated for the year -265.0 116.1

Cash flow generated from operating activities

For the fiscal year ended March 31 2022, we had profit before tax of 4,568.5 million and our operating profit before working capital changes was 5253.9 million. Our cash generated from operations after adjusting for changes in working capital was 4,509.2 million. This reflected cash outflow on account of an increase in trade receivables and inventory by 232.7 million and 123.4 million respectively and also an increase in other financial assets by 489.7 million.

After adjusting for changes in working capital and a net income tax refund receipt amounting to 1,269.0 million, our net cash flow generated from operating activities was 3240.2 million for the fiscal year ended in March 2022.

Cash flow used in investing activities

For the fiscal year ended March 31, 2022, our net cash flow used in investing activities was 4,115.2 million. This majorly includes net capex outflow towards property plant and equipment of 1,700.0 million and investment in joint venture amounting to 3,229.7 million during the Fiscal Year 2022. This also includes inflow from bank deposits (net) of 691.9 million for the Fiscal Year 2022.

Cash flow used in financing activities

For the fiscal year ended March 31,2022, our net cash inflow from financing activities was 610.0 million. This majorly includes proceeds from equity shares amounted to 1,916.6 million a part of which was used towards repayment of long terms borrowings amounting to 469.4 million and short term borrowings amounting to 625.0 million during the year ended March 31, 2022. We also had a cash outflow of 116.7 million towards interest payment and interest on lease liability amounted to 95.5 million for the fiscal year under review.

Key Ratios 2021 22 2020 21 Movement Remarks
Ratio - Leverage
Debt/Equity 0.18 0.36 -49.6% Reduced in borrowing coupled with improved performance
Debt/EBITDA 0.48 0.83 -42.4%
EBITDA/Interest 33.43 11.73 185.1%
Interest Coverage Ratio 0.03 0.09 -64.9%
Ratio Profitability
Operating Profit Margin % 32.1% 28.4% 12.8% Improved performance coupled with better margins
Net Profit Margin % 20.6% 15.3% 34.2%
Return on Equity % 30.1% 27.6% 8.8%
ROCE % 27.7% 25.9% 7.0%
Ratios Operations
Inventory Turnover Ratio 11.74 10.61 10.6%
Debtors Turnover Ratio 14.02 11.07 26.6% Improvement in operations
Current Ratio 1.83 1.62 12.9%
Ratio - Per Share
EPS 41.88 26.42 58.5%

Notes to key ratios:

• Debt /Equity: Total Debt including lease obligations/ shareholders equity

• Interest coverage ratio: Interest includes interests on lease liability due to adoption of IND AS 116/EBITDA

• EBITDA/Interest includes interests on lease liability due to adoption of IND AS 116

• Return on Equity: PAT/Average Shareholders Equity

• ROCE: EBIT/ Net Worth

• Inventory Turnover Ratio: COGS/ Average Inventory

• Debtors Turnover Ratio: Total Revenue / Average Receivables

• Current Ratio: Current Assets/ Current Liabilities

Credit Rating:

The long-term credit rating of KIMS for Fiscal Year 22 has been maintained at AA (-) by CRISIL. (Associate of S&P Global Company). ‘AA Rating for Instruments signifies adequate degree of safety regarding timely servicing of financial obligations. The outlook on the long term rating is Stable.


Risks are an integral part of any business. Effective management of business risks is a key factor determining an organizations growth, profitability, and certainty of going concern. Government intervention with respect to stricter regulations, price capping of key implants & drugs, and introduction of state-sponsored health schemes have an impact on industry margins. The risks that might impact our business prospects, financial condition, and results of operations, inter-alia include:

1. Our results of operations in any given period may be influenced by a number of factors, many of which are not under our control and may also be difficult to predict, such as; political and economic conditions, changes in the competitive landscape in which we operate, government policies and reforms with respect to the health care industry, uncertainty associated with pharmaceutical pricing, higher inflation percentage, delays in executing our growth strategies due to several factors, time and cost overrun in setting up of newer facilities, and unavailability of a quality workforce.

2. Our patients are classified under various payer categories, such as self-paying patients, patients with third-party payer agreements, and Government scheme patients. In case of delays in payments from any of the credit payer categories, our financial condition, cash flows, and results of operations may be materially and adversely affected. Provisions for disallowances reduce our revenue from operations, and provisions for doubtful trade receivables increase our expenses, thus reducing our profitability.

3. We face intense competition from other healthcare organizations, which requires us to periodically update our facilities to cater to our patients with the latest technology. If we are unable to compete effectively, our business and the results of operations may be materially and adversely affected.

4. A majority of our doctors are not our employees. Our arrangement with such doctors is on a consultancy basis. Such doctors may discontinue their association with us or be unable to provide their services at our hospitals for any reason. Further, we are dependent on a number of key personnel, including our Promoters and senior management, and any loss of talent or our inability to attract or retain such persons could adversely affect our business, financial condition, results of operations, and cash flows.

5. We may not realize the value of our goodwill or other intangible assets. We expect to engage in additional transactions that may result in our recognition of additional goodwill or other intangible assets. We have a periodic evaluation process whereby we assess if there is an occurrence of any events and circumstances which may result in all or a portion of the carrying amount of goodwill or other intangible assets being unrecoverable and may therefore require to be impaired.

6. 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.

7. The conditions and restrictions imposed by our financing arrangements with respect to our indebtedness may limit our ability to grow our business. We may require additional funding to finance our operations, which may not be available on acceptable terms. If we are unable to raise funds, the value of your investment in us may be negatively impacted.

8. With high dependence on technology/software for managing a high volume of financial and operational information, we are at risk of compromising data confidentiality in the absence of robust IT controls being put in place. Further, the absence of suitable information backup infrastructure may also lead to the organization losing critical data, as a disaster recovery mechanism may be ineffective.

The Board of Directors of KIMS has prime responsibility for monitoring the comprehensive list of risks faced by the company. The Risk Management Committee (RMC), as a subcommittee to the Board, supports the Board by supervising the implementation of the risk management policy. RMC guides the organization on the development of policies, procedures, and systems for managing risk. Please refer to the section on Risk Management for further information on the Risk Management framework.

Internal Control Systems & their Adequacy:

KIMS has a well-defined framework of internal controls commensurate to its operations size and complexity. A dedicated Internal Audit team reports directly to the Audit Committee, comprising three independent directors overseeing the Internal Audit function. The scope, authority, and responsibility of the Internal Audit function are governed by the Internal Audit Charter, which is approved by the Audit Committee. For every financial year, the Internal Audit function develops a risk-based internal audit plan to assess control design and its operating effectiveness, which is reviewed and approved by the Audit Committee.

The audit team reviews the scope defined and reports on the status of internal controls, quarterly to the Audit Committee. Before being placed to the committee, the functional heads review the internal audit reports, and corresponding action plans for each of the observations are provided with clearly defined timelines and a responsibility matrix. In its quarterly meetings, the audit committee reviews the report in detail and approves it.

Further, a separate team of Internal Auditors is deployed across all the group hospitals for concurrent review of daily transactions. A monthly review of the outcome of concurrent audit is conducted at the unit level, and a summary of the outcome is updated to management regularly.

Additionally, the audit team also does annual testing of the Entity Level Controls (ELCs), and Internal Controls over Financial Reporting (ICoFR) controls laid down by the management, to provide assurance to the committee on the status of internal controls.

All the pending observations are tracked through a comprehensive Action Taken Report (ATR) format, which is presented to the audit committee along with the audit reports every quarter.

Risk Management:

KIMS has a comprehensive risk management system covering various aspects of the business, such as strategy, operations, financial reporting, and compliance. This is based on Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework.

The Risk Management Committee (RMC) of the board comprises four directors (including two independent directors) who oversee and monitor the Risk Management exercise. Risk Management exercise is governed by a Risk Management Charter, which is approved by the RMC. Further, we have also developed a detailed Risk management process, which is reviewed and approved by RMC.

The risk management and monitoring mechanisms that we have in place include process walkthroughs, concurrent auditing, and risk-based internal audit reviews, with a focus on identifying, rectifying, and monitoring the effectiveness of our internal process and any possible process gaps. Our assessment of risk is based on risk perception surveys, business environment scanning, and inputs from various internal and external stakeholders.

As a part of the Risk Management exercise, the function heads prepare their comprehensive Risk Registers, which form the base documents for this exercise. Risks are given a scoring basis on the following three factors:

1. Probability of occurrence of risks

2. The severity of impact, on the occurrence of such risks

3. Detectability of such risks

COOs are responsible for highlighting new risks they come across, which are then updated in the risk register. Against each risk noted in the register, a detailed root cause, risk indicator list, and MIS monitoring mechanism are defined. A mitigation plan for the same is prepared and monitored through periodic reporting to the RMC.

A monthly MIS on the risks identified in the register is prepared and presented to the management. The RMC members in the scheduled meetings take note of the status of risks and give necessary suggestions, which are actioned upon. Updates to the RMC are provided on a half-yearly basis.