Krishna Institute of Medical Sciences Ltd Management Discussions

Economic Overview

Global Economic Overview¹

The global economy remained resilient in CY 2025, recording steady growth of 3.4%. Low inflation and stable private sector investments contributed to global economic stability. Growth trends, however, diverged across regions. Emerging markets and developing economies expanded by 4.4%, significantly outpacing advanced economies, which grew by 1.9%.

Monetary policy support, a relatively weaker US dollar and resilient domestic demand underpinned growth in developing countries. Inflation declined to 4.1%, supported by improved supply conditions and lower energy prices during the year, thereby strengthening consumer demand and corporate profitability.

At the same time, elevated tariffs disrupted global trade flows, prompting businesses to reconfigure supply chains and diversify sourcing strategies. In advanced economies such as the US and the UK, concerns around job security led to more cautious consumer spending, with a noticeable shift towards value-oriented consumption.

Global Economic Outlook

Global trade growth is expected to moderate as the benefits of supply chain realignment stabilise and tariff-related pressures persist in end markets. China is expected to focus on reviving domestic consumption while maintaining strategic trade partnerships within Asian supply chains.

Ongoing geopolitical uncertainty will require businesses to remain agile, leveraging regionalised supply chains and a diversified sourcing framework. Investments in AI are expected to remain robust, driven by its potential to enhance productivity. AI adoption will continue to accelerate across industries, enabling process automation, inventory optimisation and improved cost efficiencies. The pace of technology adoption is also expected to increase, driven by favourable fiscal policies and ongoing logistics infrastructure improvements in developed economies.

P – Projection

Source – IMF WEO April 2026

Indian Economic Overview²

India demonstrated resilience in FY 2025-26, recording GDP growth of 7.7% despite ongoing global uncertainties.³ India experienced moderate inflation levels during the year, driven by lower food prices. Sustained disinflation enabled the Reserve Bank of India to reduce policy rates by 100bps to 5.25%, improving credit availability and supporting economic activity.

Manufacturing activities remained robust, with the PMI indicating continued expansion driven by strong order inflows. Indias industrial production also strengthened, with notable growth in sectors such as mining, basic metals and automobiles.

Indias consumption improved significantly, with private consumption growing by over 7% following the recovery in rural demand and GST reform measures. Additionally, India made efforts towards enhancing innovation through the implementation of the RDI program initiated by the government with a budget of I1 lakh crore to stimulate innovation by the private sector.

Indian Economic Outlook

The economic outlook remains stable, supported by ongoing structural reforms and a gradual revival in manufacturing activity. Infrastructure development continues to be a key growth driver for the economy. The Union Budget for FY 2026-27 provides for an 11.5% increase in capital expenditure to I12.22 lakh crore, aimed at strengthening long-term productive capacity building.

Recent free trade agreements, including those with New Zealand and European economies, are expected to enhance the global competitiveness of Indian exporters. These agreements are likely to attract foreign investments and support export growth, particularly in sectors such as medical devices and healthcare sectors.

Industry Overview

Global Healthcare Industry⁴

Global healthcare spending surpassed inflation in 2025, registering an estimated increase of nearly 6% in nominal terms and 1.9% in real terms. As inflationary pressures eased, private healthcare expenditure rebounded strongly.

While growth continues to be driven largely by public expenditure in low- and middle-income countries, developed economies with ageing populations are also contributing to the rapid expansion of global healthcare expenditure.

Medical tourism has emerged as a key driver of international investment in healthcare and pharmaceuticals in 2025. Rising healthcare costs in North America and Western Europe have prompted an increasing number of patients to seek cost-effective treatment options abroad.

Countries such as Thailand, Turkey, India, the United Arab Emirates and Mexico are capitalising on this trend by strengthening medical expertise and expanding their healthcare workforce to position themselves as leading global destinations.

India Healthcare Industry

The Government of India currently spends approximately 2% of GDP on healthcare. Recent Union Budgets have prioritised improving the access, availability and affordability of healthcare services.

Key strategic initiatives include a shift towards preventive medicine, adoption of technology-driven healthcare solutions and increased investments in early disease diagnosis, cancer treatment capacities and digital health infrastructure.

Healthcare spending patterns in India continue to evolve positively. Private expenditure on healthcare has remained resilient, supported by increasing health awareness, rising incidence of chronic diseases and growing demand for quality healthcare services. The share of healthcare expenditure within private final consumption expenditure has increased steadily, reflecting healthcares growing importance in household spending patterns. These trends are expected to support long-term growth across the organised healthcare delivery ecosystem.

Enhancing domestic production to strengthen the healthcare ecosystem remains another important focus area. In the revised union Budget 2025–26, I94,625 crore ($11.50 billion) was allocated to the healthcare sector for the development, maintenance and expansion of the countrys healthcare system.⁵ Further strengthening this commitment, the Ministry of Health & Family Welfare has been allocated a budget of I1,06,530.42 crore in the Union Budget 2026-27, reflecting an increase of nearly 10% over the revised estimates for 2025-26.⁶

Supported by stable private capital inflows, the outlook remains positive, with a gradual transition from incremental growth to technology-led, globally integrated healthcare ecosystems. AI-enabled Healthcare ⁷

In recent years, the Government of India has undertaken significant initiatives to integrate AI into public healthcare systems, addressing challenges such as tuberculosis, diabetic retinopathy and disease surveillance.

The Ayushman Bharat Digital Mission has played a critical role in supporting the development of a robust AI-enabled healthcare ecosystem in the country.

AI-based tools integrated into the National TB Elimination Programme have contributed to a 27% reduction in adverse health outcomes. Additionally, the Media Disease Surveillance system has identified over 4,500 probable disease outbreaks in India since early 2022 by analysing digital media for symptom clusters.

Thee-Sanjeevaniplatformhasfacilitated282milliontelemedicine consultations between April 2023 and late 2025, with AI-based diagnostic support provided in nearly 12 million cases.

Looking ahead, the IndiaAI mission, backed by an allocation of I10,371.92 crore, aims to accelerate the development and deployment of advanced healthcare solutions. Key focus areas include artificial intelligence-driven lung screening, wearable diagnostic technologies, early detection of diabetic eye disorders, cancer strategic system and personalised AI-powered health assistants.

India Health Insurance Industry⁸

The Indian insurance market expanded by 3.1% in 2025, supported by an evolving regulatory landscape. Reforms introduced by the Insurance Regulatory and Development Authority of India (IRDAI), along with broader government initiatives, are enhancing transparency and strengthening the sectors future growth framework.

Key growth drivers include increased Foreign Direct Investment (FDI) limits, reforms in insurance distribution and changes in GST regulations. These measures are expected to attract fresh capital funds and stimulate demand across segments.

Health insurance penetration in India continues to improve through a combination of government-supported schemes and expanding private insurance participation. Greater insurance coverage is improving access to healthcare services, reducing financial barriers to treatment and supporting higher utilisation of organised healthcare facilities. The continued expansion of public healthcare insurance programmes is expected to further strengthen healthcare accessibility and support demand for hospital services across the country.

The industry in India is projected to grow at a compound annual rate of 6.9% between 2026 and 2030, outperforming many developed and emerging markets. Health insurance is expected to lead this expansion, with an anticipated annual growth rate of 7.2%.

Indias large consumer base, sound financial management and controlled inflation provide resilience against global economic vulnerabilities, supporting sustained growth in insurance premiums.

Opportunities

Expansion of Medical Tourism

Medical tourism is emerging as a major driver of global healthcare investments in 2025 and 2026. Rising treatment costs in North America and Western Europe are encouraging patients to seek more affordable alternatives, positioning India as a leading destination in this segment.

Government-Led Development of AI

With an allocation of I10,371.92 crore, the IndiaAI mission is accelerating the development of advanced healthcare solutions. Key initiatives include AI-based lung screening devices, wearable diagnostics and AI-powered personal health assistants.

Rapid Insurance Growth

The Indian insurance market is projected to grow at a compound annual rate of 6.9% through 2030, with the health insurance segment expanding at 7.2% annually. Recent regulatory reforms by IRDAI, coupled with the extension of AB-PMJAY to cover all senior citizens above 70 years, are expected to significantly expand the insured population and drive demand for tertiary care services.

Medical Devices and Diagnostics

India ranks among the top 20 global medical device markets, supported by rising demand for imaging technologies, diagnostic kits and minimally invasive surgical solutions. Significant growth potential exists in Tier-2 and Tier-3 cities, driven by improving healthcare access and increasing awareness of early disease detection.

Rising Population and an Ageing Demographic

Indias expanding population and evolving age profile are driving a surge in the demand for high-quality medical services. Increasing life expectancy is leading to higher demand for geriatric care, specialised treatments and long-term management of chronic diseases.

Healthcare Infrastructure Gap

India continues to face a significant shortage of hospital beds and healthcare professionals relative to recommended healthcare benchmarks. The need to expand healthcare infrastructure across both metropolitan and emerging urban markets presents substantial opportunities for hospital operators to increase capacity, enhance service offerings and improve healthcare accessibility.

Threats

Regulatory/Policy Changes

The healthcare sector remains sensitive to regulatory developments, including changes in taxation on insurance premiums and price controls on medical procedures and consumables. Such measures may impact profitability and operational flexibility.

International Brain Drain

Rapid economic growth in developed countries is intensifying global competition for skilled healthcare professionals. This may lead to domestic talent shortages and exert upward pressure on wages.

Supply Risk and Imported Inflation

Despite relatively stable domestic inflation, global geopolitical tensions may result in imported inflation, particularly for specialised medical equipment and pharmaceutical supplies. Currency volatility could further increase capital costs for advanced technology investments.

Government Initiatives ⁹

Pradhan Mantri Jan Arogya Yojna (PMJAY)

Launched in 2018, the Ayushman Bharat-PMJAY is the worlds largest public healthcare scheme, covering approximately 120 million people. To date, over 434 million Ayushman cards have been issued.

The scheme provides health insurance coverage of up to I5 lakh per annum for secondary and tertiary treatment in the form of health insurance. It is accessible to economically vulnerable families and has been extended to include senior citizens above the age of 70, thereby reducing the risk of being exposed to high medical expenses.

An allocation of I9,500 crore has been made for the scheme in the Union Budget 2026–27 to expand coverage, enhance healthcare infrastructure and increase hospital participation.

Pradhan Mantri-Ayushman Bharat Health Infrastructure Mission (PM-ABHIM)

Launched in 2021, PM-ABHIM aims to strengthen the health infrastructure from the grassroots to the district level. The programme focuses on establishing and upgrading healthcare facilities while enhancing pandemic preparedness. It includes the development of an IT-enabled, real-time disease surveillance network integrating laboratories across block, district, regional and national levels to enable early detection and response to outbreaks effectively.

Between FY22 and FY26, I 32,928.82 crore (~$3.63 billion USD) has been allocated under the scheme for infrastructure development and upgradation.

Ayushman Bharat Digital Mission (ABDM)

The ABDM is driving the creation of a robust digital public infrastructure. Under the ABHA system, individuals are assigned unique health IDs, enabling secure storage and access to medical records through digital platforms.

As of June, 15, 2026, over 900 million ABHA accounts have been created. Through dedicated applications, patients can access teleconsultation services, while healthcare providers can securely review digital health records, improving accessibility and continuity of care across geographies.

Aarogya Setu App

The Aarogya Setu app has evolved into a comprehensive digital health platform under the ABDM framework. It enables users to generate health IDs, access digital prescriptions and lab reports and manage COVID-19 vaccination certificates. The platform also integrates teleconsultations through e-Sanjeevani, offering a unified interface for essential healthcare services.

National Health Mission (NHM)

The NHM continues to play a critical role in strengthening public healthcare delivery in India.

It focuses on improving maternal, child and adolescent health through programmes including immunisation, enhancing healthcare quality standards and addressing communicable and non-communicable diseases (NCDs).

The NHM budgetary allocation has increased to around I39,390 crore for FY27, representing an 85.5% rise since FY14.

Health Education Expansion

The government of India is actively expanding medical education infrastructure to meet the growing demand for healthcare professionals. Currently, there are 23 AIIMS campuses across India, with the first AIIMS of the northeastern state of Assam opening up recently.

Additionally, India has 2,045 medical colleges, comprising 780 allopathy, 323 dental and 942 AYUSH institutions, supporting the development of a robust healthcare workforce.

Rising Burden of Non-Communicable Diseases

The increasing prevalence of cardiovascular diseases, cancer, diabetes and neurological disorders is driving demand for specialised healthcare services across the country. The growing burden of chronic illnesses is expected to support long-term demand for advanced diagnostics, complex procedures and specialised treatment facilities.

Favourable Demographic Trends

Indias large population base, increasing life expectancy and evolving disease profile continue to create long-term demand for healthcare services. The growing need for specialised treatments, chronic disease management and long-term care is expected to support the expansion of organised healthcare delivery.

Growing Urbanisation

Indias urban population continues to expand, driven by migration and economic development. Increasing urbanisation is contributing to greater demand for organised healthcare infrastructure, specialised medical services and advanced treatment facilities, particularly across major cities and emerging urban centres.

Increasing Healthcare Spending by Households

Healthcare continues to account for an increasing share of household consumption expenditure, reflecting rising health awareness, greater willingness to spend on quality healthcare services and growing demand for preventive and curative treatments. This trend is expected to support sustained growth in healthcare utilisation.

Company Overview

Krishna Institute of Medical Sciences (KIMS) is one of Indias largest corporate healthcare groups, with operations across Telangana, Andhra Pradesh, Maharashtra, Kerala and Karnataka.

Operating under the brand name ‘KIMS Hospitals, the group focuses on delivering integrated tertiary and quaternary healthcare services with a strong emphasis on clinical excellence and affordability.

The organisation operates state-of-the-art multi-speciality hospitals with a total bed capacity exceeding 6,000 and offers more than 40 speciality services, which include Cardiac Sciences, Oncology, Neurosciences, Organ Transplantation and Maternal & Child Health.

KIMS Foundation and Research Centre (KFRC)

The KFRC, established in 2010 by Dr. Bhaskar Rao Bollineni, serves as the research arm of the group.

Theinstituteundertakesscientificresearchacrossbiotechnology, genomics, pharmacology and medical engineering, to enhance patient outcomes and advance clinical understanding.

The institute has established strategic collaborations with leading institutions, including the University of Hyderabad, Indian Institute of Chemical Technology (IICT) and Genome Foundation. These partnerships contribute to the establishment of joint PhD programs, co-supervised research initiatives and the attraction of high-calibre scientific personnel.

Medical Education

KIMS Hospitals offers medical education programmes, including Diplomate of National Board (DNB) courses and post-doctoral fellowships across multiple specialities. These initiatives are supported by KFRC, which integrates clinical training with scientific research in areas such as cancer drug delivery and biotechnology.

The group also undertakes community-focused initiatives in collaboration with organisations such as the Tech Mahindra Foundation and the Public Health Foundation of India. Key programmes include mobile cancer screening centres and SIGNCARE, a telemedicine platform designed to support individuals with hearing impairment.

To achieve capital-efficient and asset-light scaling, the growth strategy of KIMS effectively combines classic greenfield and brownfield expansions with asset-light long-term leases encompassing 859 beds across Kerala and Karnataka, and high-return O&M partner models managing 850 beds across Sangli, Kompally, and Guntur to ensure strategic capital deployment.

Sustaining this expansion is a unique doctor equity participation model, through which KIMS actively fosters an ownership culture by encouraging doctors to invest directly in the equity of their respective sub-entities.

This alignment strategy has restricted doctor attrition to 22.64% in FY 2026 and helped KIMS retain over 80% of its clinical talent since inception. This stable talent pool drives the advanced clinical capabilities and technology adoption of KIMS, characterized by the active rollout of top-tier medical innovations such as the Medtronic Mazor X spine robot (the first in AP/Telangana at KIMS Kondapur), TULSA-PRO, Gamma Knife radiosurgery, and da Vinci robotic systems, supported by advanced infrastructure expenditure that reached I7,583 million in FY 2026.

Operational Performance

	Telangana		Andhra Pradesh		Maharashtra		Kerala		Karnataka	Group
Particulars	FY25	FY26	FY25	FY26	FY25	FY26	FY25	FY26	FY25	FY25	FY26
Bed Capacity	1797	1,882	2214	2,314	659	959	509	509	800	5179	6,464
Operational Beds*	1682	1,694	1806	1,840	630	637	374	401	280	4492	4,852
Occupied Beds	854	889	1092	1,009	208	332	94	160	61	2248	2,450
Occupancy %	50.8%	52.5%	60.5%	54.8%	33.0%	52.1%	25.2%	39.8%	21.6%	50.1%	50.5%
IP Volume	91,159	93,038	99,266	1,01,575	17,887	29,393	5,034	18,443	3,848	2,13,346	2,46,297
OP Volume	9,01,117	9,42,195	7,22,487	7,84,509	1,40,401	2,98,296	70,307	2,21,405	53,955	18,34,312	23,00,360
ARPOB (Rs.)	63,650	69,450	21,130	25,595	32,052	39,402	29,885	29,063	85,320	39,158	44,644
ARPP (Rs.)	2,15,676	2,42,340	81,416	92,766	1,31,299	1,57,484	95,308	91,776	2,62,952	1,43,293	1,59,575
ALOS	3.39	3.49	3.85	3.62	4.10	4.00	3.19	3.16	3.08	3.66	3.57
Total Revenue (Rs. Mn)	1,971	22,420	8,108	9,496	2,365	4,654	486	1,713	1,025	30,670.0	39,308
EBITDA (Rs. Mn)	6,062	6,820	1,962	2,337	221	(43)	(97)	78	(910)	8,148	8,282
EBITDA % to Revenue	30.7%	30.4%	24.2%	24.6%	9.3%	(0.9%)	-(20.0%)	4.6%	(88.8%)	26.6%	21.1%

* Operational Beds includes census and non-census beds

Financial Overview

Particulars	FY 2025	FY 2026
Income
Operating Revenues	30,351	39,046
Other Income	319	262
Total Revenue	30,670	39,308
Expenses
Purchase of medical drugs	6,404	8,418
Changes in inventories of medical drugs	(135)	(329)
Employee benefits expenses	4,995	6,817
Other expenses	11,258	16,120
Finance costs	903	2,025
Depreciation and Amortisation expense	1,772	2,832
Total Expenses	25,197	35,883
Operating Profit / PBT	5,473	3,425
Share of profit from associate, net of tax	-	26
Exceptional items	108	(112)
Operating Profit Margin (%)	17.80	8.71
EBITDA	8,148	8,282
EBITDA Margin (%)	26.6	21.1

Key Financial Ratios

No. Ratios	% / Times	FY 2026	FY 2025	% Change	Reasons for variance over 25%
1 Inventory Turnover	times	10.08	11.38	(1.3)	Not Applicable
2 Interest Coverage Ratio	times	4.68	11.53	(6.85)	Not Applicable
3 Current Ratio	times	0.77	0.84	(0.07)	Not Applicable
4 Debt Equity Ratio	times	0.63	0.33	0.3	Not Applicable
5 Net Profit Margin	%	15.32	21.79	(6.47)	Not Applicable
6 Return on Capital Employed	%	10.81	14.36	(3.55)	Not Applicable
7 Return on Equity	%	11.34	15.02	(3.68)	Not Applicable

Technology and Cybersecurity

The Company has strengthened its cybersecurity framework through the implementation of real-time monitoring, advanced endpoint protection and integrated threat intelligence systems.

Key technical measures include the development of Security Information and Event Management (SIEM) tools, Intrusion Detection and Prevention Systems (IDS/IPS) and periodic third-party vulnerability assessments.

These security protocols are aligned with CIS Controls and are supported by regular employee training programmes and incident response drills. Recognising the growing importance of endpoints in the digital ecosystem, the Company continues to invest in behavioural analytics and advanced threat detection capabilities.

Human Assets

KIMS Hospitals regards its workforce as a critical strategic pillar in delivering world-class healthcare services. The Company continues to strengthen its talent acquisition framework by attracting qualified clinical and non-clinical professionals across diverse geographies while leveraging local talent to support its patient-centric culture. Strategic partnerships with nursing, paramedical and healthcare management institutes, along with specialised training programmes, help build a sustainable talent pipeline for current and future healthcare requirements.

As of March 31, 2026, the KIMS Group employed over 10,000 personnel. The Company promotes diversity and inclusion by ensuring equal opportunities for career advancement irrespective of individual differences. This culture reinforces a shared communication to improve patient outcomes.

Employee development remains a key priority. Each employee is required to complete a minimum of 40 training hours per year. The Human Resources function conducts both internal and external training programmes covering issues such as NABH and ISO certification, information technology security and hospital disaster management. In addition, specialised workshops are organised on clinical governance, cybercrime and safety in the workplace.

KIMS maintains a robust performance management framework that aligns individual goals with organisational objectives. The process incorporates goal setting, structured performance reviews, feedback discussions, development planning and leadership capability building. High-performing employees are recognised and provided opportunities for career advancement and leadership development, fostering a culture of accountability, continuous improvement and professional growth.

TheCompanyplacesstrongemphasisonemployeeengagement, wellbeing and workplace safety. A wide range of cultural, social and recognition initiatives, together with wellness programmes focusing on physical, emotional and mental health, contribute to a positive employee experience. Regular employee feedback surveys support continuous organisational improvement, while periodic safety drills, incident reporting mechanisms and preventive risk management practices help maintain a safe and resilient workplace environment across all facilities.

Risk Management

Risk Category	Particulars	Mitigation Strategy
Cybersecurity and Data Privacy	Increased reliance on digital infrastructure, AI- driven diagnostics and the ABHA ecosystem heightens the risk of cyberattacks and data breaches.	The Company maintains robust IT security and comprehensive data management Practices supported by effective disaster recovery and business continuity protocols.
Clinical Risk	Risks arising from medical errors, misdiagnosis, or surgical complications may jeopardise patient safety and institutional reputation.	KIMS minimises these risks through rigorous safety audits, stringent quality control measures and continuous staff training programmes.
Regulatory Risk	Compliance challenges associated with an evolving and complex landscape of healthcare and digital data protection regulatory environment.	The Company ensures compliance through continuous monitoring of regulatory development and timely updates to internal policies and procedures.
Financial Risk Operational Risk	Exposure to interest rate volatility, changes in taxation policies and credit-related risks affecting profitability and cash flows. Inefficiencies in internal systems or delays in project execution may affect service delivery.	Proactive debt management, regular financial risk assessments and stringent internal controls are implemented to maintain financial stability. The Company utilises efficient project management and operational flexibility to ensure the timely completion of initiatives and strict cost control.
Reputational Risk	Adverse impact on brand perception due to negative media coverage, unauthorised statements or perceived negligence.	The Company prioritises patient safety and maintains transparent communication, supported by proactive stakeholder engagement and public relations strategies.
Human Capital Risks	Increased international demand for healthcare professionals may lead to talent shortages or brain drain. This competition can drive up wage inflation and operational costs for hospitals.	The Company remains committed to its strategic pillar of human resource management, focusing on nurturing top-tier talent and supporting an inclusive work culture to enhance retention and job satisfaction.

Internal Control Systems and Adequacy

The guiding principles of the Company include fair representation and disclosure in all dealings with regard to corporate and financial matters. The Companys annual reports, results and presentations aim at providing stakeholders with timely and complete information.

The Company believes in transparency, accountability and fairness in its dealings with employees, governmental authorities, financiers and all other stakeholders. Every business move is directed at increasing the value of the shareholders interests.

Cautionary Statement

Certain statements in this Management Discussion and Analysis pertaining to KIMS Hospitals objectives, projections, expectations, estimates, future outlook and other forward-looking statements are based on currently available information, assumptions and forecasts and are subject to applicable laws and regulations. These forward-looking statements involve known and unknown risks, uncertainties and other factors, many of which are beyond the Companys control, that could cause actual results, performance, or achievements to differ materially from those expressed or implied. Key factors that may impact actual outcomes include, but are not limited to, changes in macroeconomic conditions, shifts in healthcare regulations or policy, competitive dynamics, pricing pressures, technological advancements, political or economic developments in India and globally, legal proceedings and fluctuations in input or operational costs.

These statements are not guarantees of future performance and should not be unduly relied upon. KIMS Hospitals undertakes no obligation to publicly update or revise any forward-looking statements in light of future events or new information, except as required by applicable law.