Lotus Eye Hospital & Institute Ltd Management Discussions.

Industry Structure and Development:

Healthcare has become one of Indias largest sectors - both in terms of revenue and employment. Healthcare comprises hospitals, medical devices, clinical trials, outsourcing, telemedicine, medical tourism, health insurance and medical equipment.

Indias competitive advantage lies in its large pool of well-trained medical professionals. India is also cost competitive compared to its peers in Asia and Western countries. The cost of surgery in India is about one-tenth of that in the US or Western Europe.

The overall Indian healthcare market worth is around US$ 100 billion and is expected to grow to US$ 280 billion by 2020, with a Compound Annual Growth Rate (CAGR) of 22.9 per cent. Healthcare delivery, which includes hospitals, nursing homes and diagnostics centres, and pharmaceuticals, constitutes 65 per cent of the overall market.

There is a significant scope for enhancing healthcare services considering that healthcare spending as a percentage of Gross Domestic Product (GDP) is rising. Rural India, which accounts for over 70 per cent of the population, is set to emerge as a potential demand source.

India requires 600,000 to 700,000 additional beds over the next five to six years, indicative of an investment opportunity of US$ 25-30 billion. Given this demand for capital, the number of transactions in the healthcare space is expected to witness an increase in near future. The average investment size by private equity funds in healthcare chains has already increased to US$ 20-30 million from US$ 5-15 million.

A total of 3,598 hospitals and 25,723 dispensaries across the country offer AYUSH (Ayurveda, Yoga & Naturopathy, Unani, Siddha and Homoeopathy) treatment, thus ensuring availability of alternative medicine and treatment to the people. The Indian medical tourism industry is pegged at US$ 3 billion per annum, with tourist arrivals estimated at 230,000. The Indian medical tourism industry is expected to reach US$ 6 billion by 2018, with the number of people arriving in the country for medical treatment set to double over the next four years. With greater number of hospitals getting accredited and receiving recognition, and greater awareness on the need to develop their quality to meet international standards, Kerala aims to become Indias healthcare hub in five years.

Rising income level, greater health awareness, increased precedence of lifestyle diseases and improved access to insurance would be the key contributors to growth. The private sector has emerged as a vibrant force in Indias healthcare industry, lending it both national and international repute. It accounts for almost 74 per cent of the countrys total healthcare expenditure.

Further, presence of world-class hospitals and skilled medical professionals has strengthened Indias position as a preferred destination for medical tourism.

Opportunities and Threats

The Indian healthcare sector is growing at a brisk pace due to its strengthening coverage, services and increasing expenditure by public as well as private players.

There is a significant scope for enhancing healthcare services considering that healthcare spending as a percentage of Gross Domestic Product (GDP) is rising. Rural India, which accounts for over 70 per cent of the population, is set to emerge as a potential demand source.

Increase in Competitive intensity due to new entrants, Increased cost of resources, discontinuation of leases etc. are some major threats associated to the healthcare industries.

Segment–wise or product-wise performance

Your Company operates in only one segment i.e. Eye Care and Related Activities.

Sector Outlook

The overall Indian healthcare market worth is around US$ 100 billion and is expected to grow to US$ 280 billion by 2020, a Compound Annual Growth Rate (CAGR) of 22.9 per cent. Healthcare delivery, which includes hospitals, nursing homes and diagnostics centres, and pharmaceuticals, constitutes 65 per cent of the overall market.

Rising population, growing awareness of health, willingness to pay for good quality of healthcare services, Competitive cost advantages are some of the factors favouring Healthcare sector.

Presence of world-class hospitals and skilled medical professionals has strengthened Indias position as a preferred destination for medical tourism.

The Government of India aims to develop India as a global healthcare hub. It has created the National Health Mission (NHM) for providing effective healthcare to both the urban and rural population. The Government is also providing policy support in the form of reduced excise and customs duty, and exemption in service tax, to support growth in healthcare.

Risk and Concerns i. Competition:

The competition from the un-organized sector would be met by delivering quality eye care services at par with international standards which the un-organized sector lacks in view of constraints in investment to create a quality eye hospital.

Because of increased opportunities, many private players are entering into this sector. Your Company can counter this challenge by providing focused eye care delivery and by deploying the state of the art equipments backed by panel of expert Doctors. ii. Shortage of skilled manpower:

Increasing demand for health care services combined with the aggressive expansion by the Indian private health care players is expected to significantly increase the demand for medical professionals. Similarly there is a shortage of medical and para-medical staff. We have a talented and skilled manpower in terms of Doctors, Nurses and para-medical staff. We continue to attract talented and skilled medical professionals. iii. Investment:

The health care sector is a capital intensive sector and need significant funding to grow. iv. Regulatory Risk

The evolution of the global regulatory environment has resulted in increased regulatory scrutiny that has raised the minimum standards to be maintained. This signifies the alignment of corporate performance objectives, while ensuring compliance with regulatory requirements. v. Increased cost of resources

Failure to acquire resources at fair and reasonable rates and increase in operating expenses may impact the Companys growth and financials.

Internal control systems and their adequacy

Your company has established internal control systems to ensure optimum use in protecting its resources and ensuring adherence to its policies, procedures and statutes. There is proper and adequate system of internal control for the company and its branches. The company has appointed Internal Auditor to review the adequacy of the internal control system, procedures and policies. The internal auditor evaluates the adequacy of the internal control systems by testing the control mechanism and gives their recommendations to the management.

Discussion on financial performance with respect to operational performance

Financial performance with respect to operational performance has been dealt with in the Directors Report which should be treated as forming part of this Management Discussion and Analysis Report.

Material developments in Human Resources / Industrial Relations front, including number of people employed.

There were 357 number of permanent employees on the rolls of the Company as on 31.03.2017. During the year under review, your company enjoyed cordial relationship with the employees at all levels.

Cautionary Statement

The Management Discussion and Analysis Report contains forward looking statements based upon the data available with the Company, assumptions with regard to global economic conditions, the government policies etc. Actual results might differ materially from those either expressed or implied.

For and on behalf of the Board
(Sd.) S.K. Sundaramoorthy
Chairman cum Managing Director
Place : Coimbatore
Date : 27th May, 2017