narayana hrudayalaya ltd share price Management discussions

Under penetration with attractive dynamics

Healthcare industry growth:

Ageing population, burgeoning lifestyle diseases, and rising affordability are contributing to the Indian healthcare industry growth at 15-17% CAGR. Healthcare Delivery has grown at CAGR of 12-14% over FY16-20.

Dominant Private healthcare spending:

India’s private sector accounts for 65-70% of healthcare spending; hence new investments will largely be driven by private firms.

Higher Out of pocket expenditure:

Low public spending and limited penetration of health insurance has led to ‘out-of-pocket’ expenditure accounting for ~63% of total healthcare compared to global average of 22%.

Growing Medical tourism:

The revival of medical tourism due to easy travel restrictions. This market is expected to rise at a CAGR of 65- 70% between FY21-25.

Investment Climate

Heightening Investor interest in hospital care:

As of October 2021, PE Deals worth Rs 244 Billion was witnessed in the last six years.

Merger & Acquisition Deals:

The M&A deals in the healthcare industry has jumped to $1.9 Billion in H1 FY2020-21 compared to $772 Million in H1 FY2019-20, owing to factors including digitization, supply chain optimisation, new business models and incubation.

Technology-led revolution

Moving towards internet of medical things (IoMT) and ease of home care:

IoMT helps in assess a patient’s health conditions in real time and exchange information remotely.

Electronic health records (EHR):

In Union budget 2022-23, it was announced that an open platform for the National Digital Health Ecosystem will be rolled out. It will consist of digital registries of health providers and facilities, unique health identity and universal access to health facilities.

Digital platforms/Telemedicine:

National teleconsultation service a online OPD service (eSanjeevaniOPD) offered by the government. A national tele mental health programme announced to better access to quality mental health counselling and care services.

NH Consol P&L Review

Operating Income:

NH India

The Company’s revenue from operations increased from Rs 20,706 Million in 2020-21 to Rs 29,655 Million in 2021-22 on account of the recovery of business attribute to subsidizing the pandemic and removal of domestic and international travel restrictions. The flagship units in Bengaluru and Kolkata surpassed the pre COVID levels volumes despite the second wave and third wave. Also, strong traction momentum is demonstrated by our new units.


The facility’s revenue from operations increased from US$ 68.6 Million in 2020-21 to US$ 91.9 Million in 2021-22. This increase of 33.9% is attributable to strong pick up in patients’ footfall as the facility is getting decent traction from neighbouring islands leading to higher growth in the business. Also, local affluent patients who used to travel to the US for treatment, visited our facility due to travel restrictions imposed by the US government which is still prevalent. Even after the pandemic, the traction of high net worth patient footfalls continued to grow.

Cost of Material Consumed:

NH India

The cost of material consumed (Purchase of medical consumables, drugs and changes in inventories of medical consumables) increased from Rs 5,920 Million last year to Rs 8,019 Million in 202122 this fiscal as the revenues from operations got significantly increased due to recovery of business.

Consumption as a % of revenues decreased from 28.6% last year to 27.0%. Higher contribution of high-yield business such as international medical tourism coupled with growth in OP and decreased use of consumables such as surgical gloves, PPE kits and other protective gears also led to a decrease in consumption combined with operational efficiency has led to this dip in consumption.


The cost of material consumed (Purchase of medical consumables, drugs and surgical equipment and changes in inventories of medical consumables, drugs and surgical equipment) increased from US$ 11.4 Million last year to US$ 15.9 Million in 2021-22 with consumption as a % of revenues increasing from 16.5% in FY2020-21 to 17.4% in 2021-22.

Manpower Expenses (Employees Benefits + Prof. Fees paid to doctors)

NH India

The manpower expenses including professional fees paid to doctors increased from Rs 9,927 Million in FY2020-21 to Rs 12,525 Million in FY2021-22. This increase in manpower expenses is due to increase in headcount including the doctors, and also attributable to revision in employee benefits & compensation by the Company. The manpower expenses as a % of operating income decreased from 47.9% in 2020-21 to 42.2% in 2021-22 due to leverage effect of increase in revenue.


The manpower expenses including professional fees paid to doctors have increased from US$ 19.2 Million in 2020-21 to US$ 21.8 Million in 2021-22 due to increase in head count and revision in employee benefits & compensation by the Company.

Other Expenses (Overheads)

NH India

The other expenses of the Company at the India business level have decreased from Rs 4,913 Million in 2020-21 to Rs 5,774 Million in 202122. Some of the key heads and the movement of expenses across each is explained below:

Operating Rent/Revenue Share

The operating rent/revenue share increased from Rs 234 Million (1.1% of total operational revenue) in 2020-21 to Rs 334 Million (1.1% of total operational revenue) in 2021-22. This increase is on account of increase in operating revenue in 2021-22 resulting in higher payout (revenue share to hospital partners (Owner/promoter of the facilities we are running on revenue share basis).

Repair and Maintenance

The repair and maintenance expenses have marginally increased from Rs 1,072 Million in 2020-21 to Rs 1,187 Million.

Power and Fuel

The overall power and fuel cost increased from Rs 615 Million in 2020-21 to Rs 676 Million this year primarily due to increase in power/ diesel cost.

Business Promotion and Advertisements

These expenses were Rs 538 Million for 2020-21 and Rs 773 Million in 2021-22 as we increased our marketing spend in line with the recovery of business from COVID-19 induced hardship.


The other expenses of the unit have increased from US$ 12.1 Million in 2020-21 to US$ 18.7 Million in 2021-22 on account of increase in hospital operating expenses majorly in maintenance.


NH India

The Company registered an EBITDA of Rs 3,581 Million in 2021-22 for its India business as compared to Rs 199 Million we achieved last year. India business that was severely impacted in the wake of COVID-19 pandemic in 2020-21 saw a strong recovery in 2021-22 despite the second and third waves of the pandemic. Our core business in the form of high-end procedures/surgeries has gradually picked up and contributed to the increase in EBITDA. Our flagship centres at Bengaluru and Kolkata post recovery of business have surpassed the pre-COVID volumes attribute to good traction in domestic and international patient footfalls. However, our centres in hinterland regions were relatively less impacted and demonstrated resilience during the tough times and continued to show the momentum of growth trajectory. Also there has been an increase in contribution margin on account of savings in consumption.


Facility’s EBITDA increased from US$ 26.2 Million in 2020-21 to US$ 36 Million in 2021-22 reflecting a YOY growth of 37.4% on the back of increased proportion of high-net-worth Caymanian patients coming to our facility for quaternary care who historically were going to the US for medical care thus helping us register strong profitability.

Finance Cost

NH India

Finance cost decreased from Rs 648 Million in 2020-21 in 2020-21 to Rs 571 Million this year due to repayment of borrowings.

NH Consol Balance Sheet Review

Category (Amount) FY 2020-21 FY 2021-22
NH India (H Million) HCCI Consol (US$ Million) NH Consol (INR Million) NH India (INR Million) HCCI Consol (US$ Million) NH Consol (INR Million)
Borrowings 4,491 23.1 6,178 4,135 17.3 5,449
Trade Payables 3,664 6.0 4,103 4,015 6.3 4,490
Gross Tangible Assets 20,580 61.0 25,044 21,914 63.4 26,680
Trade Receivables 1,943 11.5 2,785 2,437 25.5 4,369
Inventories 243 3.2 478 312 3.7 594

Borrowings NH India

Total Borrowings decreased from Rs 4,491 Million as on 31st March 2021 to Rs 4,135 Million as on 31st March 2022 despite a significant drop in revenues as we implemented certain cost control measures such as salary cuts, reduced marketing spends, etc. Better working capital management ranging from strong institutional collection, restructuring the payment terms with our vendors, etc also helped manage the situation.


Total Borrowings came down from US$ $ 23.1 Million as on 31st March 2021 to US$ 17.3 Million as on 31st March 2022. This is in line with the repayment schedule of the term loan from First Caribbean International Bank.

Trade Payables

NH India

The trade payables have increased from Rs 3,664 Million as on 31st March 2021 to Rs 4,015 Million as on 31st March 2022. This increase is on account of us having re-negotiated certain contracts with our vendors to optimise our working capital requirement by extending the payment cycle due to cash crunch as the business was impacted severely due to lockdown and other restrictions.


The trade payables marginally increased from US$ 6.0 Million as on 31st March 2021 to US$ 6.3 Million as on 31st March 2022. This increase is line with the uptick in revenues.

Assets Gross Block NH India

Gross Block (tangible assets) increased from Rs 20,580 Million as on 31st March 2021 to Rs 21,914 Million as on 31st March 2022. Bulk of this increase is attributed towards investment in medical equipment across our network to strengthen our clinical offerings so as to provide quaternary care.


Gross Block (tangible assets) increased slightly from US$ 61.0 mn as on 31st March 2021 to US$ 63.4 mn as on 31st March 2022.

Trade Receivables

NH India

The trade receivables (net of provision for doubtful receivables) increased from Rs 1,943 Million as on 31st March 2021 to Rs 2,437 Million as on 31st March 2022.


The trade receivables (net of provision for doubtful receivables) increased from US$ 11.5 Million as on 31st March 2021 to US$ 25.5 Million as on 31st March 2022. This increase in receivables is in line with increase in revenues of the facility.


NH India

The inventory increased from Rs 243 mn as on 31st March 2021 to Rs 312 Million as on 31st March 2022 as we implemented certain measures to optimise our working capital requirement in light of the uncertainty about the business recovery.


The inventory increased from US$ 3.2 Million as on 31st March 2021 US$ 3.7 Million as on 31st March 2022 as the company is maintaining increased volume of the stock due to supply chain disruptions because of the pandemic and also due to uptick in the business.

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

2021-22 was a year of recovery for the business after the COVID impact of 2020. While the country went through two waves of COVID, the relative impact of the same was significantly less than in the previous wave. In these challenging times, we continued to keep ourselves abreast of market forces to ensure that we provide our employees an organisational environment that is designed to engage and motivate employees and help them deliver superior performance at work. This helped in creating an environment of trust and bonding within the employees and in turn then gave their best to the turnaround in business delivery, post the COVID impact.

The NH brand continues to carry a respectable goodwill in the field of Healthcare delivery and is one of the most sought-out workplaces for good talent. Being spread across geographical locations have helped us to leverage our expertise across the group entities.

The Company also recognises the importance of Human Resources Development and in the context of programmes on training and development of the employees which continues to be an important focus area. The Company acknowledges the value every employee brings with him / her and continuously strives to nurture competence and potential. Trainings continue to be conducted for both Clinical and Non-Clinical areas which has helped us raise the quality of performance and output.

As an organisation, we strongly believe in being compliant with all statutes and labour-related acts, we also ensure that our partners and vendor organisations who work as an integrated part of NH are also following the same standards of compliance. This is closely monitored by a central team and also at each location where NH has its presence.

Training and Development

At NH we continue to invest significantly in training of our workforce on a continuous basis. While there were significant challenges faced with the advent of COVID-19, in 2020, the Learning and Development (L&D) function, managed to deliver several programmes on safety, hygiene, and managing during the COVID-19 crisis, through a digital platform "NH Excelerate". We have also developed several online modules on training nursing group on skill enhancement and capability building. The nurses are encouraged to take these courses and qualify through an assessment. This helps in building the capability, while also creating an environment of sustained learning and development. We have also continued to invest in developing the senior and midlevel leadership to build skills and competency on operational excellence, cross-functional skill development, core leadership skill development and interpersonal skills.

During the year, the L&D Team rolled out specific initiatives that are aimed at enhancing the customer experience, through the Service Excellence initiative to enhance the experience of the patient in the hospital.


This year we consolidated our core operating strategy to align the new business initiatives business on retail, managed care and clinics. We have fulfilled several key positions in core clinical areas of expertise that were started in several units. Recruitment of nursing talent continued to be a challenge for the team, where we have managed to maintain our position as the most-sought after place to work, for nurses.


Being a vital function of Human resources, our compensation strategies ensure there is a balance in work-employee relation by providing competitive monetary and non-monetary benefits which are as per market standards. As part of the strategy, we review market forces to align the compensation philosophy of the organisation, thereby providing all associates with a good balance of compensation and benefits. This year also, we have benchmarked salaries against market and implemented a significant correction to roles like nursing, which are critical and core to the success of the hospital.

Risks and Concerns

Risks are an integral part of any enterprise and needs to be balanced with the rewards at all times. Risk Management is increasingly a key differentiator that determines profitability, growth, and even long-term sustenance of organizations. Healthcare industry has been particularly impacted by the pandemic that hit without warning in March 2020. Heightened Government oversight and intervention by way of an active regulatory regime that tends to control margins on medicines, implants and even cost of other medical services impacts revenue and margin of hospitals. Joint negotiation by the major insurance organizations by way of GIPSA etc., and the ever increasing coverage of various State and Centra Government schemes also driving down the margins for healthcare service providers.

At NH, we proactively focus on risk identification, management and mitigation. There is a concerted program at all levels - Operational, Financial and Strategic to continuously update the risk register at the enterprise level. This robust framework helps in responsibility accounting and brings to bear the efforts of the right stakeholders to focus on the mitigation of the identified risks at various levels in the enterprise.

Internal Control Systems and their adequacy

The Company has adequate Internal Control Systems, commensurate with the size, scale and complexity of its operations. The Board of Directors has laid down internal financial controls to be followed by the Company and the policies and procedures to be adopted by the Company for ensuring the orderly and efficient conduct of its business, including adherence to the Company’s policies and compliance with all applicable Laws, Rules and Directives from any Statutory or Regulatory Authority, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and timely preparation of reliable financial information.

The Audit, Risk and Compliance Committee, comprising of three independent directors of the Company, reviews the effectiveness of the Company’s financial controls and other internal controls and risk management systems and processes (including those relating to compliance with all applicable laws and regulations) to ensure that they are robust and have been appropriately developed, implemented and maintained so that financial, compliance and other risks are identified, assessed, mitigated and controlled. They are aided in this task by an Internal Audit Team which continually evaluates the existing internal controls, providing feedback on its effectiveness and recommendations on possible improvements to the Operational and Executive Management team. The key findings are reported on a quarterly basis to the Audit, Risk and Compliance Committee for in-depth review and follow-up on appropriate resolutions of critical issues.

Key Financial Ratio Analysis

Ratios 2021-22 2020-21 Movement Remarks
(i) Debtors Turnover 4.38 3.18 37.7%
(ii) Inventory Turnover 23.15 15.66 47.8% Improved performance coupled
(iii) Interest Coverage Ratio 15.09 1.63 824.2% with better margins
(iv) Current Ratio 0.78 0.60 28.8%
(v) Debt Equity Ratio 0.31 0.36 -12.4%
(vi) Operating Profit Margin (%) 9.7% -4.5% 316.4%
(vii) Net Profit Margin (%) or sector-specific equivalent ratios, as applicable. 5.3% -4.5% 216.7% Improved performance coupled with better margins
(viii) Return on Net Worth 10.91% -7.22% 251.0%
Ratios 2021-22 2020-21 Movement Remarks
(i) Debtors Turnover 4.35 3.86 12.6%
(ii) Inventory Turnover 13.76 10.35 32.9% Improved performance coupled
(iii) Interest Coverage Ratio 19.02 4.85 292.4% with better margins
(iv) Current Ratio 1.17 0.95 23.3%
(v) Debt Equity Ratio 0.37 0.55 -33.6%
(vi) Operating Profit Margin (%) 13.5% 1.0% 1218.1% Improved performance coupled
(vii) Net Profit Margin (%) or sector-specific equivalent ratios, as applicable. 9.2% -0.5% 1772.5% with better margins
(viii) Return on Net Worth 22.97% -1.28% 1901.2%