Rainbow Childrens Medicare Ltd Management Discussions

INDIAS ECONOMY OVERVIEW

The Indian economy has witnessed strong growth in

FY 2023-24, driven by robust investment growth in plant and machinery, strong momentum in manufacturing, and a modest improvement in trade. As per the second advance estimates released by the National Statistics Organisation (NSO), the Indian economy is forecasted to expand by 7.6%, surpassing the 7.0% growth observed in the previous year. Positive macroeconomic indicators, improved conditions in the labour market, heightened urban demand, and increased government emphasis on capital expenditure have also contributed to the overall economic growth.

The Reserve Bank of Indias Monetary Policy Committee (MPC) has maintained the policy repo rate at a constant 6.5% over FY 2023-24, adhering to its ‘withdrawal of accommodation stance. The RBI has restated its commitment to maintaining headline inflation at 4%, and it has anticipated an inflation rate of 5.4% for FY 2023-24. The RBIs stance on inflation and its efforts to manage price stability are crucial in moderating these cost pressures, thus influencing the financial sustainability and the affordability of healthcare services.

Various e-commerce platforms have witnessed growth by adopting innovative digital payment methods like the unified payments interface (UPI). Digital payment transactions have significantly increased, up from Rs 2,071 Crore in FY 2017-18 to Rs 13,462 Crore in FY 2022-23, with a strong annual growth rate of 45%. As of 11th December, 2023, digital payment transactions for FY 2023-24 have already exceeded Rs 11,660 Crore, indicating a continued trend of embracing digital payments. This growing acceptance of digital payments supports the hospital industrys transformation, making healthcare services more accessible and financially streamlined.

The positive sentiment is fuelled by an upswing in the private capital expenditure cycle, improved business sentiments and robust financial positions of banks and corporations. On the demand side, the optimistic outlook for household consumption and fixed investment bodes well for healthcare, as increasing disposable income and business confidence drive greater spending on health services and insurance. However, potential challenges like geopolitical tensions and market volatility may impact the broader economic climate, potentially influencing healthcare investment and access.

INDUSTRY OVERVIEW

Indian Healthcare Industry

Indias healthcare industry largely comprises the key segments of hospitals, pharmaceuticals, diagnostics, medical devices and equipment, health insurance and medical tourism. The Indian healthcare industry was valued at around USD 180 billion in FY 2022-23 and is projected to grow to approximately USD 320 billion by FY 2027-28. Hospitals are a central pillar of Indias healthcare system, reflecting both significant advancements and persistent challenges. Serving a population of over a billion, Indian hospitals have become complex institutions offering a wide array of services, ranging from primary care in local clinics to advanced treatments in state-of-the-art facilities. Hospitals are the most significant segment of Indias healthcare market, accounting for approximately 71% of the market size. The healthcare sectors growth is driven by Indias demographic shifts and a growing prevalence of non-communicable diseases (NCDs), combined with an increasing capacity for patients to afford healthcare.

The improvements in specialty and case mix, a better payor mix with a higher contribution from cash and insurance patients, and annual price adjustments by companies to counter cost inflation have supported the overall growth of the hospital industry. In FY 2023-24, the hospital industrys revenue growth is estimated to have ranged between 12% and 14%. The average revenue per occupied bed (ARPOB) is projected to grow by 8-10% in FY 2023-24, following a 10% increase in FY 2022-23.

The healthcare sector is experiencing increasing demand due to various factors, such as demographic changes, a rising prevalence of non-communicable diseases (NCDs), and an increased ability to pay for healthcare. As life expectancy rises, more people are reaching the age of 50/60 years and beyond, leading to a greater need for healthcare services. Furthermore, heightened health awareness due to urbanisation, rising income levels, greater health insurance penetration, and various central and state government schemes have boosted the capacity to pay for healthcare.

Healthcare service delivery is typically centred in urban areas due to better income levels and a higher availability of doctors and trained medical staff. The urban concentration has resulted in a higher rate of hospitalisation for both in-patient and out-patient treatments in cities compared to rural areas. Such shift is expected to expand the target population for corporate hospitals that operate at the higher end of the pricing scale. Besides the major cities like Mumbai, Delhi, Chennai, and Kolkata, rapid growth in cities such as Bengaluru, Gurugram and Hyderabad have created new healthcare micro-markets.

India has significant room for growth in healthcare infrastructure and spending, offering a substantial opportunity to bridge the gap between demand and supply. With government budgets being limited, the private sector is set to benefit from the anticipated industry growth. By FY 2026-27, the private healthcare sector is estimated to comprise 73% of the total healthcare services in the country. In addition, the total healthcare industry is estimated to expand by 10-12% Compound Annual Growth Rate (CAGR) till FY 2026-27. The number of large hospital chains are expected to grow in future, driven by their ability to invest and attract top clinical talent, the increasing need for complex medical procedures, and their appeal to insured and medical tourism patients.

Digital Healthcare

Over the next decade, health care service delivery in India is anticipated to be shaped by technological advancements and the increasing adoption of digital health practices among both providers and patients. This trend is driven by a shift in mindset, technical innovations, infrastructure improvements, government support, and other key factors.

In parallel, private sector participants are leveraging digital technologies such as robotics, telehealth, artificial intelligence (AI), and 5G to provide tech-enabled care to their patients. Patients are also embracing technology, using it to maintain connections with the health ecosystem and manage their health more proactively. These developments are expected to accelerate the transformation of health care service delivery in India, leading to more efficient, accessible, and personalised care experiences.

Over 65% of Indias population resides in villages, but only 40% of hospitals are in rural areas. Adopting 5G technology could enhance healthcare in these regions by enabling rapid telemedicine and faster ambulance response times. In FY 2021-22, India faced a 31% shortfall in primary health centres (PHCs) in rural areas. Digital healthcare solutions, like 5G-enabled telemedicine and virtual consultation kiosks, have the potential to transform rural healthcare, providing rural residents with access to quality medical services without the need to travel long distances. This technological integration can address rural healthcare disparities and improve overall health outcomes.

About 71% of Indian doctors find patient health data overwhelming, highlighting the need for Electronic Health Records (EHR) and telehealth. The World Health Organisation (WHO) estimates India needs 1.8 million more healthcare workers by 2030 to meet global standards. Artificial intelligence (AI) can assist by managing large volumes of patient data and enabling precision medicine. Additionally, with 65% of hospital beds serving only half

098 the population, satellite centres in underserved areas could promote a more equitable distribution of healthcare.

Source: https://www2.deloitte.com/content/dam/Deloitte/in/ Documents/public-sector/in-ps-the-future-of-health-noexp.pdf https://www.bain.com/insights/healthcare-innovation-in-india/

Indian Healthcare Insurance Industry Overview

The India health insurance market was valued at USD 133 billion in 2023. According to the IMARC Group, the market is expected to grow to USD 291 billion by 2032, representing a CAGR of 9.1% from 2024 to 2032.

Indias health insurance market is driven by a growing geriatric population, increasing cases of chronic diseases, and a rising number of healthcare facilities. Government programmes for economically vulnerable citizens and central government employees further boost demand, while insurers cost-control efforts, niche insurance products, and the use of data analytics and artificial intelligence are enhancing the markets growth.

The health segment contributed 36.83% to the total gross direct premiums (GDP) for Non-Life Insurers year till date (YTD) December 2023, which is an increase from 34.62% as of December 2022, according to Insurance Regulatory and Development Authority of India (IRDAI). The growth rate for the health segment was 21.37% YTD December 2023, compared to 20.14% in December 2022. In the health insurance segment, the public sector insurers had a market share of 40.15% YTD December 2023, down from 45.98% in December 2022. The public sector insurers experienced a growth rate of 5.99% as of December 2023, lower than the 13.73% in December 2022. The private general insurers had a combined market share of 32.09% as of December 2023, up from 27.42% in December 2022. The private insurers experienced strong growth as compared to the other insurers by registering a growth rate of 42.05% in 2023, a significant increase from 26.03% in 2022. The standalone health insurers achieved a market share of 27.76% as of December 2023, slightly up from 26.61% in December 2022. They witnessed a growth rate of 26.63% for 2023, as compared to 26.34% in 2022.

OVER THE NEXT DECADE, HEALTH CARE SERVICE DELIVERY IN INDIA IS ANTICIPATED TO BE SHAPED BY TECHNOLOGICAL ADVANCEMENTS AND THE INCREASING ADOPTION OF DIGITAL HEALTH PRACTICES AMONG BOTH PROVIDERS AND PATIENTS. THIS TREND IS DRIVEN BY A SHIFT IN MINDSET, TECHNICAL INNOVATIONS, INFRASTRUCTURE IMPROVEMENTS, GOVERNMENT SUPPORT, AND OTHER KEY FACTORS.

Health insurance penetration across India is expected to increase in the coming years for several reasons. Rising medical inflation and the escalating costs of healthcare will likely drive more Indians to purchase health insurance to avoid depleting their savings or incurring heavy medical debt. Additionally, the “Digital India” initiative and the growing use of tablets and smartphones have made it easier than ever to buy insurance. As more people adapt to the convenience of purchasing insurance policies through online channels like apps and websites, the reliance on traditional methods such as insurance agents is expected to decline. This shift towards digital platforms could further boost health insurance penetration across India.

The combined effect of rising out-of-pocket expenses, greater health awareness, escalating medical inflation, higher rates of lifestyle diseases, and the governments supportive stance towards healthcare will make “insurance for all” a reality in India. These factors are driving more people to seek health insurance, setting the stage for broader coverage and greater access to healthcare services.

Source: IRDAI https://www.imarcgroup.com/india-health-insurance-market https://www.forbes.com/advisor/in/health-insurance/health-insurance-statistics/

Transformation of the healthcare sector

Innovation in healthcare, through technologies like telemedicine, artificial intelligence, and electronic health records, boosts the hospital industry by streamlining operations, enhancing patient care, and reducing costs, thereby driving growth, and improving overall efficiency. Healthtech made up about 25% of the healthcare innovation market in FY 2022-23, with its value more than doubling from around USD 3 billion in FY 2019-20 to approximately USD 7 billion in FY 2022-23. For decades, the Indian healthcare industry has led the way in innovating low-cost services and products for both domestic and international markets. In recent years, the industry has expanded its scope of innovation as companies embrace emerging technologies, creating new business models, software-driven solutions, and products that go beyond traditional value engineering approaches. These advancements have opened new pathways for innovation, enriching the healthcare landscape.

As of March 2024, healthcare innovation in India represents a USD 30 billion opportunity, primarily driven by pharma services and healthtech, with biotech and medtech sectors beginning to gain traction. The investment landscape has evolved, with growing interest in these areas and a shift toward positive unit economics in healthtech. The pharma services are expected to occupy a larger share in healthcare innovation in the coming period, growing at a CAGR of 13-15% by FY 2027-28. The healthcare innovation market is expected to reach USD 60 billion by FY 2027-28, driven by factors like consumer-focused healthcare, global value chain shifts, and increasing scientific expertise. These trends suggest major changes ahead, with potential for consolidation, new partnerships, and shifts in profit pools.

Global Maternity and Paediatric Care Industry

The global maternity and paediatric healthcare market has seen significant growth, with the market size reaching USD 808.8 billion in 2023. According to the IMARC Group, the market is expected to continue expanding, with a projected market size of USD 2,212.7 billion by 2032. This represents a CAGR of 11.6% during the forecast period from 2024 to 2032. The growth trend is influenced by rising awareness of maternal and child health, advancements in healthcare technology, and greater investment from both government and private sectors in healthcare infrastructure. The maternity healthcare sector has seen consistent growth due to factors like improved awareness of maternal health, progress in prenatal care, and more frequent institutional deliveries.

The paediatric healthcare market is experiencing rapid growth, driven by an increasing global child population and greater awareness of paediatric health issues. This expansion is fuelled by innovations in diagnostics, therapeutics, and vaccines specifically for children, along with a stronger focus on preventive care. The sector also benefits from increased healthcare spending and a wider variety of medical devices and support services designed for paediatric use.

Global Maternity and Paediatric Healthcare Market Size (in USD billion)

Indian Maternity and Paediatric Care Industry

Critical care delivery in India has enhanced considerably over the past two decades with the strengthening of healthcare infrastructure. As of August 2022, there were 37,281 Intensive Care Unit (ICU) and High Dependency Unit (HDU) beds, along with 1,24,695 oxygen-supported beds. Paediatric care is evolving, with 16,908 ICU/HDU beds specifically-designed for younger patients. Additionally, the nation has 52,265 ventilators, essential for patients with severe respiratory conditions. These numbers reflect Indias commitment to providing a diverse and comprehensive healthcare system that can cater to the needs of a large population, including the specialised requirements of paediatric care.

Source: https://tn.data.gov.in/resource/stateuts-wise-icuhdu-beds-oxygen-beds-paediatric-icuhdu-beds-and-ventilators-reply

Indias low spending on childcare products and services, despite having one of the highest birth rates globally, indicates a significant potential for growth in the paediatric healthcare sector. In 2022, Indias average expenditure per child was Rs 8,000, much lower than Chinas Rs 46,000 and the United States Rs 24.1 Lakh. This gap suggests that as incomes rise and awareness about child health increases, the market for paediatric healthcare services could expand significantly.

With a birth rate of 16.4 per thousand in 2021, which is much higher than Chinas 7.5 and the United States 11, Indias maternity and paediatric healthcare sectors have a large and growing market to cater to. This high demand could foster growth in service delivery, encouraging more hospitals to offer specialised maternity and paediatric care, and opening doors for innovative health services and products tailored for mothers and children.

Greater investment in childcare products and services can lead to improved infrastructure, more widespread access to specialised maternal and paediatric care, and better health outcomes for children. These factors, combined with a broader focus on preventive healthcare, suggest a promising future for the paediatric healthcare market in India.

Source: https://www.business-standard.com/industry/news/ india-s-childcare-market-expected-to-grow-on-the-back-of-macro-drivers-124011800169_1.html

THE PAEDIATRIC HEALTHCARE MARKET IS EXPERIENCING RAPID GROWTH, DRIVEN BY AN INCREASING GLOBAL CHILD POPULATION AND GREATER AWARENESS OF PAEDIATRIC HEALTH ISSUES.

GOVERNMENT INITIATIVES

Aayushman Bharat Scheme

Ayushman Bharat Scheme consists of two integral components: Ayushman Arogya Mandir and Ayushman Bharat PM-JAY.

Ayushman Arogya Mandirs involves upgrading Sub Health Centres (SHCs) and Primary Health Centres (PHCs) in urban and rural areas to enhance community healthcare accessibility. As of 15th December, 2023, the Ayushman Arogya Mandir Portal has successfully operationalised 1.63 Lakh Ayushman Arogya Mandirs in the country

Ayushman Bharat Pradhan Mantri - Jan Arogya Yojana (AB PM-JAY) stands as the worlds most extensive publicly funded health assurance scheme. This initiative offers health coverage of Rs 5 Lakh per family per year, specifically for secondary and tertiary care hospitalisations. As on 27th December, 2023, about 55 Crore individuals corresponding to 12 Crore families are covered under the scheme. Moreover, as of 20th December, 2023, around 28.45 Crore Ayushman Cards have been generated since the initiation of the scheme

The success of Ayushman Bharat programmes suggests a broader trend toward comprehensive healthcare for all, aligning with the growing emphasis on healthcare penetration and ensuring that even underserved populations have better access to medical services.

Ayushman Bharat Digital Mission

The Ayushman Bharat Digital Mission (ABDM), formerly known as the National Digital Health Mission, was introduced to establish a comprehensive national digital health system that ensures widespread health coverage in a cost-effective, easily accessible, inclusive, affordable, timely, and secure manner. As of 19th December, 2023, significant milestones have been achieved under ABDM, including the creation of 49.86 Crore Ayushman Bharat health accounts, registration of 2.60 Lakh healthcare professionals, and enrolment of 2.30 Lakh health facilities.

Global Initiative on Digital Health

Under Indias G20 Presidency, digital health emerged as a focal point, concentrating on “Digital Health Innovation

& Solutions for Universal Health Coverage (UHC) and enhanced healthcare service delivery.” India launched the Global Initiative on Digital Health (GIDH) on 19th August, 2023, proposing it as an institutional framework to develop a global digital health ecosystem. The GIDH aims to create a ‘common platform for global collaboration, addressing the digital divide by advocating equitable access to technological tools and fostering innovation in digital health worldwide.

Medical Education

The number of medical colleges has seen an 82% increase, rising from 387 before 2014 to 706 as on 27th December, 2024, with 389 being government and 317 private institutions. Additionally, there has been a substantial growth of 112% in MBBS seats, escalating from 51,348 before 2014 to 1,08,940 on the same date. Moreover, PG seats have increased by 127%, progressing from 31,185 before

2014 to 70,674. Under the Central Sponsored Scheme for establishing new medical colleges, 157 have been approved in three phases, with 108 currently operational and the rest expected to become functional in the coming years.

FY 2024-25 Interim Union Budget Highlights

The Interim Budget for India in FY 2024-25 has introduced substantial measures to promote a healthier future for the Indian people. Key highlights in the recent budget include increased allocations for the Pradhan Mantri Ayushman Bharat Health Infrastructure Mission (PMABHIM), Ayushman Bharat-PMJAY, and the Production Linked Incentive (PLI) scheme, signalling a strong emphasis on accessible healthcare and sustainable development.

The key initiatives outlined in the budget include the following:

The allocation for PMABHIM has been raised from Rs 2,100 Crore in FY 2023-24 to Rs 4,108 Crore in FY 2024-25

The allocated budget for Ayushman Bharat (PMJAY) has been elevated from Rs 7,200 Crore in FY 2023-24 to Rs 7,500 Crore in FY 2024-25

The budget allocation for the Production Linked Incentive Scheme has experienced an upswing, increasing from Rs 4,645 Crore in FY 2023-24 to Rs 6,200 Crore in FY 2024-25

The government aims to establish additional medical colleges by leveraging existing hospital infrastructure

Initiatives will be taken to encourage vaccination for girls aged 9 to 14 years, focusing on preventing cervical cancer

Programmes will be introduced to address maternal and childcare concerns, consolidating them into a comprehensive initiative to enhance synergy in implementation

Upgradation schemes will be launched under Saksham Anganwadi and Poshan 2.0, with the aim of improving nutrition delivery, early childhood care, and development

The U-WIN platform for managing immunisation, along with intensified efforts of Mission Indradhanush, will be implemented nationwide

Healthcare coverage under the Ayushman Bharat scheme will be expanded to include all ASHA workers, anganwadi workers, and helpers

The budget allocation for biotechnology research and development has been increased from Rs 500 Crore in FY 2023-24 to Rs 1,100 Crore in FY 2024-25

The Interim Union Budget for FY 2024-25 aligns seamlessly with the vision of fostering a technologically advanced and innovative India by allocating a significant fund of Rs 1 Lakh Crore for technology financing

Source: https://www.healthcareradius.in/government-policy/ budget-2024-25-at-a-glance-for-indias-healthcare-sector#:~:text=Total%20Healthcare%20Expenditure%3A%20 Total%20expenditure,4%2C108%20Crores%20 in%202024%2D25

RAINBOW HAS 12 NABH-ACCREDITED HOSPITALS, 3 EDGE-CERTIFIED HOSPITALS,

AND THE DISTINCTION OF INDIAS FIRST JOINT COMMISSION INTERNATIONAL

(JCI) RECOGNISED REPRODUCTIVE CENTRE. THE COMPANY ALSO HOLDS THE DISTINCTION OF OPERATING INDIAS FIRST JCI-ACCREDITED PAEDIATRIC HOSPITAL.

TRENDS AND OPPORTUNITIES IN THE INDIAN HEALTHCARE SECTOR

Low Market Penetration

With a population exceeding a billion people, theres a pressing need to expand healthcare infrastructure, particularly in rural and underserved areas. The Ministry of Health and Family Welfare has been granted a significant allocation of Rs 90,659 Crore in the interim budget for FY 2024-25, reflecting a noteworthy increase of 12.59% compared to the previous budgets revised estimates of Rs 80,518 Crore for FY 2023-24. This substantial increase in funding reflects the governments commitment to enhancing healthcare coverage and services in India. This includes the establishment of hospitals, clinics, and diagnostic centres to improve accessibility. Expanding healthcare coverage and preventive healthcare initiatives could mitigate accessibility barriers and reduce the burden of disease, ultimately improving overall population health.

Positive Demographic Factors

India, with 17.76% of the worlds population, stands as the most populated country in the world. As of 2023, around 36.30% of the population lived in urban areas, reflecting a trend towards increasing urbanisation. The median age of the Indian people has been 28.20 years, indicating a predominantly young population. The demographic scenario in India, marked by a sizeable population, the rise of the middle class, an uptick in nuclear families, and a youthful age structure, is propelling the demand for healthcare.

Enhanced Health Awareness

Enhanced health awareness stands as a pivotal opportunity for promoting the growth of the healthcare industry in India. As people are becoming increasingly cognizant of the significance of preventive healthcare and lifestyle choices, there emerges a growing demand for wellness products and services. Additionally, heightened awareness prompts individuals to seek regular health screenings and consultations, driving demand for diagnostic services and telemedicine platforms.

Rise in Lifestyle Diseases

The prevalence of lifestyle diseases, with around 10.1 Crore individuals having diabetes, has further increased the importance of healthcare given the potential progression of these conditions into terminal illnesses. The FY 2023-24 witnessed an increased emphasis on mental health awareness and services, with a growing focus on integrating mental health into primary care. Moreover, there is a notable trend towards utilising technology for remote mental health interventions.

Expanding Medical Travel

The flourishing healthcare industry has elevated Indias global standing in healthcare and boosted its economy by attracting substantial revenue from foreign patients seeking specialised and cost-effective medical treatments. Between January and December 2023, approximately 6.87% of Foreign Tourist Arrivals visited the country for medical and wellness purposes, totalling 6.35 Lakh.

Effective Regulatory Environment

The Indian healthcare industry benefits from a robust and effective regulatory landscape, which establishes a strong foundation for its growth trajectory. Mandates on essential infrastructure elements and workforce levels further bolster the industrys capability to deliver high-quality services. The regulatory framework promotes trust among stakeholders, encourages investment, and promotes innovation, ultimately paving the way for sustainable growth and development within the Indian healthcare industry.

The recently announced Digital Personal Data Protection Act, 2023 aligns healthcare data storage regulations with its provisions, particularly regarding patient data retention. However, it brings crucial controls over data processing and sharing, curbing instances of data commercialisation and ensuring individuals control over their data. It imparts trust and transparency in healthcare practices while emphasising the need for harmonisation between existing regulations and the new Act.

The regulatory framework governing the healthcare industry, including hospitals, and the health insurance industry can be intricately linked, presenting an opportunity for the overall healthcare sector. The IRDAI has launched initiatives like Bima Sugam, Bima Vahak, and Bima Vistaar to promote insurance penetration, particularly in semi-urban and rural regions. In June 2023, IRDAI expanded the “use-and-file” method to encompass life insurance products, aiming to broaden consumer choices and expand market access. Focused on establishing a principle-centred regulatory system, IRDAI promotes business-friendly approaches and proactive risk management through a Risk-Based Supervision (RBS) framework. There have been significant changes in reinsurance regulations, including halving the minimum capital requirement for Foreign Reinsurance Branches (FRBs) to Rs 50 Crore, with the aim to position India as a global reinsurance hub and simplify reinsurance formats. The insurance industry is gearing up for the adoption of IFRS 17 (or Ind AS 117) by 1st April, 2025, with phased implementation involving 15 identified insurers, expected to impact accounting rules without fundamentally altering insurers financial positions.

https://www.meity.gov.in/writereaddata/files/Digital%20 Personal%20Data%20Protection%20Act%202023.pdf https://www.iasplus.com/en/news/2024/02/india-ifrs-17 https://www.grantthornton.in/globalassets/1.-member-firms/ india/assets/pdfs/insurance-series_ii_may-july_23.pdf https://www.thehindubusinessline.com/money-and-banking/ top-15-insurance-companies-to-adopt-ind-as-from-april-2024/ article67165345.ece https://prsindia.org/billtrack/digital-personal-data-protection-bill-2023

Collaboration and Consolidation Trends

Hospital chains are increasingly forming strategic partnerships, alliances, and joint ventures with other healthcare providers, technology firms, and pharmaceutical companies to enhance service offerings, improve operational efficiencies, and drive innovation. Simultaneously, mergers and acquisitions are prevalent as larger players seek to expand their geographic footprint, access new markets, and diversify their service portfolios through the acquisition of smaller competitors. Additionally, specialised networks and consortiums are emerging to facilitate resource pooling, knowledge sharing, and standardisation of clinical practices. Such trends, scale and government-private partnerships, reflect a concerted effort to navigate evolving market dynamics, achieve economies of scale, and deliver high-quality healthcare services to a diverse and growing population in India. The value of private equity deals in the healthcare sector saw a 60% rise, surging from Rs 296 billion in 2022 to Rs 469 billion in the year-to-date as of December 2023. The healthcare deals contribution to the overall PE space has reached its peak at 13% as of December 2023, compared to around 7% in 2019.

Source: https://www.forbes.com/sites/ bernardmarr/2023/10/19/2024-iot-and-smart-device-trends-what-you-need-to-know-for-the-future/?sh=64a540537f34

Outlook

Healthcare industry players are planning significant capital expenditures over the next four to five years. This reflects the industrys confidence in continued growth and the need to expand capacity and infrastructure to meet increasing demand for healthcare services. Metropolitan areas are anticipated to be central to this upcoming capacity expansion. Cities like Delhi NCR, Mumbai, and Bengaluru are expected to see significant increases in hospital bed capacity over the next few years, indicating a strategic focus on these key urban centres for healthcare growth and development. Such factors are anticipated to drive the growth of hospital sector at a CAGR of about 15%, to reach a market size of Rs 7.7 trillion by the end of FY 2024-25. The private hospital players are expecting to add over 30,000 beds in the next four to five years till 2029, with an investment estimated at around Rs 32,500 Crore across the healthcare industry. Additionally, major companies in the industry are actively seeking inorganic growth opportunities, potentially leading to the addition of further beds through mergers and acquisitions. Despite additional debt financing for expansion, robust accruals are expected to uphold strong debt metrics in the foreseeable future.

Sorce: ICRA January 2024 report

COMPANY OVERVIEW

Company Background

Rainbow Childrens Medicare Limited (hereafter referred to as ‘Rainbow or ‘the Company) initially started as a paediatric multi-specialty hospital in the year 1999 with a 50-bed capacity in Banjara Hills. In 2009, the Company expanded its scope to include maternity care (gynaecology/ obstetrics), constituting around 30% of its total revenue in FY 2023-24. Rainbow has experienced significant growth, emerging as a leader in the fields of paediatrics, obstetrics, and gynaecology. The Companys paediatrics services include neonatal, and paediatric intensive care, multi-specialty care services, and quaternary care, such as multi-organ transplants in children. The Companys womens care services, provided under “Birthright by Rainbow”, includes perinatal care offerings. Womens care services comprise a diverse range of treatments and support, including normal and complex obstetric care, multi-disciplinary foetal care, perinatal genetic and fertility care, as well as a variety of gynaecology services. Rainbow operates 19 hospitals with a total capacity of 1,935 beds, along with 4 outpatient clinics, across 6 cities in FY 2023-24. These cities include Hyderabad, Bengaluru, Chennai, Vijayawada, Vizag, and Delhi.

Rainbow has 12 NABH-accredited hospitals, 3 EDGE-certified hospitals, and the distinction of Indias first Joint Commission International (JCI) recognised reproductive centre. The Company also holds the distinction of operating Indias first JCI-accredited paediatric hospital. Driven by leadership from Dr. Ramesh Kancharla, with over 20 years of practicing experience in Paediatrics Hepatology and Liver Transplantation, Rainbow provides comprehensive healthcare services across its core specialties.

The Company operates on a hub-and-spoke model, where the central hospital delivers comprehensive outpatient and inpatient care, with a particular emphasis on tertiary and quaternary services. Simultaneously, the satellite facilities provide emergency care in paediatrics and obstetrics, extensive outpatient services, as well as comprehensive obstetrics, paediatric, and level 3 NICU (Neonatal Intensive Care Unit) services. This operational model has proven successful in Hyderabad and Bengaluru. The Company aims to replicate this approach in Chennai and across the National Capital Region, with subsequent plans for expansion into tier-2 cities in Southern India.

Dedicated Child-Centric Healthcare Network

Rainbow has built a robust framework within an environment centred around children, highlighting the importance of cohesive multidisciplinary principles. The Company believes that creating a child-friendly atmosphere is crucial for providing high-quality paediatric care. The hospitals staff undergoes special training to interact with children in a friendly and reassuring manner. This environment significantly reduces stress and anxiety during hospital visits, improving treatment outcomes and increasing patient satisfaction. Additionally, it builds confidence and trust among children, their families, and the hospital staff, playing a vital role in efficient paediatric care delivery.

Innovative Doctor Engagement

Rainbow has a distinctive doctor engagement model where doctors work exclusively on a full-time, retainer basis to provide 24/7 consultant-led services, particularly crucial for childrens emergency, Neonatal, and Paediatric intensive care services, as well as supporting paediatric retrieval services. The necessity of a 24/7 doctor model in a childrens hospital is underlined by the fact that around 70% of paediatric business is emergency-based. By ensuring the availability of doctors round the clock, with a team of over 775 full-time doctors, Rainbow boasts a wealth of expertise and the ability to deliver prompt and efficient care to its young patients. Several of Rainbows doctors specialising in neonatal care, paediatric intensive care, paediatric sub-specialties, obstetrics, and gynecology have received training and hold qualifications from the United Kingdom, United States, Canada, and Australia, providing Rainbow with a strong competitive advantage. Additionally, the Company runs the largest paediatric DNB (Diplomate of National Board) training programme in private healthcare in the country, providing postgraduate residential DNB and fellowship programmes.

Pioneer in Paediatric and Perinatal Healthcare

The Company specialises in delivering healthcare services within the crucial domains of paediatric and perinatal care. It possesses expertise in various specialised medical disciplines, including neurology, nephrology, oncology, cardiology, among others. A key strength of the Company is its remarkable ability to collaborate effectively across both paediatric and prenatal services. This sets the Company apart from competitors and positions it prominently within the healthcare industry.

Distinctive Brand and Patient Loyalty

Rainbow has strategically positioned its brand as a premier provider of paediatric healthcare services, earning a distinguished reputation for advanced medical care and specialised treatment options. This reputation not only draws in patients and referrals from healthcare professionals but also enhances the hospitals visibility and market share. The robust brand positioning serves to set the hospital apart from competitors, promoting patient loyalty. A distinctive identity and image has also facilitated in building an emotional bond that encourages continued reliance of the Companys patients on the institution for future healthcare requirements.

Multi-Disciplinary approach

The hospital incorporates a culture that seamlessly integrates professionals from diverse medical disciplines, ensuring each patient receives a comprehensive and integrated healthcare treatment. Specialists in paediatrics, neurology, nephrology, oncology, cardiology, and other relevant fields collaborate closely to create personalised treatment plans, leading to more informed decision-making and enhanced overall care quality. This commitment to collaboration extends beyond the medical staff to include support personnel such as nurses, therapists, and administrative staff, adopting a unified and coordinated approach throughout every aspect of patient care.

Unique Hub-and-Spoke Model

Rainbow utilises a hub-and-spoke model, wherein a central hospital, known as the hub, serves as the focal point in a region. The hub, equipped with key facilities for highly complex surgeries and super-specialists, offers a range of services from secondary to tertiary to quaternary care, ensuring comprehensive healthcare. The hub maintains a minimum capacity of 100 beds. Complementing the hubs are smaller-scale hospitals, referred to as spokes, each with a minimum capacity of 50 beds and facilities for secondary and tertiary care. Presently, Rainbow operates under four hubs: (i) Banjara Hills, Hyderabad, (ii) Marathahalli, Bengaluru (Bangalore), (iii) Guindy, Chennai, and (iv) Malviya Nagar, Delhi.

The Hub-and-Spoke model exhibit several features, including increased accessibility to remote areas as regional spokes are situated 200-250 kilometres away from city hubs, enhanced utilisation of super-specialised PICU (Paediatric Intensive Care Unit) & NICU beds and other specialised services at hubs, improved traffic mix of secondary, tertiary, and quaternary care, and low asset intensity. The hub-and-spoke model represents a cost-effective approach to extending its presence to remote regions, simultaneously optimising the asset utilisation of larger hubs. It has resulted in superior operational efficiency and a higher return on investments.

Capital-intensive industry

The Company actively practices proactive financial management and consistently invests in upgrading equipment to stay ahead of competitors in the healthcare industry. The swift obsolescence of technology in hospitals requires frequent updates to offer the latest treatments and services. However, making substantial investments in acquiring and maintaining equipment can strain the Companys financial resources. Additionally, the high costs linked to such equipment may lead to increased treatment expenses for patients, potentially limiting the Companys ability to attract individuals who cannot afford these costly treatments.

Intensive Regulations Requirement

The Company adheres to a range of regulations at the central, state, and local levels, covering diverse areas such as patient care, privacy, safety, and record-keeping. Failure to comply with these regulations may result in fines, legal repercussions, and damage to the hospitals reputation. Moreover, the healthcare industrys regulatory landscape is ever evolving, necessitating the hospital to allocate resources to stay updated with new regulations and ensure ongoing compliance.

The substantial burden of regulatory requirements can affect the hospitals capacity to deliver high-quality care to its patients. Meeting these regulations often proves to be a time-consuming process, diverting resources away from patient care and causing potential delays in essential services. Additionally, certain regulations might limit the hospitals ability to introduce innovative treatments or services that could otherwise benefit its patients.

Underpenetrated Paediatric Market

In India, cities with populations ranging from 40 to 50 Lakh are experiencing rapid development across numerous sectors. However, the number of paediatric hospitals in these fast-growing cities is considerably low, limiting the availability of specialised treatment for seriously ill children. Consequently, the underpenetrated paediatric market presents a substantial opportunity for the Company to address the increasing demand for quality paediatric healthcare.

Increasing Maternity Age and Complications

With advancements in healthcare and societal shifts, more women are opting for delayed childbirth, leading to a greater demand for specialised maternity care. Rainbows expertise across various medical disciplines positions it well to address the complexities associated with advanced maternal age. This strategic positioning offers the Company the opportunity to expand services, enhance its reputation, and contribute significantly to the well-being of mothers and infants in the country.

Strong Potential to Attract International Clients

Rainbow has strong potential to establish itself as a preferred destination for international patients seeking high-quality medical care, owing to its reputation for excellence in healthcare services, state-of-the-art facilities, and skilled workforce. Additionally, its strategic location within a medical tourism hub, coupled with its ability to offer competitive pricing without compromising on standards, enhances its appeal to overseas patients. Currently, Rainbow hospitals attract patients from Bangladesh, Bhutan, Bahrain, Kenya, Tanzania, Rwanda, Somalia, Sudan, and Maldives, among other countries.

Increasing Competition

Rainbow faces competition from government-owned entities and private non-profit organisations, which benefit from potential tax advantages and the ability to finance capital expenditures through endowments and charitable contributions. Additionally, Rainbow may encounter challenges from new market entrants. To uphold and enhance its market position, the Company has implemented various strategies, including offering attractive compensation to attract and retain high-quality medical professionals and delivering quality services at competitive rates. However, these efforts might lead to reduced profitability for the Company. Successfully competing with its rivals could help Rainbow maintain or increase its market share in the industry.

Dependence on Healthcare Professionals

The success of business strategies and their implementation is heavily dependent on the Companys ability to attract, acquire, and retain medical experts in specialised disciplines such as paediatrics and obstetrics. Recruiting and retaining professionals in these key specialties is crucial, as their expertise significantly enhances the quality of patient care. Additionally, having specialists elevates the Companys reputation, resulting in increased referrals and revenue growth. However, India faces a shortage of experienced medical professionals. Skilled physicians, nurses, and technicians are also highly sought after by competitors, intensifying the challenge.

SIGNIFICANT PROGRESS WAS MADE IN MARKET PENETRATION WITH THE

COMMISSIONING OF THREE NEW SPOKE HOSPITALS IN EXISTING CITIES. THE COMPANY ALSO ADDED NEW BLOCKS TO TWO OF ITS EXISTING FACILITIES. OVERALL, A TOTAL OF 280 BEDS WERE ADDED DURING FY 2023-24, THE HIGHEST EVER IN A SINGLE YEAR.

OPERATIONAL REVIEW

The Company continued to fortify its operations, achieving several notable milestones and implementing numerous new initiatives. All projects planned for FY 2023-24 were executed on schedule, reflecting the Companys commitment to effective project management and operational efficiency.

The Company demonstrated its clinical excellence through advanced medical intervention and the successful management of complex medical cases. Additionally, two hospitals i.e., Banjara Hills, Hyderabad and Marathalli, Bengaluru were accorded the prestigious Joint Commission International (JCI) accreditation, affirming the Companys dedication to providing healthcare services that meet global quality and safety standards.

Significant progress was made in market penetration with the commissioning of three new spoke hospitals in existing cities. The Company also added new blocks to two of its existing facilities. Overall, a total of 280 beds were added during FY 2023-24, the highest ever in a single year. The new hospitals in Himayatnagar, Hyderabad; Sarjapur, Bengaluru; and Anna Nagar, Chennai, along with the new blocks at Hydernagar and LB Nagar units in Hyderabad, will enhance accessibility to quality healthcare services and improve health outcomes.

With significant opportunities for expansion in the southern region, new hub hospitals are being established in these areas to further leverage the Companys strong brand presence. Progress on these projects, encompassing new hospitals in Hennur, Bengaluru; Rajahmundry, Andhra Pradesh; and Coimbatore, is on track, with these facilities expected to begin operations by the end of FY 2025. Additionally, the Company has secured two land parcels in Gurugram and is actively collaborating with architects in the planning and design phases.

The Company continued to strengthen its offerings to elevate patient outcomes. A dedicated transplant ICU was commissioned at the flagship unit in Hyderabad, aligning with the Companys focus on quaternary care. The Company also strengthened its air ambulance services for the transportation of critically ill children from various parts of the country. Another highlight was the enhancement of IVF services at several units through investments in infrastructure, technology, and specialised personnel.

The Company forged strategic alliances with the Government of the United Republic of Tanzania and the Ministry of Health, Zanzibar, to establish comprehensive inter-institutional cooperation in paediatric healthcare. These collaborations signify Rainbows global recognition and commitment to extending specialised medical services internationally.

The Company has reinforced its sales efforts to drive performance and outreach. Emphasis was placed on strengthening both Business-to-Consumer (B2C) and Business-to-Business (B2B) sales channels, utilising advanced technologies such as Salesforce and Sales Cloud to enhance efficiency and outcomes of sales initiatives. Additionally, a dedicated corporate sales vertical was launched to tap into new market segments and diversify revenue streams.

Recognising the importance of robust backend operations for driving operational excellence and patient satisfaction, the Company implemented a comprehensive digital roadmap. Enhancements included payment gateway integration, the launch of a new website and app, the implementation of a new Hospital Information System (HIS), and the deployment of Business Intelligence (BI) dashboards.

To meet the increasing demands of its expanding network while maintaining high standards of patient care, the Company undertook several initiatives to strengthen its supply chain. Closer collaboration with vendors ensured timely delivery of essential supplies and equipment. The Company also invested in advanced technology solutions to streamline supply chain processes and optimise inventory levels.

FINANCIAL OVERVIEW

Financial and Operational Performance (Key highlights)

The Company delivered robust financial and operational performance during FY 2023-24 as detailed below:

Financial highlights

Particulars	For the year ended 31 March 2024	For the year ended 31 March 2023
INCOME
Revenue from operations	12,969.00	11,735.74
Other income	370.64	308.65
Total income	13,339.64	12,044.39
EXPENSES
Cost of materials consumed	1,652.80	1,582.78
Employee benefits expense	1,761.70	1,440.61
Finance costs	590.54	551.95
Depreciation and amortisation expense	1,120.82	902.68
Professional fees to doctors	3,053.66	2,723.05
Other expenses	2,211.99	2,025.53
Total expenses	10,391.51	9,226.60
Profit before tax	2,948.13	2,817.79
Tax expenses:
(a) Current tax	770.39	840.82
(b) Deferred tax credit	(5.13)	(146.80)
Total tax expense	765.26	694.02
Profit after tax	2,182.87	2,123.77

 

Particulars	FY24	FY23	YoY	FY24	FY23
			Growth	% on Revenue
EBITDA	4,288.85	3,963.77	8.20%	33.07%	33.78%
Profit before tax	2,948.13	2,817.79	4.63%	22.73%	24.01%
Tax (Including Deferred Tax)	765.26	694.02	10.26%	5.90%	5.91%
Profit after tax	2,182.87	2,123.77	2.78%	16.83%	18.10%
EPS - Basic (Rs)	21.38	20.89
EPS - Diluted (Rs)	21.38	20.89
EBITDA (Pre-IND AS)	3,563.86	3,369.52	5.77%	27.48%	28.71%

REVENUE

We delivered a resilient financial performance for FY 2024, successfully navigating seasonal headwinds that affected patient inflow across the industry. The high base effect, due to increased footfalls and inpatient admissions in the previous year as children adapted post-COVID, also impacted the industrys performance. Our clinical and operational excellence, combined with cost optimisation measures, enabled us to overcome the external challenges and achieve our highest-ever revenue of Rs12,969.00 Million.

Revenue for FY 2023-24 amounted to Rs 12,969.00 million, indicating a 10.51% increase from the FY 2022-23 revenue of Rs 11,735.74 million. This growth is primarily driven by a 1.00% rise in inpatient volumes and a 2.94% increase in outpatient volumes coupled by ARPOB (Average Revenue per Occupied Bed) growth of 14.14%, despite a decline in occupancy from 55.4% to 47.9%. Growth in FY 2023-24 was primarily driven by our specialty services, including paediatric super-specialty, obstetrics, tertiary care, and quaternary care services. These services have high ARPOB with relatively lower ALOS (Average Length of Stay). Our superior case mix mitigated the impact of lower occupancy rates due to reduced seasonal business.

Significant Factors contributing to the growth in revenues are stated in table below-

Particulars	Units	FY 2023-24	FY 2022-23	YoY Change
In-patient (IP) volume	#	87,736	86,864	1.00%
Out-patient (OP) volume	#	12,77,087	12,40,569	2.94%
Delivery volume	#	15,798	14,797	6.76%
ARPOB	Rs	55,853	48,932	14.14%
ALOS	Days	2.65	2.76	(3.99%)
Occupancy	%	47.9%	55.4%	(13.54%)

EBITDA

In FY 2023-24, the EBITDA reached Rs 4,288.85 million, reflecting a strong 8.20% increase from the FY 2022-23 figure of Rs 3,963.77 million. This growth was propelled by a combination of strong revenue expansion and the consistent maintenance of an optimised cost structure.

PAT

In FY 2023-24, the Profit After Tax (PAT) amounted to

Rs 2,182.87 million (16.83% of revenue), indicating a growth of 2.78% in comparison to the FY 2022-23 figure of Rs 2,123.77 million. Since the company is on expansion plan adding new leased hospitals, PAT is impacted due to IND AS 116 - the incremental impact of interest and depreciation under IND AS 116 vs the usual rental payments amounted to Rs 201.50 million. PAT (Pre Ind AS 116) amounted to Rs 2,384.40 million (18.3% of revenue).

Other Income

The Other income primarily includes interest income from fixed deposits, income from mutual funds, reversal of expected credit loss and other miscellaneous income, witnessing a remarkable 20.08% surge from Rs 308.65 million to Rs 370.64 million. This increase is attributed to: a) an increase in income from mutual funds of Rs 41.95 million, driven by rebalancing of investments from Fixed Deposits to higher yield generating Mutual Funds. b) reversal of expected credit loss of Rs 28.42 million on account of improvement in receivables collection.

EXPENSES

The Company experienced a 12.63% rise in total expenses, increasing by Rs 1,164.91 million from Rs 9,226.60 million in FY 2022-23 to Rs 10,391.51 million in FY 2023-24. This upswing is primarily a result of a substantial increase in employee benefits expense by 22.29%, professional fees to doctors by 12.14%, and other expenses by 9.21%. The latter includes expenditures for contract wages, canteen, lab investigations, power and fuel, repairs and maintenance, business promotion and advertisement, Corporate Social Responsibility (CSR) expenses spends as well as legal and professional fees.

Medical Consumables and Pharmacy Items

The acquisition of medical consumables and pharmaceutical items involves the procurement of essential healthcare supplies, along with related GST, customs duty (for imported medicines), government taxes, and freight charges. These items incurred costs of Rs 1,652.80 million in FY 2023-24 and Rs 1,582.78 million in FY 2022-23, representing 12.74% and 13.49% of revenues, respectively. The decrease is attributed to better formulary mix, optimisation of consumption of materials and better negotiations. The Company has planned to sustain its cost transformation programme, focusing on procurement excellence by consolidating suppliers, standardising formulary, and adopted these standards across units. reviews across medical offerings and facilities.

Operational Excellence Initiatives

To achieve operational excellence, the Company has initiated centralised procurement of store requirements, implementing best-in-industry practices for inventory management such as 5S, Six Sigma, Lean principles, SCM Process Re-engineering, and technology transformation to reduce Turnaround Time (TAT), to maintain minimal inventory levels, and decrease logistics costs. The introduction of an online bidding and E-auction platform aims to enhance transparency and efficiency in vendor bids, maximising cost/margin.

Employee Benefits Expense

Employee benefits expenses, including salaries and benefits, amounted to Rs 1,761.70 million in FY 2023-24, reflecting a 22.29% increase compared to Rs 1,440.61 million in FY 2022-23. This growth is driven by salary increments, strengthening of leadership and sales & marketing team and an increase in the number of employees compared to FY 2022-23 due to addition of new hospitals. Employee benefits expense as a percentage of the hospitals total revenue increased from 12.28% in FY 2022-23 to 13.58% in FY 2023-24.

Finance Costs

Finance costs primarily comprise interest on lease liabilities under Ind AS 116 and interest on Non-Convertible Debentures (NCDs) at 9.5%, which we fully repaid in June 2022. The financial costs increased to Rs 590.54 million in FY 2023-24, compared to Rs 551.95 million in FY 2022-23, owing to interest expenses on new lease liabilities created during the year for hospitals added in the current year.

Depreciation and Amortisation

Depreciation and amortisation expenses, covering depreciation on Property, Plant, and Equipment (PPE), amortisation of intangibles, and depreciation of right-of-use assets, increased to Rs 1,120.82 million from Rs 902.68 million. The increase is attributed to higher depreciation on new units opened in FY 2023-24 and the amortisation of right-to-use assets.

Professional Fees to Doctors

Professional fees to doctors increased to Rs 3,053.66 million in FY 2023-24 from Rs 2,723.05 million in FY 2022-23, in line with the growth in business. As a percentage of operating revenue, professional fees increased from 23.20% in FY 2022-23 to 23.55% in FY 2023-24, driven by new hospital additions.

Other Expenses

Other expenses witnessed a 9.21% growth to Rs 2,211.99 million in FY 2023-24 from Rs 2,025.53 million in FY 2022-23. Factors contributing to this increase include contract wages, canteen, lab investigations, power and fuel, repairs and maintenance, business promotion and advertisement, Corporate Social Responsibility (CSR) expenses spends as well as legal and professional fees.

Income Tax Expense

Income tax expense increased to Rs 765.26 million in FY 2023-24 from Rs 694.02 million in FY 2022-23, with an effective tax rate of 25.95% in FY 2023-24.

Capital Expenditure

The gross block witnessed a growth of Rs 1,550.93 million, reaching Rs 6,387.07 million as of 31st March, 2024. This increase is primarily attributable to the addition of new units in FY 2023-24, specifically in Annanagar (Chennai), Central Hyderabad and Sarjapur (Bengaluru), along with the inclusion of other medical equipment. Additionally, there is a capital work in progress amounting to Rs 138.07 million, which encompasses expenditures related to the forthcoming units in Gurugram & Rajahmundry.

Key financial ratios

Overall improvement in operating results led to better key financial ratios as tabulated below.

Particulars	Units	FY 2023-24	FY 2022-23	Change %	Reason
Liquidity ratios
Current Ratio	#	4.16	3.44	20.93%
Inventory Turnover Ratio	Days	7.73	9.43	(18.03%)
Trade Receivables/	Days	21.32	23.77	(10.31%)
Debtors Turnover Ratio
Leverage ratios
Debt Equity Ratio	#	-	-
Debt Service Coverage Ratio	Times	5.37	3.58	(50.00%)	This ratio has increased from 3.58 in March 2023 to 5.37 in March 2024 mainly due to nil borrowings and increase in earnings available for debt services on account of increase in net profit after tax during the year
Interest Coverage Ratio	Times	-	490.81	100%	No interest on external
					borrowings in FY24
Profitability ratios
Operating Profit Margin	%	33.07	33.78	(2.09%)
Net Profit Margin	%	16.83	18.10	(7.02%)
Return on Equity Ratio/Networth (ROE)	%	18.72	25.36	(26.18%)	This ratio impacted due to increase in networth, however, only funds are partially invested for the new units and balance funds are kept in Investments
Return on Capital Employed (ROCE)	%	21.00	24.64	(14.77%)

OVER THE COMING YEAR, THE FOCUS WILL BE ON ENHANCING EXISTING UNITS AND OPTIMISING THEIR PERFORMANCE. THE OPENING OF NEW HOSPITALS HAS DEEPENED MARKET PENETRATION AND INCREASED OVERALL BED CAPACITY, WHICH IS ANTICIPATED TO CREATE NEW GROWTH OPPORTUNITIES.

BUSINESS OUTLOOK

The Company remains steadfast in delivering exceptional multi-disciplinary paediatric and perinatal care, supported by continuous investments in state-of-the-art infrastructure, expanded service offerings, top-tier talent recruitment, and advanced technology deployment.

Over the coming year, the focus will be on enhancing existing units and optimising their performance. The opening of new hospitals has deepened market penetration and increased overall bed capacity, which is anticipated to create new growth opportunities. Furthermore, as operations at new and recent hospitals stabilise, they are expected to mirror the performance of the Companys established units.

The Company is also committed to establishing new facilities in strategic locations, prioritising the launch of centres in untapped markets with growing demand for quality healthcare services. This includes a targeted go-to-market approach, particularly in Tier II cities, and exploring new markets through a clinical model to assess feasibility and potential.

IVF services have emerged as a significant growth avenue, and the Companys focused efforts to enhance this offering are expected to yield growth opportunities. Other strategic growth areas include paediatric quaternary care, perinatal care, and international business. Additionally, the Company remains open to actively exploring mergers and acquisitions (M&A) opportunities.

In summary, the Company is confident about delivering value to patients and driving growth by leveraging its strengths and executing strategic business initiatives.

INTERNAL CONTROLS

Rainbow has implemented stringent internal control measures, recognising internal control as the foundation for sound governance and operational integrity. The Company has a well-defined internal control framework commensurate to the size and complexity of its operations. The Internal Audit team reports directly to the Audit Committee, which comprises four independent directors overseeing the Internal Audit function. The Internal Audit Charter, approved by the Audit Committee, governs the scope, authority, and responsibilities of the Internal Audit function.

Annually, the audit team formulates a risk-based internal audit plan to assess control design and operational effectiveness, subject to approval by the Audit Committee. Quarterly, the audit team reviews the defined scope and reports on the status of internal controls to the Audit Committee. Prior to committee presentation, functional heads review the internal audit reports, providing corresponding action plans with clearly defined timelines and a responsibility matrix for each observation. In quarterly meetings, the Audit Committee thoroughly reviews and approves the report. Additionally, a separate team of auditors conducts concurrent reviews of daily transactions across all group hospitals.

Monthly reviews of the concurrent audit outcomes are performed at the unit level, with regular updates to the management. The audit team conducts annual testing of Entity Level Controls (ELCs) and Internal Controls over Financial Reporting (ICoFR) controls established by management, ensuring the committee receives assurance on the status of internal controls. Pending observations are diligently tracked through a comprehensive Action Taken Report (ATR) format, presented to the audit committee along with the audit reports every quarter.

HUMAN RESOURCE MANAGEMENT

In the ever-changing landscape of the Companys healthcare services, the human resources department plays a pivotal role, committed to nurturing a vibrant workplace culture, safeguarding the professional growth and welfare of its esteemed team members. The Company focuses on promoting excellence in healthcare and attracting top talent by providing outstanding human resource practices. During the year, the Company invested in hiring the right clinical talent across new and existing locations in order to build new specialities and strengthen the existing ones. Additionally, the Company has established a strong leadership team for driving organisational goals.

The commitment to offering the best training programmes and career development opportunities has led to recognition by the National Board of Examinations as a Membership of the Royal College of Paediatrics and Child Health (MRCPCH) Examination Centre and training centre in India. The Companys multidisciplinary approach cultivates a comprehensive clinical environment within the Rainbow network, supporting employee learning and growth. Moreover, the Company offers comprehensive support for full-time physician retention, imparting strong career development and growth opportunities. The Company had 3,940 permanent employees as of 31st March, 2024.

RISK MANAGEMENT

In navigating the complexities of the Companys business landscape, Rainbows Risk Management framework serves as a vigilant safeguard. It is strategically designed to identify, assess, and mitigate potential challenges, ensuring the Companys resilience and sustainable growth amidst dynamic environments. In terms of risk management, Rainbow has a robust system covering various business aspects, aligning with the Committee of Sponsoring Organisations (COSO) framework.

The oversight and monitoring of the Risk Management exercise are carried out by the Boards Risk Management Committee (RMC). The Risk Management exercise operates under the governance of a Risk Management Charter, which receives approval from the RMC. Additionally, a comprehensive Risk Management process has been developed, subject to review and approval by the RMC. The risk management and monitoring mechanisms include process walkthroughs, concurrent auditing, and risk-based internal audit reviews, ensuring comprehensive oversight and mitigation of potential risks. These efforts are directed towards identifying, rectifying, and monitoring the effectiveness of internal processes, addressing any potential gaps.

The Companys approach to risk assessment relies on various methodologies, including risk perception surveys, scanning the business environment, and gathering insights from internal and external stakeholders. As an integral part of the Risk Management exercise, the heads of functions prepare detailed Risk Registers, serving as foundational documents. Risks are evaluated based on three key factors: the probability of occurrence, the severity of impact, and the detectability of such risks.

Operational leaders play a pivotal role in highlighting new risks, which are promptly updated in the risk register. Each risk entry in the register includes a thorough examination of root causes, a risk indicator list, and the establishment of a Management Information System (MIS) monitoring mechanism. A mitigation plan is devised and monitored through regular reporting to the RMC. A monthly MIS report detailing identified risks, is prepared, and presented to the management. During scheduled meetings, the RMC members review the status of risks and provide necessary suggestions, which are promptly acted upon. Updates on risk management are communicated to the RMC on a half-yearly basis. With such vigorous risk management efforts and initiatives, Rainbow exemplifies a proactive stance in managing risks, ensuring ongoing success and sustainability for the Company.

ESG

Rainbow continues to advance its Environmental, Social, and Governance (ESG) vision and promote business sustainability. The Company has adopted energy-efficient measures, such as solar rooftops, solar water heaters, and IoT technology for equipment maintenance and energy tracking. A key highlight for the year was entering into a Memorandum of Understanding (MoU) for the supply of solar and wind power through the open access system. The Company also continues to implement comprehensive waste and water management strategies to minimise its environmental footprint. As part of its social commitment, Rainbow partners with non-profit organisations and schools to raise awareness about paediatric healthcare. More details on the Companys social initiatives and environmental efforts are available on pages 76 and 82 respectively.

CAUTIONARY STATEMENT

Certain statements that may be made or discussed in this release may be forward-looking statements and/or based on managements current expectations and beliefs concerning future developments and their potential effects upon Rainbow Childrens Medicare Limited. The forward-looking statements are not a guarantee of future performance and involve risks and uncertainties and there are important factors that could cause actual results to differ, possibly materially, from expectations reflected in such forward-looking statements. Rainbow Childrens Medicare Limited does not intend, and is under no obligation, to update any forward-looking statement made in this release.