Rainbow Child. Management Discussions

Indian economic overview

India continued to be the fastest growing major economy in the world in FY 2022-23, despite global headwinds. During the year, the rebound of post-pandemic private consumption, growing manufacturing activity and a resurgent service sector reflected the resilience of the economy. The Indian Governments focus on infrastructure investments also helped drive economic growth and employment generation.

Inflation, triggered by volatile commodity prices, remains a downside risk, as do supply-side limitations, a widening current account deficit, and geopolitical volatility. However, the proactive policy stance of the Government of India and the RBI is expected to bring inflation under control in the foreseeable future. Indias economy is on track to achieve 7% GDP growth in FY 2022-23.1 High frequency indicators such as GST collections, railway and air traffic, electronic toll collections and the volume of E-way bills generated indicate robust economic recovery.

The countrys continued growth momentum is poised to make it an attractive destination for investments. The IMF has also reported that India and China are expected to contribute over 50% to global growth in CY23.

India is expected to remain the fastest-growing among G-20 nations in the coming years. Indias presidency of the G20 Summit in 2023 has significantly boosted its international standing.

Industry overview

Indian healthcare industry

Owing to the countrys overall economic development and growing population, the Healthcare industry has emerged as one of the largest contributors to the Indian economy, both in terms of revenue generation and employment opportunities. The Indian Health Care sector is expected to grow to INR 8,620 billion by FY26 with a CAGR of 12%.

The domestic healthcare industry is witnessing growth due to several key factors, such as an increase in the elderly population, rising awareness among people, higher incidences of lifestyle diseases, a broadening of health insurance coverage and accelerated adoption of digital technologies. The Indian Government is implementing long-term and substantial changes to enhance the healthcare industry. In addition to this, the Government is also rolling out numerous favourable policies to promote Foreign Direct Investment (FDI) in this sector.

Apart from obstacles, the pandemic has presented India with many opportunities by creating several avenues for developmentinIndia.Thecrisishasenhancedtheprospectsfor Indian start-ups to expedite the advancement of inexpensive, adaptable and expeditious solutions in the healthcare sector, especially through various digital platforms.

Over time, the healthcare sector in India has undergone a notable transformation, transitioning from an informal setup to a more structured and corporatised framework. This evolution has led to substantial growth and remarkable advancements in the diagnosis, treatment, and management of various diseases, facilitated by the utilisation of advanced medical technologies. Moreover, the sector has witnessed a reduction in the cost of life-saving drugs and medical devices, due to the progress made by the pharmaceutical industry. The establishment of world-class specialty hospitals in Tier 1 and Tier 2 cities, combined with a large pool of highly skilled and well-trained medical professionals, has also played a pivotal role in the sectors remarkable expansion and development.

The expansion of public healthcare facilities in India has encountered difficulties in adequately addressing the healthcare needs of the countrys significant population. The task of providing healthcare services in remote areas has been particularly complex. As a result, the private sector has played a prominent role in the healthcare landscape, capitalising on the untapped potential that exists within the public sector and leveraging its own robust foundation to fill the gaps in healthcare provision.

The private healthcare sector initially emerged with a limited numberofstandalonecentresprimarilylocatedinmetropolitan cities, serving as pioneers of quality healthcare throughout the country. Encouraged by positive patient responses and recognising the scarcity of infrastructure across the nation, these centres expanded their presence to encompass larger urban areas. Moreover, the private sector swiftly advanced to provide tertiary and quaternary care services, adopting state-of-the-art medical equipment and procedures, and embracing innovative models of service delivery.

These hospitals gradually transformed into centres of Excellence, known for their remarkable clinical outcomes, and began attracting international patients. This successful model inspired other significant industry players to make substantial investments in infrastructure, technology, and human resources, thereby replicating and further elevating the standards of care across the healthcare sector.

The Indian healthcare industry is predominantly led by private service providers who have effectively utilised innovative approaches to address operational challenges. These healthcare institutions offer exceptional facilities, engage highly skilled professionals with global recognition, harness advanced technologies in medical treatments, and adhere to stringent quality standards. As a result, the private sector has secured a significant market share, accounting for approximately 60-70% of the countrys total healthcare market.2

Presently, the healthcare sector in India presents a compelling amalgamation of opportunities and challenges. The notable disparity between the ‘required and ‘existing healthcare infrastructure has spurred substantial investments in assets such as hospitals and related facilities. The Indian healthcare industry offers corporations a distinctive prospect for innovation, differentiation, and financial gains, making it an increasingly favoured sector for strategic and financial investments.

The Indian market within the realm of the global healthcare sector demonstrates considerable untapped potential, which becomes notably apparent when comparing the healthcare industries across different nations. Within this context, it becomes evident that the Indian market presents a substantial opportunity for both growth and advancement. By effectively harnessing this untapped potential, the healthcare sector in India can make significant strides towards addressing the healthcare requirements of its population and making noteworthy contributions to the global healthcare landscape.

Digital healthcare market

The pandemic has compelled Indians to adopt digital transformation and reconsider prevailing healthcare trends. A significant proportion of patients (approximately 60%) and physicians (around 65%) now prefer digital platforms to in-person consultations. The widespread availability of smartphones and internet services, combined with enhanced government impetus, has facilitated the expansion of the digital healthcare market. As of 2021, the value of the digital healthcare market in India stood at INR 524.97 billion. It is anticipated to grow at a CAGR of 28.50% during the 2022-2027 period and reach a value of INR 2,528.69 billion by 2027.3 The digital fitness and well-being sector is a major contributor to the overall healthcare market in India. Moreover, the huge monthly expenditure on health and fitness activities by Indian millennials demonstrates the growing interest in health and wellness among the younger demographic.

India ranks second among developing nations in mobile health adoption, driven by rising patient awareness, increased demand for information access, and an emphasis on treatment and diagnosis process transparency. The sector is experiencing growth due to the promotion of value-based healthcare services in India, aimed at providing patients with optimal outcomes at the lowest possible cost.

Health insurance providers market penetration bolstering the healthcare sector

The size of the health insurance market in India reached USD 120.1 billion in 2022. It is projected to grow at a CAGR of 10.64% during the period 2023-2028 and is expected to reach USD 219.1 billion by the end of 2028.4 Recently, there has been a spike in the demand for healthcare insurance among the general population due to escalating medical costs. This, along with the rising number of elderly individuals, is an important factor contributing to the favourable market outlook for healthcare insurance in India.

The healthcare industry in India has been strongly influenced by the market penetration of health insurance companies. For a large number of people who previously faced financial constraints, health insurance has made it easier for them to access high-quality healthcare services. As a result, this has stimulated the demand for healthcare services and enabled healthcare providers to broaden their scope of services.

This surge in healthcare demand has, in turn, led to a commensurate upsurge in the number of healthcare facilities such as hospitals, clinics and diagnostic centres in India. Health insurance providers have additionally partnered with healthcare providers, thereby contributing to better healthcare infrastructure development in the nation.

The advent of new participants in the health insurance sector has spurred competition, resulting in reduced premium rates and improved insurance products for consumers. As a result, health insurance has become more affordable and accessible to a larger population, leading to heightened demand for healthcare services.

Transformation of the healthcare sector

The healthcare sector in India has undergone considerable transformation in recent decades as a result of the widespread adoption of technology, a trend that has been further accelerated by the global pandemic. Notable examples of this transformation include the use of smartwatches to track vital signs and detect potential medical concerns, the use of robots to conduct medical procedures via 5G networks, as well as the development of a government app that has facilitated the vaccination of over 2 billion individuals during the pandemic.

In recent years, emerging technologies have played a pivotal role in the development of advanced, cost-effective treatments. Specifically, artificial intelligence (AI), data analytics and the Internet of Medical Things (IoMT) have rapidly evolved from being basic devices that monitor essential physiological indicators such as heart rate and blood oxygen levels. These technologies have advanced to include smartwatches that can perform complex scans, such as electrocardiograms (ECGs), as well as e-textiles that can monitor blood pressure and predict the likelihood of heart attacks.5

Indias maternity and paediatric care industry

The expansion of private and public healthcare facilities, as well as increased knowledge about childcare and early identification of diseases, are expected to drive growth in the maternity and paediatric care market in India. In FY2020, the combined market share of paediatric and maternity care in hospitals was approximately 33% of the total hospital market, amounting to INR 1,390 billion. Private maternity care held a 45% share of the total maternity market, and it is projected to expand at a compound annual growth rate (CAGR) of 12% between FY2020-26, reaching a market size of INR 330 billion. Similarly, the private paediatric care market constituted 60% of the overall paediatric market and is predicted to grow at a CAGR of 14% during FY2020-26, eventually achieving a market size of INR 1,340 billion. (Source- CRISIL Research).

Delayed pregnancy leading to higher maternity healthcare demand in India

The female population of India in the reproductive age group of 18-49 years was estimated to be 240 million in FY20. Yet, a number of socioeconomic reasons have contributed to an increase in the average age of pregnancy in the country. According to CRISIL Research, the age group of 25-29 years accounted for 32% of births in FY2010-15, up from 28% in FY2000-05. Moving forward, the age groups 25-29 years and 30-34 years are predicted to contribute a greater proportion of live births, accounting for 37% and 19% of live births in FY2020-25, and 40% and 23% of live births in FY2025-30, respectively. This trend towards delayed pregnancy can cause increased complications, which may result in a higher demand for maternity healthcare in India.


(Source- CRISIL Research)

Perinatal healthcare and rising C-section deliveries in India

India has the highest global incidence of pre-term births, according to a report by the World Health Organisation (WHO). This condition of pre-term birth is closely associated with increased rates of neonatal mortality and long-term health problems. Another significant factor contributing to the growth of perinatal healthcare is the increasing number of deliveries via C-section. In India, around 15% of the overall increase in C-section deliveries can be attributed to the advancing age of mothers. Over time, there has been a substantial surge in the total C-section rate, with primary C-sections accounting for the majority of this rise.


(Source- ICICI Direct Research)

Recently, India has made significant progress in improving the health of mothers and children by implementing targeted initiatives under the Reproductive, Maternal, New-born,

Child, Adolescent Health Plus Nutrition (RMNCAH+N) plan. According to data from the Sample Registration System (SRS), the country has successfully achieved a significant milestone by reducing the Maternal Mortality Ratio (MMR) to less than 100 per one lakh live births in the year 2020. In addition, eight states have already met the Sustainable Development Goal (SDG) target of lowering the MMR to less than 70 per one lakh live births, an aim that was originally set to be achieved by 2030.


(Source- Economic Survey 2022-23)

Government initiatives

The Government has endeavoured to collaborate with pertinent sectors and stakeholders under the National Health Mission, to advance towards accomplishing comprehensive healthcare coverage and administering superior quality medical services to all at a reasonable expense.

Major developments in FY23

Pradhan Mantri TB Mukt Bharat Abhiyaan to end TB by 2025

The Pradhan Mantri TB Mukt Bharat Abhiyaan is an initiative aimed at uniting all community members to offer assistance to those undergoing treatment for tuberculosis. The ultimate objective of this programme is to expedite Indias efforts towards eliminating tuberculosis.

National List of Essential Medicines Revision

The Union Health Ministry has recently launched the new National List of Essential Medicines (NLEM) which encompasses 384 drugs. This list comprises 34 newly added drugs, while 26 drugs from the previous list have been excluded. The medicines included in this list are made available to consumers at prices that are below the price ceiling fixed by the National Pharmaceutical Pricing Authority (NPPA). This initiative is expected to encourage the usage of cost-effective and high-quality medicines, thereby contributing to a reduction in out-of-pocket expenses on healthcare.

National Tele Mental Health Programme (Tele MANAS)

The National Tele Mental Health Programme is a scheme designed to enhance the accessibility of quality mental health counselling and care services in India. The programme offers a range of services that are administered by 130 mental health professionals, 173 DMHP personnel and 580 Tele-MANAS counsellors. Currently, the Tele-MANAS services are available in 20 different languages. This initiative is expected to facilitate better mental healthcare services and enhance the overall mental well-being of the people.

For the FY2022-23, the Government has allotted a sum of INR 120.98 crore towards the implementation of the National Tele-Mental Health Programme (NTMHP).

100% FDI in the healthcare industry has been approved through the automatic route for investments in the development of hospitals, healthcare facilities and the manufacture of medical products.6

Increase in medical tourism

India has emerged as a popular destination for medical tourism in recent years due to its affordable yet high-quality healthcare facilities, skilled medical professionals, and traditional systems of medicine like Ayurveda and Yoga. According to the Medical Tourism Index, FY21, released by the Medical Tourism Association, India is currently ranked tenth out of the worlds top 46 medical tourism destinations. The Indian government has also taken initiatives to encourage medical and wellness tourism in the country, including the development of a National Strategy and Roadmap for Medical and Wellness Tourism.

The confidence in Indias healthcare system has increased due to the governments effective management of the COVID crisis and its proactive measures to prepare for future challenges. This development is expected to greatly benefit the Medical Value Tourism (MVT) sector, which is projected to reach a value of $13 billion by 2022.7 Moreover, the global market for Medical Value Travel (MVT) is anticipated to witness substantial growth, reaching $53.51 billion by 2028, with a compound annual growth rate (CAGR) of 21.1%.

The MVT sector in India is strengthened by a network of 40 healthcare facilities accredited by the Joint Commission International (JCI) and 1400 hospitals accredited by the National Accreditation Board for Hospitals & Healthcare Providers (NABH), ensuring the delivery of high-quality care. MVT currently contributes approximately 10% to the revenue of major hospital chains, and this figure is expected to rise up to 15% within the next few years. However, it is important to address the broader healthcare infrastructure to support this growth.8 In line with efforts to enhance Medical Value Tourism, the government has undertaken the ‘Heal in India initiative, which aims to streamline and bolster the sector. As part of this initiative, a user-friendly ‘One Step portal has been introduced to provide credible information and convenience to foreign patients. The portal offers a range of services, including seamless airport coordination, easy access to patient documents, and prompt resolution of inquiries. Additionally, the government has introduced medical visas, also known as ‘Ayush Visa, to facilitate the entry of foreign patients seeking medical treatment in India. These proactive measures are anticipated to attract a greater number of foreign patients, contributing to the growth of MVT in the country.

Insurance for health care

Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB PM-JAY) scheme represents a significant step towards the attainment of universal health coverage in India. The government of India provides health insurance coverage to nearly 50 crore poor and vulnerable people through this initiative. This ambitious scheme is considered to be the largest health insurance programme in the world and its objective is to mitigate the out-of-pocket healthcare expenses of its target beneficiaries. The scheme provides health insurance coverage of up to INR 5 lakh annually for secondary and tertiary care hospitalisation. A range of medical procedures and treatments, including surgeries, diagnostics, and medical consultations, are covered under this scheme.9

Life expectancy

In recent years, India has witnessed a gradual increase in life expectancy, which is attributable to a range of factors, including improved healthcare infrastructure, access to quality medical treatment, and enhanced public health initiatives. As people live longer lives, the need for healthcare services rises, offering prospects for expansion in the healthcare business. With a larger population of elderly individuals, there is a greater need for geriatric care, rehabilitation services, and long-term care facilities. This has spurred the development of specialised healthcare services and facilities that cater to the needs of the elderly.

Rising use of telemedicine

The emergence of telemedicine, in conjunction with government programmes such as e-health, as well as tax exemptions and incentives, is moving the Indian healthcare business forward. The expansion of telemedicine has also given opportunity for healthcare practitioners and technology businesses to build novel solutions that address patients changing requirements. This includes the development of mobile health applications, remote monitoring devices, and virtual reality technologies, among others.

Telemedicine tends to improve the efficiency and accessibility of healthcare services by enabling medical professionals to reach more patients in a shorter time frame. This can help to reduce waiting times and improve patient outcomes, particularly in cases where timely medical intervention is critical.

Robotic process automation

The emergence of Robotic process automation (RPA) presents significant opportunities for growth and innovation in the Indian healthcare industry. By improving the efficiency, accuracy, and cost-effectiveness of healthcare operations, RPA has the potential to drive improvements in patient outcomes and financial performance, while freeing up human resources to focus on more complex tasks that require human expertise. The adoption of RPA in the Indian healthcare industry is still in its early stages, but there is growing interest and investment in the technology. Major healthcare providers in India are exploring the use of RPA to streamline their operations and improve patient outcomes.

Improving medical infrastructure

The Indian government has taken several steps in order to improve the medical infrastructure in the country. The government has launched the Pradhan Mantri Swasthya Suraksha Yojana (PMSSY), which aims to support the development of medical infrastructure, including the construction of new hospitals and the upgrading of existing facilities. Additionally, the government has launched the National Rural Health Mission (NRHM), which aims to improve healthcare infrastructure and services in rural areas. Private healthcare providers and investors also play a key role in improving medical infrastructure in India. Many private healthcare providers are investing in the construction of new hospitals and clinics, as well as the deployment of advanced medical technologies and equipment.

Company overview

Rainbow network comprises of 16 hospitals and 3 clinics in 6 cities, with a total bed capacity of 1,655 beds. Our Pediatric services under "Rainbow Childrens Hospital" includes newborn and pediatric intensive care, pediatric multi-specialty services, pediatric quaternary care (including organ transplantation); whereas our women care services under "Birthright by Rainbow" offers perinatal care services which includes normal and complex obstetric care, multi-disciplinary fetal care, perinatal genetic and fertility care along with gynecology services. Rainbow Childrens Hospital built on strong fundamentals of multidisciplinary approach with a full-time consultant led clinical service along with 24*7 commitment in a child centric environment. The Company follows a hub-and-spoke operating model where the hub hospital provides comprehensive outpatient, inpatient care, with a focus on tertiary and quaternary services while the spokes provide emergency care in pediatrics and obstetrics, large outpatient services and comprehensive obstetrics, pediatric and level 3 NICU services. This model is successfully operational at Hyderabad and is gaining traction in Bengaluru. The endeavour is to replicate this approach in Chennai and across the National Capital Region. Subsequently Rainbow intends to expand into tier-2 cities of Southern India. Rainbow embraces a unique doctor engagement model, where doctors work exclusively on a full-time, retainer basis. The doctors work in teams and have 24*7 commitment, which is particularly important for childrens emergency, neonatal, pediatric intensive care services and to support pediatric retrieval services. The Company also operates the countrys largest pediatric DNB training programme in private healthcare, offering post graduate residential DNB and fellowship programme.

Review of operations

The Company delivered robust operational and financial performance during the current financial year, led by high patient footfalls and profitability across hospitals in every geography. Strong momentum was witnessed for all key operating metrics like occupancy, outpatient, inpatient and delivery volumes across hospitals.

In the current year, the Company has successfully inaugurated a new hospital with 100 beds in the Financial District of Hyderabad, as well as a 55-bed hospital in Sholinganallur (OMR), Chennai. These establishments have received positive response and have been operating in line with the Companys expectations.

The construction and development of new spoke hospitals are also underway. Specifically, projects for an approximately 60-bed hospital in Central Hyderabad, an additional block adjacent to Rainbow Hydernagar in Hyderabad with approximately 50 beds, and an 80-bed hospital in Anna Nagar, Chennai are progressing satisfactorily. The Company anticipates that these hospitals will commence their operations during the latter half of the current financial year.

Furthermore, the project work for a spoke hospital in Bangalore and a regional spoke hospital in Rajahmundry is also progressing well and is expected to be completed in the next 18 months.

In FY23, the Company entered into a lease agreement for two significant projects:

• A brownfield spoke hospital with approximately 80 beds was acquired in Sarjapur, Bengaluru. This strategically located hospital will significantly contribute to the expansion of the Rainbow network within the city. Its operation is expected to commence during the last quarter of the current financial year.

• The development of an additional block at Rainbow LB Nagar, Hyderabad has been initiated. This expansion project encompasses an outpatient department and an IVF facility, aimed at improving patient facilities and accommodating future growth at the spoke hospital.

The Company participated in an e-auction held by HSVP (Haryana Shehri Vikas Pradhikaran) and successfully secured twolandparcels.Thefirstlandparcelmeasuresapproximately 9,391 square meters (2.32 acres) in sector 44 of Gurugram, while the second parcel measures approximately 4,987.10 square meters (1.23 acres) in sector 56 of Gurugram. As part of the Companys expansion plans, the Company intend to construct a greenfield hub hospital in sector 44 with around 300 beds. This hospital will offer comprehensive outpatient and inpatient care, with a special emphasis on tertiary and quaternary services. It will serve as a referral centre for multidisciplinary paediatric and perinatal care, catering to Gurugram and the surrounding northern states. Additionally, a greenfield spoke hospital with approximately 100 beds will be built in sector 56, focusing on 24/7 emergency care, extensive outpatient services, and comprehensive obstetrics, paediatric inpatient, and level 3 NICU services.

Financial highlights

% age of revenue

All numbers in INR mn FY 23 FY 22 YoY Growth FY 23 FY 22
Revenue from operations 11,736 9,738 20.52%
Other income 308 189 62.99%
Total Income 12,044 9,927 21.33%
Medical consumables and pharmacy items 1,583 1,947 (18.72%) 13.49% 20.00%
Employee benefits expenses 1,441 1,161 24.11% 12.28% 11.92%
Finance Cost 551 532 3.64% 4.70% 5.46%
Depreciation and amortisation expense 903 833 =RIGHT>8.41% 7.69% 8.55%
Professional fee to doctors 2,723 2,038 33.64% 23.20% 20.93%
Other expenses 2,026 1,543 31.25% 17.26% 15.85%
Total expenses 9,226 8,053 14.57% 78.61% 82.71%
EBITDA 3,964 3,049 30.01% 33.78% 31.31%
Profit Before Tax (PBT) 2,818 1,873 50.41% 24.01% 19.24%
Tax expense
(a) Current tax 841 576 45.94% 7.16% 5.92%
(b) Deferred tax expense/(credit) (147) (89) 64.21% (1.25%) (0.92%)
Total tax expense 694 487 42.59% 5.91% 5.00%
Profit for the period/year 2,124 1387 53.15 18.10% 14.24%


The revenues for FY23 stood at INR 11,736 million, which is a growth of 20.5% compared to INR 9,738 million in FY22. Revenue growth in FY23 excluding vaccination revenue was at 33.7% (Vaccination revenue in FY22 was INR 960 million which was negligible in FY23). This increase is primarily attributable to increase in inpatient volumes by 31% (resulting in increase in occupancy from 44.59% to 55.4% in FY23) and outpatient volumes by 48% in FY23 compared to FY22. Significant Factors contributing to the growth in revenues are stated in table below-

FY 23 FY 22 YoY Change
In-patient (IP) volume # 86,864 66,082 31%
Out-patient (OP) volume # 12,40,569 840,000 48%
Delivery volume # 14,797 12,603 17%
ARPOB INR per day* 48,932 52,159 (5%)
ALOS # days 2.76 2.83 (2%)
Occupancy % 55.4% 44.59%

*Impact of INR ~5,142 on ARPOB in FY22 on account of COVID Vaccine of INR 960 Mn. Excluding this, ARPOB growth is 5.3% in FY23


The EBITDA for FY23 was INR 3,964 million, which is a growth of 30.1% compared to INR 3,049 million in FY22 driven by strong growth in revenues, lowering material costs and maintaining an optimised cost structure.


The PAT for FY23 was INR 2,124 million, which is a growth of 53.15% compared to INR 1,387 million in FY22.

Other income

It primarily consists of interest income, dividend and other income which increased 62.99% from INR 189.37 million to

INR 308.65 million. The increase is contributed by interest income of INR 179 million on the back of increase in fixed deposit balances & interest rate increases.


The Companys total expenses increased by INR 1,173 million or by 14.6% from INR 8,053 million in FY22 to INR 9,226 million in FY23. Increase in total expenses is majorly due to increase in employee benefits by INR 280 million, professional fees to doctors by INR 685 million and other expenses by INR 483 million for contract wages, power & fuel, repairs & maintenance, business promotion & advertisement and legal & professional fees.

Medical consumables and pharmacy items

Purchase of medical consumables and pharmaceutical items represents procurement of medical consumables, pharmaceuticals and other items for the provision of healthcare services and related GST, customs duty (for imported medicines), other government taxes and freight charges. These items costed INR 1,583 million in FY23 and INR 1,947 million in FY22 representing 13.5% and 20% of revenues respectively. The decrease is attributable to decrease in COVID-19 vaccination revenues (with a high cost proportion of vaccine costs). COVID-19 vaccination cost amounted to 38% of total pharmaceuticals and medical consumables cost for FY22, which was negligible in FY23.

We will continue to drive our cost transformation program focused on procurement excellence that will

• rationalise drugs and consumables cost through consolidation of suppliers, standardising formulary & its adoption across units, • bring in efficiencies in capex process and • optimise indirect spend. Simultaneously, efforts to drive revenues via more focused sales and marketing efforts towards large payor mix segments, an increasing focus on medical tourism and pricing reviews across medical offerings and facilities would also be emphasised upon.

On the operational excellence front, we started centralised procurement of stores 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 the TAT, maintain minimal inventory levels and reduce logistics costs.

We also started online bidding & E-auction platform process for increasing the transparency & efficiency in vendor bids to maximise the cost /Margin.

Employee benefits expense

Salaries and benefits expenses of INR 1,441 million in FY23 increased by 24.1% compared to INR 1,161 million in FY22. The increase in employee benefits expenses was driven by increases in the average salary of the employees on account of the increments and the increase in the number of employees compared to FY22. Employee benefits expense as a percentage of the hospitals total revenue increased marginally from 11.9% in FY22 to 12.3% in FY23.

Finance costs

Finance cost comprise primarily interest on lease liabilities under Ind AS 116 and interest on NCDs at 9.5% which was fully repaid in June 22. The financial costs increased to INR 551 million in FY23, compared to INR 532 million in FY22. The increase in interest cost was due interest expense on new lease liabilities created during the year for upcoming hospitals.

Depreciation and amortization

Depreciation and amortization included depreciation on PPE, amortization on intangibles and Depreciation of right-of-use assets. The depreciation and amortization expense increased to INR 903 million from INR 833 million due to increase in depreciation on new units opened in FY23 and due to amortization of right to use assets.

Professional fees to doctors

Professional fees to doctors increased due to growth in business to INR 2,723 million in FY23 as against INR 2,038 million in FY22. As a percentage of operating revenue professional fees increased from 20.9% of operating revenue during FY22 to 23.2% in FY23 on account of the increased OPD business in FY23 and reduction of business from vaccination from FY22 which had negligible fee share to doctor. The professional fees are paid on a fixed and variable basis and are dependent on the volume of business at the hospitals (as the professional fee is calculated based on the volume of patients attended to by the relevant doctor).

Other expenses

Other expenses grew by 31.3% to INR 2,026 million in FY23 from INR 1,543 million in FY22.

Factors that contributed to increase in other expenses include administrative and repairs & maintenance expenses of the hospitals and its equipment, business promotion & advertisement, allowance for expected credit loss, CSR expenses, legal & professional fees & contract wages etc.

Income tax expense

Income tax expense increased to INR 694 million in FY23 from INR 487 million in FY22 with an effective tax rate of 24.6% in FY23.

Capital expenditure

Gross block increased by INR 1,209 million to INR 7,525 million as of 31 March 2023 and the increase primarily represents new units added in FY23 of Shollinganallur & Financial District and other medical equipment. Capital work in progress of INR 208 million which includes spend towards our upcoming units at Anna Nagar, Chennai and at Central Hyderabad.

Key financial ratios

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

Liquidity ratios Unit FY 23 FY 22 Change % Reason
Current Ratio # 3.35 2.62 27.86% This ratio has increased from 2.62 in March 2022 to 3.35 in March 2023 mainly due to increase in bank deposits and current investments.
Inventory Turnover Ratio Days 9.43 15.63 (39.67%) This ratio has decreased from 15.63 in March 2022 to 9.43 in March 2023 mainly due to mainly due to purchase of covid vaccines in previous year.
Trade Receivables/ Debtors Turnover Ratio Days 23.77 23.08 2.98% -
Leverage ratios
Debt Equity Ratio # - 0.07 NIL No Debt
Debt Service Times 3.58 4.46 (19.73) (As of 31st March 2023)
Coverage Ratio
Interest Coverage Ratio Times 490.81 68.5 616.51 This ratio has increased in FY23 mainly due to increase in earnings available for debt service and reduction in interest cost, post early redemption of NCDs.
Profitability ratios
Operating Profit Margin % 33.78% 31.31% 7.89% This ratio has increased in FY23 mainly due to increase in EBITDA which was on account of increase in revenue from operations.
Net profit margin % 18.10% 14.24% 27.11% This ratio has increased in FY23 mainly due to increase in Net profit after taxes which was on account of increase in revenue from operations.
Return on Equity Ratio/ % 25.36% 26.36% (3.79%) -
Networth (ROE)
Return on Capital % 24.61% 23.01% 6.95% -
Employed (ROCE)


Expertise in paediatric and perinatal care

The Company provides healthcare services in the critical areas of paediatric and perinatal care. Its expertise includes specialised medical disciplines, such as neurology, nephrology,oncology,cardiologyandothers.TheCompanys core strength lies in its remarkable capability to effectively collaborate across both paediatric and perinatal services, which sets it apart from its competitors and positions it as a prominent player within the healthcare industry.

Embracing 24*7 engagement

The Company offers specialised services in paediatric and perinatal care, emphasising a collaborative approach with a 24*7 doctor engagement model. This model enables a cohesive and coordinated team effort to provide comprehensive care to patients.

Child-friendly environment

Rainbow emphasises creating a welcoming and comforting atmosphere for children which is essential for offering quality paediatric care. Additionally, the hospitals staff members are specially trained to interact with children, in a friendly and reassuring manner. The child-friendly atmosphere plays a pivotal role in mitigating the stress and anxiety that children may experience during their hospital visits, consequently enhancing treatment outcomes and elevating patient satisfaction. Moreover, it fosters a sense of confidence and reliance between the children, their families and the hospital staff, which is an integral component of efficient paediatric care delivery.

Excellent brand positioning

Rainbow has established a distinguished reputation as a leading provider of paediatric healthcare services, renowned for its advanced medical care and specialised treatment options. This reputation attracts patients and referrals from healthcare professionals, augmenting the hospitals visibility and market share. Moreover, a robust brand positioning helps distinguish the hospital from its peers and fosters patient loyalty. By establishing a distinctive identity and image, the hospital can effectively communicate its values and mission to patients, creating an emotional connection that ensures patients return for future healthcare needs.

Additionally, strong brand positioning assists in the recruitment and retention of top healthcare professionals. Rainbows prominent brand positioning as a pioneer in paediatric healthcare draws highly skilled medical professionals who seek to work in a hospital renowned for its exceptional reputation. This makes sure that the hospitals continue to deliver the highest quality of care to their patients.

Hub-and-spoke model

Paediatrics and Obstetric care and emergency

Rainbow uses a hub-and-spoke approach, in which super-specialty doctors at the hub hospital may serve a greater geographic region by getting referrals from spoke hospitals for patients requiring tertiary and quaternary treatment.

Rainbow first established its hub-and-spoke approach in Hyderabad, with the Banjara Hills hospital functioning as the hub and four spoke hospitals located across the city. In Bangalore, the hub-and-spoke model is gaining traction, with the Marathahalli hospital serving as the hub and getting more complex referrals from its spoke hospitals.


Capital-intensive industry

Prudent financial management and regular investment in equipment upgrades are crucial for the Company to maintain competitiveness within the healthcare industry. The rapid obsolescence of technology in hospitals necessitates frequent upgrades to provide the latest treatments and services. However, substantial investment in equipment acquisition and maintenance may create a strain on the Companys financial resources. Furthermore, the high costs associated with such equipment may result in elevated treatment costs for patients and may hinder the Companys ability to attract patients who cannot afford the expensive treatments.

High burden of regulatory requirements

The Company is required to comply with a variety of regulations at the central, state and local levels. These regulations cover a wide range of areas, including patient care, privacy, safety, and record-keeping. Non-compliance with these regulations can lead to fines, legal action, and damage to the hospitals reputation. Additionally, the regulatory landscape in the healthcare industry is continuously changing, requiring the hospital to allocate resources to remain updated with new regulations and ensure compliance.

The high burden of regulatory requirements can have an impact on the hospitals ability to provide high-quality care to its patients. Complying with these regulations can

90 be a time-consuming process that diverts resources from patient care and can cause delays in providing essential services. Furthermore, certain regulations may restrict the hospitals ability to offer innovative treatments or services that could benefit its patients.


Underserved pediatric market

Despite the presence of approximately 250 childrens hospitals in developed countries like the US, effective healthcare services for children remain scarce.

Cities with populations ranging from 40 lakhs to 50 lakhs in India, a country that is making tremendous development in many areas, are in desperate need of paediatric hospitals with a minimum of 200 beds to attend to the seriously ill and providing specialised treatment. This highlights a significant gap in the provision of high-quality paediatric healthcare services across the country. As a result, the underserved paediatric market presents a substantial opportunity for the Company to meet the growing demand for quality paediatric healthcare.

International business

The healthcare business in India has considerable development potential, not just inside the country but also across the Indian subcontinent. To fully realise this potential, the Company must maintain a rigorous approach to creating and providing healthcare services, with a focus on both breadth and depth.

Multi-speciality hospitals in India have already begun to expand their reach beyond national borders. Looking ahead, there is immense potential for the paediatric segment of the Indian healthcare industry to attract international business in the years to come. As a result, it is crucial for the Company to prioritise the development of comprehensive, high-quality services that are capable of meeting the diverse needs of patients, both domestic and international.


Low bed occupancy rate

Several factors can impact the bed occupancy rates of Rainbow, many of which are beyond the control of the hospital. These include patient demographics, treatment complexity, length of hospital stays, doctor reputation, and regulatory changes. Failing to maintain or enhance bed occupancy rates despite considerable capital investments by the Business may have an adverse impact on the business and its operating performance.

Intensive competition

Rainbow faces competition from entities that are either owned or operated by government bodies or private non-profit organisations. These competitors may avail tax benefits and finance their capital expenditures through endowments and charitable contributions. Additionally, Rainbow may encounter new entrants in the market. In order to maintain and improve its competitive position, Rainbow has implemented various measures such as offering lucrative compensation to attract and retain quality medical professionals and providing quality services at competitive rates. However, such efforts may result in lower profitability for the Company. Failure to effectively compete with its rivals may adversely affect Rainbows market share in the industry.

Dependency on medical experts

The ability to attract, acquire, and retain medical experts in specialised disciplines such as paediatrics and obstetrics, particularly in areas related to corporate growth objectives, is critical to the success of business strategies and their implementation.

The recruitment and retention of medical professionals in these key specialties are of utmost importance, as their expertise and experience play a critical role in delivering quality patient care.

Moreover, the presence of these specialists can enhance the Companys reputation, leading to increased referrals and revenue growth. Nevertheless, India confronts enormous challenges in attracting experienced medical staff. Competitors can lure away skilled physicians, nurses, and technicians because there is a strong need for specialised doctors and skilled caregivers.


The Companys approach to CSR is deeply rooted in its core values of promoting inclusive growth. CSR is recognised by the Company as an integral and strategic component of its business process, as well as a critical component of its commitment to sustainability.

The Companys CSR actions are consistent with its mission of harnessing the potential of people and natural capital to support social, economic, and environmental advancement. The primary objective of the Companys CSR policy is to establish guidelines for integrating CSR into its business process, which promotes sustainable development of society.

As a responsible corporate citizen, the Company strives to integrate its economic, environmental, and social objectives and utilise its resources effectively towards improving the quality of life and building the capacity of local communities, society, and various stakeholders.

Human resource

The Companys human resource practices are aimed at promoting excellence in healthcare and attracting and retaining the best talent in the industry. Its success is driven by its commitment to providing the best training programmes and career development opportunities for its employees. The National Board of Examinations has recognised the Company as an MRCPCH Examination Centre and training centre, with a leading training programme in India. The Companys multidisciplinary approach fosters a comprehensive clinical environment, enabling employees to learn and grow in the Rainbow network. The Company provides full-time physician retention support in the beginning years of employment, enriching career development and providing opportunities for growth. The number of permanent employees on the rolls of the Company as of March 31, 2023 is 3,581.

Risk management

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

The Risk Management Committee (RMC) of the board oversees and monitors the Risk Management exercise. Risk Management exercise is governed by a Risk Management Charter, which is approved by the RMC. Further, we have also developed a detailed Risk management process, which is reviewed and approved by RMC. The risk management and monitoring mechanisms that we have in place include process walkthroughs, concurrent auditing, and risk-based internal audit reviews, with a focus on identifying, rectifying, and monitoring the effectiveness of our internal process and any possible process gaps. Our assessment of risk is based on risk perception surveys, business environment scanning, and inputs from various internal and external stakeholders. As a part of the Risk Management exercise, the function heads prepare their comprehensive Risk Registers, which form the base documents for this exercise. Risks are given a scoring basis on the following three factors:

1. Probability of occurrence of risks

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

3. Detectability of such risks

Operational Leaders are responsible for highlighting new risks they come across, which are then updated in the risk register. Against each risk noted in the register, a detailed root cause, risk indicator list, and MIS monitoring mechanism are defined. A mitigation plan for the same is prepared and monitored through periodic reporting to the RMC. A monthly MIS on the risks identified in the register is prepared and presented to the management. The RMC members in the scheduled meetings take note of the status of risks and give necessary suggestions, which are actioned upon. Updates to the RMC are provided on a half-yearly basis.

Internal control systems and their Adequacy

RMCL has a well-defined framework of internal controls commensurate to its operations size and complexity. A dedicated Internal Audit team reports directly to the Audit Committee, comprising four independent directors overseeing the Internal Audit function. The scope, authority, and responsibility of the Internal Audit function are governed by the Internal Audit Charter, which is approved by the Audit Committee. For every financial year, the Internal Audit function develops a risk-based internal audit plan to assess control design and its operating effectiveness, which is reviewed and approved by the Audit Committee. The audit team reviews the scope defined and reports on the status of internal controls, quarterly to the Audit Committee. Before being placed to the committee, the functional heads review the internal audit reports, and corresponding action plans for each of the observations are provided with clearly defined timelines and a responsibility matrix. In its quarterly meetings, the audit committee reviews the report in detail and approves it. Further, a separate team of Auditors is deployed across all the group hospitals for concurrent review of daily transactions. A monthly review of the outcome of concurrent audit is conducted at the unit level, and a summary of the outcome is updated to management regularly. Additionally, the audit team also does annual testing of the Entity Level Controls (ELCs), and Internal Controls over Financial Reporting (ICoFR) controls laid down by the management, to provide assurance to the committee on the status of internal controls. All the pending observations are tracked through a comprehensive Action Taken Report (ATR) format, which is presented to the audit committee along with the audit reports every quarter.

Cautionary statement

The MDA section may contain forward-looking statements regarding future prospects. These statements involve various known and unknown risks and uncertainties, which may result in material differences between actual results and the forward-looking statements. In addition to changes in the macro-environment, the emergence of a global pandemic like COVID-19 can introduce unforeseen, unprecedented, unascertainable, and continuously evolving risks to the Company and its operating environment. The estimates and figures presented in the report are based on certain assumptions made by the Company, taking into account internal and external information that is currently available. However, the factors underlying these assumptions can change over time, leading to corresponding changes in the estimates on which they are based. It should be noted that forward-looking statements only reflect the Companys current intentions, beliefs, or expectations and only as of the date on which they were made. The Company is not obligated to revise or update any forward-looking statements in light of new information, future events, or other factors.