Shanmuga Hospital Ltd Management Discussions

Industry Overview

The Indian healthcare sector is undergoing rapid transformation, driven by rising income levels, increased health insurance coverage, urbanization, lifestyle changes, and growing awareness. The industry is projected to reach USD 638 billion by 2030, growing at a CAGR of 14%. Government programs such as Ayushman Bharat, state-level schemes like CMCHIS, and sustained FDI inflows (over USD 7 billion since 2000) are accelerating infrastructure development and improving access to quality care.

Growth in Tier-2 Cities: Spotlight on Salem Salem has emerged as a prominent regional healthcare hub in western Tamil Nadu, catering not only to urban residents but also to patients from nearby districts. Increased demand for secondary and tertiary care, improved diagnostics, and a growing preference for private providers are shaping healthcare delivery in the city.

The Government is committed to ensuring sound health and well-being of all ages through a preventive and promotive healthcare orientation in all developmental policies and universal access to good quality healthcare services. To this end, the Government is implementing various schemes and programmes and initiatives such as:

1. Ayushman Bharat Pradhan Mantri Jan Aarogya Yojana (AB-PMJAY) (2018)

2. PM Jan Aushadhi Kendras

3. AMRIT (Affordable Medicines and Reliable Implants for Treatment)

4. Ayushman Bhav Campaign (Sep 2023)

5. Ayushman Bharat Digital Mission (ABDM) (2021)

6. e-Sanjeevani (2019) (Source: Economic Survey and IBEF)

Key Trends Shaping the Sector Digital Health: Expansion of telemedicine, AI- powered diagnostics, and electronic health records under the Ayushman Bharat Digital Mission. Specialized Services: Rapid growth in oncology, nephrology, and cardiology driven by rising NCDs and awareness.

Insurance Access: Over 550 million Indians now covered by public or private insurance, widening the patient base.

Medical Tourism: Tamil Nadu leads in foreign patient inflows due to its affordability and clinical excellence.

• Workforce Shortage: Projected gaps in doctors and nurses, particularly in rural and semi-urban areas.

• Rising Costs: Operational expenses, equipment maintenance, and compliance with quality standards continue to grow.

• Regulatory Pressure: Increased focus on pricing transparency, accreditation, and sustainability.

Road Ahead

The healthcare sector, as of 2025, is one of Indias largest employers, employing a total of 7.5 million people. The demand for Indian healthcare professionals is expected to double nationally and globally by 2030 due to a shortage of healthcare workers in India, where there are only 1.7 nurses per 1,000 people and a doctor-to-patient ratio of 1:1,500 nationwide.

The Government aims to develop India as a global healthcare hub. Public health surveillance in India will further strengthen the health systems. The Interim Budget 2024-25 emphasizes healthcare infrastructure by increasing the allocation for the Pradhan Mantri Ayushman Bharat Health Infrastructure Mission (PMABHIM) from Rs. 2,100 crore (US$ 251 million) to Rs. 4,108 crore (US$ 492 million), alongside plans to establish more medical colleges utilizing existing hospital infrastructure.

2. Financial and Operational Performance The financial statements have been prepared in compliance with the requirements of the Companies Act, 2013, and Indian Accounting Standards (Ind AS) in India. The management accepts responsibility for the integrity and objectivity of these financial statements, as well as for various estimates and judgments used therein. The estimates and judgments relating to the financial statements have been made on a prudent and reasonable basis, in order that the financial statements reflect the state of affairs of the Company in a true and fair manner.

Analysis:

Total operating income increased by 11.19% to ^4,785.33 lakhs during the financial year 2024-25, compared to ^4,303.74 lakhs in the previous year. However, the Company recorded a decline in Profit After Tax (PAT) to S420.67 lakhs in FY 2024-25 from S524.84 lakhs in FY 2023-24, reflecting a drop of approximately 19.84%. The decline in profitability is primarily attributable to higher depreciation arising from significant investments in advanced medical equipment made during the year.

Opportunities:

• Rising income levels and increased spending on healthcare

• Greater health awareness among urban and semi-urban populations

• Increased demand for specialized care such as robotic surgeries, oncology, and nephrology services

• Expanding insurance penetration and government healthcare initiatives

• Potential to grow medical tourism in Tier-2 cities

• Technology-driven solutions like telemedicine, AI diagnostics, and electronic health records.

Threats:

• Intensifying competition from both private and government healthcare providers

• Rising cost of operations including infrastructure, compliance, and skilled manpower

• Increasing dependency on advanced, capitalintensive medical technology

• Regulatory challenges and pricing controls in healthcare delivery.

4. Risks and Concerns

• Increasing competitive intensity in the regional healthcare market

• Technological obsolescence due to rapid innovation cycles

• Scarcity and rising cost of resources, including high-quality consumables and equipment

• Continuous changes in government policies and regulations, especially in pricing and licensing.

Internal Control Systems and Their Adequacy

• The Company has a robust system of internal controls in place, ensuring protection of assets, authorization of transactions, accuracy of records, and regulatory compliance.

• An independent Internal Auditor conducts regular audits as per an approved plan

• Audit findings and Action Taken Reports (ATR) are reviewed by the Audit Committee

• Recommendations from Statutory Auditors are also incorporated as necessary

• The control systems are reviewed periodically and found to be adequate and effective

Operational Highlights

During the year under review, Shanmuga Hospital Limited undertook several key initiatives aimed at enhancing patient care and expanding its clinical capabilities. A significant milestone was the commissioning of a state-of-the-art LINAC machine, strengthening the hospitals oncology services and enabling advanced radiation therapy for cancer patients. The hospital also inaugurated a dedicated Pulmonology Department to meet the growing demand for respiratory healthcare. In addition, the renovation of the Suite Rooms and Emergency Department was completed, ensuring improved patient comfort, faster emergency response, and better infrastructure. These operational advancements were complemented by strong patient volumes, with approximately 25,440 inpatients and 41,773 outpatients receiving care during the year, reflecting the hospitals increasing trust and reach within the community."

Human Resources and Industrial Relations Shanmuga Hospital Limited firmly believes that skilled and motivated professionals are the cornerstone of its sustained success. In line with this belief, the Company implemented several initiatives focused on continuous improvement, including skill enhancement programs, behavioral training, and department-wise development workshops aimed at fostering a culture of excellence and accountability. To recognize and retain top talent, a performance-based reward system was introduced, encouraging meritocracy and motivation across all levels. As of March 31, 2025, the Company employed a dedicated team of qualified healthcare professionals and support staff, ensuring seamless 24/7 operations. Industrial relations remained cordial and harmonious, reflecting a positive and collaborative work environment throughout the year.

Future Outlook

Shanmuga Hospital Limited remains optimistic about its growth trajectory, supported by the increasing demand for quality healthcare services, continuous infrastructure enhancements, and the adoption of advanced medical technologies. To further strengthen its clinical capabilities and patient services, the Company has identified several strategic initiatives that will be implemented in a phased manner, subject to regulatory approvals, funding, and operational considerations.

The key initiatives include:

• Increase in Inpatient Capacity

• Expansion of infrastructure with the addition of 50 inpatient beds, enhancing the Hospitals ability to accommodate and treat more patients efficiently.

• Launch of Nephro Care Center

• Establishment of a dedicated center for dialysis and kidney care, designed to deliver high-quality nephrology services and strengthen the Hospitals specialty offerings.

• Renal & Liver Transplant Program

• Introduction of a comprehensive renal and liver transplant program, covering evaluation, donor matching, surgery, and post-operative care, managed by a multidisciplinary team to ensure quality outcomes.

• Upgraded Outpatient Facility

• Relocation of the Outpatient Department (OPD) to a modern, purpose-built complex aimed at improving operational efficiency, reducing patient wait times, and enhancing overall care experience.

• Digital Health Integration

• Launch of the "Shanmuga Health App", a patient-centric digital platform that will enable convenient access to healthcare services, medical records, and appointment scheduling.

Through these planned initiatives, the Hospital aims to reinforce its position as a leading healthcare provider in the region while ensuring excellence in patient care and clinical outcomes. Disclaimer: The above-mentioned future plans are forward-looking statements based on current expectations and assumptions. Actual outcomes may vary due to unforeseen circumstances or external factors beyond the Companys control.

9. Details of significant changes (i.e. Change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefore is Annexed to this Report

10. Cautionary Statement

The information and opinion expressed in this Report may contain certain forward-looking statements, which the

management believe are true to the best of its knowledge at the time of its preparation. Actual results may differ

materially from those either expressed or implied in this report.

11. Declaration as to the Compliance of Code of Conduct of the Board Members and The Senior Management Personnel

This is to confirm that the Company has adopted the Code of Conduct for its employees including the Directors and Senior Management Personnel. The Code of Conduct is posted on the Companys website.

I confirm that the Company has in respect of the financial year ended March 31, 2025, received from the senior management team of the Company and the Members of the Board a declaration of compliance with the Code of Conduct as applicable to them for the year ended March 31, 2025.