Shanmuga Hospital Ltd Management Discussions

1. Industry Overview

The Indian healthcare sector continues to be one of the fastest-growing segments of the economy, supported by rising healthcare awareness, increasing health insurance penetration, growing prevalence of lifestyle diseases, improving healthcare infrastructure and rapid digital transformation. According to industry estimates, the Indian healthcare delivery market is expected to grow at a CAGR of approximately 10% to 12% over the next few years, driven by increasing demand for quality healthcare services and expanding access to medical care across urban and semi-urban regions. India remains one of the worlds fastest- growing major economies with GDP growth estimated at around 6.5% during FY 2025-26. Continued government focus on healthcare infrastructure, digital health initiatives and expansion of health insurance coverage is expected to support sustained growth in the healthcare sector. Government programmes such as Ayushman Bharat and the Ayushman Bharat Digital Mission continue to improve accessibility, affordability and digitisation ofhealthcare services across the country.The healthcare sector is also witnessing significant transformation through the adoption of digital healthcare solutions, telemedicine, artificial intelligence-enabled diagnostics and integrated patient engagement platforms. Increasing health insurance penetration, rising healthcare expenditure and growing demand for specialised healthcare services are expected to create substantial opportunities for organized healthcare providers. Salem and the surrounding regions continue to emerge as an important healthcare destination in Western Tamil Nadu, generating increasing demand for advanced tertiary and specialty healthcare services. Against this backdrop, Shanmuga Hospital Limited remains well-positioned to capitalize on emerging opportunities through its focus on clinical excellence, technology adoption, patient-centric care and continuous enhancement of healthcare infrastructure and services.

Healthcare Landscape in Salem and Western Tamil Nadu

Salem continues to emerge as a leading healthcare destination in Western Tamil Nadu, serving patients not only from Salem district but also from neighbouring districts and adjoining states. The increasing demand for tertiary and super-specialty healthcare services, advanced diagnostics, oncology care, nephrology services, critical care, and preventive healthcare has contributed significantly to the regions healthcare growth

Key Industry Trends

Growing adoption of digital healthcare and telemedicine services.

Increasing demand for specialized and superspecialty medical care.

Expansion of health insurance coverage and cashless healthcare facilities.

Rising focus on preventive healthcare and wellness management.

Increased investments in advanced medical technologies and diagnostics.

Growing adoption of Artificial Intelligence (ai) and data-driven healthcare solutions.

Enhanced patient expectations regarding quality, safety, convenience, and accessibility.

Challenges

Shortage of skilled healthcare professionals.

Increasing operational and manpower costs.

Rapid technological advancements requiring continuous investments.

Regulatory changes and compliance requirements.

Inflationary pressures affecting healthcare delivery costs

Outlook

The Indian healthcare sector is expected to maintain strong growth momentum in the coming years. Increasing healthcare expenditure, growing awareness, technological advancements and government support for healthcare infrastructure are expected to create significant opportunities for organized healthcare providers. The Company remains well-positioned to capitalize on these opportunities through its strong clinical capabilities, patient-centric approach, and ongoing infrastructure and technology investments.

2. FINANCIAL AND OPERATIONAL PERFORMANCE

The financial statements have been prepared in accordance with the provisions of the Companies Act, 2013, Indian Accounting Standards (Ind AS), SEBI Regulations and other applicable statutory requirements. The Management accepts responsibility for the integrity and objectivity of the financial statements and confirms that all estimates and judgments have been made on a prudent and reasonable basis.

FINANCIAL SUMMARY (RS.)

(All figures are in Lakhs)

Particulars	2025-26	2024-25
Operating Income	4743.61	4785.33
Other Income	62.71	23.35
Total Income	4806.32	4808.67
Operating Expenses	3920.9	3968.23
EBITDA	885.42	840.44
Interest Expense	36.75	55.9
Depreciation	281.65	215.8
Profit/(Loss) before Tax	567.02	568.74
Tax Expense	145.96	148.07
Profit/(Loss) after Tax (PAT)	421.06	420.67

Analysis

During the year under review, the Company continued its focus on enhancing healthcare delivery, strengthening specialty services, improving operational efficiency, and investing in technology-driven healthcare solutions. The Companys operational and financial performance reflects its commitment towards delivering quality healthcare services while maintaining sustainable growth and financial discipline.

3 OPPORTUNITIES AND THREATS Opportunities

Growing demand for quality healthcare services in Tier-II cities:

Rising urbanization, increasing health awareness and improving income levels continue to drive demand for quality healthcare services.

Expansion of specialty and super-specialty healthcare services:

Increasing demand for advanced medical treatments presents opportunities to expand specialized healthcare offerings.

Increasing insurance penetration and government healthcare schemes:

Wider health insurance coverage and government initiatives are expected to improve access to quality healthcare services.

Growing demand for oncology, nephrology, critical care and advanced surgical services

The increasing prevalence of chronic diseases and lifestyle-related illnesses is driving demand for spe cialized medical care.

Digital healthcare initiatives and telemedicine:

Technology-driven healthcare solutions provide opportunities to improve patient engagement, operational efficiency and service accessibility.

Medical tourism and regional patient referrals:

The Companys quality healthcare services position it to attract patients from neighbouring regions and support growth in medical tourism.

Increasing preference for organized healthcare providers:

Patients are increasingly choosing organized hospitals that offer comprehensive healthcare services, advanced infrastructure and quality clinical outcomes Threats

Intensifying competition:

The healthcare sector continues to witness increasing competition from private hospitals, corporate healthcare chains and government healthcare institutions.

Rising employee and Professional retention costs:

Increasing demand for skilled doctors, nurses and healthcare professionals may lead to higher employee and retention costs.

Capital-intensive business: Continuous

investment is required in medical equipment, technology and infrastructure to maintain quality standards and remain competitive.

Regulatory changes: Changes in healthcare

regulations, pricing policies and compliance requirements may impact operations and profitability.

Inflationary pressures: Rising costs of medical consumables, pharmaceuticals, equipment, utilities and other operating expenses may affect profit margins.

4. RISKS AND CONCERNS

The Company continually evaluates and monitors risks that may affect its business operations and growth prospects. Key risks include:

Regulatory and compliance risks.

Talent acquisition and retention challenges.

Technology and cybersecurity risks.

Operational risks arising from increasing patient volumes.

Inflationary pressures impacting profitability.

Changes in healthcare reimbursement mechanisms and insurance frameworks. Appropriate risk management systems and mitigation measures have been established to address these risks effectively.

5. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has established adequate internal control systems commensurate with the size, nature and complexity of its business operations. These systems are designed to ensure the orderly and efficient conduct of business, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records, and timely preparation of reliable financial information.

The key features of the internal control framework include:

Well-defined policies, procedures and authorization frameworks.

An independent internal audit mechanism to evaluate the adequacy and effectiveness of internal controls.

Periodic review of internal audit findings and control measures by the Audit Committee.

Continuous monitoring of operational and financial controls.

Regular compliance monitoring with applicable laws, regulations and internal policies.

The Board of Directors and the Audit Committee periodically review the adequacy and effectiveness of the Companys internal control systems and are satisfied that the internal controls are adequate and operating effectively.

6. OPERATIONAL HIGHLIGHTS

During the financial year under review, the Company continued its efforts towards strengthening its position as a leading healthcare provider in the region through investments in infrastructure, technology, clinical excellence and patient-centric initiatives. As part of its commitment towards enhanced transparency and stakeholder engagement following its listing on the BSE SME Platform, the Company voluntarily adopted the publication of quarterly financial results during the financial year. This initiative reflects the Companys commitment to maintaining high standards of corporate governance and timely dissemination of information to investors and stakeholders.

As part of its commitment towards enhanced transparency and stakeholder engagement following its listing on the BSE SME Platform, the Company voluntarily adopted the publication of quarterly financial results during the financial year. This initiative reflects the Companys commitment to maintaining high standards of corporate governance and timely dissemination of information to investors and stakeholders. The Company also continued the development of its integrated digital healthcare platform, Shanmuga 360, aimed at enhancing patient convenience and engagement. The platform is envisioned to provide a comprehensive healthcare ecosystem encompassing online appointment booking, teleconsultation services, access to medical records, diagnostic services, pharmacy services and other patient-centric healthcare solutions. The development of the platform marks an important milestone in the Companys digital transformation journey and is expected to strengthen patient outreach and service accessibility. Further, the Company continued to focus on strengthening specialty services, enhancing clinical capabilities, improving patient experience and driving operational efficiencies across various departments. The Company continued to witness healthy patient footfalls across outpatient and inpatient services during the year, reflecting the trust reposed by patients and the community in the quality of healthcare services offered by the Hospital.

Patient Statistics

Particulars	2025-26	2024-25
Inpatients (IP)	4593	4247
Outpatients (OP)	44898	41733

7. HUMAN RESOURCES AND INDUSTRIAL RELATIONS

The Company firmly believes that its employees are the cornerstone of its success and sustainable growth. During the financial year under review, the Company continued to focus on the following key areas:

Skill enhancement and professional development programmes.

Clinical and non-clinical training initiatives.

Leadership development programmes.

Employee engagement and retention strategies.

Performance-based recognition and reward mechanisms.

Workplace safety, employee health and wellbeing initiatives.

Industrial relations remained cordial and harmonious throughout the financial year. The Company continues to foster a culture of professionalism, integrity, accountability, teamwork and continuous learning, while promoting a safe, inclusive and performance-driven work environment.

8. FUTURE OUTLOOK

The Company remains optimistic about its future growth prospects and continues to focus on strengthening its position as a leading healthcare provider in the region. The strategic focus areas for the coming years include:

Expansion of healthcare infrastructure and patient care facilities.

Strengthening specialty and super-specialty healthcare services.

Enhancing patient experience through technology-enabled healthcare solutions.

Continued investment in advanced medical equipment and clinical excellence.

Digital healthcare expansion through the phased rollout and enhancement of the Shanmuga 360 platform.

Strengthening operational efficiencies and quality healthcare delivery.

Enhancing shareholder value through sustainable growth and sound corporate governance practices. Through these initiatives, the Company aims to further strengthen its market position while continuing to deliver high-quality healthcare services to the community.

Disclaimer The statements made in this Report describing the Companys objectives, projections, estimates, expec tations and predictions may constitute forward-looking statements within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed or implied due to various risks, uncertainties and other factors beyond the Companys control.

RATIOS	As at March 31, 2026	As at March 31, 2025	Variance	Reason for Variance
Current Ratio (in times)	2.22	3.35	(33.55%)	Decrease mainly due to encashment of term deposits (S993.13L) used to fund capital expenditure during the year, together with lower closing Trade Receivables and Trade Payables balances.
Debt-Equity Ratio (in times)	0.16	0.19	(17.35%)	Not Applicable
Debt Service Coverage Ratio (in times)	24.09	15.03	60.27%	Increase mainly due to higher PBT for the year and no scheduled principal repayment of borrowings during FY26.
Return on Equity Ratio (%)	0.1	14.80%	(30.80%)	Decrease mainly due to a higher average shareholders fund base (following FY25 IPO proceeds) growing faster than net profit, and higher depreciation on the years capital expenditure.
Inventory Turnover Ratio (in times)	6.08	7.32	(16.92%)	Not Applicable
Trade Receivables Turnover Ratio (in times)	6.4	6.41	-0.17%	Not Applicable
Trade Payable Turnover Ratio (in times)	4.73	4.23	11.80%	Not Applicable
Net Capital Turnover Ratio (in times)	3.4	4.41	-22.91%	Not Applicable
Net Profit Ratio (%)	8.88%	8.79%	0.97%	Not Applicable
Return on Capital Employed (%)	12.01%	13.09%	(8.27%)	Not Applicable
Return on Investment (in %)	1.87%	2.33%	(19.59%)	Not Applicable
Interest Coverage Ratio	16.43	11.17	47.04%	Increase mainly due to a reduction in interest cost from S55.90L to S36.75L (-34%), following repayment of working capital borrowings (ShortTerm Borrowings reduced from S402.10L to S314.43L), while EBIT remained broadly flat at S603.77L (PY S624.64L).
Operating Profit Margin Ratio	11.52%	0.1271	(9.34%)	Not Applicable

10. DISCLOSURE OF ACCOUNTING TREATMENT

The financial statements of the Company have been prepared in accordance with the Indian Account ing Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules, 2015, as amended from time to time. No treatment different from that prescribed under the applicable Accounting Standards has been followed in the preparation of the financial statements.

11. CAUTIONARY STATEMENT

The statements in this Management Discussion and Analysis Report describing the Companys objectives, expectations and projections may be forward-looking statements within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed or implied depending upon economic conditions, government policies, competitive developments and other incidental factors.

11. DECLARATION REGARDING COMPLIANCE OF CODE OF CONDUCT

The Company has adopted a Code of Conduct applicable to Directors, Senior Management Personnel and Employees. The Code of Conduct is available on the Companys website. It is hereby confirmed that all Directors and Senior Management Personnel have affirmed compliance with the Code of Conduct for the financial year ended March 31, 2026

For and on behalf of the Board of Directors of Shanmuga Hospital Limited

	Sd/-	Sd/-
Place: Salem	Dr. P. S. PANNEERSELVAM	Dr. P. Prabu Sankar
Date : 11.08.2026	Managing Director	Director & CEO
	DIN:08772887	DIN: 08772888