Vijaya Diagnostic Centre Ltd Management Discussions

Global Economy

The global economy demonstrated remarkable resilience in 2023, navigating through challenges to achieve a growth rate of 2.1%. This performance, while lower than the previous years 3.1%, showcases the adaptability and strength of economies worldwide in the face of monetary policy adjustments and regional financial fluctuations. Looking ahead, the World Bank projects an encouraging uptick in global growth to 2.4% in 2024, signalling a positive trajectory as inflationary pressures ease and commodity markets stabilise.

Advanced economies, despite facing policy tightening, are poised for steady growth. The projected growth rates of 1.5% in 2023 and 1.4% in 2024 reflect the ongoing recovery from pandemic-related disruptions and the gradual normalisation of economic activities. This steady performance underscores the robustness of these economies in maintaining growth amid evolving global conditions. Emerging markets and developing economies (EMDEs) continue to be dynamic drivers of global economic expansion. While growth in EMDEs, excluding China, is expected to moderate to 2.9% in 2023 from 4.1% in 2022, theres optimism for a rebound to 4.0% in 2024. This anticipated acceleration is particularly encouraging, driven by Chinas economic resurgence and positive developments in other large economies within the region.

On the inflation front, theres cause for optimism. The International Monetary Fund (IMF) forecasts a gradual but steady decline in global inflation from 8.7% in 2022 to 6.9% in 2023, and further to 5.8% in 2024. This downward trend reflects the effectiveness of monetary policies and the stabilisation of commodity prices, paving the way for increased economic stability and consumer confidence.

The outlook for the global economy, while presenting challenges, also offers numerous opportunities for growth and innovation. The World Bank emphasises the potential for positive outcomes through global cooperation and structural reforms. Theres a growing focus on reinforcing central bank independence, enhancing financial supervision, and improving the efficiency of public spending – all of which contribute to maintaining price and financial stability.

Indian Economy

The Indian economy demonstrated remarkable resilience and robust growth in 2023, reflecting its strong fundamentals and effective policy measures. According to the World Bank, Indias GDP growth rate for 2023 is projected to be around 6.3%, making it one of the fastest-growing major economies in the world. This growth is underpinned by a strong recovery in domestic demand, increased investment, and a rebound in manufacturing and services sectors (World Bank, 2024).

The International Monetary Fund (IMF) also highlights Indias impressive economic performance, noting that the countrys growth has been driven by robust private consumption, government spending, and a revival in investment activities. The IMFs World Economic Outlook report projects Indias GDP growth to remain strong at 6.3% in 2024, supported by continued policy support and structural reforms (IMF, 2024).

One of the key drivers of Indias economic growth has been the recovery in the services sector, which has shown significant momentum. The services sector, which accounts for over 50% of Indias GDP, has benefited from increased consumer spending, digital transformation, and a resurgence in travel and tourism. Additionally, the manufacturing sector has also shown resilience, with strong performance in key industries such as automotive, pharmaceuticals, and electronics.

Inflation in India has been relatively moderate, with the Reserve Bank of India (RBI) maintaining a balanced approach to monetary policy. The RBIs efforts to control inflation, coupled with favourable monsoon conditions, have helped keep food prices stable. The IMF projects that Indias inflation rate will moderate to 5.2% in 2023 and further to 4.8% in 2024, providing a stable environment for economic growth (IMF, 2024).

Looking ahead, the outlook for the Indian economy remains positive. The World Bank projects that Indias GDP growth will accelerate to 6.4% in 2025, driven by continued policy reforms, infrastructure development, and increased foreign investment. The governments focus on key initiatives such as the Atmanirbhar Bharat (Self-Reliant India) campaign, Make in India, and Digital India is expected to further boost economic growth and create new opportunities for businesses and investors (World Bank, 2024).

Industry Overview

Indian Healthcare Sector

The Indian healthcare sector has demonstrated remarkable growth and resilience, emerging as a pivotal component of the countrys economy. According to the India Brand Equity Foundation (IBEF) report of May 2024, the total industry size was estimated at US$ 372 Billion in 2023, reflecting the sectors substantial scale and potential. The healthcare market in India has experienced robust growth, with a Compound Annual Growth Rate (CAGR) of 22.52% between 2016 and 2022. This impressive growth trajectory is expected to continue, with projections indicating that the market will reach US$ 638 Billion by 2025.

Healthcare sector Growth Trend

(US$ Billion)

One of the key drivers of this growth is the increasing healthcare expenditure. The budgeted spending on the health sector by federal and state governments has risen from 1.6% of GDP in FY21 to 2.6% in FY23. The government aims to further increase public health spending to 2.5% of the countrys GDP by 2025, underscoring its commitment to enhancing healthcare infrastructure and services

Government Healthcare Expenditure as a % of GDP

Hospital Market and Infrastructure Development

The hospital market in India, a crucial component of the healthcare sector, was valued at US$ 98.98 Billion in 2023. It is projected to grow at a CAGR of 8.0% from 2024 to 2032, potentially reaching an estimated value of US$ 193.59 Billion by 2032. This growth is supported by significant infrastructure development, with the government planning to add three million beds by 2025 to achieve the target of 3 beds per 1,000 people.

Workforce Expansion and Employment Opportunities

The healthcare sector is one of Indias largest employers, with a workforce of 7.5 Million people as of 2024. The demand for healthcare professionals is expected to double both nationally and globally by 2030, driven by the current shortage of healthcare workers in India. The country currently has only 1.7 nurses per 1,000 people and a doctor-to-patient ratio of 1:1,500 nationwide, indicating significant room for workforce expansion

Digital Transformation and Technological Advancements

The Indian healthcare sector is witnessing a rapid digital transformation. The AI in Healthcare Market is projected to grow from US$ 14.6 Billion in 2023 to US$ 102.7 Billion by 2028, highlighting the increasing adoption of advanced technologies in healthcare delivery. Telemedicine, in particular, has seen substantial growth, with the domestic telemedicine market expected to reach US$ 5.5 Billion by 2025.

Government Initiatives and Policy Support

The government has implemented several initiatives to boost the healthcare sector. The Pradhan Mantri Jan Arogya Yojana (PMJAY) has been instrumental in providing health insurance coverage to a large section of the population. As of October 2023, a total of 26 Crore Ayushman cards have been created under this scheme. The government has also focused on expanding medical education infrastructure. The number of allopathic doctors with recognised medical qualifications increased to 1.308 million in June 2022, from 0.83 million in 2010. Additionally, the government has approved grants for new medical colleges and is expanding existing facilities to strengthen the healthcare workforce.

Opportunities and Future Outlook

The healthcare sector in India presents numerous opportunities for growth and investment. The governments focus on universal health coverage, coupled with rising income levels and increasing health awareness, is expected to drive demand for healthcare services. The sector is also witnessing a shift from communicable to lifestyle diseases, necessitating specialised care and creating new market segments.

Corporate wellness solutions represent another growing area. This segment is expected to contribute significantly to preventive healthcare and employee well-being initiatives.

Overview of the Indian Diagnostics Market

The Indian diagnostics market has experienced significant growth over the past few years, driven by increasing healthcare awareness, rising income levels, and advancements in diagnostic technologies. According to a report by Polaris Market Research, the Indian diagnostics market was valued at USD 16.23 Billion in 2023 and is forecasted to reach USD 43.57 Billion by FY32 (Polaris Market Research, 2024).

The sector is highly competitive and fragmented, with organised players holding only around 17% of the market share. The majority of the market is dominated by unorganised players, which presents both challenges and opportunities for growth and consolidation (CareEdge Ratings, 2024).

Market Size and Growth Projections

The Indian diagnostics market is projected to grow at a Compound Annual Growth Rate (CAGR) of 14%, reaching USD 20 Billion FY26 (Business Today, 2024). This growth is supported by several factors, including the increasing prevalence of chronic diseases, rising healthcare expenditure, and the growing adoption of preventive healthcare measures.

Key Trends Shaping the Industry

Digital Transformation and Technological Advancements

The diagnostics industry in India is undergoing a digital revolution, with significant investments in artificial intelligence (AI) and machine learning (ML) technologies. The AI in Healthcare Market is projected to grow from USD 14.6 Billion in 2023 to USD 102.7 Billion by 2028 (Lupin, 2024). Telemedicine and home-based diagnostic services are also gaining traction, driven by the demand for convenience and faster results.

Increasing Focus on Preventive Healthcare

There has been a paradigm shift towards preventive healthcare, with more individuals opting for regular health check-ups and screenings. This trend is supported by rising income levels and greater health awareness. The market for preventive healthcare is expected to grow significantly in the coming years, contributing to the overall expansion of the diagnostics sector.

Geographical Expansion and Inorganic Growth

Companies in the diagnostics industry are focusing on expanding their geographical footprint through both organic and inorganic growth strategies. Leading players are setting up new centres in untapped geographies and acquiring regional players to capture higher market share.

Increased Healthcare Spending

The budgeted spending on the health sector by federal and state governments has risen from 1.6% of GDP in FY21 to 2.1% in FY23. The government aims to further increase public health spending to 2.5% of the countrys GDP by 2025 (CareEdge Ratings, 2024). This increased expenditure is expected to enhance healthcare infrastructure and services, benefiting the diagnostics market.

Opportunities in the Diagnostics Market

Rising Demand for Diagnostic Services

The demand for diagnostic services is expected to rise due to the increasing prevalence of chronic diseases such as diabetes, hypertension, and cardiovascular diseases. The sedentary lifestyle and ageing population are key factors contributing to this trend. The number of people suffering from non-communicable diseases is expected to increase from 19% in 2008 to 28% in 2030 (CareEdge Ratings, 2024).

Medical Tourism

India has emerged as a preferred destination for medical tourism, offering high-quality medical services at competitive prices. The medical tourism market in India was valued at USD 7.69 Billion in 2024 and is expected to reach USD 14.31 Billion by 2029 (Business Today, 2024). The influx of international patients seeking cost-effective and quality treatment options is expected to boost the demand for diagnostic services.

Corporate Wellness Solutions

The corporate wellness segment is gaining importance as companies recognise the need to ensure the health and well-being of their employees. The diagnostics industry is poised to benefit from this trend, with an increasing number of corporate clients opting for health check-up packages and wellness programmes.

Government Initiatives and Policy Support

The Indian government has implemented several initiatives to support the healthcare sector, including the Pradhan Mantri Jan Arogya Yojana (PMJAY), which provides health insurance coverage to a large section of the population. As of October 2023, a total of 26 crore Ayushman cards have been created under this scheme (CareEdge Ratings, 2024). These initiatives are expected to drive demand for diagnostic services and improve access to healthcare.

Future Outlook

The Indian diagnostics market is poised for substantial growth and transformation in the coming years. With a combination of government support, technological advancements, and increasing private sector participation, the sector is well-positioned to address the healthcare needs of Indias large and diverse population. The focus on digital health initiatives, expansion of insurance coverage, and emphasis on medical education and workforce development are expected to drive sustained growth.

Company Overview

Vijaya Diagnostic Centre Limited, established in 1981, has grown to become one of Indias leading diagnostic service providers. With a steadfast commitment to delivering high-quality, comprehensive diagnostic solutions, Vijaya has built a robust network of 145 diagnostic centres and 21 reference laboratories across 23 cities. Our integrated business model, combining pathology and radiology services under one roof, allows us to offer a wide range of diagnostic tests with accuracy and efficiency.

Our mission is to make diagnostic services accessible and affordable while maintaining the highest standards of quality. We continually invest in state-of-the-art technology and infrastructure to ensure that our patients receive the best possible care. Our commitment to excellence is reflected in our accreditations and certifications, including NABL and NABH.

Financial Performance in FY24

FY24 has been a year of robust growth and operational excellence for Vijaya Diagnostic Centre. We reported a substantial revenue increase of 19.3%, amounting to _5,478 Million. This growth was driven by both organic and inorganic factors, including the successful integration of PH Diagnostics. Our EBITDA for the year stood at _2,209 Million, reflecting a year-on-year growth of 21.4%. The EBITDA margin was healthy at 40.3%, demonstrating our ability to maintain profitability while expanding our operations. Our Profit After Tax (PAT) grew by 40.4%, reaching _1,188 Million. Operationally, we have made significant strides. Our total tests performed increased by 24.1% year-on-year, reaching 11.9 Million tests in FY24. Our total footfall also saw a substantial increase of 21.4%, with 3.5 Million patient visits during the year. These metrics highlight the growing demand for our services and our ability to meet this demand effectively.

We have consistently maintained industry-leading margins, supported by our integrated business model and a strong focus on the B2C segment. Our radiology business, which now constitutes 36% of our total revenue, has been a significant contributor to our growth. The revenue per test stood at _461, and the revenue per footfall was _1,543, reflecting our ability to deliver high-value services to our customers.

Outlook

Looking ahead, the outlook for Vijaya Diagnostic Centre remains positive. We plan to add 10 new hub centres over the next two years, with a particular emphasis on Pune and Eastern India. Our expansion strategy is backed by a strong financial position, with plans to fund these initiatives through internal accruals and existing cash reserves. We are confident that our strategic initiatives, combined with our commitment to operational excellence, will enable us to deliver lasting value to our stakeholders. Our focus on quality, accuracy, and patient-centric care will continue to drive our growth and success. We also plan to explore new opportunities for growth, including potential inorganic acquisitions in high-potential markets. Our goal is to create a dense network of integrated diagnostic centres that can efficiently serve a broad customer base across India. In conclusion, Vijaya Diagnostic Centre is well-positioned to capitalise on the opportunities in the Indian diagnostics market. Our strategic focus on geographical expansion, digital transformation, and investment in human resources and sustainability will drive our growth and success in the coming years.

Key Financial Ratios

Ratios	FY 2023-24	FY 2022-23	Reason
Debtors Turnover (In times)	2.58	2.67
Inventory Turnover (In times)	18.10	18.62
Interest Coverage Ratio (In times)	Nil	Nil
Current Ratio (In times)	2.90	4.17	During the previous year the company has successfully acquired wholly owned subsidiary in Pune by utilising the surplus investments in bank balances and mutual funds. Hence there is a decrease in these surplus bank balances and current Ratio.
Debt Equity Ratio (In times)	Nil	Nil
Operating Profit Margin (In %)	40	40
Net Profit Margin (In %)	22	19
Return on Net Worth (In %)	18.08	15.54

Strategic Position to Capitalise on Opportunities

Vijaya Diagnostic Centre is strategically positioned to capitalise on the numerous opportunities in the Indian diagnostics market. Our extensive network of diagnostic centres and reference laboratories, coupled with our commitment to quality and innovation, positions us well to capture a larger market share.

Geographical Expansion and Inorganic Growth:

We have been focusing on expanding our geographical footprint through both organic and inorganic growth strategies. The acquisition of PH Diagnostic Centre Private Limited, Punes largest B2C-focused integrated diagnostic chain, marks our entry into the Western India market. This acquisition allows us to expand our presence in Pune, a region with significant growth potential.

In addition to the acquisition of PH Diagnostics, we have proposed the amalgamation of Medinova Diagnostic Services Limited. This merger aims to consolidate our market position and create synergies that will benefit both entities.

Digital Transformation and Technological Advancements:

The diagnostics industry in India is undergoing a digital revolution, and Vijaya Diagnostic Centre is at the forefront of this transformation. We have invested significantly in artificial intelligence (AI) and machine learning (ML) technologies to enhance diagnostic accuracy and operational efficiency. Our advanced Laboratory Information Management System (LIMS) and Radiology Information Systems (RIS) ensure that we maintain high standards of accuracy and efficiency in our diagnostic services.

Human Resources

Personnel at Vijaya Diagnostic Centre are immersed in a dynamic environment equipped with advanced and high-end laboratory and diagnostic facilities, enabling them to work with cutting-edge technology. To attract and retain top talent, the company offers Employee Stock Options (ESOPs) as rewards, fostering a high-performance culture and aligning employee interests with long-term organisational goals.

The company also prioritises employee well-being and satisfaction through a dedicated grievance cell, which addresses employee concerns and ensures fair and transparent communication. Regular training and development programmes, led by top-level experts and consultants, are conducted to enhance the skills and knowledge of our workforce. These initiatives ensure that our employees remain at the forefront of the latest advancements in diagnostic technology and practices.

As of March 31, 2024, the total number of staff at Vijaya

Diagnostic Centre stands at over 2,698, reflecting our commitment to building a skilled and motivated workforce capable of delivering exceptional diagnostic services.

Internal Control Systems and Their Adequacy

Vijaya Diagnostic Centre has implemented a robust and comprehensive internal control framework that aligns with the companys strategic objectives and operational requirements. This system is designed to safeguard assets, ensure compliance with regulatory standards, and maintain the integrity of financial reporting.

The companys internal control mechanisms encompass a wide range of policies, procedures, and monitoring processes that are regularly reviewed and updated to address evolving business needs and regulatory requirements. Key features of our internal control system include:

1. Risk Assessment and Management: A structured approach to identifying, evaluating, and mitigating risks across all business functions.

2. Financial Controls: Rigorous checks and balances to ensure accuracy in financial reporting and adherence to accounting standards.

3. Operational Efficiency: Continuous monitoring and improvement of operational processes to enhance productivity and reduce wastage.

4. Compliance Management: Comprehensive systems to track and ensure compliance with all applicable laws and regulations.

5. Information Technology Controls: Robust IT systems with appropriate access controls and data security measures.

6. Internal Audit Function: An independent internal audit team that conducts regular audits across all departments and reports directly to the Audit Committee.

The Audit Committee, comprising independent directors, plays a crucial role in overseeing the effectiveness of these internal control systems. They regularly review audit reports, monitor the implementation of audit recommendations, and provide guidance on strengthening control mechanisms. In FY24, we further enhanced our internal control framework by implementing advanced data analytics tools to improve real-time monitoring capabilities and by conducting specialised training programmes for employees to reinforce the importance of internal controls in their day-to-day activities. The management believes that the current internal control systems are commensurate with the nature, size, and complexity of our operations. However, we recognise that internal control is an ongoing process, and we remain committed to continuously improving and adapting our systems to meet future challenges and opportunities.

Cautionary Statement

This Management Discussion and Analysis contains statements that describe the companys objectives, projections, estimates, expectations, or predictions. These ‘forward-looking statements are within the meaning of applicable securities laws and regulations. The company has undertaken various assessments and analyses to make these statements. However, actual results may differ materially from those expressed or implied due to various factors beyond the companys control.

These factors include, but are not limited to, changes in government regulations, tax regimes, economic developments within India and other countries, and other incidental factors. Market data and product information contained in this report are based on information gathered from various published and unpublished reports and their accuracy, reliability, and completeness cannot be assured. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. They are advised to conduct their own investigation and analysis of the information contained or referred to in this section before taking any action with regard to their own specific objectives. Furthermore, the discussion of our financial condition and results of operations should be read together with our audited, consolidated financial statements and the notes to these statements included in the annual report.