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Hospital Market in India FEB 2010

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Hospital Market in India FEB 2010 Powered By Docstoc
					Hospital Market - India
February 2010
Executive Summary

               Hospital industry accounts for more than 70% of healthcare sector revenues by 2012
  Market       Estimated to reach USD 54.7 bn by 2012
               Private sector is valued at USD 22 bn in 2009 and would reach USD 45 bn by 2012 at 27% CAGR

              Drivers:                                                     Challenges:
               Poor public healthcare infrastructure                        High start-up cost and capital
 Drivers &                                                                  expenditure
               Increasing spend on healthcare services
Challenges     Increase in lifestyle-related diseases                       Shortage of medical professionals
               Medical tourism
               Nascent but growing medical insurance

               Private sector dominates with 78% market share, led by groups like Apollo, Wockhardt, Fortis,
Competition    Manipal Group, and Max Healthcare
               New entrants include domestic firms like Reliance, Artemis Health Sciences, and Paras Group
               Foreign entrants exploring the market for partnerships, acquisitions and greenfield projects

               Favourable policies on FDI and taxations will increase foreign participation
               Private equity investing significantly; investment set to increase, especially in regional hospitals
 Future        Large hospital groups making strategic acquisitions but future opportunities may be limited
 Outlook       Evolving concept of “health cities”, which have scale and provide a host of satellite services
               Emergence of telemedicine for rural areas with participation from private sector and government
               Despite increase in number of beds, supply constraints will remain in top cities


                                       HOSPITAL MARKET IN INDIA 2010.PPT                                          2
•Market Overview
•Drivers & Challenges
•Competition
•Future Outlook




          HOSPITAL MARKET IN INDIA 2010.PPT   3
 Indian hospital market is expected to reach USD 54.7 bn by
 2012
 Market Overview                                                                          Market Size and Growth – Private sector
 • Public and private hospitals will contribute more
                                                                                            USD bn
   than 70% of healthcare sector revenues by 2012
                                                                                            50                              +27%                   45.0
 • Hospital market in India is expected to reach USD
   54.7 bn by 2012 with private sector contributing USD                                     40                                      35.4
   45 bn                                                                                    30                       27.9
                                                                                                      22.0
 • Increasing number of hospitals in Tier-II and Tier-III                                   20
   cities is the major driver for private sector growth                                     10
 • Market is fragmented with large number of                                                 0
   independent, privately run hospitals                                                              2009           2010e          2011e          2012e
 • Demand for healthcare far exceeds supply due to
   dismal performance by the government
                                                                                          Healthcare segments share by 2012
 • A huge shortage of beds is a major driver for
                                                                                                                         Medical Equipment & Supplies
   investment in a growing industry                                                                            Pharma               Medical Insurance
 • Current figures of 9 beds per 10,000 in India is far                                                                      9%
                                                                                                                       13%            Diagnostics
                                                                                                                                4%
   behind the world average of 40 beds per 10,000                                                                                  3%
 • India needs an investment of USD 14.4 bn by 2025 to
   increase the bed density to 20 per 10,000
 • Specialty hospitals in particular are expected to grow                                             Hospital
   faster than overall industry due to rise in heart
   diseases and cancer                                                                                                       71%
Source: IBEF “Healthcare Industry Overview”, Jan 2010; Economic Times article “Healthcare to become $77-bn sector in India by 2012: Report”, Nov 2009; Business
Standard article “Private hospital sector may touch Rs 2 lakh cr by 2012: Study”, Dec 2009;

                                                                 HOSPITAL MARKET IN INDIA 2010.PPT                                                                4
 Hospitals are largely dominated by the private sector, which
 is expected to outgrow government investment in industry
                                                                                            Private
           Government
                                                  Nursing Homes                             Mid-tier                          Top-tier
 Healthcare centres, district            Primarily nursing homes                Corporate hospitals with in-    Major corporate hospital
 hospitals and general                   and recovery rooms with                house staff and consulting      chains and specialty
 hospitals                               adequate infrastructure                physicians                      hospitals
 Variable; based on type                 <30 beds                               30-100 beds                     >100 beds




 Public & Private Share in Hospitals                                                Public & Private Growth (2005-2015)
                                       Private Sector
                                                                                                                               2005-2015 CAGR
                                                                                         Govt. Hospitals -2%
    2005           34%             26%        14%        26%
                                                                                         Nursing Homes              9%            10%

    2015        19%            40%           11%        30%
                                                                                                  Mid-tier     5%        6%
     Nursing Homes
     Mid-tier                                                                                     Top-tier           12%                 14%
     Top-tier                                                                                                                  Lower estimate
     Govt. Hospitals                                                                                                           Upper estimate
Source: McKinsey “India Pharma 2015 Prescribed Growth”, Aug 2007

                                                              HOSPITAL MARKET IN INDIA 2010.PPT                                                 5
•Market Overview
•Drivers & Challenges
•Competition
•Future Outlook




          HOSPITAL MARKET IN INDIA 2010.PPT   6
Drivers & Challenges




  Drivers
  Dismal government performance in
  providing healthcare infrastructure                                 Challenges
  Growing demand for quality care and                                 High start-up cost and capital
  increasing ability to pay                                           expenditure
  Mounting instances of lifestyle
                                                                      Shortage of medical professionals
  diseases requiring hospitalization
  Rapid growth of India as a destination
  for medical tourism
  Increasing penetration of medical
  insurance




                                           HOSPITAL MARKET IN INDIA 2010.PPT                              7
 Poor Government record in providing healthcare
 infrastructure has left huge unaddressed demand
 India’s global healthcare ranking                                                        Govt. healthcare spend benchmark
                     India’s Rank among 192 nations                                              %      Govt. spend as % of total healthcare spend
                                                                                          100                                                  Worse than
 Health as %                                                                                                                                 other emerging
 of Govt. Exp.                                                     190                     80           65                                     economies
                     3.9% of Government Expenditure is on Healthcare                       60                      54
                                                                                                                                45
                                                                                                                                            38
  Govt. Share                                                                              40
                                                                   190                                                                                 17
 of Heath Exp.                                                                             20
                     17% of Total Healthcare Expenditure is by Government
                                                                                             0
Health Exp. As                                                                                       Thailand    Brazil       USA        China        India
     % of GDP                                       132
                     Total Healthcare Expenditure in India is 4.8% of GDP
                                                                                          Healthcare funding pattern - India
       Nurses
                                                    132
    (per ’000)
                     India has 8 nurses for every 10,000 people
                                                                                                                                                71%
                                                                                                                  3%
    Physicians
                                                      141                                                           17%
    (per ’000)                                                                                       80%                               12% 6%
                     India has 6 doctors for every 10,000 people
                                                                                                                                            12%
                 0            50         100         150           200
                                                                                                                                           Centre
            Best = 1                                        Worst = 192                                 Out of pocket                      State
                                                                                                        Insurance                          Local
                                                                                                        Govt.                              Social Insurance


Source: ENAM “Fortis”, Dec 2007; WHOSIS database

                                                                    HOSPITAL MARKET IN INDIA 2010.PPT                                                         8
 Economic growth to drive healthcare sector as more
 consumers will be able to afford quality medical care
 Aggregate Consumption                                                                       Long-term opportunity
  In trillion INR (FY 2000)           69     Household income: ‘000s INR (FY2000)
                                                                                             •With economic growth driving incomes, the
                                             Global
                                     20%
                                             (>1000)               Largest
                                                                                              purchasing power will increase significantly
                                     23%
                                             Strivers            consuming                    across all consumer groups creating one of the
                                             (500-1000)           category
                        34                                                                    largest consumer groups globally
                                             Seekers
                       12%
                             9%      36%     (200-500)                                       •Middle and upper classes, which are more
     17 6%             35%                   Aspirers                                         likely to demand quality care, will find medical
    12% 6%                                   (90-200)
    53%                35%           17%
                                             Deprived (<90)
                                                                                              care increasingly affordable
    24%                9%             3%
                                                                                             •As per McKinsey’s forecasts, healthcare
  2005E            2015F             2025F
                                                                                              expenditure (incl. medical equipment,
 Share of wallet (%)
                                                                                              healthcare services, and pharmaceuticals) will
   7               9                                                  Necessity
           5           6
                              13      Healthcare*
                                                                      Discretionary           command a greater share of wallet
   2                                  Education & recreation
               3               9                                      Healthcare
    17
               19              6      Communication                   (Discretionary)
                                                                                             •Taking into account total income
      8                       20      Transportation                                               2015: 9% X INR 34 trillion = ~INR 3 trillion
   3                   9
    12         3                      Personal products & services                                 2025: 13% X INR 69 trillion = ~INR 9 trillion
                12            11
       6                              Household products
                 5           10
                                 3                                                           •Assuming hospitals continue to account for
                                      Housing & utilities
                               5      Apparel                  * Healthcare =
                                                                                              50% of healthcare market, this translates into
   41
               34
                              25      Food, beverages,         Medical equipment +            an INR 1.5 trillion (in FY 2000 INR figures)
                                      & tobacco                hospitals +
                                                               pharmaceuticals
                                                                                              opportunity by 2015 alone
  2005E    2015F      2025F
Source: McKinsey Global Institute “The ‘Bird of Gold’:The Rise of India’s Consumer Market”, May 2007

                                                                       HOSPITAL MARKET IN INDIA 2010.PPT                                           9
 Mounting instances of lifestyle diseases in urban areas
 driving hospitalization and increase in-patient revenues
  •Increasing instances of lifestyle diseases is an urban phenomenon, especially among the young and
   working class in metropolitan areas
  •Lifestyle diseases such as cardiac ailments, diabetes etc. require hospitalization and are more expensive
   thereby increasing lucrative in-patient revenues at hospitals. e.g.
        In 2006, cancer, cardiac and diabetes collectively accounted for 13% of hospitalization cases but 36% of inpatient
        revenue
     Increasing prevalence of chronic                       Requiring hospitalization and costing          Driving lucrative in-patient care
             diseases in India                                             more                                        revenues
               % of population                                      INR / Treatment (2001)                   Split of Hospital Revenues
                              3.31%                                                                        Out-patient
  Cardiac                            4.91%
                            2.80%                                                               29,600     In-patient
 Diabetes                       3.70%
                                                                                                             49%           42%          37%
                    1.30%
  Obesity                   2.70%         2005
              0.18%                       2015
                                                                                     9,700
   Cancer                                                    4,100       5,800                                51%          58%          63%
              0.20%
              % of Hospitalization Cases
             (Cancer + Cardiac+ diabetes)                    Acute     Maternity Injuries      Lifestyle     2007         2008          2009
                                                                                               Disease
    2006                      13%

   2011E                            17%

   2016E                               20%



Source: McKinsey “India Pharma 2015 Prescribed Growth”, Aug 2007; IBEF “Healthcare”, Oct 2007; NSSO

                                                               HOSPITAL MARKET IN INDIA 2010.PPT                                               10
 Medical tourism is providing supplemental revenues for
 top-tier private hospitals
 Medical Tourism in India                                                                Drivers & Challenges for Medical Tourism
 • In addition to growing domestic demand, medical                                                    Drivers                                 Challenges
   tourism is generating additional revenue for high-
                                                                                         • Significant savings                  • Inadequate air connectivity
   quality private hospitals
                                                                                         • World-class facilities               • Visa requirements from
 • Expected to become a USD 2 bn industry by 2010                                        • Quality and experience of              most countries
 • Growing at 30 % annually, India is competing with                                       medical professionals                • Medico legal jurisdictions
   Singapore, an established medical care hub in Asia                                    • Minimal waiting time                 • Country specific restrictions
 • India treated 4,50,000 foreign patients in 2007 which                                 • Large market of uninsured in
   makes it the 2nd largest medical tourism destination                                    developed countries
   in the world

 Significant cost advantage - sample                                                     Demand from major locations
          (USD)                  India         Thailand           USA                                                                                UK
                                                                                                                  Long waiting period even
                                                                                                                     for critical illnesses
 Bone Marrow Transplant          30,000          62,500          400,000
                                                                                        South Asia
 Liver Transplant                40,000          75,000          500,000
                                                                                                                                                 Shortage of quality
 Open Heart Surgery               4,400          14,250          50,000                    Absence of super-                                    medical facilities even
                                                                                            speciality care               India                  for those who can
 Hip Replacement                  4,500           6,900            N.A.                                                                                afford it
 Knee Surgery                     4,500           7,000          16,000                                                                                        Africa
                                                                                                                 High medical cost; cosmetic
 Gall Bladder Removal              555            1,755            N.A.
                                                                                                                   surgery not covered by
 Neuro Surgery                    8,000           N.A.           29,000                                 US               insurance


Source: Healthcare Outlook “A Quarterly Report By Technopak” Feb 2007; IBEF “Healthcare Industry Overview”, Jan 2010; IBEF “Healthcare”, Oct 2007;

                                                                HOSPITAL MARKET IN INDIA 2010.PPT                                                                   11
 Growing penetration rates of health insurance will become
 a driver for the hospital market
 Health Insurance                                                                            Growing health insurance coverage
 •In India, penetration of health insurance is
  very low but growing:                                                                                     Health Insurance Premium Collections
        More families from middle class are now
        purchasing health insurance                                                                                                       +107%
        20% of population is likely to have medical
                                                                                                USD bn
        insurance by 2015 compared to current 2%                                                                                                  3.00
                                                                                               3.0
        Additionally, many companies are providing
        health insurance coverage to employees thereby                                         2.5
        driving penetration                                                                                            +29%
                                                                                               2.0
 •Broader coverage indirectly boosts demand :
                                                                                                                                1.45
        Insurance makes healthcare more affordable and                                         1.5
                                                                                                             1.12
        reduces out-of-pocket expenses
                                                                                               1.0
        Insurance providers typically tie-up with large
        hospitals to provide convenient services such as                                       0.5
        cashless transactions
                                                                                               0.0
        Therefore, more individuals opt for health                                                         2007-2008          2008-2009       2011-2012e
        insurance in order to afford quality care and
        services from hospitals



Source: IBEF “Healthcare Industry Overview”, Jan 2010; IFC “Rise of Health Insurance in India”, Apr 2007

                                                                   HOSPITAL MARKET IN INDIA 2010.PPT                                                       12
 High start-up costs, capex requirements and shortage of
 medical personnel are major challenges for the industry
 Capital intensive business                                                                 Start-up cost structure and capex
 • Hospital business is capital-intensive with an average                                          Building         Medical Equip               Land
   breakeven period of five years
                                                                                                     30%                45%               11%       14%
 • In addition, the industry is characterized by high
   capital expenditure requirements, which acts as an
                                                                                                                                      Other Equip
   entry barrier
 • Most hospitals are focussing on profitability by:                                             Hospital Type          Capex Requirement
        Decreasing average length of stay                                                           General                INR 0.4 mn / bed
        Increasing patient turnover
                                                                                                 Multi-specialty           INR 1.5 mn / bed


 Shortage of qualified personnel                                                            Personnel – supply and demand
 • Physician shortfall projected at 45,000 in 2012
 • Shortfall for nurses would be even greater- roughly                                               Category          Current           Required
   350,000 nurses are required for primary and                                                       Physicians        660,801           1,200,000
   secondary care by 2015
                                                                                                  Dental Surgeons       73,000            300,000
 • Emigration of healthcare professionals, especially to
   developed countries, is one reason for domestic                                                     Nurses         1,371,121          2,100,000
   shortage
        ~60,000 Indian physicians are estimated to be working in
        countries like USA, UK and Australia


Source: ENAM “Fortis”, Dec 2007; Credit Suisse “Apollo”, Jul 2007; IBEF “Healthcare”, Oct 2007

                                                                  HOSPITAL MARKET IN INDIA 2010.PPT                                                  13
•Market Overview
•Drivers & Challenges
•Competition
•Future Outlook




          HOSPITAL MARKET IN INDIA 2010.PPT   14
 Private players dominate the hospital market in India

 Competition                                                                            Public vs. Private sector share
 •Hospital industry is dominated by the private
  sector with 78% market share                                                                                                        Public Sector
 •Hospital industry in India is extremely                                                                                      22%
  fragmented due to the large number of
  nursing homes and small- to mid-sized
  hospitals
                                                                                                                 78%
 •Large private players are leading industry
                                                                                                Private Sector
  growth:
       Apollo
                                                                                        New Market Players
       Fortis (acquired Escorts in 2005 & Wockhardt in
       2009)                                                                                        Domestic                           International
       Manipal Group                                                                    • Reliance Healthcare                  • Parkway Group, Singapore
       Max Healthcare                                                                   • Artemis Health Sciences              • Pacific Healthcare Holding,
                                                                                          (Apollo Tyres)                         Singapore
 •New players are also entering the market and
                                                                                        • Paras Group                          • Columbia Asia, Malaysia
  competition is limited due to the large
                                                                                                                               • EMAAR Group, Dubai
  untapped potential of the market                                                                                             • Prexus Healthcare
                                                                                                                                 Partners, USA



Source: E&Y “Healthcare in India, Emerging Market Report, 2007”, Healthcare Outlook “A Quarterly Report by Technopak” February 2007

                                                               HOSPITAL MARKET IN INDIA 2010.PPT                                                          15
 Profiles of major players (1/4)

           Company                                                           Business Description
                                     • Apollo Hospitals Enterprises Ltd (AHEL) was started in 1983 as a 150 bed hospital in Chennai
                                     • The group hospitals include over 8,065 beds in 46 hospitals across India and abroad
                                     • AHEL has presence across the healthcare delivery value chain including tertiary healthcare
                                       services, health & lifestyle clinics, education, clinical trials, telemedicine, hospital info
                                       systems, strategy & implementation consulting, pharmacy retailing and third party insurance
    Apollo Hospitals                   administration
    Enterprises Ltd                  • Apollo started its first children’s hospital in July, 2009 with 80-bed capacity spread over
                                       40,000 square feet. It aims to provide care to children and adolescents up to 16 years
                                     • It plans to invest INR 8.14 bn to set-up 5 paediatric hospitals, 4 in India and 1 in Nigeria by
                                       2011. Cost of four 100-bed hospitals to be set-up in India is estimated to be INR 1.62 bn each
                                     • International Finance Corp of World Bank granted a loan of INR 2.32 bn to AHEL for the
                                       expansion of its network of Apollo Reach Clinics
                                     • APHEL is starting a 290-bed super speciality hospital in Bhubaneswar, spread over 7.5 acres
                                       of land with a built-up area of about 206, 158 sq.ft
                                     • Apollo plans to start a new Stemcyte and Cord blood Collection Centre in Ahmedabad in the
                                       first quarter of 2010, through a joint venture with Cadilla Pharmaceutical, Stemcyte India
                                       Therapeutics Ltd and Stemcyte USA
                                     Financials: The company reported revenues of INR 14.57 bn for the year ending March 2009



Source: Company websites, press articles                                                                        Note: This list is not exhaustive

                                                          HOSPITAL MARKET IN INDIA 2010.PPT                                                  16
 Profiles of major players (2/4)

           Company                                                           Business Description
                                     • Incorporated in 1996 and started its first hospital in 2001 in Mohali, Punjab
                                     • Fortis has a network of 29 hospitals which includes 12 satellite or heart command centers
                                       that has thee capacity to increase beds to about 3280, it includes recent additions of 4
                                       hospitals in Mauritius, Bangalore, Kota and S.L.Raheja in Mumbai
                                     • Major areas of operations include healthcare, tele-medicine, education and research
    Fortis Healthcare                • It operates in a hub & spoke model with super speciality hospitals as hubs/nerve centers and
                                       multi-speciality hospitals as spokes
                                     • Fortis is coming up with a 500-bed super speciality hospital in Shalimar Bagh, New Delhi with
                                       centres of excellence in Cardiac Sciences, Gastro-intestinal and Renal
                                     • Fortis Healthcare international Institute of Medical Sciences (FIIMS), Medicity is a major
                                       educational institution of international standards
                                     • Fortis plans to have 40 hospitals with 6000 beds by 2012
                                     • Fortis recently completed acquisition of Wockhardt Hospitals Ltd. adding 10 more hospitals
                                     • The company plans to raise INR 10 bn by issuing securities to float a separate entity to
                                       manage the 10 Wockhardt hospitals and to acquire more hospitals in India and abroad
                                     Financials: The company reported revenues of INR 6.2 bn for the year ending March 2009




Source: Company websites, press articles                                                                      Note: This list is not exhaustive

                                                          HOSPITAL MARKET IN INDIA 2010.PPT                                                17
 Profiles of major players (3/4)

           Company                                                            Business Description
                                     • Incorporated in 1985 and started first Max Medcentre, Panchsheel park, New Delhi in 2001
     Max Healthcare                  • It has a network of 8 hospitals in Delhi and NCR with 800 beds, over 225 ICU beds, over 1500
                                       physicians and 3000 support staff
                                     • It offers medical and service excellence in over 30 medical disciplines, it also offers scientific
                                       and medical education apart from patient care
                                     • Max Healthcare has collaboration with Singapore General Hospital in the areas of medical
                                       practices, nursing, paramedical, research and training
                                     Financials: The company reported revenues of INR 4.23 bn for the year ending March 2009
 Manipal Healthcare • Manipal Healthcare has a network of 11 hospitals including 8 teaching hospitals, it also has 7
                                       rural maternity and child welfare homes
                                     • It covers entire facilities spectrum from secondary to super-speciality care, also provides
                                       research and education
                                     • Manipal Hospital, Bangalore and Kasturba Hospital in Manipal are internationally renowed

      Care Hospitals                 • Started in 1997 as a 100-bed single speciality Heart institute facility in Nampally, Hyderabad
                                     • It provides tertiary care with various speciality departments, education, training and research
                                     • It has a network of 12 hospitals and 1400 beds across India
                                     • Care supports many National and International Clinical Researches and currently has 15
                                       ongoing International trials


Source: Company websites, press articles                                                                          Note: This list is not exhaustive

                                                           HOSPITAL MARKET IN INDIA 2010.PPT                                                   18
 Profiles of major players (4/4)

           Company                                                           Business Description
      Columbia Asia                  • It is a consortium of healthcare companies operating across the Asian continent, with
                                       hospitals in India, Malaysia, Vietnam and Indonesia
                                     • Has a network of hospitals across India including Kolkata, Gurgaon, Patiala, Bangalore and
                                       Mysore
                                     • Columbia plans to invest nearly USD100 mn over the next three years to create over 2,000
                                       beds from the current 570 beds in its five hospitals that it owns in India
                                     • It has plans to open chain of hospitals in many tier II and tier III cities like Chandigarh,
                                       Ahmedabad, Dehradun, Ghaziabad, Jalandhar, Lucknow, Meerut, Trivenduram etc




Source: Company websites, press articles                                                                       Note: This list is not exhaustive

                                                          HOSPITAL MARKET IN INDIA 2010.PPT                                                 19
 Region-wise profiles (1/3)

                                                   Bed-Capacity
  Region                 Hospital Name                                   Place                                Other details
                                                     (Approx)
                 Indus Super Speciality Hospital       100               Mohali            • State-of-the-art dedicated cancer centre
                                                                                           • Centre of excellence in Orthopedics (bones &
                        Silver Oaks Hospital           100               Mohali
                                                                                             joints), Cardiac care, Psychiatry and Endocrinology
   North                                                                                   • Income from operations for 9 months ending
                         Regency Hospital              133               Kanpur
                                                                                             December 31, 2009: INR 243 mn
                                                                                           • IFC , a member of World Bank group provided
                         Rockland Hospital             110             New Delhi
                                                                                             funding to Rockland
                                                                                           • Part of HealthCare Global Enterprises, funded by
                 Bangalore Institute of Oncology        60             Bangalore             IDFC PE, Evolvence and PremjiInvest
                                                                                           • Milestone Religare plans to invest USD 10 mn
                                                                                           • With Iven Medicare investment of USD 24 mn it
                          Vikram Hospital             500 +              Mysore
                                                                                             started a chain of hospitals around Mysore area
                                                                                           • Chain of hospitals spread across semi-urban regions
   South
                              Vaatsalya                 50                Hubli              in Karnataka. Funding from Oasis Fund of Bamboo
                                                                                             Finance, a Swiss PE firm
                                                                                           • Building a 10-storeyed building to increase the
                         Moulana Hospital              450               Kerala
                                                                                             capacity to 700 beds
                  Malabar Institute of Medical                                             • Covers about 40 disciplines in healthcare and has a
                                                       300               Calicut
                           Sciences                                                          academy for providing education facilities


Source: Company websites, press articles                                                                               Note: This list is not exhaustive

                                                       HOSPITAL MARKET IN INDIA 2010.PPT                                                            20
 Region-wise profiles (2/3)

                                               Bed-Capacity
  Region                 Hospital Name                                Place                                  Other details
                                                 (Approx)
                                                    600                                 • World class dedicated health city for medical
                                                                                          tourism. A part of Khubchandani Group, and
                        Krimson Healthcare       (Krimson            Mumbai
                                                                                          Parkway Healthcare Holdings, Singapore has
                                                Health City)                              invested in one of the group hospitals
                                                                                        • It has a network of hospitals across the country and
                        RG Stone Urology &
                                                   150+              Mumbai               got funding of USD 10 mn from Iven Medicare of
                       Laparoscopy Hospital
                                                                                          ICICI Ventures
                                                                                        • Chain of hospitals majorly spread in Pune, also has
                         Sahyadri Hospital         250 +               Pune               centres in Nasik, Karad, Nerul (Mumbai). Got
   West                                                                                   investments from Iven Medicare of ICIC Ventures
                        Sanjeevan Hospital          100                Pune             • Managed by Jnana Prabodhini Medical Trust (JPMT)
                                                                                        • Offer courses in emergency medical services and
                           Noble Hospital           250                Pune
                                                                                          plans for facilities to conduct clinical research trials
                          Sterling Hospital         310            Ahmedabad            • Private Equity firm Actis has invested USD 16 mn
                                                                                        • 1500 open heart surgeries, 7500 Cathlab
                            SAL Hospital            300            Ahmedabad              procedures, 100 renal transplants and 3000 major
                                                                                          surgeries in other specialities done every year
                      Oyster & Pearl (O & P)        110                Pune             • Funding from Spring Healthcare of Sabre Holdings




Source: Company websites, press articles                                                                               Note: This list is not exhaustive

                                                    HOSPITAL MARKET IN INDIA 2010.PPT                                                               21
 Region-wise profiles (3/3)

                                                  Bed-Capacity
 Region                 Hospital Name                                    Place                                Other details
                                                    (Approx)
                         Medica Synergie              125               Kolkata           • Iven Medicare invested INR 250 mn in this chain
                                                                                          • A joint venture by Emami and Shrachi Groups and
                          AMRI Hospital               190               Kolkata
                                                                                            has chain of hospitals in the region
                                                                                          • It is a super speciality cardiac hospital which also
               Desun Hospital & Heart Institute       303               Kolkata             offers multi speciality medical services like plastic
   East                                                                                     surgery treatment and heart surgery treatment
                                                                                          • It is promoted by a group of 54 NRI Oriyas under
                         Kalinga Hospital             228            Bhubaneswar            the name of Hospital Corporation of Orissa (HCO),
                                                                                            a Company registered in USA
                         Hi-Tech Hospital             350            Bhubaneswar          • It also provides medical education in various fields




 Note: The hospitals have been profiles on the basis of bed capacity more than 100 and/or recent investments by PE/VC firms and/or
 having expansion plans
Source: Company websites, press articles                                                                               Note: This list is not exhaustive

                                                      HOSPITAL MARKET IN INDIA 2010.PPT                                                             22
•Market Overview
•Drivers & Challenges
•Competition
•Future Outlook




          HOSPITAL MARKET IN INDIA 2010.PPT   23
Hospital market has a bright future as investments from
foreign firms, private equity and domestic players increase
             Government policies on FDI and tax are encouraging foreign companies to enter the market



             Private equity firms are investing significantly in hospitals, both large corporate chains and
             standalone regional hospitals


             Large hospital chains use acquisitions that offer growth at a lower cost but future opportunities
             may be limited
 Future
 Outlook `
             Major hospital chains are investing in “health cities”, which have scale and provide a host of
             satellite services


             Telemedicine is emerging as a feasible option for public and private sector facilities to provide
             basic medical care to rural areas


             Despite increase in number of beds with significant contribution by top four private groups,
             supply constraints will remain in top cities


                                     HOSPITAL MARKET IN INDIA 2010.PPT                                           24
 Government policies on FDI and tax are encouraging foreign
 companies to enter the market
 Government policies                                                                    Foreign investment picking up
 •100% FDI is permitted for all health-related                                          •At least 20 international players are competing
  services under the automatic route                                                     for a share of the Indian hospital market
 •Income tax exemption for 5 years to hospitals                                         •Early international entrants, particularly from
  in rural areas, Tier II and Tier III cities                                            Singapore and Malaysia are already taking
 •Policies and attractive market are combining                                           advantage of the hospital market potential
  to attract foreign service providers and
  investors

                                                  Sample of foreign firms investing in India

     Parkway Group Healthcare                                          Columbia Asia                                     Pacific Healthcare Holdings
         (Singapore-based)                                            (Malaysia-based)                                        (Singapore-based)
 • Seeking to acquire tertiary care                         • Formed alliance with DLF                                • Invested USD 1.5 mn for 15%
   hospital projects in A & B cities                          Home Developers Ltd. to                                   stake in Cure Heart Ltd., which
   (especially in South)                                      construct five hospitals in                               owns 68% of a cardiac care
 • Looking at acquiring 50% stake                             Kolkata, Palam Vihar, Patiala,                            group in Bangalore and Goa
   in Khubchandani Hospitals                                  Mysore, and Bangalore                                   • Opening hospitals in
                                                            • Pursuing building permits in 15                           Hyderabad, Chennai and
                                                              other locations                                           Bangalore
Note: Above list may not be exhaustive
Source: IBEF and Ernst & Young “Healthcare: Market Size and Growth” Oct 2006, INBICS “Healthcare sector” Mar 2008, Investment Commission of India

                                                                HOSPITAL MARKET IN INDIA 2010.PPT                                                      25
 Tax holiday by government to hospitals in rural areas is
 driving growth in Tier II and III cities
 Hospital name            Tier II and Tier III plans
                          • Apollo started Apollo Reach hospitals for Tier III cities. It planned initially in places like Karimnagar, Chittoor
   Apollo Hospitals         (Andhra Pradesh), Karur, Karaikudi (Tamil Nadu) and Andaman& Nicobar Islands with 100-150 beds capacity. It
                            has huge plans to set-up 250 Apollo Reach hospitals across non-urban India with an investment of INR 125 bn
                          • Plans to start a new model of healthcare delivery for tier II and III cities. It intends to set-up small hospitals with
                            capacity up to 200 beds and by reducing the investment costs to half per bed in these areas in order to provide
   Fortis Healthcare        treatment at nearly 50% less cost than present facilities in tier I cities. It has presence in Mohali, Raipur, Amritsar
                            and Srinagar at present
                          • Max Healthcare plans for a three-phase expansion plan to tier II and III cities. It started green field projects in
   Max Healthcare           Mohali, Bhatinda and Dehradun with bed strength of 150-250. It also plans to expand to Muradabad or Rohtak

       Wockhardt          • It has set-up facilities in Rajkot, Surat and 2 hospital sin Nagpur as part of its expansion plan to Tier II cities. It
                            intends to set-up similar facilities in Goa, Nashik and a heart hospital in Ludhiana. In first phase the group plans to
       Hospitals            come up 200 bed capacity hospitals and in second phase increase the bed capacity. It has allotted a budget of INR
   (Acquired by Fortis)     25-30 bn for these ventures
                          • It plans to expand to tier II and III cities through acquisitions and tie-ups. The pan is to build 100-150 bed
   Global Hospitals         hospitals The list of cities include Nagpur, Ahmedabad, Trivandrum, Chandigarh, Bhubaneswar, Coimbatore,
                            Ludhiana, Sholapur and Pune
                          • The Group invested INR 4 bn in tier II projects in places like Goa, Vizag, Salem, Tumkur, Mysore, Vijayawada and
    Manipal Group           Jaipur. Salem and Vijayawada have brown field projects while all others are green field projects
                          • AMRI is a Kolkata-based joint venture between Emami and Shrachi Group of Industries plans to open a 300 bed
    AMRI Hospitals          facility in Bhubaneswar with a budget of INR 1.2 bn. It also plans to expand its hospital network to Raipur, Ranchi
                            and Guwahati


Source: Press articles                                                                                                   Note: This list is not exhaustive

                                                        HOSPITAL MARKET IN INDIA 2010.PPT                                                             26
 Government to set-up five mobile hospitals with 200 bed-
 capacity each across the country for disaster management
 Government plans                                                                            Mobile Hospital Overview
 • In order to cater to regions hit by natural or man-                                       • Bed-capacity: 200
   made calamities, the government plans to launch 5                                         • Storage capacity: 3 days water, diesel and oxygen
   mobile hospitals in East, West, North, South and                                          • Trailer size: 1272 square feet
   Central zones
                                                                                             • No of trailers/units: 10-12
 • National Disaster Management Committee (NDMC)
   under the Home Ministry took this decision and                                            • Facilities: Operation theatres, intensive care units,
   these mobile hospitals will be located in a way to                                                      basic testing facilities, digital X-ray
   reach to any place in India within 6 hours span                                                         machines, cardiovascular and pulmonary
                                                                                                           care support, blood banks, kitchen etc.
 • The Delhi-Government also plans to set-up these
   mobile hospitals during the Commonwealth Games
   conducted in October this year                                                            Cost comparison (200 bed-capacity)
 • These mobile hospitals are manufactured by an
                                                                                                      INR mn
   American firm and they were extensively used in the                                                               2,000
                                                                                                 2,000
   aftermath of Hurricane Katrina to serve the
   casualties in remote areas                                                                    1,500
 • Mobile hospitals can also be used as primary health                                                                                                        -85%
   care centres or isolation hospitals for infectious                                            1,000
   outbreaks and as a satellite for telemedicine and
                                                                                                    500                                           300
   computerized records
                                                                                                       0
                                                                                                                   Hospital               Mobile Hospital

Source: Topnews article “Govt To Set Up Five Mobile Hospitals In India “, Aug 2009; Times of India article “Govt may buy Hurricane Katrina's mobile hospitals “, Dec 2009

                                                                   HOSPITAL MARKET IN INDIA 2010.PPT                                                                   27
 Private equity firms investing significantly in hospitals, both
 large corporate chains and standalone regional hospitals
  •Investing in standalone regional hospitals or secondary hospitals in small towns instead of restricting to
   large hospital chains and super specialty hospitals
        According to a Technopak study, 70% of investment in 2008-2011 (estimated at USD 5 bn) is directed at regional
        hospitals in small towns

       Private Equity Firm                                                                   Investment Plan
 IFC (International Finance Corp.)         USD 10 mn in equity investments and USD 4 mn in convertible preferred shares to Rockland Hospitals
 Warburg Pincus                            Total investments in Max Healthcare stands at USD 34.15 mn
 Quantum and Blue Ridge                    Bought 10% in Fortis Healthcare
 General Atlantic LLC                      Reportedly was in talks to buy 20% stake in Wockhardt Hospitals at a deal value of USD 80 - 100 mn
 AIG & JPMorgan                            AIG and JPM acquired 25% stake in Narayana Hrudayalaya Pvt. Ltd (NHPL) for INR 4 bn (INR 2 bn each)
 Iven Medicare (the health arm of          • Equity investment of USD 24 mn in Vikram Hospital (VHPL) Mysore
 ICICI Venture)                            • Invested USD 10.25 mn in Delhi-based RG Stone Hospital
                                           • USD 16.25 mn in Kolkata-based Medica Synergie
                                           • USD 36 mn in Pune-based Sahayadri
 Bennet, Coleman & Company                 Lotus Eye Care Hospital sold 0.25 mn shares in a pre-IPO placement at a total value of INR 12.5 mn
 Apax Partners (British PE firm)           Apax invested about USD 100 mn for an 11% stake in Apollo Hospitals Enterprise
 IDFC PE and Capital International         • IDFC had infused USD 70 mn in Manipal Health Systems
                                           • Invested USD 10 mn in equity in Bangalore-based Healthcare Global Enterprises Ltd

Note: Above list may not be exhaustive
Source: Business World article “PEs have devised a holding company model, with exit options”, Jun 2009; Indiape.com, IBEF “Healthcare”, Oct 2007

                                                                 HOSPITAL MARKET IN INDIA 2010.PPT                                                 28
 PE firms using holding company model to create more exit
 options and reduce risk
 Holding Company Model
 •In order to reduce risk and look for more exit options, PE firms or investment groups opting for holding
  company structure
 •In the holding company model all the investments in a sector such as healthcare would be made by the
  holding company. The advantages of having such structure includes:
        Multiple hospitals under single focused management
        Exit options like direct initial public offering, secondary stake sale, listing of individual companies
        Investments are not limited by confident investors or limited partners
        Economies of scale in procurement and top management bandwidth utilization
                                              Holding company investment details
      PE Firm or Investment Group                    Holding Company                                      Investment Details
     Sabre Capital                                Spring Healthcare                  Oyster & Pearl Hospitals in Pune
     ICICI Venture                                Iven Medi-Care                     Vikram Hospital, Mysore; RG Stone Hospital, Delhi;
                                                                                     Medica Synergie, Kolkata; Sahaydri, Pune
     IVFA & Dr Moopen’s Group                     DM Healthcare                      Aadhar Group, Kolhapur
     Piramal Group                                India Venture Advisors             KMC Group, Trichy
     Luxemborg based group                        Oasis Fund                         Vaatsalya Hospitals, Karnataka

Source: Business World article “PEs have devised a holding company model, with exit options”, Jun 2009;                    Note: This list is not exhaustive

                                                                 HOSPITAL MARKET IN INDIA 2010.PPT                                                      29
 Large hospital chains use acquisitions that offer growth at a
 lower cost but future opportunities may be limited
  • Hospital chains are acquiring regional or standalone hospitals as part of their growth strategy to expand geographical
    footprint and operational bed capacity
  • Acquiring operational hospitals provides immediate access to cash flows and revenues compared to long breakeven
    periods associated with new projects
  • Acquired hospitals are typically reconfigured to the parent chain’s specifications leading to standardization of quality,
    practices and efficiency as per world class standards
  • In some cases, the target’s brand is retained to capitalize on its existing reputation and brand loyalty


         Company                                                               Deal description
 Yash Birla Group               Acquired 51% stake in the joint venture called Birla Kerala Vidyashala
 Fortis Healthcare              •Acquired 56% stake in the Bangalore-based Apollo RM Hospital
                                •Acquired Hiranandani Hospital for USD 6.1 mn, Navi Mumbai
 Wockhardt Hospitals            Stake in 100 bedded Hospital in Nagpur, Maharashtra
 Reliance KDAH, Mumbai          Dr. Mandke Heart Hospital, Andheri, Mumbai


  • However, with only 2% of hospitals having more than 250 bed-capacity, few large opportunities exist
  • Further, PE investment is preferred or sought by smaller hospitals over large hospital chains since:
        Many promoters, typically doctors, are not interested in selling their business completely
        PE investment allows them to raise funds, retain control and identity in return for selling a minority stake


Note: Above list may not be exhaustive
Source: vccircle.com, Press Articles

                                                           HOSPITAL MARKET IN INDIA 2010.PPT                                30
 Major hospital chains are investing in “health cities”, which
 have scale and provide a host of satellite services
  • Major corporate hospital groups investment significantly in setting up state-of-the-art “Health Cities”
  • Health Cities will cater to larger populations by offerings additional facilities such as hotels, residential facilities,
    recreational facilities of spa, gym and even golf courses
  • They are also expected to lay a greater emphasis on education and R&D

                                                                    Upcoming Health Cities
                                    Health City                               Beds           Area (acres)              Investment (USD mn)
                Dr.Naresh Trehan’s MediCity ,Gurgaon                          1,600                 93                              293
                Fortis MediCity, Gurgaon                                    600-800                N.A.                             293
                Fortis MediCity, Lucknow                                       800                  52                           122-195
                Apollo Health City, Hyderabad                                  700                  33                              243
                Nagpur Health City, Nagpur                                    2,000                100                              N.A.
                Chennai Health City, Chennai                                  1,000                 46                              245
                Bengal Health City, Durgapur                                 50,000                800                              487
                Narayana Health City, Bangalore                               5,000                100                              488
                Narayana Hrudayalaya Health City                              1,000                  5                               22

                      About 15-20 Health Cities are expected to come up in India in the next 5 years
                      About 15-20 Health Cities are expected to come up in India in the next 5 years
Note: Above list may not be exhaustive
Source: The Economic Times, Realty Plus: July 2007; Press Articles; IBEF “Healthcare”, Oct 2007; Express Healthcare “Hospitals 2010”, Jan 2010

                                                                   HOSPITAL MARKET IN INDIA 2010.PPT                                             31
 List of hospitals to be commissioned in 2010 (1/2)

                                                    Total bed       Area       Investment
   Hospital Name                  Place                                                                          Expansion plans
                                                    capacity       (acres)      (INR mn)
                                                                                                  • Start a nursing college and paramedical
  Apollo Hospital            Bhubaneswar                300          7.5            1200            training institute by 2010 and oncology set
                                                                                                    up by 2011
                                                                                                  • Set-up more hospitals in Kolkata, Siliguri,
         AMRI                Bhubaneswar                300           5             1200            Burdwan and Raipur and become leader in
                                                                                                    Eastern India
                                                                                                  • Blue Sapphire Healthcare is planning to
 Asian Institute of
                               Faridabad                350           3             2000            follow the wheel and spoke strategy, with
 Medical Sciences
                                                                                                    spoke as Faridabad
                                                                                                  • Plans to upgrade other existing facilities in
  Aadhar Hospital               Kolhapur                250          2.5            500
                                                                                                    the area
    Eternal Heart                                                                                 • Expand to different parts of India with
                                  Jaipur                150          1.85           600
      Hospital                                                                                      such facilities
   Fortis Hospital                Delhi                 550          7.34           2000          • Hire 157 clinicians and 212 non clinicians

                                                                                   1900           • Set-up feeder outreach centres and
  Global Hospital               Mumbai                  425          2.79                           hospitals in other suburbs of Mumbai to
                                                                                 (Phase 1)          increase ease of access

Note: Above list may not be exhaustive
Source: Express Healthcare “Hospitals 2010”, Jan 2010

                                                              HOSPITAL MARKET IN INDIA 2010.PPT                                                  32
 List of hospitals to be commissioned in 2010 (2/2)

                                                    Total bed        Area        Investment
   Hospital Name                  Place                                                                           Expansion plans
                                                    capacity        (acres)       (INR mn)
                                                                                                   • Start with 300 beds and add 150 beds in
   Fortis Hospital               Kolkata                450           1.5            1750
                                                                                                     30 months
                                                                                                   • Build a cancer surgery unit in second
     ILS Hospital               Agartala                166           350             900
                                                                                                     phase and expand capacity to 236 beds
       People
                                                                                                   • Set-up similar projects in two tier cities of
    International                Bhopal                 400            10            2000
                                                                                                     India and in Qatar and Bangladesh
       Hospital
                                                                                                   • Plans to make this as a hub for geriatric
       Rockland                                                                                      care with excellent rehabilitation services.
                                Gurgaon                 250             5            2500
       Hospital                                                                                      Also start departments for trauma, stem
                                                                                                     cell therapy and in-vitro fertilization
     Seven Hills                                                                                   • Start with 300 beds initially and then
                                Mumbai                  1500           17           10,000
     Health City                                                                                     expand to 1500
    Tata Medical                                                                                   • Start with 150 and then expand to 300
                                 Kolkata                300          13.36           3300
       Centre                                                                                        slowly
                                                                                                   • Set-up speciality spokes across Bangalore
  Vikram Hospital              Bangalore                200             1             900            and tertiary care hospitals across
                                                                                                     Karnataka
Note: Above list may not be exhaustive
Source: Express Healthcare “Hospitals 2010”, Jan 2010

                                                               HOSPITAL MARKET IN INDIA 2010.PPT                                                33
 Telemedicine is emerging as a feasible option for healthcare
 facilities to provide basic medical care to rural areas
  • Rural poor are heavily reliant on state for subsidized and free healthcare
  • However, Government is unable to cope with demand in urban areas, let alone rural regions
  • Minimal or no presence of private sector have in rural areas due to low spending levels infrastructural constraints
  • Only 25% of specialist physicians reside in semi-urban areas and 3% in rural areas

                           Majority of Indian population is deprived of proper healthcare facilities


                                                                         Telemedicine                                     Increasing facilities in
                                                                      becoming a feasible                                 small cities and towns
                                                                     option for rural areas                                (public and private)




 •Telemedicine is fast-emerging in India, supported by the ICT sector
 •Several major private hospitals have adopted telemedicine services and a number have developed
  public-private partnerships (PPPs)
        E.g. include Apollo, AIIMS, Narayana Hridayalaya, Arvind Hospitals and Sankara Nethralaya
 •Approximately 120 telemedicine centers throughout India and increasing:
        Asian Heart Institute (AHI) planning to establish 60 more telemedicine satellite centers in rural Maharashtra
        Indian Space Research Organization (ISRO) plans to establish 100 telemedicine centers across the country
Source: PwC “Healthcare in India”, Sep 2007; IBEF “Healthcare”, Oct 2007; McKinsey Global Institute “The ‘Bird of Gold’:The Rise of India’s Consumer Market”, May 2007

                                                                  HOSPITAL MARKET IN INDIA 2010.PPT                                                                 34
 Despite significant contribution by top four private groups,
 bed supply constraints will remain in top cities
 Capacity addition in key cities (2007-2011)
          Delhi                     Mumbai                      Chennai                Bangalore                        Kolkata                Hyderabad
                  19,836

          6,901                              14,219              1,000    13,784
 12,935                                                12,784                                        12,261
                           10,239    3,980                                                                               2,950    10,338
                                                                                            5,380               7,388                      7,468         8,318
                                                                                   6,881                                                           850



  2006 Addition 2011       2006 Addition 2011          2006 Addition 2011          2006 Addition 2011            2006 Addition 2011        2006 Addition 2011




 Capacity additions – top-tier vs. others                                             Shortage in key urban cities
     6,901                                                                                 15,327                                                        2006
                                                      5,380                        11,819                                                                2011
     37%                                                                                                        8,965 10,425
                                                       9%
                  3,980                                                                                     8,171
                            2,950         850                                                       6,614
                  43%        12%
     63%                                18%           91%                                                                          2,704 2,523
                             88%        82%                       1,000
                  57%                                                   15%                                                      947         651
                                                                   85%
     Delhi    Mumbai Kolkata Hyderabad Bangalore Chennai                                                                                                 -1,814
     Top-tier (Fortis, Apollo, Wockhardt, Max)                                                                                                     -3,931
     Other                                                                            Mumbai           Delhi     Kolkata Hyderabad Bangalore Chennai
Source: ENAM “Fortis”, Dec 2007

                                                                HOSPITAL MARKET IN INDIA 2010.PPT                                                          35
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                                                        HOSPITAL MARKET IN INDIA 2010.PPT                                                    36

				
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