FORTIS HEALTHCARE LIMITED
(FORMERLY FORTIS HEALTHCARE (INDIA) LIMITED)
ANNUAL REPORT 2011-2012
Your Directors have pleasure in presenting here the Sixteenth Annual Report
of your Company together with the Audited Standalone and Consolidated
Financial Accounts and the Auditors` Report thereon for the Year ended
March 31, 2012.
The highlights of Consolidated Financial Results of your Company and its
Subsidiaries are as follows:
[Rs. in Million]
Year ended Year ended
March 31, March 31,
Operating Income 29,840.37 14,957.91
Other Income 1,773.14 1,006.35
Exceptional items 63.29 3,455.43
Total Income 31,676.80 19,419.69
Total Expenditure 25,807.27 14,359.46
Operating Profit 5,869.53 5,060.23
Less: Finance Charges, Depreciation 4,791.93 3,544.89
Profit before Tax 1,077.60 1,515.34
Less: Tax Expenses 408.46 152.39
Net Profit for the year 669.14 1,362.95
Profits/ (Losses) attributable to 39.80 (44.23)
Share in the (Loss)/Profit of 13.27 (75.10)
Net Profit attributable to the 722.21 1,243.62
shareholders of the Company
The highlights of financial results of your Company as a Standalone entity
are as follows:
(Rs. in Million]
Year ended Year ended
March 31, March 31,
Operating Income 2,810.90 2,654.49
Other Income 1,270.45 1,755.40
Exceptional item 1,846.24 -
Total Income 5,927.59 4,409.89
Total Expenditure 2,763.25 2,351.33
Operating Profit 3,164.34 2,058.56
Less: Finance Charges 1,150.48 640.46
Net Profit/ (Loss) 2,013.86 1,418.10
attributable to the
shareholders of the Company
OPERATING RESULTS AND PROFITS
The sound performance of your Company is manifested in the Operating
Revenues and Net Profit posted for the year under review. During the year
ended March 31, 2012, the Consolidated Revenues from Operations stood at
Rs.29,840.37 Million as against Rs.14,957.91 Million for the corresponding
previous year registering a growth of 100%. The Profit before Depreciation,
Interest and Tax stood at Rs.5,869.53 Million as against Rs.5,060.24
Million for the corresponding previous year, registering a growth of 16%.
The Net Profit after Tax but before Profits attributable to Minority
Interest and Share in the profits of Associates stood at Rs.669.14
Your Company has continued to strive towards improving the value
proposition it offers to the patients and general public and during the
year under review, has made further strides in implementing its strategic
growth and development initiatives across various facets of the
Organization. Expanding and deepening the footprint of network hospitals
has helped us to touch increasing number of lives during the year.
Your Company is a leading, integrated healthcare delivery provider in the
Pan Asia-Pacific region. The healthcare verticals of the Company span
diagnostics, primary care, day care speciality and hospitals, with an asset
base in 10 countries, many of which represent the fastest-growing
healthcare delivery markets in the world. Currently, the Company operates
its healthcare delivery network in Australia, Canada, Dubai, Hong Kong,
India, Mauritius, New Zealand, Singapore, Sri Lanka and Vietnam with 75
hospitals, over 12,000 beds, over 600 primary care centres, 191 day care
speciality centres, over 230 diagnostic centres and a talent pool of over
23,000 people. Your Company is driven by the vision of becoming a global
leader in the integrated healthcare delivery space and the larger purpose
of saving and enriching lives through clinical excellence.
A detailed discussion on Operational and Financial Performance of the
Company for the year, is given in "Operations Reviews" and "Management
Discussion and Analysis" Sections of this Annual Report.
CHANGE OF NAME
In furtherance of the strategic intent to consolidate the Group`s
healthcare services business across Asia Pacific Region and increase
integration amongst various entities existing in the key geographical focus
areas for greater operational and administrative efficiencies, Fortis
Healthcare International Pte. Limited ("Fortis Healthcare International")
was acquired and consolidated with the Company -Fortis Healthcare Limited,
in January, 2012, thereby combining the Indian and overseas operations of
the Fortis Group under one umbrella.
In view of the above and to reflect the expanded geographical coverage of
the Group, the Board of Directors of your Company had, on January 11, 2012,
revisited the Company`s corporate identity and proposed to change the name
of the Company from "Fortis Healthcare (India) Limited" to "Fortis
Healthcare Limited". The same was approved by the Shareholders by way of
Postal Ballot on February 23, 2012. With the approval of the Registrar of
Companies, NCT of Delhi & Haryana, Ministry of Corporate Affairs, the name
of the Company has since been changed to "Fortis Healthcare Limited"
effective March 06, 2012.
CAPITAL RAISING AND CHANGES IN CAPITAL STRUCTURE
Changes in Capital Structure
Under the terms of the "Employee Stock Option Plan 2007", the Company
allotted 76,240 equity shares of Rs.10 each, against exercise of vested
stock options by the eligible employees during the year.
Accordingly, the issued and paid up Equity Share Capital of the Company
increased from Rs.4,051.03 Million divided into 40,51,03,475 Equity Shares
of Rs.10 each to Rs.4,051.80 Million divided into 405,179,715 Equity
Shares of Rs.10 each.
LISTING OF EQUITY SHARES/BONDS
The Equity Shares of the Company continue to be listed on National Stock
Exchange of India Limited (NSE) and Bombay Stock Exchange Limited (BSE).
Further, the existing Foreign Currency Convertible Bonds (FCCBs) are listed
on "Bourse de Luxembourg" (Luxembourg Stock Exchange). The requisite annual
listing fees have been paid to these Exchanges.
SHARES UNDER COMPULSORY DEMATERIALIZATION
The Equity Shares of your Company are included in the list of specified
scrips where delivery of shares in dematerialized (demat) form is
compulsory, if the same are traded on a Stock Exchange, which is linked to
a Depository. As of March 31, 2012, 99.77% Equity Shares of the Company
were held in demat form.
During the year under review, 200,000 Stock Options were granted under the
"Employee Stock Option Plan 2007".
Further, during the year, the Company also constituted the "Employee Stock
Option Plan 2011" whereunder, 40,50,000 Stock Options were granted to
eligible employees and Directors of the Company / its Holding Company(ies)
The relevant details of the Stock Options granted during the year and
outstanding as on March 31, 2012 have been set out in Annexure-I to this
During the year under review:
- The Company acquired 74.59% stake in Super Religare Laboratories Limited
(`SRL`), resulting in SRL (together with its wholly owned subsidiary and
two joint ventures) becoming a subsidiary of the Company. Subsequent to the
acquisition, the Company`s shareholding in SRL was diluted to 71.49% as a
result of SRL issuing additional equity shares to certain strategic
- Further the Group incorporated Fortis Health Management (North) Limited,
Fortis Health Management (East) Limited, Fortis Health Management (West)
Limited and Fortis Health Management (South) Limited as wholly owned
- The Company has acquired 100% stake in Fortis Healthcare International
Pte Limited (`FHIPL`) from RHC Financial Services (Mauritius) Limited
through its wholly owned subsidiary - Fortis Asia Healthcare Pte Ltd.
Accordingly, FHIPL has become a step-down subsidiary of the Company. FHIPL
is a Singapore based leading integrated healthcare delivery company with
multi-vertical presence including in primary healthcare, speciality day
care, hospitals and diagnostics, with a presence in nine countries viz.,
Hong Kong, Australia, New Zealand, Singapore, Sri Lanka, Dubai, Vietnam,
Mauritius and Canada. Pursuant to the said investment in FHIPL , the
direct/indirect subsidiaries of FHIPL became the direct/indirect
subsidiaries of the Company.
- The Company has acquired 45% of total equity share capital of Hiranandani
Healthcare Private Limited (HHPL), consequently raising its shareholding to
85% in HHPL. Accordingly, HHPL has become a subsidiary of the Company.
- In order to consolidate the holding, the Company had purchased the
remaining 67% stake in Fortis Healthcare International Limited (FHIL) from
International Hospital Limited (IHL), its wholly owned subsidiary in India.
With the proposed transaction, FHIL became direct and wholly owned
subsidiary of the Company.
- Changes during the year
- The Company acquired the remaining 10% stake in Escorts Heart Institute
and Research Centre Limited ("EHIRCL") from Fortis Healthcare Holdings
Private Limited (formerly known as Fortis Healthcare Holdings Limited),
resulting in EHIRCL (together with its two subsidiaries) becoming a wholly
owned subsidiary of the Company.
- The Group sold its 2% stake in a subsidiary, namely, Fortis Emergency
Services Limited ("FESL") to Fortis Healthcare Holdings Private Limited
(formerly known as Fortis Healthcare Holdings Limited), the Holding
Company. Accordingly, FESL has ceased to be a step-down subsidiary of the
- The entire issued and paid-up capital of Fortis Global Healthcare
Infrastructure Pte. Ltd., Singapore (FGHIPL) which was incorporated as a
wholly owned subsidiary of Fortis Healthcare International Limited (FHIL)
was transferred by FHIL to Religare Health Trust Trustee Manager Pte
Limited [acting in its capacity as trustee manager of Religare Health Trust
(RHT)] and FHIL received 3,100 units of RHT as consideration for the said
transfer. As on March 31, 2012, FHIL ,wholly owned subsidiary of the
Company, holds 3100 units in RHT representing 100% beneficiary interest in
- In accordance with Regulation 3(1)(e)(i) of the SEBI (Substantial
Acquisition of Shares and Takeovers) Regulations, 1997, International
Hospital Limited transferred 11,752,402 equity shares constituting 63.2% of
paid capital of Fortis Malar Hospitals Limited, in terms of inter se
transfer of shares amongst group coming within the definition of group as
defined in Monopolies and Restrictive Trade Practices Act, 1969, to Fortis
Hospitals Limited by way of gift on June 20, 2011.
EXEMPTION UNDER SECTION 212(8) OF THE COMPANIES ACT, 1956
The Ministry of Corporate Affairs, Government of India, vide its Circular
No. 2/2011 dated February 8, 2011, has provided an exemption to Companies
from complying with the provisions of Section 212 of the Companies Act,
1956, provided such Companies publish the Audited Consolidated Financial
Statements in the Annual Report. Accordingly, in terms of general
exemption, the Board of Directors of the Company, in its Meeting held on
May 28, 2012, resolved that the Financial Statements and other required
documents of the subsidiary companies are not required to be attached with
the Balance Sheet of the Company for this fiscal.
The Annual Accounts of these subsidiary companies and the related
information are open for inspection by any member including the members of
subsidiary companies at the registered office of the Company and that of
subsidiaries concerned, during the working hours on all working days. The
Company will make available these documents to the members including
members of subsidiary companies upon receipt of request from them. The
members, if they so desire, may write to the Company to obtain a copy of
financials of the subsidiary companies.
REPORT ON CORPORATE GOVERNANCE
Your Company continues to place greater emphasis on managing its affairs
with diligence, transparency, responsibility and accountability.
Your Company is committed to adopting and adhering to the best Corporate
Governance practices recognized globally. Your Company understands and
respects its fiduciary role and responsibility towards stakeholders and the
society at large, and strives hard to serve their interests, resulting in
creation of value and wealth for all stakeholders at all times.
The report of Board of Directors of the Company on Corporate Governance is
given in the section titled "Report on Corporate Governance" forming part
of this Annual Report.
Certificate of M/s Sanjay Grover & Associates, Company Secretary in whole-
time Practice, regarding compliance with the Corporate Governance
requirements as stipulated in Clause 49 of the Listing Agreement with the
Stock Exchanges is annexed with the said Corporate Governance Report.
During the year under review, your Company has not invited or accepted any
deposits from the Public pursuant to the provisions of Section 58A of the
Companies Act, 1956, and therefore, no amount of principal or interest was
outstanding in respect of deposits from the Public as of the date of
DIVIDEND AND TRANSFER TO RESERVES
Keeping in view the aggressive growth strategy of the Company, the Board of
Directors of your Company have decided to plough back the profits and thus,
not recommended any dividend for the financial year under review. Also,
during the said year, no amount has been transferred to reserves.
Ms. Joji Sekhon Gill and Mr. Pradeep Ratilal Raniga have been co-opted as
Additional Directors on the Board of the Company w.e.f. May 28, 2012.
Pursuant to the provisions of Section 260 of the Companies Act, 1956, ("the
Act"), they hold the office upto the date of the ensuing Annual General
Meeting and are eligible for appointment as Directors of the Company in
terms of Section 257 of the Act.
The Company has received Notices under Section 257 of the Act, proposing
the appointments of Ms. Joji Sekhon Gill and Mr. Pradeep Ratilal Raniga as
the Directors, liable to retire by rotation.
Further, in accordance with the provisions of the Act, and Articles of
Association of the Company, Mr. Gurcharan Das, Mr. Sunil Godhwani and
Justice S S Sodhi are liable to retire by rotation at the ensuing Annual
Justice S S Sodhi, in view of his pre-occupation, has not offered himself
for re-appointment and accordingly, will cease to be a Director of the
Company with effect from the conclusion of the ensuing Annual General
Meeting. Since, no proposal has been received for filling the vacancy, for
the present it is proposed not to fill the vacany created by the
retierement of Justice S S Sodhi. The Board of Directors extends its
sincere appreciation for the valuable contributions made by Justice S S
Sodhi during his tenure as a Director of the Company.
Mr. Gurcharan Das and Mr. Sunil Godhwani, being eligible, have offered
themselves for re-appointment.
Your Directors recommend the appointment / re-appointment of Ms. Joji
Sekhon Gill, Mr. Pradeep
Ratilal Raniga, Mr. Gurcharan Das and Mr. Sunil Godhwani, as referred
above, at the ensuing Annual General Meeting.
STATUTORY AUDITORS / AUDITORS` REPORT
M/s. S.R. Batliboi & Co., Chartered Accountants, Statutory Auditors of your
Company, will retire at the conclusion of the ensuing Annual General
Meeting and being eligible, offer themselves for re-appointment as
Statutory Auditors for the financial year 2012-13.
The Company has received a letter dated May 25, 2012 from them to the
effect that their re-appointment, if made, would be within the limit
prescribed under Section 224(1B) of the Act, and that they are not
disqualified for such re-appointment within the meaning of Section 226 of
Based on the recommendations of the Audit, Risk & Controls Committee, the
Board of Directors of the Company proposes the re-appointment of M/s S.R.
Batliboi & Co., Chartered Accountants, as the Statutory Auditors of the
The Statutory Auditors have, in their report to the Board of Directors on
the Consolidated Financial Statements of the Company, its subsidiaries and
associates, made the following comments which are self-explanatory:
5. Without qualifying our opinion, we draw attention to note 30 of
financial statements, regarding the assessment of recoverability of Minimum
Alternate Tax (MAT) credit for Rs. 1,046.27 lacs. The management has
explained to us that, as part of its restructuring plan, Company has sold
certain business undertakings comprising of Hospital Operations and
Management, In Patient health services and emergency healthcare services to
another fellow subsidiary. The arrangements of the manner in which revenue
would arise to transferor companies from the transferee company are in
process of being finalized. Till such time, no adjustment has been recorded
towards on MAT credit recoverable in the Company.
6. Without qualifying our opinion, we draw attention to the note no 19 of
financial statements regarding non-provision of proportionate premium on
redemption of US Dollar 100,000,000 5% Foreign Currency Convertible Bonds
due 2015 amounting to Rs.603 lacs. The same has been disclosed as a
contingent liability. Management has represented that the redemption
premium will be offset against the securities premium account and
accordingly, no adjustments have been considered in the accounts.
7(a). The Delhi Development Authority (DDA`) had terminated the leases of
certain land allotted by it to a society (later converted into the company)
and then issued eviction notices to Escorts Heart Institute and Research
Centre Limited (a subsidiary of the Company) for vacation of these lands.
The subsidiary company is in appeal against these actions by DDA which is
pending with the court of law and has accordingly not made any adjustments
to the carrying value of these lands or to the other assets, as the
eventual outcome cannot be estimated presently.
(b) Certain tax demands aggregating to Rs.9,208.28 lacs (without
considering the demand of Rs.10,101.10 lacs raised twice in respect of
certain years and after adjusting Rs.13,760.88 lacs for which the Escorts
Heart Institute and Research Centre Limited (a subsidiary of the Company)
has a legal right to claim from erstwhile promoters as discussed in detail
in note 12 of financial statements) raised on the subsidiary company by the
Income Tax Authorities are pending in appeals and the eventual outcome of
the above matters cannot presently be estimated.
Accordingly, we are unable to express an opinion at this stage in respect
of these matters reported in paragraphs (a) and (b) above and their
consequential effect, if any, on the financial statements. The same were
also the subject matter of qualification by us in the previous years as
DISCLOSURES UNDER SECTION 217(1) & (2) OF THE COMPANIES ACT, 1956
A large capital outlay would be involved in benefitting from the growth
opportunities in the Indian healthcare sector. Your Company is, therefore,
aligning itself to internationally emerging trends, such as transformation
to an asset light model. Aligning the Company`s business with such
international trends would assist your Company to grow faster and enable it
to provide state of the art, medical and healthcare services. In
furtherance thereof, your Company had been continuously evaluating various
business and ownership strategies regarding your Company and its
subsidiaries (the "Fortis Group"), and various models for raising long-term
financial resources by capitalising upon the expertise of the Fortis Group.
Consequently, your Company is undergoing an internal restructuring, whereby
the business of certain identified hospitals of the Fortis Group will be
divided into the two separate business verticals (i) Clinical
Establishments Division; and (ii) Medical Services Division, such that they
are managed under different verticals whilst continuing to have mutual
The details of the internal restructuring have also been disclosed in the
Notes to Accounts and other specific communication(s) to the shareholders.
Except as disclosed above or elsewhere in this Annual Report, there have
been no material changes and commitments, between the end of financial year
and the date of this Report, which can affect the financial position of the
During the year, Fortis Health Management (South) Limited, a subsidiary of
the Group, has entered into a Partnership agreement with Dr. Chandrashekar
G.R. and Dr. Sarla Chandrashekar on April 27, 2011 with 51% share in
assets, liabilities, income and expenses, to provide cardiac care
Except as disclosed above or elsewhere in this Annual Report, during the
financial year under review, no material changes have occurred in the
nature of the Company`s business or that of its subsidiaries and generally
in the classes of business in which the Company has an interest.
ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE
Particulars required under Section 217(1)(e) of the Companies Act, 1956,
read with the Companies (Disclosure of Particulars in the Report of Board
of Directors) Rules, 1988, regarding Conservation of Energy,
Technology Absorption and Foreign Exchange Earnings & Outgo, is given in
Annexure II, forming part of this Directors` Report.
PARTICULARS OF EMPLOYEES
The Statement containing particulars of the employees as required under
Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars
of Employees) Rules, 1975, as amended, forms part of this Report. However,
in terms of Section 219(1)(b)(iv) of the Companies Act,1956, the Report and
Accounts are being sent to the members excluding this Statement. Copies of
this statement may be obtained by the members by writing to the Company
Secretary at the registered office of the Company.
DIRECTORS` RESPONSIBILITY STATEMENT
For the Financial Year 2011-12, the Directors hereby confirm:
(a) that in the preparation of the Annual Accounts for the year ended March
31, 2012, the applicable Accounting Standards had been followed along with
proper explanation relating to material departures;
(b) that the directors had selected such Accounting Policies and applied
them consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of the
Company at the end of the financial year and of the profit or loss of the
Company for that period;
(c) that the Directors had taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of the
Company and for preventing and detecting fraud and other irregularities;
(d) that the Directors had prepared the Annual Accounts on a going concern
Your Directors place on record their gratitude to the Central Government,
State Governments and all other Government agencies for the assistance,
cooperation and encouragement they have extended to the Company.
Your Directors also take this opportunity to extend a special thanks to the
medical fraternity and patients for their continued cooperation, patronage
and trust reposed in the Company.
Your Directors also greatly appreciate the commitment and dedication of all
the employees at all levels, that has contributed to the growth and success
of the Company. Your Directors also thank all the strategic partners,
business associates, Banks, financial institutions and our shareholders for
their assistance, co-operation and encouragement to the Company during the
On behalf of the Board of Directors
Date : August 14, 2012 Malvinder Mohan Singh
Place : Gurgaon Executive Chairman
ANNEXURE - II TO DIRECTORS` REPORT
INFORMATION AS PER SECTION 217(1)(e) READ WITH COMPANIES (DISCLOSURE OF
PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES, 1988 AND
FORMING PART OF THE DIRECTORS` REPORT FOR THE YEAR ENDED MARCH 31, 2012.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS
A. Conservation of Energy
a) Energy conservation measures taken:
* Optimization of Heating Ventilation and Air Conditioning, Chillers, Air
Handling Units and Pump operation, Air Balance study to improve air
* Optimization of Boilers to improve efficiency and reduce fuel
consumption. Leakages plugged and water pipe lines insulated.
* Provided hermetically sealed Stainless Steel doors for Operation
Theatres to plug wastage of conditioned air.
* Streamlining of Sewerage Treatment Plant and Irrigation System for
effective utilization of wastewater, resulting in water conservation.
* HSD savings by running only one boiler thereby providing condensate
storage in a tank and using hot water back in washers.
* Replacement of Sodium Vapour lamps with Compact Fluorescent Light for
external lighting, use of Light Emitting Diodes and use of Electronic
chokes and T-5 tube rods against conventional ones.
b) Additional investment and proposals, if any, being implemented for
reduction of consumption of energy:
* Installed energy efficient Air Compressor, UPS with high efficiency
motors for conservation of energy.
c) Impact of measures at (a) & (b):
* The energy conservation measures taken from time to time have resulted
in considerable reduction of energy and thereby reducing the cost.
* Stress given on the use of Building Management Systems resulting in
reduction in Chiller running time.
d) Total energy consumption and energy per unit of production as per Form A
of the Annexure in respect of industries specified in the Schedule thereto:
B. Technology Absorption
1. Research & Development (R & D):
2. Technology Absorption, Adaptation & Innovation:
a) Efforts in brief, made towards technology absorption, adaptation &
* To reduce the water consumption by treatment of waste water for use in
cooling towers and flushing of toilets. This recycling of water has been
approved by Infection Control Committee.
b) Benefits derived as a result of the above efforts, e.g. product
improvement, cost reduction, product development, import substitution etc.
* Water conservation by reduction of ground water uses.
c) In case of imported technology (imported during last 5 years reckoned
from the beginning of the financial year), following information may be
C. FOREIGN EXCHANGE EARNINGS AND OUTGO
a) Activities relating to exports: Initiatives taken to increase exports,
development of new export markets for products and services and export
* A well thought thorough strategy has been put in place to ensure that
the target revenue for the next year is achieved. The key components of
this strategy includes penetrating deeper in key markets, identified as
power markets, develop new markets and leverage local opportunities in
driving the International Business.
* The Asian market has been divided in three regions namely Middle East,
SAARC Region and the CIS region. Within each of these region a country has
been identified as a power market, where in Company plans to set up a
representative office in collaboration with associates based in that
market. Thus in the SAARC region, representations have been set up in
Lahore in Pakistan and in Kabul in Afghanistan. Similarly in the Middle
East a representation has been established in Baghdad in Iraq and one in
Tashkent in Uzbekistan. These representations serve as Company information
centres as well as facilitation centres for patients traveling to India.
All our Marketing activities including camps and CMEs are being channelized
through these representations. This strategy has given us the depth and
greater penetration in these markets.
* A similar strategy is being followed in Africa, where the continent has
been split in three regions namely Western and North Africa, East Africa
and Central Africa and South Africa. Representative offices have been set
up through our associates in Abuja, Nigeria in Western Africa, Juba in
South Sudan and in Kampala in Uganda on the Eastern side and in Kinshasa in
Congo, central Africa.
* New markets have been identified in and around these hubs. Thus in Asia,
Myanmar, Vietnam, Yemen, Qatar and Bahrain are being explored. Kazakhstan
and Tajikistan are also being evaluated. In Africa, Ghana, Ethiopia, Kenya,
Tanzania, Rawanda and Burundi are being developed. Pacific Islands in the
far east such as Fiji, Kiribati, Tuvalu and Nauru have been explored and
are now yielding steady revenues.
* Additionally, a robust digital marketing strategy is being put in place
to target the western world including the US, UK and Canada. A new website
is being developed, which will help drive digital queries and patient flow
from these markets.
A strategy of an aggressive engagement with local facilitators based in
Delhi, Mumbai, Bangalore and Chennai has been put in place to ensure
drainage of patients into our hospitals. An information kiosk is being set
up at the International Airport in New Delhi. This will allow for easy
handling and management of patients arriving in New Delhi.`
b) Total foreign exchange earned and used:
(i) Earnings : Rs.11.80 Million
(ii) Expenditure : CIF Value of Imports
Rs. 44.15 Million
Rs. 277.58 Million
MANAGEMENT DISCUSSION AND ANALYSIS
Global Economic Scenario:
The worldwide GDP is expected to grow from approximately USD 69 trillion in
2011 to USD 85 trillion in 2015, at a compounded annual growth rate (CAGR)
of 5.6%. The Asia Pacific (APAC) region is expected to witness the fastest
growth, in percentage, in GDP and GDP per capita. The region, comprising 15
nations (including Australia, India, China, Japan, South East Asian
countries and other emerging Asian countries), is estimated to grow from
approximately USD 20 trillion in 2011 to USD 26 trillion in 2015 at a CAGR
of 7.5%, led primarily by the strong economic growth in China, India and
the ASEAN countries. The higher per capita GDP is expected to result in an
increased demand for quality healthcare services across most countries in
the region. While North America and the European Union (EU) countries are
expected to witness GDP CAGRs of 4.2% and 3.6%, respectively, the Middle
East and North Africa (MENA) region is estimated to grow at a CAGR of 6.2%
from 2011 to 2015.
Global Population Statistics: The United Nations (UN) estimates that the
global population will rise from approximately 6.8 billion in 2009 to 9.1
billion in 2050. The UN also anticipates that by 2050, Asia and Africa will
account for 79% of the world`s population. Asia is expected to have the
highest population in 2050, reaching 5.2 billion, with a CAGR of 0.6% from
2009 to 2050, followed by Africa. Asia is also expected to witness a
rapidly ageing population, with the proportion of those who are 60 years
and above growing from 11% in 2010 to 28% in 2050. The rate of growth and
demographic shifts are an indication of the opportunity for healthcare
delivery services to meet the demands of the population in the region.
THE HEALTHCARE INDUSTRY
The Global Healthcare Industry
The global healthcare industry comprises a wide range of products and
services offered by hospitals, nursing homes, diagnostic laboratories,
physicians, pharmacies, pharmaceutical companies, medical equipment
manufacturers and suppliers.
According to the Economic Intelligence Unit (EIU), the global healthcare
industry is believed to have spent approximately USD 6.0 trillion on
healthcare expenditure in 2011, both on the public and private sides. North
America and Western Europe have accounted for approximately 70% of this
Despite the cost pressures faced by healthcare providers, the global
healthcare industry is expected to experience steady growth, reaching USD
7.5 trillion in healthcare expenditure by 2015. This would be driven by
changing demographic patterns, rising population, gaps in healthcare access
and overall economic growth. With the prevailing challenges in the US and
Europe, the emerging economies, comprising the Asia Pacific region and the
transition A economies, are projected to witness a higher growth in
healthcare expenditure from 2011 to 2015, with CAGRs of 10.0% and 10.2%
respectively. Asia Pacific`s healthcare expenditure is expected to rise
from approximately USD 1.2 trillion to approximately USD 1.8 trillion in
the aforesaid period.
Table: Healthcare expenditure of the Global & Major regions from 2011 to
Figures in USD billion
2011E 2012E 2013E 2014E 2015E CAGR
World 6,042 6,325 6,674 7,079 7,524 5.6%
North 2,639 2,759 2,900 3,060 3,228 5.2%
Western 1,590 1,590 1,619 1,660 1,737 2.2%
Transition 175 192 213 234 259 10.2%
Asia Pacific 1,216 1,355 1,486 1,637 1,778 10.0%
Latin 354 380 401 425 452 6.3%
The Middle 100 105 117 127 138 8.3%
East & Africa
* (Transition economies include Azerbaijan, Bulgaria, Czech Republic,
Hungary, Kazakhstan, Poland, Romania, Russia, Slovakia & Ukraine)
Source: Economist Intelligence Unit (EIU)
Trends in the Global Healthcare Industry
The global healthcare industry is witnessing a paradigm shift led by
increasing awareness amongst consumers and implying a move in healthcare
services from sickness to wellness and from treatment to preventive
medicine or treatment. Government and health organisations are increasing
their efforts to create greater consumer awareness for healthy living,
largely triggered by the various disease outbreaks in the recent past
including H1N1, among others.
The increasing access to an array of communication mediums, such as the
Internet and print media, has led to a higher level of patient awareness
and a larger demand for quality healthcare services. As a result, there is
a need for the government and healthcare providers to expand healthcare
systems to meet the growing consumer demand.
Key growth drivers for the global healthcare industry are as follows:
1. Rising population: Rising population and a better economy will see
developed nations improving their quality of care, albeit with funding
constraints, given their current economic environment, while the emerging
countries will see an increase in government spending and private insurance
to widen healthcare access.
2. Rapidly ageing population: A rapidly ageing population will increase the
demand for geriatric care, treatment and preventive services that are
related to chronic diseases or non-communicable diseases. APAC,
particularly the more economically developed countries in the region, will
see a significant increase in proportion of such elderly population by
3. Expansion of healthcare access and expenditure through government and
private funding: According to PwC`s projections, between 2010 and 2020, the
OECD (Organisation for Economic Co-operation and Development) and the BRIC
(Brazil, Russia, China and India) nations will spend cumulatively USD 3.6
trillion on health infrastructure and USD 68.1 trillion on non-
infrastructure healthcare. The increase in expenditure per capita,
especially among the middle and high income groups, also leads to a higher
demand for wellness programmes, branded or corporate set-up hospitals,
prevention treatment, medical tourism and other related aspects of
4. Convergence of healthcare industry: The paradigm shift towards
preventive medicine and wellness would drive growth in other fields such as
genetics, information technologies, and nanotechnology towards a more
individualised approach to healthcare. The convergence of all these aspects
creates an opportunity to enable personalisation, targeted medicines, new
drug delivery mechanisms and virtual patient monitoring tools.
However, growth in the global healthcare industry would continue to be
restrained by a number of issues with key ones being the global economic
cycle which is still on a gradual recovery path and having implications on
consumer spending, healthcare budgets and capital investments; lower
healthcare spending in emerging economies and increasing local competition.
The shortage of healthcare professionals worldwide may also limit the
desired expansion of healthcare services across many regions. Other
challenges would include rising costs, unsatisfactory public healthcare
quality, changes in incidence of diseases and inequality of healthcare
access in different economies.
The Asia Pacific Healthcare Industry
Asia Pacific accounts for around 60% of the global population, and is a
highly diverse region with significant differences in geopolitics, cultures
and religions, demographics and social development. Governments in Asia
Pacific are focusing their efforts on improving healthcare infrastructure
and services, in their respective countries. The region has become the
global hub for emerging private hospital services driven by medical tourism
activities, increasing chronic disease burden, and the growing ageing
The GDP of Asia Pacific is estimated to increase to approximately USD 26.3
trillion in 2015, with healthcare spending accounting for 6.8% of the same.
While Australia, New Zealand, and Japan each have a relatively high level
of healthcare spending as a proportion of GDP (varying between 7% and 12%),
other countries in Asia Pacific like India, Malaysia, China, The
Philippines, Thailand, Singapore and Indonesia have a lower proportion of
their GDP spent on healthcare (varying between 2% and 5%). This is
reflective of the importance placed on healthcare spending by these
countries, and explains the existence of or the lack of an excellent
healthcare infrastructure in these countries.
With the ageing of the population, there is an increase in dependency on
private healthcare services. Consequently, governments are expected to be
forced to commit a larger share of GDP to healthcare. While developed
countries in Asia Pacific have a high per capita healthcare spend and a
higher percentage of government expenditure on healthcare relative to the
overall healthcare expenditure, emerging economies are dominated by a
higher private sector spend and out of pocket expenses on healthcare due to
low medical insurance penetration and a lower per capita healthcare spend.
For such countries health sector reforms and large investments in
healthcare infrastructure, particularly those aimed at encouraging private
investment in the health sector, can pay high dividends in terms of a
better quality of life for their citizens.
Key Growth Drivers
Increasing Wealth in the Asia Pacific Region: The Asia Pacific Region has
the fastest growing GDP and GDP per capita in terms of percentage which
will require the economies in the region to provide much better access to
good healthcare facilities to their citizens in a cost-effective manner.
The rising demand for healthcare products and services within these
countries and the underpinnings of significant changes in the healthcare
delivery system, with an emphasis towards private sector led and Public
Private Partnership (PPP) based models, would fuel growth of healthcare
services in the region.
Growing Population & Changing Demographics:
The Asian region, with a majority of the world`s
population provides a huge market in medical infrastructure and healthcare
delivery services. With increasing life expectancy, private healthcare
services play an important role in handling patients that the government
facilities are unable to cope with. It is estimated that the population
aged 60 years and above is set to increase at a rapid pace in the region to
reach 500 million by 2015. On the other hand, the emerging economies in the
region are also witnessing a growing middle class population with higher
disposable incomes, better literacy levels, more healthcare awareness,
leading to demand quality healthcare with a preference to opt for private
healthcare services. The middle class population in Asia Pacific accounts
for 28% of the global middle class population.
Increase in Chronic Diseases in the Asia Pacific Region: Non Communicable
Diseases (NCD) have become a leading cause of death, morbidity and
disability in the region. Some of the key factors contributing to the
increase in these chronic diseases include demographics, unhealthy diet,
physical inactivity and increasing intake of tobacco and alcohol.
Cardiovascular diseases, cancer, chronic lung diseases and associated
disorders have emerged as major health problems. This has led to an
increasing demand for healthcare set-ups providing super speciality and
tertiary care of treatment for such chronic diseases in the region.
Medical Tourism: Medical tourism is a rapidly growing industry and has
become a common phenomenon in the Asia Pacific Region. Some of the major
medical hubs in the Asia Pacific region for medical tourism include India,
Singapore, Malaysia and Thailand. Overall, the number of medical tourists
visiting Asia Pacific is expected to grow by 10%-15% annually until 2015.
The key factors that will continue to provide an impetus to growth in
medical tourism would include the increasing adoption of sophisticated
medical technology, rising affluence of the middle income group seeking
cost effective and affordable quality medical care, availability of skilled
doctors and para-medical staff, world class accredited facilities, better
access to healthcare related information, willingness of patients to travel
to access specialised treatment not available in their own country and
lesser waiting times.
Expanding access to healthcare: The rise in the affluent population in the
Asia Pacific region, coupled with a shortage in the availability of
healthcare professionals, has resulted in disparity with regard to
healthcare access. High quality services are accessible to a fraction of
the population in emerging countries. The lack of these services and the
requisite medical infrastructure provide a robust opportunity for private
healthcare service providers to review their business models and explore
possibilities of reaching a wider population. The use of medical
technologies such as telemedicine, remote monitoring through integration of
information technology, collaboration with private insurance, organic and
inorganic expansion in rural and semi-urban markets, are some of the ways
and means by which healthcare access can expand and reach a wider
Select markets in Asia Pacific
India is the second most populous country in the world, and based on its
economic growth, is emerging as an attractive market for healthcare
delivery. By 2030, India is expected to surpass China to become the world`s
most populous nation. Total healthcare spending as a percentage of GDP
stands at approximately 5% currently. This is higher than some other
emerging economies, but much lower than the developed economies where
healthcare spend accounts for an average of around 12% of GDP. The Indian
healthcare industry was estimated to be approximately USD 68 billion in
2011 and is expected to reach approximately USD 120 billion by 2015, a CAGR
of 15%. Currently, India accounts for nearly 6% of the world`s hospital
beds and shares 20% of the world`s disease burden. Of the total healthcare
market in India approximately 70% comprises the healthcare delivery
services, followed by approximately 20% from pharmaceuticals and the rest
from medical technologies and other components. The Indian healthcare
delivery system comprises both the public (government) and the private
sectors providing primary, secondary and tertiary care to the population.
While the public system focuses mainly on primary care in rural areas, the
private segment caters to the urban population and is focused on secondary
and tertiary care. Approximately 70%-80% of the total healthcare workload
in India is catered to by the private sector, of which approximately 10% is
serviced by the corporate hospital chains, with the balance being in the
unorganised sector i.e. smaller hospitals/nursing homes. Another important
characteristic of the healthcare delivery market in India is the disparity
in healthcare services between the rural and the urban populaces. While
secondary and tertiary care services are provided by both public and
private organisations, in metros and tier 1 cities, the rural areas are
relegated to basic care i.e. primary care services which have limited
accessibility and a lack of quality healthcare delivery infrastructure and
services. The household expenses towards healthcare are expected to
increase from 7.5% in 2005 to approximately 10% in 2015.
Opportunities and Key Growth Drivers
* Given the changing lifestyles and the growing consumption of tobacco and
alcohol, coupled with factors such as poor diets, physical inactivity; non
communicable diseases such as cancer, stroke, diabetes and others which
require hospitalisation, are on the rise in India. The National Commission
on Macroeconomics and Health (NCMH) estimates India to have more than 2.5
million cancer patients by 2015, World Health Organisation (WHO) estimates
India will become the diabetes capital of the world with 79 million
patients by 2030. Coupled with these and other chronic illnesses, patient
volumes are expected to rise rapidly, with larger contributions from
inpatients. Inpatient revenues are expected to constitute 63.7% of the
healthcare delivery market in 2015, as compared to 55.4% in 2010.
* India is amongst the nations that are experiencing the fastest economic
growth and prosperity, globally. Increasing urbanisation and rising
disposable incomes have significantly expanded the upper and middle class
segments of the population. With higher disposable incomes and increasing
awareness on health related issues, patients are likely to increase their
discretionary spend on healthcare, especially on preventive healthcare.
Such a trend is likely to favour private healthcare delivery practitioners,
which are already well positioned in secondary and tertiary care services.
* According to the Census of India, the literacy levels in the country
have increased by 9.2% in the past decade to 74% in 2011. With the
availability of information on the Internet, journals and other media
avenues, there is a rapid increase in awareness on healthcare issues and
diagnosis, which is expected to lead to a rise in patient volumes from
primary to secondary or tertiary healthcare services.
* The Indian health insurance segment is one of the fastest growing
segments in the general (non-life) insurance industry in India. Insurance
is limited to only a small proportion of the population in the organised
sector (less than10%) and out of pocket healthcare financing still
constitutes 80% of the total spend on healthcare in India. Health insurance
penetration is expected to rise from 3.3% in 2008 to 8% by 2013, growing at
a CAGR of over 20%. Given increasing awareness, higher disposable incomes
and the government efforts in the form of health insurance schemes and tax
benefits. The increasing penetration of health insurance is expected to
strengthen the growth in the healthcare delivery market.
* The Associated Chambers of Commerce and Industry of India (ASSOCHAM)
estimates India`s medical tourism market to grow at an annual rate of more
than 30% in the next 3 years to reach approximately USD 2.1 billion by
2015. With world class quality accredited hospitals, affordable and
advanced treatment options, immediate treatment facilities, availability of
skilled / talented doctors and para-medical staff, high quality patient
care and India`s geographical proximity, the medical tourism market is set
to provide a strong growth opportunity for the private healthcare companies
in India. Furthermore, the Government of India (GOI) has also been
encouraging medical tourism by offering tax breaks and export incentives to
participating hospitals along with expedited clearance of medical visas.
* With economic prosperity, the country has also witnessed rising income
levels and increasing purchasing power from the tier 2 and tier 3 cities.
The populace in these cities has come to demand high quality and speciality
healthcare services, the availability of which is significantly limited at
present. These cities are also expected to drive the business growth and
expansion of the private healthcare delivery market.
* Day care specialities are evolving as a differentiated business model
amongst private healthcare players. Given rising income levels and
increasing awareness about healthcare, more and more customers are opting
to get day care surgeries/ treatments at individual specialist care centres
run and operated by the organised healthcare players in the market. The
model not only has advantages to patients in terms of lesser time spent at
hospitals and lower costs, but is useful for the private hospital players
to decongest their hospitals and utilise the beds for critical and tertiary
care treatments. Day care specialities have begun in the fields of
orthopaedics, urology, ophthalmology, diabetes and renal, among others.
* The government is pushing forward a number of initiatives to promote
private healthcare in the country by providing various subsidies and
incentives to motivate players to invest in the healthcare market. These
include tax benefits, lower import tariffs for life saving and medical
equipment, accounting benefits in the form of higher depreciation and
subsidised land. The government has also identified certain healthcare
schemes such as the National Rural Health Mission (NHRM) and schemes like
the Rashtriya Swasthya Bima Yojna (RSBY) to facilitate healthcare growth.
The Indian Diagnostics Industry
The diagnostic services sector is expected to grow to approximately USD 5.0
billion by 2015 at a CAGR of 28%. Its pathology and imaging/radiology
segments are expected to grow to approximately USD 3.5 billion at a CAGR of
28% and USD 1.5 billion at a CAGR of 27%, respectively. The industry
constitutes approximately 3%-4% of the overall healthcare delivery market
and is largely an unregulated industry. It is estimated that diagnostic
test results impact more than 70% of medical decisions and hence form an
essential element in the delivery of effective healthcare services. Medical
lab (pathology) constitutes almost two thirds of the diagnostics market,
whereas radiology and imaging largely account for the rest. More than 90%
of the diagnostics market in the country is serviced by unorganised players
with the balance comprising a limited number of corporate diagnostic
chains. Out of an estimated 60,000 laboratories in the country, less than
0.5% are accredited signifying the lack of regulations in the sector. The
corporate diagnostic chains usually operate under the hub-and-spoke model
with reference laboratories in one or more key cities, a defined catchment
area of surrounding towns and localities and collection centres or pick up
points from healthcare centres such as hospitals or nursing homes. Under
this model, franchisees also supplement underserviced or highly profitable
but localised areas. This model allows a corporate chain to leverage its
brand recognition across larger areas covering major cities and towns.
While the growth projections in the diagnostic services sector take into
account growth in derived demand from expanding insurance market in the
hospital care segment, the actual growth could jump up significantly if, in
the future, insurance cover directly includes diagnostics services referred
Although the corporate presence in this segment is marginal at present,
examples from more developed countries indicate that the natural path for
progression from the unorganised to the organised sector is related to the
* Income growth, ageing population and migration from rural to urban areas
* Demand for greater standardiation and accuracy of results
* Emphasis on accreditations and increasing regulation and legislation
* Growth of institutional healthcare (hospital establishments)
* Competition and consolidation
* Increasing reach of health insurance
* General demand growth for better quality of diagnosis and healthcare
Evidence from more developed diagnostics markets also indicate that even
though greater corporatisation may be a natural progression, factors such
as ease of access, integrated service (visiting practitioners, pathology,
radiology, pharmacy, etc.), referrals from private practitioners or
hospitals and economies of scale play an important role in revenue
generation and profitability. The Indian diagnostic services market is
gradually evolving from a highly fragmented market with small and localised
players to more corporate service providers with national and international
accreditations for delivery standards and processes.
Australia, New Zealand and Canada
The dentistry industry in Australia is estimated to have total revenues of
in excess of approximately USD 5.8 billion with growth in real terms of
3.8%. The dental market is quite fragmented with practices owned and
operated by individual dentists or a small group of dentists. In 2010,
there were around 12,200 practising dentists in Australia (approximately 55
per 100,000 population) and 7,900 dental establishments. A majority of
these dentists are in private practice and most practitioners operate in
private practices comprising less than 6 dentists.
The New Zealand market has a total revenue of approximately USD 650 million
and it is estimated to be growing at a similar rate as Australia.
In Canada, the industry is estimated to have total revenues in excess of
approximately USD 13.4 billion and a 6% annual growth rate over the last 10
years, with approximately 95% of the spend in the private sector. The
dentistry market in Canada, like Australia, is highly fragmented with more
than 92% of the dentists in private practice.
Cultural norms and expectations are shifting the demand pattern for
preventative, and restorative dental treatment, driving real growth in
dental spending over the medium to long term. The demand for dental
services is influenced, amongst other things, by:
* The degree of recognition of problems associated with the misalignment
of teeth and jaws, increasing the demand for orthodontic work
* The increased rate of retention of natural teeth in the population and
the expectation that people will retain their natural teeth, promoting
demand for orthodontic, preventative, restorative and periodontal services.
The percentage of the population without their own teeth decreased from
15.4% in 1979 to 5.2% in 2005 in Australia
* The expectation of the general community about dental health has
increased and is driven by preventative programmes and public education
campaigns. This, along with a decline in the loss of natural teeth within
the adult community, has been associated with a rise in the frequency of
visits to a dentist.
Over the last 10 years, it has been generally recognised that there is a
shortage of dentists in Australia, although recent expansion of dental
courses at Australian universities is expected to improve the situation.
Dentistry in Australia is regulated at a state level by the various state
government dental acts and regulations. Dentists are registered by dental
registration boards, which are statutory bodies responsible to the relevant
government ministry in each state. The representative body for dentists,
with a branch in each state, is the Australian Dental Association (ADA).
The practice of dentistry remains quite regulated and only registered
dentists can practise.
There is no formally regulated fee structure in Australia with pricing of
dental services being set at the practice level with reference to local
market dynamics. The ADA provides pricing guidelines on a state by state
basis. Dental services are not generally covered by Medicare although a
rebate can be provided by a personal tax refund for out of pocket costs
above USD 1,500 in any financial year. In Australia, private health funds
offer dental insurance plans through their policies. The insurance works as
a rebate against costs incurred usually with a limit per year per
procedure. Despite Health Insurance Funds contributing towards dental
service fees, the majority (67%) of the costs are paid for by individuals.
Private health insurance funds only contribute around 14% of the total.
Hong Kong`s healthcare expenditure is projected to reach USD 19.8 billion
by 2015 from USD 13.9 billion in 2010, an average annual growth rate of
6.2%. The healthcare delivery model, comprising mainly of primary,
speciality and hospital care, is characterised by both private and public
sector participation, with the industry being fairly regulated. Coupled
with an increasing disposable income, an ageing population, age related
ailments, growing incidence of lifestyle related diseases, rising private
insurance and a higher private spend on healthcare, the industry presents
an attractive growth opportunity, in both hospital services and primary and
speciality care networks. Private healthcare expenditure as a percentage of
total healthcare spending is slated to increase from 54% in 2010 to
approximately 60% in 2015.
By 2015, 30% of Hong Kong`s population will be above 55 years of age and
15% will be above 65 years of age. The burden on the public healthcare
system has prompted the government to undertake a host of healthcare
reforms, with the healthcare industry being identified as one of the six
industries the government is seeking to develop into a stronger pillar of
the economy. One of the biggest initiatives by the government is its goal
to enhance public private partnerships through various means aimed at
development of more healthcare infrastructure and wider electronic
healthcare record systems. The government is opening capacity in the
private sector to assist in creating more healthcare infrastructure,
primarily private hospitals. Hong Kong has 12 registered private hospitals,
which accounted for 11% of the total hospital beds (2010), and this is set
to increase with the government setting aside 4 sites for new hospital
Private inpatient growth is projected to increase at a CAGR of 10.7% from
2010 to 2015, while public inpatient growth is expected to witness a CAGR
of 5.5% during the same period, outlining the importance and opportunity
for private healthcare players. Furthermore, the government`s push to
strengthen primary healthcare services through public private partnerships
and the rise in the percentage of private insurance will increase the
demand for primary care, thus benefitting existing primary care service
providers and also providing them an opportunity to steer patients in need
of further downstream care to speciality care and private hospitals.
Singapore is considered a benchmark of healthcare delivery in Asia with an
overall healthcare expenditure in excess of USD 8.0 billion (4% of GDP).
The industry comprises both public and private healthcare systems, wherein
the key components of healthcare, i.e. primary care services, are being
undertaken largely by the private practitioners (approximately 2,000), and
hospital services are dominated by the public system.
A significant proportion of healthcare expenditure in Singapore is out of
pocket and accounts for approximately 55% of the total healthcare spend
(2010). The healthcare financing system for Singaporeans is ably supported
by both government funding, via co-pays, subsidies, medical schemes and the
private insurance market, which has gained momentum post liberalisation of
the medical insurance sector for private players.
The key drivers of growth include the ageing population, leading to a
demand for more geriatric services; rising disposable incomes, resulting in
higher private expenditure; provision for consumer preference in choosing a
healthcare provider based on value and quality; an influx of non-residents
that rely solely on private insurance; a medical tourism industry that is
experiencing strong growth; and the existing high burden on the public
healthcare system. This environment provides an attractive opportunity for
private healthcare service providers to initiate or expand their presence
in the marketplace.
The Ministry of Health is beginning to look at how it could engage the
private sector further and has initiated programmes such as the Community
Health Assist Scheme (CHAS), which provides subsidised treatment at private
general practitioners (GP) for the needy elderly and the disabled. The
Singapore Tourism Board is also promoting Singapore as a regional centre of
medical excellence to strengthen its image as a world class healthcare
Vietnam is an emerging economy with a low per capita expenditure on
healthcare and, with an estimated 89 million people, is amongst the most
populated country in the ASEAN region. The total spend on healthcare in
2010 was approximately USD 7.7 billion or 7.6% of GDP.
The healthcare delivery model in Vietnam is largely dominated by the public
sector providing both curative and preventive treatments. The vast majority
of hospitals in Vietnam are generally overburdened and offer basic
treatment. Out-of-pocket expenditure accounts for approximately 50%-55% of
the total healthcare expenditure. The local healthcare infrastructure is of
poor standards. It is marked by inadequate equipment, relatively low
standards of medical technologies and a lack of advanced healthcare
To keep up with the healthcare demands of the populace and to provide
better access to quality affordable healthcare, the government has put in
place a number of initiatives to bolster the healthcare industry and
increase national insurance coverage, which currently covers 45% of the
population. With an aim to improve access to health services, the
government is encouraging investments by private players under the public
private partnership model and has granted special tax benefits / exemptions
and also adopted preferential policies on land and investment for
developing healthcare infrastructure.
Given that nominal GDP growth is expected to increase at a CAGR of 11% from
2010 to 2015 and total healthcare expenditure expected to increase at a
CAGR of 13.8%, a growing middle class, with higher disposable incomes, will
demand better quality and advanced healthcare facilities and services.
These would provide attractive opportunities for private players to expand
and grow in the healthcare space in the country.
The healthcare market in the Asia Pacific region has become the global hub
for emerging private hospital services driven by a growing ageing
population, increasing medical tourism and the shift in the disease profile
towards chronic ailments. Patients with better access to information,
higher literacy levels and rising per capita income will demand the latest
treatment options with quality patient care and services. Most emerging
countries in the region, inadequate in terms of the healthcare
infrastructure for their citizens, are witnessing a discernible change in
their respective government towards recognising the need for encouraging
private investments in the sector and inducting public private partnership
models. With technological advancements and seamless geographic boundaries,
the demand for end-to-end integrated healthcare services is expected to
increase in the future and companies that have a presence across multiple
verticals and geographies will be well positioned to capitalise on the
growth opportunity in the region.
Risks and Challenges
Shortage of Healthcare Professionals: Human capital development is crucial
for delivery of health services. There is a shortage of healthcare
professionals to meet the demands of the rising population. This challenge
is more prominent among the emerging countries where there is a huge gap in
healthcare supply and demand, primarily as a result of talent gap,
ineffective training policies, weak institutions, lack of government
support and lack of incentives for health professionals. For example, the
number of doctors per 1,000 people in Indonesia, Vietnam and Thailand is
less than 1, as compared to developed nations such as South Korea, Taiwan
and Singapore, which have between 1.5 and 2 doctors per 1,000 people.
India had a ratio of 0.5 doctors and 1.3 nurses per 1,000 population, as
compared to the global average of 1.4 doctors and nearly 2.8 nurses per
1,000 population. This translates into a gap of nearly 1.0 million doctors
and 1.8 million nurses as of 2010. The gap in terms of number of beds
stands at nearly 3.7 million, given India`s ratio of 0.8 beds per 1,000
population, against the WHO recommendation of 4.0 beds per 1,000
Governments in many emerging economies such as India need to address this
huge shortage in infrastructure and manpower by adopting public private
partnership models. Given the longer gestation periods for healthcare
projects and the capital intensive nature of the industry, governments
would need to provide additional benefits and incentives for encouraging
more investments by private players. In addition, the largely unorganised
and fragmented nature of this sector calls for the need of aligning quality
and standardisation of medical procedures and healthcare services across a
common platform. Lack of an adequate number of medical colleges and
institutions also calls for massive investments in educational
infrastructure to meet the growing demand for doctors and other healthcare
professionals in the region.
Broadening Spectrum of Services and Specialities: The shift of disease
patterns and demographics changes the type of healthcare services offered.
The spectrum of services has broadened to preventive, diagnosis,
intervention, recovery, rehabilitation and patient management, while
hospital services are moving from acute to chronic to preventive and
specialised care. Furthermore, with the increasing burden of non-
communicable diseases, which are caused by environmental degradation,
lifestyle changes (especially in the middle-high income groups) and the
rapid ageing population, healthcare budgets will continue to be under
pressure due to the requirement of sophisticated and capital intensive
Innovative Delivery Models: With increasing healthcare costs and
competition, consumers demand better quality and transparency in pricing.
Healthcare service providers, especially private healthcare companies, will
therefore need to find innovative delivery models that allow them to focus
on providing core medical services, emphasising clinical quality and
safety, service quality, timely access, treatment options and
Research & Access of Population Health Data: Access to health data is
limited in emerging countries. This health data is important for healthcare
service providers to understand the risk and behaviour of consumers in
order to identify gaps in services. Many of the countries in Asia Pacific
lack the availability of systematic and scientific health data to
comprehensively understand treatment costs and disease burdens. This
warrants a public private collaboration to strengthen research into and
access to population health data.
Fortis Healthcare is a leading integrated healthcare delivery provider in
the pan Asia Pacific region. Founded by the iconic Indian business leader,
the Late Dr. Parvinder Singh, architect of Ranbaxy Laboratories, Fortis is
a manifestation of his vision "to create a world-class integrated
healthcare delivery system in India, entailing medical skills combined with
compassionate patient care". The company is the fastest-growing healthcare
network across the Asia Pacific and has the largest hospital network in
India, with the highest number of quality accredited hospitals. Fortis
aspires to become a global leader in the integrated healthcare delivery
space and is driven by the larger purpose of saving and enriching lives
through clinical excellence.
Fortis commissioned its first hospital in 2001 in North India and, in just
10 years, has grown to become a multi-geography, multi-vertical, integrated
healthcare provider in 10 countries. Currently, the company operates its
healthcare delivery network in Australia, Canada, Dubai, Hong Kong, India,
Mauritius, New Zealand, Singapore, Sri Lanka and Vietnam, with 75
hospitals, a capacity of over 12,000 beds, over 600 primary care centres,
191 day care speciality centres, more than 210 diagnostic centres and a
talent pool of over 23,000 people.
Fortis Healthcare has grown rapidly through acquisitions, greenfields,
brownfields and management contracts. Fortis India consummated the biggest
deal in the Indian Healthcare Sector with the acquisition of five hospitals
from Escorts Heart Institute & Research Ltd in 2005. This was followed by
another strategic large acquisition in 2009: the acquisition of the
Wockhardt chain of 10 hospitals (including two facilities under
construction), giving Fortis a presence across India and an employee
strength of over 10,000.
Fortis made its first international foray in January 2009 and, along with a
local partner, acquired a majority stake in a leading private hospital in
Mauritius. Fortis further consolidated its India presence by ascending the
healthcare value chain with the acquisition of Super Religare Laboratories
(SRL) in May 2011. SRL being a leader in the organised diagnostic market in
India is a complimentary fit to Fortis`s hospital business. In September
2011, the company announced the acquisition of Fortis Healthcare
International Pte Limited. This acquisition gave Fortis Healthcare a
dominant position in the rapidly evolving healthcare delivery marketplace
in Asia Pacific. The combined entity becomes one of the largest and the
fastest-growing integrated healthcare delivery networks in the Asia Pacific
healthcare arena, evolving as a front runner in healthcare delivery.
Expansion during the year
Super Religare Laboratories: In May 2011, the company acquired
approximately 86% stake in Super Religare Laboratories Ltd (SRL) one of
India`s largest and leading diagnostic services companies, offering
diagnostic testing (including Pathology and Radiology), preventive care
testing and clinical research trial testing. At the time of acquisition,
SRL had 8 reference laboratories, 7 Centres of Excellence, 181 Network
Laboratories (164 pathology labs and 17 radiology labs), 15 Wellness
Centres and 888 Collection Centres. Fortis` stake in SRL, from the time of
its acquisition, is expected to eventually reduce to approximately 56%, as
a result of infusion of capital in the company by various private equity
players. The recent transaction in June 2012 with two prominent private
equity players infused Rs.370 Crore of capital in the form of Compulsory
Convertible Preference Shares (CCPS).
Acquisition of Fortis Healthcare International Pte Limited (FHIPL): During
the fiscal, the company consummated its acquisition of 100% of Fortis
Healthcare International Pte Limited, a Singapore based leading integrated
healthcare delivery company with a presence in 9 countries. This
acquisition has fortified Fortis presence as a premier healthcare
organisation in the Asia Pacific region and has diversified its reach
across a number of strong growth markets and verticals in the region. FHIPL
has a multi-vertical presence in diagnostics, primary healthcare, day care
speciality and hospitals; and its global assets include:
* Dental Corporation, Australia & New Zealand:
The largest dental care network in Australia and New Zealand with over 175
practices. Fortis owns approximately 60% in Dental Corporation.
* Quality Healthcare Ltd, Hong Kong: The largest primary care network in
Hong Kong with more than 600 centres, wholly owned by Fortis.
* Fortis Hoan My, Vietnam: One of Vietnam`s largest private healthcare
provider groups with approximately 800 beds across 5 hospitals and 4
clinics; 65% owned by Fortis.
* Fortis Colorectal Hospital, Singapore: A greenfield speciality hospital
in Singapore which will be South East Asia`s first hospital dedicated to
colorectal disorders, wholly owned by Fortis.
* SRL, Dubai: The largest private pathology diagnostics laboratory in the
UAE. The business comprises SRL International FZ LLC. and MENA Healthcare,
with Fortis owning 100% and 82.5% stake respectively.
* Lanka Hospitals, Sri Lanka: Sri Lanka`s largest super speciality
hospital with 350 beds in which Fortis owns approximately 28.6% stake.
To further strengthen its presence in the Singapore healthcare market and
expand its vertical presence into the diagnostics segment, the Company
during the year acquired an 85% stake in RadLink Asia Pte Limited,
Singapore. This is the largest private outpatient diagnostic and molecular
imaging chain in Singapore, with a presence in diagnostic imaging,
molecular imaging, cyclotron (radio-isotopes manufacturing) and GP clinics.
With all of the aforementioned, the company acquires a wider footprint
across the region with an optimum mix of developed and emerging markets. It
positions the Company as a prominent integrated healthcare service provider
with expanded offerings in the region; with a potential for unlocking value
by leveraging clinical competencies and combined scale across verticals and
businesses. It provides the Company with an opportunity to create a common
technology foundation for the future across various functions and to
establish a global supply chain and shared services platform. Importantly,
it enables the Company to leverage its enhanced talent pool of clinical and
management professionals, allowing it to enhance the value proposition it
offers to its patients.
Fortis`s Diversified Geographic and Vertical Presence
Key Upcoming Projects
Fortis Memorial Research Institute, Gurgaon, Haryana: The Company`s
flagship hospital in Gurgaon is expected to be formally inaugurated in Q2
FY13. The hospital has been equipped with modern infrastructure, state-of-
the-art technology and has Centres of Excellence in Oncology, Trauma,
Pediatrics, Mother & Child care, Gastroenterology, Neuro-sciences and Renal
care. The hospital is designed to offer the best medical care with
international protocols and will also focus on medical value travel. This
is a premium multi super-speciality hospital, spread over 11 acres of land
with a bed capacity of 450 in phase-I and an overall capacity of
approximately 1,000 beds.
Fortis Colorectal Hospital Singapore (FCH) aims to create a new model of
private healthcare in the form of a specialist surgical hospital focusing
on colorectal diseases. By virtue of this model, FCH is at the leading edge
of colorectal surgery, deploying the most advanced medical technologies and
partnering with the most outstanding colorectal surgeons. This will be
Fortis Healthcare`s first colorectal hospital and also South East Asia`s
first and only colorectal hospital. The hospital was formally inaugurated
on 31 July 2012.
Fortis Hospital, Kangra, Himachal Pradesh:
Fortis Hospital, Kangra commenced operations during the first week of July
2012 and is the first corporate, multi-speciality hospital in Himachal
Pradesh. The hospital has advanced clinical programmes and provides super-
specialised care in Urology, Cardiology, Renal sciences, Orthopaedics,
Endocrinology and Pulmonology. The state-of-the-art hospital has a critical
care unit, an obstetrics and maternity programme, complete with a Neonatal
ICU (NICU). It also offers 24-hour emergency services, diagnostic services,
physiotherapy, dental care and preventive health checks.
Fortis Hospital, Arcot Road, Chennai: The Arcot Road project is designed
for a 200 bed tertiary care multi-speciality hospital. The civil and
interiors work is progressing in full swing and is on-track. The hospital
is expected to be launched during the last quarter of this fiscal year.
Fortis Hospital, Ludhiana, Punjab: The construction work at the 214 bed
super speciality hospital in Ludhiana is on in full earnest. The hospital
will focus on Neuro-sciences, Renal care, Gastroenterology, Cardiology,
Mother & Child care, and Oncology. The hospital is expected to be completed
by the end of FY13.
Other Projects: Several similar projects are being undertaken by the
Company and these would significantly increase the existing bed capacity
over the next 3-5 years. These projects, primarily under an "asset light"
model, are spread across metros and tier I cities, enabling the company to
further deepen its footprint in the country.
Financial and Operational Highlights
For FY12, the Company reported its audited consolidated total income of
Rs.3,168 Crore (a growth of 63%), which include revenue of Rs.642 Crore
from the international operations and Rs.433 Crore from the diagnostics
business. Earnings before Interest, Depreciation, Tax and Amortisation was
reported at Rs.587 Crore, against Rs.506 Crore (a growth of 16%) in the
previous year. The net profit for the company stood at of Rs.72 Crore for
the year under review.
On the operational front, the company reported an annual revenue of
Rs.2,984 Crore, a growth of 100%. The India business comprising the
Hospital and the Diagnostic business contributed Rs.2,342 Crore, a growth
of 57% over the corresponding year. For the year under review, the hospital
business in India grew by 28% to Rs.1,909 Crore, compared to Rs.1,496 Crore
The International business, which was consolidated for three months period
ended 31 March 2012, reported a revenue of Rs.642 Crore and contributed
approximately 50% to the consolidated revenues for the same period. The
major contributors were Dental Corporation, Australia and Quality
Healthcare, Hong Kong, which reported revenues of Rs.359 Crore and Rs.212
Crore, respectively, for the period under consolidation.
For the year 2012, the Operating EBITDA of the company stood at Rs.403
Crore, a growth of 100% (excluding the Parkway transaction impact).
Consolidating the acquisition of the International business and the
diagnostics business in India, the operating EBITDA margin of the Company
stood at 13.5%. For the India Hospital business, the operating
EBITDA stood at Rs.280 Crore, a growth of 39% and representing a 14.6%
margin compared to an operating EBITDA of Rs.202 Crore and margin of 13.5%
in FY11. The net profit for the company stood at Rs.72 Crore for the year.
As the company continues to add new hospitals and new medical programmes in
India, it is maintaining its focus on medical quality in terms of improving
and standardising the quality of nursing and also equipping its hospitals
with high-end technology. During the year, the company launched an e-ICU
project with FEHI, e-connecting ICUs of Raipur, Dehradun and Amritsar, an
MRI (with Cardiac capabilities) and Gamma Camera (for radioactive Cardiac
Studies) were installed in FEHI, a Da Vinci Robot was also installed in
FEHI (for minimal invasive surgeries). The company, started a Liver
Transplant programme in Noida, installed New Cath Labs in hospitals at
Mohali, Mulund and Raipur, installed a urology laser in Amritsar, an
Endoscopic Bronchial Ultrasound at Bannerghetta Road, Bengaluru and
Endoscopic Ultrasound at Cunningham Road, Bengaluru and Anandpur, Kolkata.
The hospitals across the network in India performed approximately 58,000
Cardiac procedures, over 5,900 Neurological procedures and over 13,000
Orthopaedic procedures. While cardiac procedure volumes grew 11%,
orthopaedic and neurological procedure volumes each registered a growth in
excess of 20%.
Focus on quality remains an ongoing feature at all the Fortis hospitals and
it is typical for most hospitals to make focused attempts towards achieving
accreditation, commensurate with their relative positioning in the region,
locally, country-wide and internationally. During the year under review,
Fortis Mulund successfully received its accreditation by the Joint
Commission International (JCI) for the third time while Fortis Escorts
Heart Institute, Delhi, Fortis Escorts, Jaipur, Fortis Hospital, Mohali
received re-accreditations from National Accreditation Board for Hospitals
(NABH). Furthermore, Fortis Malar hospital received NABH accreditation for
its Blood Bank - the first hospital blood bank to do so in the states of
Tamil Nadu, Kerala and Andhra Pradesh. The blood bank at Fortis Mulund was
also re-accredited by the NABH. The diagnostic laboratory at the Jaipur
hospital received the prestigious National Accreditation Board for
Laboratories (NABL) accreditation. The Fortis network currently has 4 JCI
accredited hospitals, 12 NABH accredited hospitals, 7 NABH accredited blood
banks and 5 NABL accredited laboratories.
The company`s Diagnostics Business (SRL) in India expanded its operations
to reach over 1,100 collection centres and set-up three new network
laboratories in the cities of Delhi, Bangalore and Kolkata during the year.
The company also strengthened its doctors coverage from 45,000 doctors in
FY11 to 73,000 doctors in FY12.
The largest business of the Company internationally, Dental Corporation
(DC) is the market leader in Australia and New Zealand with over 175 dental
practices comprising over 600 chairs. During FY12, DC acquired 25 practice
locations and launched 4 new greenfield practices, in partnership with the
existing dentists, and undertook 8 expansion projects at existing
facilities. Dental Corporation also entered the dental market in Canada
during the year.
Quality Healthcare (QH), the Company`s primary care business in Hong Kong,
retained its market leader position with approximately 8% market share. The
company also expanded its presence in the diagnostics space by launching
its first Diagnostic and Imaging Centre, providing a full range of services
and further enhanced its diagnostics presence by acquiring 70% interest in
Central Medical Diagnostic Center Limited (CMDC), a leading diagnostic and
imaging group in Hong Kong. During the year, the company sharpened its
focus on high-end speciality work by adding 12 specialists viz. Neurology,
Orthopaedic, Endocrine, Urology, Dermatology, etc. and launched a new
Orthopaedic Medical Centre in the commercial area to attract high-end
Internal Control Systems
The Board acknowledges its overall responsibility for ensuring that the
Company has satisfactory systems of internal control. Internal Control
Systems and procedures are in place to identify, control and report on
major risks, including strategic, people, operational, financial,
technological and regulatory risks. The Board monitors exposure to these
risks with the assistance of various committees and the senior management.
The fundamental objective of the Company`s internal control systems is to
manage and mitigate the risks facing the Company. The Company believes that
its internal control systems and procedures are commensurate with its size,
have been designed to safeguard corporate assets, maintain proper
accounting records and provides, among other things, a reasonable assurance
that transactions are executed with Management authorisation. The system
comprises a well-established organisational structure and framework for
policies and standards. Under the current framework, each geography or
functional unit is primarily responsible for implementing effective
controls within its area of operation.
The internal control systems are supported by a review and continuous
improvement cycle run under the mandate of an extensive internal audit
programme, periodical management reviews and a tight budgetary control
mechanism. The Internal Audit Department provides an independent review on
the adequacy and effectiveness of the internal control system and helps
identify and prioritise opportunities for improvement.
The annual audit plan, prepared on a risk assessment methodology, is
discussed and approved by the Audit, Risk and Controls Committee. In
addition to its agreed annual schedule of work, the Department conducts
other special reviews as required. The Head of Internal Audit reports to
the Executive Director on an administrative basis but has direct access to
the Audit, Risk and Controls Committee and its Chairman, ensuring that
independence is preserved.
The Internal Audit Department leverages external expertise (in the form of
outsourcing audit field and testing work to professional audit firms and
building access to subject matter expertise) and in this regard holds
accountability for setting out the scope and terms of the relationship, and
managing execution and output of such field work towards rendering its
opinion. The findings of the Internal Audit functions are shared within
management and action plans are monitored towards resolution under the
supervision and guidance of the Audit Risk and Controls Committee.
Our People Agenda
At Fortis Healthcare, people remain the most important asset in enabling
the Company to achieve its strategic goals. Fortis continues to attract,
develop and engage with talent and endeavours to provide a value centric
culture to enable the delivery of performance.
As the business continues to expand, the need to continuously have the
right people at the right place to maintain high standards and drive growth
through innovative business models and integrated healthcare delivery
systems becomes all the more important. The HR function aims to create a
stimulating environment that demands performance and nurtures creativity,
recognises achievements individually and collectively.
Values & Culture Integration
With different businesses in different verticals and different geographies
at different stages of development, we had globally defined what binds us
The collective leadership team co-created a shared Purpose, Vision and set
of Global Values. What brings meaning to our existence is Our Purpose -
`Saving and Enriching Lives` while our aspiration is encapsulated by Our
Vision: `To be the global leader in the Integrated Healthcare space`. And
what acts as our compass and guiding light is our set of Global Values
Patient Centricity, Integrity, Teamwork, Ownership, and Innovation. Our
Global Values are at the core of everything we do, guiding our actions and
The Global Values were launched successfully via a `Live` Webcast for the
first time across all the Company`s businesses and geographies on 16
February 2012 from New Delhi. This was followed by the respective local
office `celebration` to engage and socialise the `Values` with all
employees. In addition, numerous initiatives for next year to reinforce a
Values-driven organisation and co-create our desired Fortis` `Ways of
Working`, which we consider as our key integrator and differentiator were
put in place.
Integration within the India Business
In an effort to integrate and build a single operating entity for the India
operations, a unified organisation structure for the Corporate Functions
and Operations was created and rolled out in the month of December.
Integrated organisation structures were created and proliferated for Human
Resources, Information Technology, Sales & Marketing, Finance, Internal
Audit, Supply Chain Management and other functions. We also took a giant
leap in our efforts towards integration by creating a unified grade
structure which will be proliferated across the country shortly. Also, for
the very first time, a common performance appraisal cycle was run with all
To maintain our growth and sustainability, succession plans for the senior
leadership team and identification of critical positions and key
competencies required for the successor pools were initiated. Given the
competition for talent in healthcare in Asia, we strive to grow our
internal pipeline through targeted talent acquisition and talent management
FORWARD LOOKING STATEMENT
Except for the historical information contained herein, statements in this
discussion which contain words or phrases such as `will`, `would`,
`indicating`, `expected to` etc., and similar expressions or variations of
such expressions may constitute `forward-looking statements`. These
forward-looking statements involve a number of risks, uncertainties and
other factors that could cause actual results to differ materially from
those suggested by the forward-looking statements. These risks and
uncertainties include, but are not limited to, our ability to successfully
implement our strategy, future business plans, our growth and expansion in
business, the impact of any acquisitions, our financial capabilities,
technological implementation and changes, the actual growth in demand for
our products and services, cashflow projections, our exposure to market
risks as well as other general risks applicable to the business or
industry. The Company undertakes no obligation to update forward-looking
statements to reflect events or circumstances after the date thereof. These
discussions and analysis should be read in conjunction with the Company`s
financial statements included herein and the notes thereto.
1. Frost & Sullivan report on the Healthcare Delivery Market.
2. International Monetary Fund (IMF), United Nations (UN), World Health
3. Indian Diagnostic Services Market Report by IMaCS (ICRA Management
Consulting Service Limited).
4. IBIS World Industry Report 08623: Dental Services in Australia.
5. Australian Research Centre for Population Oral Health ("ARCPHOH")
(Teusner DN), Australian dentist labour force 2003, Australian Dental
6. New Zealand Ministry of Health, Health Expenditure Trends in New Zealand
7. Canadian Dental Association.
8. Australian Institute of Health & Welfare,
9. Australian Bureau of Statistics.
10. Market Research Reports , web articles, press clippings, others.