Submitted byGROUP 4 (Section F) 1. Akanksha Vyas 2012PGP020 2. Bharath Gangadharan 2012PGP085 3. Pavitra Yadav 2012PGP250 4.

4. Sugeet Mittal 2012PGP378 5. Sumit Kumar Pramanik 2012PGP383 6. Sumit Swarnakar 2012PGP384

Primary Care Secondary Care Tertiary Care Pharmacies Consultancy Hospital Management Healthcare Insurance Diagnostic Labs

Expected to grow from US$35bn in 2008 to US$62bn in 2013 Constituted 5% of GDP. In terms of jobs created, it was in top 3 in 2011 Capacity of ~1.3mm beds, estimated to need 1.75mm beds by 2025, involving estimated US$75bn 61% of private healthcare spend is on outpatient care, 57% on acute infectionary diseases

Over the years the industry has evolved to come to be dominated by private investments
Evolution of hospital sector in India
Till 1970s
Largely government driven Considered as charitable activity, and tedious process for even simple procedures

1980-1990s

First signs of corporate activity, opening of nursing homes

Adoption of technology and emergence of sub-specialties

1990- to date

Emergence of specialty hospitals and need for high medical service standards Growth driven by increasing health insurance penetration

Resources
2006 Population (bn) Number of beds Government Beds Private Beds Investment Required ($bn) Government (2006-2012) ($bn) Private (2006-2012) ($bn) Revenues (Private Hospitals) 15.0 1.1 1,222,654 539,545 683,108 2012 1.2 2,231,442 651,814 1,579,628 75.1 14.8 41.8 34.6

Expenditure
Private Spending Government spending 41.8 8.1 3.6 2001 14.8 2012

High patient population

2
2010 78% 78% 2011 69% 62%

Availability of quality healthcare

Shift in disease pattern from

Leading medical

Doctors 9.4 2.8 1.3 2.6 3.8 1.2

Nurses

communicable to high incidence life style related diseases

Demand for tertiary and

69% 62%

tourism destination
One of the largest number

quaternary care
Increasing penetration on

Apollo

Fortis Max Occupancy rates

About 0.5 million doctors,

insurance to drive growth in healthcare business

0.9 million nurses and 1 million beds

Growth drivers 4
Investment opportunities

Increased expenditures on healthcare (US$bn)

Growth in population and increased disposable income to

Gap in infrastructure, in terms of healthcare facilities

and personnel, presents opportunities for attracting foreign investment

FDI investments of ~1bn in hospitals and

increase healthcare spending

Healthcare expenditure is expected to increase by 15% per

annum
Private healthcare accounts for nearly 80% of the countrys
2.6

diagnostic centers segment 9.7

0.7 2.9 2.6 2.2 1.9

total healthcare expenditure, although it is more expensive as compared to public healthcare services 62
35

Sri Lanka

India

China

Russia

Malaysia

Brazil

Availability of beds

World avg.

2008A

2013E

Malaysia

of Joint Commission International (JCI) approved hospitals

1.4 1.8 1.3 1.0 0.7 0.6

World avg

China

Brazil

India

USA

Company

Mkt. cap. (INR Cr.) 9417.4

Sales (US$mm) Key metrics

Business description

Key investors Promoter group (34%), FIIs(24%), Foreign corporate bodies (21%)

Chairman: Prathap Reddy Headquarters: Chennai

458.6 No. of hospitals: 53 Founded by Dr. Prathap C Reddy in 1983, as a 150-bed hospital in No. of beds: Over 8,500 Chennai No. of pharmacies: 1,050 Largest hospital chain in India, it also operates neighbourhood diagnostic clinics, an extensive chain of Apollo Pharmacies, medical BPO and health insurance services and clinical research divisions with 53 hospitals (spread all over India and also in Mauritius and Bangladesh), over 8,500 beds, 1,050 pharmacies and 100 neighbourhood clinics Alliance with AIG, ALICO, Vanbreda, Seven Corners, International SOS, GMC services, Emergency assistance (Japan), Companion Global Healthcare, International Claims Service and Prestige International

3905.93

219.9 No. of hospitals: 51 No. of beds: Over 8,000

Formed in 1996, was started by the promoters of Ranbaxy Laboratories Second largest hospital chain in India with a pan India presence managing more than 51 hospitals and ~8,000 beds under management Successfully completed acquisitions2005: Escorts chain of hospitals 2008: Malar Hospitals, Chennai 2009: Wockhardt hospitals Alliance with international partners such as Aetna, Bupa, Cigna, GMC Services, HTH Worldwide, Vanbreda, World Access & Surgical Tourism (Canada)

Fortis Healthcare Holdings Ltd. (81%)

CEO: Bhavdeep Singh Headquarters: New Delhi

Manipal Health Systems Pvt Ltd.

32.4

110.9 No. of hospitals: 15 No. of beds: ~3,700

Formed in 1953, was started by Dr. T.M.A. Pai as part of a University and Healthcare township at Manipal Provides tertiary, secondary and primary healthcare delivery services with 15 hospitals, 9 primary care clinics and 55 community health programs, 7 rural maternity and child welfare homes including ~ 3,700 beds under management

CEO: Ramdas Madhav Pai Headquarters:Bangalore

Provides services in cardiovascular, neurology, nephrology, oncology, urology, dental science, metabolic disorders, andrology & various other diagnostic services In Jun 2008 IDFC Private Equity made a INR900.0mm ($20mm) investment

Kotak Private Equity Group, Manipal Education and Medical Group International India Pvt. Ltd.

Source: Company information

Company

Sales (US$mm) Key metrics N/A No. of labs: 170 No. of tests/day: 34,000 No. of customers/year: 12mm

Business description Founded in 1996, is the largest pathology laboratory network in India, servicing nearly 4,000 hospitals / path labs comprising over 50,000 doctors Performs over 34,000 tests/day and caters to approximately 8 million patients in a year offering a comprehensive range of over 3,500 tests covering 95 technologies

Key investors Fortis Healthcare Ltd., Religare Enterprises Ltd.

CEO: Sanjeev Chaudhry Headquarters: Delhi

Geographic footprint extends to Gulf countries, UK and SAARC In July 2010, acquired Piramal's dignostic business for INR600mm (US$129mm), combined entity to have 170 dignostic centers serving more than 12 million customers N/A No. of labs: 39 No. of tests/day: N/A No. of customers/year: 4mm Established in 1949, is one of the largest diagnostic service provider in the country Offers more than 1,650 different types of tests and has a pan India presence in all important cities and towns of India, in the form of laboratories and patient service centres Employee strength of over 1,000, serves around 4 million customers every year In August 2010, TA Associates bought a 16% for $35mm, also Sequoia capital holds 16% stake in the firm N/A No. of labs: 124 No. of tests/day: ~13,0001 Has 124 diagnostic centers in 85 cities, and over 400 collection centers visited by more than 9,900 patients per day Offers a comprehensive range of tests in pathology Also offers a comprehensive range of tests in radiology spanning X-ray, ultrasound, color dopplers, mammography, bone densitometry, Orthopantomography (OPG), CT scan and MRI In July 2010, was acquired by Super Religare Laboratories for INR600mm (US$129mm) Super Religare Laboratories Sequoia Capital India, TA Associates Inc.

Summary of diagnostic services players

Chairman: Arvind Lal Headquarters: Gurgaon

Chairman: Ajay Piramal (pre acquisition) Headquarters: Mumbai

Source: Company information

Business overview
Founded by Dr. Prathap C Reddy in 1983, it started as 150-bed hospital hospital in Chennai Largest hospital chain in India, it also operates neighborhood diagnostic clinics, an extensive chain of Apollo Pharmacies, medical BPO and health insurance services and

clinical research divisions

50 hospitals (spread all over India and also in Mauritius and Bangladesh) Over 8,500 beds 1,050 pharmacies 100 neighborhood clinics Alliance with AIG, ALICO, Vanbreda International, Seven Corners, International SOS, GMC services. Emergency assistance (Japan), International Claims Service and

Prestige International

Recent news
September 14, 2012: Apollo Hospitals wins awards in 4 categories at Asian Hospital Management Awards, 2012 August 14, 2012: Apollo Hospitals decides to raise private label products in pharmacies July 6, 2012: Apollo Hospitals performs complex Robotic assisted Urosurgery on 7-year old African child

Key management and board

Name Dr. Prathap C Reddy Preetha Reddy Suneeta Reddy Sangita Reddy APV Reddy Position Executive Chairman MD Joint MD Executive Director, Operations Company secretary

Source: Company information, FactSet, equity research

Business overview
Formed in 1996, was started by the promoters of Ranbaxy Laboratories 2001: Opened its flagship hospital in Mohali Alliance with international partners such as Aetna, Bupa, Cigna, GMC Services, HTH Worldwide, Vanbreda and World Access Second largest hospital chain in India with a pan India presence Manages more than 40 hospitals ~ 6,700 beds under management Successfully completed acquisitions 2005: Escorts chain of hospitals 2008: Malar Hospitals, Chennai 2009: Wockhardt hospitals Segment wise revenues: Inpatient care (81%); Outpatient care (10%); Income from medical services (3%); Management fees from hospitals (1%); Others (5%);

Recent news
July 6, 2012: Fortis and GE join hands to provide care to critically ill patients in small towns in India, via CritiNext January 09, 2011: Fortis doctors perform Indias first CT-Scan based Knee Replacement February 11, 2010: Announced a 200 bedded Greenfield project in Ludhiana, Punjab and a 100 bedded hospital project in Kangra, Himachal Pradesh

Key management and board

Name Malvinder Mohan Singh Shivinder Mohan Singh Bhavdeep Singh Balinder Singh Dhillon Srivatsan
Source: Company information, equity research

Position Chairman MD CEO Executive Director CFO

Increased regulation in bodes well for organized players as it is expected to drive higher in-patient volumes and improve supply of medical fraternity
Growth of Indian healthcare sector has been unplanned and unregulated and lacks accountability Centre as well as states have provided tax incentives and concessions to promote healthcare delivery Failed to regulate the sector and ensure a minimum level of patient care quality Only 13 states in India register nursing homes / hospitals under the Nursing Home Act, whereas the remaining states register nursing homes/ hospitals either under the Shops and Establishments Act or Societies Act Resulted in serious problems like opaque pricing, overcharging and inefficiencies in the system Clinical Establishments Bill 2010 Makes it mandatory for all clinical establishments to register under the Act, however applicable only to 4 states Arunachal Pradesh, Mizoram, HP and Sikkim and Union Territories for now National Accreditation Board for Hospitals and Healthcare Providers (NABH) Established by Ministry of Health and Family Welfare, its accreditation of facilities confirms quality assurance and its standards focus on patient safety and quality of patient care NABH standards include 49 applicable licenses and statutory obligations under Indian law Nationwide implementation of Clinical Establishment Act 2010 Eventual nationwide implementation and strict enforcement may result in a spate of closure of nursing homes Only 54 hospitals in the county have got NABH accreditation of the 450 that have applied for it so far

NABH accreditation is now mandatory for hospitals seeking empanelment in the Central Government Health Scheme (CGHS)
Strict regulations / guidelines pertaining to minimum area/ beds, minimum number of qualified doctors/ nurses per bed, maintenance of records, checks on medical equipment, accreditation, etc.

Traditional approach

Recent regulations

Implications and trends

Poor supervision of small scale manufacturers Weak penalties for making and selling fakes and sub-standards India does not have list of essential drugs No compulsion to make and sell quality generics No supervision of detailing practices Prices kept relatively low Need for market competition to keep prices down IMA-refusal to recognize crucial role pf unregistered practitioner Who could be trained to deal with limited illnesses accounting for large percentage of Disease Government PHCs and hospitals quite unregulated for quality of service, presence of doctors, overcrowding, hygiene, etc No oversight over commercial hospitals & Nursing Homes No pursuit of criminals in Trade & Manufacturers Making & Selling fake and sub-standard drugs Drug Regulatory authorities understaffed, under budgeted, poorly motivated Pricing decisions poorly framed; No framework of essential cheap drugs for masses Need for system to pursue goal of Affordable and Safe Health for ALL

Health Governance is scattered over Ministries High Private expenditures on Health Care Poor efficiency of Government expenditures India must retain large and efficient Public sector for Health Care Accept large number of unavoidable illegal medical practitioners: Coopt them with training Minimize number of pharmaceutical manufacturers and ensure their quality Insist on Regular Re-training of all practitioners Make all offences non-cognizable Enforcement of Patent and Copyright Laws Severe Penalties for criminal acts of making and selling fake and substandard drugs, poor hygiene in hospitals and nursing homes, Make it easier to sue for poor quality health provision Manufacturers Involvement in patent protection (eg, fmcg, movies, recordings, etc) Expand and improve quality of Drug Regulatory personnel Accept WHO List of essential Drugs Impose proportion of Generics Patent Laws must guarantee quality, affordability and Availability of Medicines

Johnson & Johnson American multinational medical devices, pharmaceutical and consumer packaged goods manufacturer Employs more than 2000 people and the businesses span Consumer, Medical Devices & Diagnostics, Pharmaceuticals and Vision Care Pfizer American multinational pharmaceutical corporation headquartered in New York City Pfizer Limited (India) has a turnover of US$ 184.96 million (March 2012) Two of Pfizer India's brands -- Corex (Cough Formulation) and Becosules (Multivitamin) -- continue to rank among the Top 15 pharmaceutical drug brands

Roche F. Hoffmann-La Roche Ltd. is a Swiss global health-care company that operates worldwide under two divisions: Pharmaceuticals and Diagnostics After a contractual relationship of 10 years with NPIL, it was decided by FHLR to end the Frame Co-operation Agreement with NPIL in November 2003 GlaxoSmithKline Originally from UK, established in the year 1924 in India GlaxoSmithKline Pharmaceuticals Ltd. (GSK Rx India) is one of the oldest pharmaceuticals company The GSK India product portfolio includes prescription medicines and vaccines

In September 2011, Indias second largest hospital chain, Fortis Healthcare (India) Ltd, announced that it will merge with Fortis Healthcare International Pte Ltd., the promoters privately held company Abbot acquired Piramal Healthcare solutions in 2010 at US $ 3.72 billion which was 9 times its sales Fortis Healthcare one of the biggest healthcare chain of India acquired 23.9% stake in parkway holdings of Singapore based for USD 685.3 million (INR 31.10 billion) Medfort Hospitals to merge with eye care chain maxivision (September 2011 report)

Major Highlights 1. Healthcare spending to be increased from Rs.26,897 cr to Rs. 30,702 cr an increase of 14%. 2. Proposed increase in allocation for National Rural Health Mission and launch of the National Urban Health Mission to meet the needs of urban poor and slum dwellers.

3. The Rashtriya Swasthya Bima Yojana (RSBY) , health insurance for the poor has been extended to cover MGNREGA beneficiaries. This scheme will also include to

Apollo Hospitals
Particulars Mar 12 Mar11 Mar10 Mar09

Net Worth
Return on Net Worth(%) Debt-Equity Ratio Revenue EBITDA

2506.82
8.88

1898.94
10.04

1653.47
8.31

1461.17
7.01

0.26 2957.71 539.03

0.5 24363.66 425.95

0.48 1920.65 323.07

0.37 1531.07 228.43

Fortis Healthcare
Particulars
Net Worth Return on Net Worth(%) Debt-Equity Ratio Revenue EBITDA

Mar 12

Mar11

Mar10

Mar09

3257.84 2.22 2.00 2984.04 586.97

3285.37 4.25 0.37 1497.56 499.46

1886.95 4.81 3.63 945.18 189.91

1070.63 3.04 0.72 632.11 89.18

Max Healthcare
Particulars Net Worth Mar 12 Mar11 Mar10 Mar09

2637.75

1672.02

1825.77

1566.30

Return on Net Worth(%)

Debt-Equity Ratio

6.06

0.28

-5.51

-17.27

0.24

0.98

0.81

0.45

Revenue EBITDA

793.97
40.59

498.54
46.91

373.76
28.00

437.22
36.28

1. Increasing expenditure on healthcare

In India, expenditure expected to grow 15% per annum. Segment expected to constitute more than 6% of Indias GDP and employ about 9 million people in 2012 Medical equipment industry is to reach US$ 4.97 billion and is growing at 15 per cent per year.

2. Preference for private treatment

Private healthcare accounts for nearly 80% of the countrys total healthcare expenditures. Preference can be attributed to better perceived quality and accessibility.

3. Demand-supply gap
Growing demand for improved public health infrastructure due to the countrys population. Highlights the need for better healthcare delivery

1. The All India Institute of Medical Sciences (Amendment) Bill, 2012, replaces an ordinance which allowed the six AIIMS-like institutes to become operational from Sep 15. The bill also gives the central government authority to establish more AIIMS-like institutes. The six institutes were approved for Patna, Raipur, Bhopal, Bhubaneswar, Jodhpur and Rishikesh. 2. Fortis Healthcare has acquired the cream of rival Wockhardt Hospital chains assets eight running hospitals and two green field projects - for Rs 909 crore. 3. In September 2011, Indias second largest hospital chain, Fortis Healthcare (India) Ltd, announced that it will merge with Fortis Healthcare International Pte Ltd., the promoters privately held company. This will make Fortis Asias top healthcare provider with the approximate total revenue pegged at Rs. 4,800 crore. Fortis India will buy the entire stake of the Singapore based Fortis International. 4. Private-Public Partnerships The Indian Government is focused on developing the PPP model to cover the demand-supply gap prevalent in the healthcare sector. Private sector expertise coupled with efficiencies in operation and maintenance would lead to improved healthcare services delivery to the masses.

1. Indian Brand Equity Foundation 2. FactSet 3. Equity research 4. indiafoonline.com 5. Moneycontrol.com