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Key growth drivers

Favorable demand-supply gap: India has 0.91 beds per 1000 population as compared to an
ideal rate of 4 beds per 1000 population (based on global standards)
PPP initiatives and innovative business models facilitating penetration in relatively unexplored
tier III cities and rural areas
Increasing insurance penetration providing greater access to quality healthcare services,
thereby enhancing patient base for hospitals
Key challenges
Lack of skilled manpower
High real estate cost
Extended commercial stabilization period
High operating leverage inherent in the business model
Approval/ clearance issues constraining the pace of development
Key Sector Trends
Changing demographics; increasing incidence of lifestyle-related diseases leading to greater
demand for alternative treatments
Growing medical tourism, aided by relatively lower treatment costs, fuelling demand
Increasing PE and VC interest, supporting capacity additions in the sector

SECTOR TRENDS

Increase in government capital-spend; however, scope for further investments


Increasing focus on tier I and tier II cities
Lower than desired growth in insurance penetration; majority of healthcare cost continues to
be borne out of pocket
Rising medical tourism
Increasing PE and VC interest
Innovative Business Models

FUNDAMENTAL BUSINESS ASPECTS OF HEALTHCARE INFRASTRUCTURE COMPANIES

High real estate cost - particularly crucial for single project companies
Investment in medical equipment critical to mitigate obsolescence risk and improve
competitive positioning
Managing human resources particularly in light of increasing competition
Complexity of service delivery driver of operating metrics
Association with established brands enhances credibility and revenue visibility
Capex plans and extent of reliance on debt funding key determinants of cash flows

Stressed healthcare infrastructure in India


Stressed healthcare infrastructure in India

The significance of the hospital infrastructure can be underscored simply by highlighting this
fact that Indian healthcare industry is currently estimated at US $40 billion of which 50%
comprises hospital infrastructure followed by pharmaceuticals (25%), insurance & medical
equipments (15%) and diagnostics making up for the balance 10%. The healthcare industry is
expected to grow to US $79 billion by 2012 and US $280 billion by 2020 and the growth of
hospital infrastructure is expected to be proportionate to it.
Indian healthcare expenditure is still amongst the lowest globally and there are significant
challenges to be addressed both in terms of accessibility of healthcare service and quality of
patient care. India rates poorly on even the basic healthcare indicators when benchmarked
against not only the developed economies, but also the other BRIC nations. The tabulation below
is evidence of the fact that a significant portion of the Indian population is unable to access
healthcare services which is a consequence of:

Accessibility to healthcare infrastructure on an overall basis is relatively imbalanced


and is extremely limited to many rural areas of the country. In addition, existing
healthcare infrastructure is unplanned and is irregularly distributed. Further, there is
a severe lack of trained doctors and nurses to service the needs of the large Indian
populous

The private sector has evolved a multi-pronged approach to increase accessibility


and penetration. It has tackled the issue of lifestyle related diseases with the
development of high-end tertiary care facilities. Also new delivery models such as
day-care centres, single specialty hospitals, end-of-life care centres, etc., are on the
horizon to service larger sections of the population and address specific needs.

Indias healthcare infrastructure has not kept pace with the economys growth. The
physical infrastructure is woefully inadequate to meet todays healthcare demands,
much less tomorrows. While India has several centers of excellence in healthcare
delivery, these facilities are limited in their ability to drive healthcare standards because
of the poor condition of the infrastructure in the vast majority of the country.