Apollo Hospitals In Rapid growth phase

Prepared by Aravind Ganesan

Apollo Hospital In Rapid growth phase

AGENDA

INDIAN HEALTHCARE INDUSTRY A CASE OF UNMET DEMAND

APOLLO HOSPITALS WELL POSITIONED TO LEVERAGE THE OPPORTUNITY

STRONG FINANCIAL PERFORMANCE OF APOLLO HOSPITALS

PROMISING FUTURE OUTLOOK FOR APOLLO

Apollo Hospital In Rapid growth phase

Indias current healthcare spend and healthcare infrastructure is comparatively less

India is an under penetrate healthcare market
20% 15% 10% 5% 100 75 50 25

Lack of adequate infrastructure

0%
Global Brazil China India USA UK Healthcare Expenditure (% of GDP) Reliance on out of pocket expenditure 60% 40% 20% 0% Government Out of pocket Global Private prepaid India Others 15 0

0
Brazil Russia China India USA Hospital Beds (Per 10k Population) Lower number of Physicians as well

45 30

Brazil

Russia

China

India

USA

Physicians (Per 10k Population)

Apollo Hospital In Rapid growth phase 3

Changing demographics coupled with growth in per capita income and health insurance coverage to drive industry growth
Higher disposable income will increase affordability of healthcare in India
6000 5000 4000 3000 2013 2014 2015 2016 2017 2018 Per capital Income 300000 200000 100000 0 2011 2012 2013 2014E 2015E

Health insurance coverage will also aid in making Healthcare more affordable in India

Health Insurance Premium (Rs. Mil)

Ageing population will create a greater demand for healthcare services in India Indias Demographics 0-29 7% 31% 62% 2000 8% 35% 57% 2010 10% 37% 53% 2020 30-59 60+ 12% 40% 48% 2030 15% 41% 44% 2040 19% 41% 40% 2050
Apollo Hospital In Rapid growth phase 4

Medical tourism is another opportunity for growth

US

India

South Korea

Thailand

Bypass surgery Bypass surgery with valve replacement Hip replacement

70,000 75,000

7000 9,000

31,750 42,000

22,000 25,000

33,000

10,200

10,600

12,700

Knee replacement

30,000

9,200

11,800

11,500

Cost differential makes India a favorite destination for medical tourism After the advent of the US Affordable Care Act, US Insurance companies plan to encourage medical tourism

Apollo Hospital In Rapid growth phase

AGENDA

INDIAN HEALTHCARE INDUSTRY A CASE OF UNMET DEMAND

APOLLO HOSPITALS WELL POSITIONED TO LEVERAGE THE OPPORTUNITY

STRONG FINANCIAL PERFORMANCE OF APOLLO HOSPITALS

PROMISING FUTURE OUTLOOK FOR APOLLO

Apollo Hospital In Rapid growth phase

Apollo Hospitals is the leader with national footprint and presence across value chain
FORTIS # of Beds:6881 # of Hospitals:51 Pan India Apollo has created a strong brand name

GEOGRAPHICAL PRESENCE

APOLLO Hospitals # of Beds:8420 # of Hospitals:51 MANIPAL Hospitals # of Beds:4900 # of Hospitals:15 MAX Healthcare # of Beds:1100 # of Hospitals:8

Integrated business model Multi specialty

Single state

Apollo
Narrow BUSINESS SPAN AND BREDTH OF SERVICE
Apollo Hospital In Rapid growth phase 7

Wide

Pharmacy

Primary clinics

Apollo better positioned to tackle industry wide issues

Apollos education focus Human resource Professional management team Arrangement with doctors Special focus on case mix High cash balance Customized strategy Organizational climate survey Centralized purchasing Low D/E ratio Cluster based approach

Unique markets

Integrated business model High competition Better financials Higher operational efficiency

Apollo Hospital In Rapid growth phase

Brand name

Escalating break even levels

AGENDA

INDIAN HEALTHCARE INDUSTRY A CASE OF UNMET DEMAND

APOLLO HOSPITALS WELL POSITIONED TO LEVERAGE THE OPPORTUNITY

STRONG FINANCIAL PERFORMANCE OF APOLLO HOSPITALS

PROMISING FUTURE OUTLOOK FOR APOLLO

Apollo Hospital In Rapid growth phase

Apollo hospital exhibits robust financial performance across businesses

Revenue growth at a CAGR of 25.4% Consistent improvement in Margins

40000
30000 20000 10000 0 2008 2009 2010 2011 2012 Others 2013 2008 Hospitals Pharmacy 15% 6%

EBITDA Margin 14% 6% 15% 7% 16%

Net Margin 16% 7% 16% 8%

7%

2009

2010

2011

2012

2013

Healthy return on capital in a capital intensive industry

Healthcare services
ROCE

Consolidated
ROCE

14% 2008

17%
2009

15% 2010

19% 2011

18% 2012

18% 9% 2013 2008

10% 2009

10% 2010

13% 2011

13% 2012

14% 2013
10

Apollo Hospital In Rapid growth phase

Growth coupled with focus on efficiency

Metric 2011 2012 2013

Growth in in-patient volume Quick ramp up of new hospitals

Advancement in treatment Increase in minimally invasive procedure

Bed count

4767

5153

5450

Occupancy rate

Reducing ALOS

Occupancy rate (%)

73%

71%

72%

ALOS

4.79

4.78

4.65

Better occupancy rate and reducing ALOS Better case mix Higher tariff

ARPOB

18,474

20,455

21,70 2

Increasing ARPOB

Apollo Hospital In Rapid growth phase

11

Case mix focus in order to drive ARPOB and reduce ALOS

Specialty Mix
40% 30% 20% 10% 0% 2011 2013

Specialty Mix CAGR ('11-'13)

Cardiology
Others General surgery Transplants Orthopaedic Neurology Oncology 0% 20% 40% 60% Operating Margins 25-30% 25-30% 22-25% CAGR ('11-'13)

Ailment Cardiac Orthopaedics Opthomology

ALOS (Days) 5 3-4 1

Average Realization (Rs.) 2,00,000 2,00,000-2,50,000 15,000-30,000

Oncology
Neurosurgery

4-5
10

70,000-1,00,000
1,50,000-3,00,000

30-45%
16-18%
Apollo Hospital In Rapid growth phase 12

Capturing growth potential and increasing sales of private label

Increased retail penetration (CAGR 19%)

Stronger revenue growth (CAGR 41%)

1500 1000 500 2008 2009 2010 2011 2012 2013 No. of stores

10000 5000 0 2008 2009 2010 2011 2012 2013 Revenue (Rs. Mil) Focusing on profitability

2012-2013
80% 60% 40% 20% 0% FY 08 Batch FY 09 Batch FY10 Batch Total
Apollo Hospital In Rapid growth phase 13

Revenue growth EBITDA Growth

AGENDA

INDIAN HEALTHCARE INDUSTRY A CASE OF UNMET DEMAND

APOLLO HOSPITALS WELL POSITIONED TO LEVERAGE THE OPPORTUNITY

STRONG FINANCIAL PERFORMANCE OF APOLLO HOSPITALS

PROMISING FUTURE OUTLOOK FOR APOLLO

Apollo Hospital In Rapid growth phase

14

Apollos future performance looks promising

Rapid bed addition going forward High focus on super specialty hospitals NEW BED ADDITION

10000
5000 0 2012 2013 2014E 2015E 2016E Bed addition Increased asset efficiency going forward

REACH 20% Multi specialty 6%

Super Specialty 74%

Strong pharmacy store addition going forward 2000

25% 15% 5% 2013 2014E 2015E 2016E 2017E 2018E Growth in Revenue Growth in Depreciation 1500 1000 2013 2014E 2015E 2016E No. of stores
Apollo Hospital In Rapid growth phase 15

Apollo has great potential and in absolute terms is currently fairly priced but overpriced relative to its Indian peers
Apollo Market cap Earnings EV EBITDA P/E EV/EBITDA Value of Firm + Cash and marketable securities = - Value of Debt Value of Equity Number of shares outstanding Value of Equity per Share current price per share
118552.5 2940.4 123105.5 6121.0 40.3 20.1

Fortis
46463.7 4906.9 103196.0 14637.5 9.5 7.1

Indraprastha
3336.9 287.6 3807.3 799.9 11.6 4.8

128246.96 6988.23 11367.77 123867.42 134.47 921.18 881.65

Apollo Hospital In Rapid growth phase

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APPENDIX

Apollo Hospital In Rapid growth phase

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REFERENCES

http://www.livemint.com/Industry/lzrlJ8yJ5YJimXvqjwbXjN/Health-insurance-surge-to-put-India-in-top-10-pharmamarkets.html http://www.dnaindia.com/health/report-health-insurance-in-india-still-remains-an-untapped-market-1891509 http://en.wikipedia.org/wiki/List_of_countries_by_future_GDP_%28PPP%29_per_capita_estimates http://www.business-standard.com/article/companies/medical-tourism-set-to-be-in-the-pink-of-health-113082100489_1.htm Company reports

Apollo Hospital In Rapid growth phase

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