Investor's presentation on Apollo Hospitals, created under the supervision of the research department at Wallfort Financial Services Ltd.

1. 

2. Industry Overview
Healthcare has become one of India's largest sectors both in terms of revenue and
employment.
Healthcare service industry as a whole comprises of hospital industry, medical equipment
manufacturers, research organizations, pharmaceutical manufacturers, insurance providers.
Hospital industry is the single largest contributor to the Healthcare service industry by revenue
in India.
Healthcare sector in India has seen tremendous growth in the recent years and is presently
estimated to be around $100 billion industry.

3. Market for Healthcare
 There have been some important initiatives undertaken by the Government of India to improve the availability and
accessibility to Healthcare. The eradication of polio, notable reduction in HIV / AIDs incidence, encouragement of traditional
healthcare systems and practices and initiatives to reduce pre-natal mortality rates have been significant initiatives showing up
as green shoots across the healthcare landscape. There have been endeavors to leverage private sector efficiencies and
capacities through the Public Private Partnerships model.
 The inconsistency in the distribution of healthcare services across the country is a major concern which needs to be
addressed. Existing infrastructure in the rural areas does not make it conducive for quality healthcare to sustain, causing
inadequacies in meeting the ever growing needs of a major portion of the Indian population. The urban areas on the other
hand, which account for a smaller proportion of the population, has been enjoying better availability of healthcare
infrastructure.
 The private healthcare sector in India, is gearing up to match global healthcare delivery models. The growth of the private
sector is expected to continue going forward. They possess technical and managerial skills, and are innovative and flexible in
the deployment of resources. They are perceived to provide personalized quality services with greater efficiency than public
hospitals. The private healthcare sector is expected to grow consistently with support of macro-economic policies that recognize
the healthcare sector as an industry and provides for stimulus to private sector investment through tax concessions.
Additionally, the willingness of the people to pay for health services, along with support from the government aimed at de-
bottlenecking the sector will add impetus to the growth of the private sector.
 The hospital and diagnostic centers space attracted foreign direct investment worth $3,074.01 million between April 2000 and
March 2015.* This industry is growing at a tremendous pace owing to its extended coverage, range of services and increasing
expenditure by public as well private players.

4. Growth Drivers
Growth in Medical Tourism: The
relatively low cost of surgery and
critical care in India makes it an
attractive destination for medical
tourism. According to Grant
Thornton India, The Indian Medical
Tourism market is expected to grow
from to USD 7-8 billion by 2020.
Per capita income growth: Expected
to cross 1 lakh rupees (2017). An
increase in purchasing power is likely
to encourage growth in demand. The
growing per capita income naturally
leads for an increasing number of
people asking for quality healthcare
services.
Population growth: India's
population is expected to grow to
over 1.5 billion by 2026. At 9 beds
per 10,000 persons, the number of
beds in India significantly lags the
global median of 30 beds. This paves
the way for a huge growth in the
hospital delivery market.
Increased life expectancy: As life
expectancy has increased, the share
of population aged over 60 years is
expected to reach over 12 per cent
by 2026 from current levels of
around 8 per cent. This demographic
change implies a growing need for
hospitals and healthcare services.
Increase in health awareness:
India’s current literacy rate has
increased to 74% from 64.8% in
2001, leading to increased general
awareness, patient preferences and
better utilization of institutionalized
care in India.
Increase in lifestyle diseases: Due to
change in lifestyle, incidence of
lifestyle related diseases, such as
heart problems, oncology and
diabetes have vastly increased,
leading for a growing need for more
treatment centres.

5. Barriers to Entry and Exit
ENTRY:
Economies of Scale: The hospital service industry is expected to grow at the rate of 12.9% CAGR for next five
years and hence the hospital chains can achieve economies of scale if they work on improving operational
efficiencies. It will be difficult for the new entrants to achieve this economies of scale even after investing huge
amount of money in fixed costs involved in raising a hospital.
Brand identity: The established hospitals like Apollo have the brand identity to attract more customers.
Similarly the other hospitals in this industry also have loyal customers (patients and insurance providers) in
their respective geographies. As there is risk of life involved, this industry is all about building trust to the
customers. Hence, initially it will be very difficult for the new entrants to build the level of trust as the already
existing hospitals.
Switching costs: Patients mostly will be comfortable when they are treated by the doctor who knows about
their history. So, patients will be hesitant to change the doctor unless otherwise it is strongly recommended by
someone else. Hence, the switching from one hospital to another for the same treatment occurs rarely in
hospital industry. So, it will be difficult for the new players get patients from other hospitals.

6. Capital Requirement (including legal barriers): This industry requires huge capital to meet the
fixed costs. The fixed costs include land cost, building construction cost, cost involved in getting
licenses from different government bodies, buying equipment etc. They may also need money to do
marketing and to attract doctors with high salary in comparison with the other hospitals. It will be
difficult for the new entrant to generate such huge capital which thus provides as a huge barrier to
entry in the industry.
Access to technology: Innovations in healthcare industry has led to sophisticated technologies in
treating patients. To get access to these technologies, huge fixed cost will be incurred. So, hospitals
can afford to invest in this as the demand is high for their service in the market. Hence, it will be
difficult for the new entrant to invest in technology also.
EXIT:
Cost of Exit: Hospitals, being capital intensive, industry requires huge capital investment to meet the
fixed costs. Sunk costs are a special type of fixed costs, representing those that have been irrevocably
committed and cannot be recovered; the costs of training a health professional who later emigrates is
an example of a sunk cost. Health care delivery tends to incur high fixed costs, as those related to
facilities, equipment and personnel. Therefore exit barrier for a hospital in this industry is high with
respect to the costs incurred.

7. Company Overview
• Apollo Hospitals was established in 1983 by Dr. Prathap C Reddy. It was India’s first
corporate hospital, and is acclaimed for pioneering the private healthcare
revolution in the country. Since then, Apollo has risen to a position of leadership
and has emerged as Asia’s foremost private integrated healthcare services
provider.
• It has a robust presence across the healthcare ecosystem, including Hospitals,
Pharmacies, Primary Care & Diagnostic Clinics. The Group also has Telemedicine
units across 10 countries, Health Insurance Services, Global Projects Consultancy,
Medical Colleges, Medvarsity for E-Learning, Colleges of Nursing and Hospital
Management and a Research Foundation.
• Its two main sources of revenue is its hospitals and standalone pharmacies.

8. Executive Board

9. FinancialYear 2016

10. STANDALONE PHARMACIES
37%
Of Consolidated Revenues
9,554 beds across 70 hospitals
located in India and overseas.
Employs
7,600+ doctors
11,300+ nurses
4,300+ paramedics
HEALTHCARE SERVICES
60%
Of Consolidated Revenues
2,430 outlets
Across 22 states
Health Insurance (AHEL stake 10%)
Primary clinics – 73
Sugar clinics – 44
Dental clinics – 73
Birthing centers “CRADLE” – 10
Day Care centers – 12
Diagnostics – 148
Dialysis – 6
OTHER BUSINESSES
3%
Of Consolidated Revenues
Financial Performance

11. Market Share
 As of March 31, 2016 Apollo had a capacity of 9,554 beds in 69 hospitals located in
India and overseas.
 Of the 9,554 beds, 7,620 beds own in 42 hospitals, 160 beds in 7 cradles, 340 beds
in 12 day care / short surgical stay centers and 1,434 beds are in 8 hospitals under
management through operations and management contracts.
 Market share: Number of beds owned / total number of beds :


12. Key Competitors
Hospitals
 Northern India – Fortis (3,000 owned
beds), Metro Hospitals (1,500 beds),
Max Healthcare (1,160 operational
beds, total capacity of 1,900 beds)
 Southern India – Manipal Group
(1,600 owned beds and 3,200
managed beds), Columbia Asia (781
beds)
 Western India – Sterling Hospitals
(1,100 beds)
Stand-alone Pharmacies
 The two large competitors in
organized pharmacy are Optival
Health Solutions and Guardian Life
Care. Optival Health Solutions
operating under Medplus brand has
1,050 pharmacy stores across Andhra
Pradesh, Karnataka, Maharashtra,
Tamil Nadu and West Bengal.
Guardian Life Care has 230 stores in
Maharashtra, Uttar Pradesh and the
National Capital Region
 Other organized players are Medicine
Shoppe, Religare W ellness, W ellness
Forever, Thulasi Pharmacies, but they
are small with about 50-100 stores

13. Strengths
 Brand Salience: AHEL a leading private sector healthcare player in India was set up an era when there was a
huge gap between the need for quality healthcare and healthcare services. Since its inception, the Company
has setup several pioneering developments in healthcare in the country and has carved several milestones in
its journey. Today the brand is associated with excellence in patient care, rapid technological adoption and
best-in-class health care services. The benefits of this recognition and position clearly translate into making
them the most preferred choice for local and international patients, and medical professionals.
 Large and growing Network: The large network offers advantages through multiple touch points and
enhanced reach, benefits of scale, ability to incubate new businesses, elevation of capabilities due to the
sheer volumes of medical procedures and a rich resource bank of medical professionals.
 Integrated offering: The sub-brands under Apollo include Apollo Sugar, Apollo Diagnostics, Apollo White and
Apollo Dialysis. It also runs specialty hospitals Apollo Cradle and Apollo Spectra Hospitals. Over the years the
group has managed to garner its presence in West Asia and African countries as. This allows it to participate
in multiple stages of the patient care processes resulting in better outcomes and an enhanced value
proposition both for the patient and the service provider.
 Deep expertise: Apart from being the preferred service provider in India, there are an increasing number of
international patients who select Apollo on the basis of quality of care and healthcare outcomes thereby
validating the standard of operations not just in India but even globally.

14. Weaknesses
 Regulatory intensity: With the number of licenses and approvals required to set up a hospital it causes a
huge barrier for private players in India to think of expansion. There are multiple rules and regulations for
importing medical equipment to setting up parking facilities at hospitals or adding or reducing staff. The lack
of co-ordination between various regulatory departments and absence of proactive and forward looking
regulation has resulted in loss of some potential opportunity for the healthcare sector. At the same time, lack
of agility in unearthing unscrupulous practices as well as failure to halt unfair trade practices by certain
participants in the sector has also harmed the perception about service providers in the sector.
 Shortage of Healthcare Human capital poses a challenge: India is a country with manpower in abundance,
given the sheer size of its population. However, what the country lacks is good education for majority of this
population or better training institutes for skilled manpower .The healthcare services industry is highly
manpower intensive. Skilled manpower includes doctors, nurses and para – medical staff. The overall
requirement for resources makes it challenging to set up and profitably run a hospital in India.
 Technology obsolescence: Today ‘Technology’ is at the helm of any growing industry and it has to keep
getting upgraded due to the high risk of obsolescence. One of the biggest problems faced by Indian players is
availability of good technology and at reasonable costs.
 Heterogeneous Markets: With the growing population the need for healthcare has been on the rise in India.
There are different requirements even in markets which are reasonably proximate. Every market has a unique
set of circumstances with variance in demographics, disease profiles, customer attitudes, seasonal variations,
price sensitivity etc. Even hospitals in two different cities in the same state will not be subject to identical
operating circumstances. This requires a higher degree of customization and increases the level of monitoring
required. Merely having all of the necessary resources is not a guarantee to success. Due to the complexities
involved, significant management overview is required in sustaining clinical standards, balancing case mix,
ensuring adequate volumes and regularly upgrading technology.

15. Opportunities
 Deeper Value of offerings: There is significant scope to enhance the value offering for patients by leveraging on technology. This need not
necessarily be cost led but can also include faster recovery, lower trauma, more comprehensive offerings from service providers and higher
quality of care with better outcomes. Those providers who are able to elevate their offerings on multiple parameters will have an
advantage compared to other service providers.
 NCDs on the rise: The rising number of Non-communicable diseases (NCD) patients suffering from diabetes, cardiovascular diseases and
cancer in India is directly proportionate to the changing lifestyle patterns of the working population . This is a huge challenge for the Indian
healthcare service providers who will need to address the rising incidence of NCDs. At the same time, it presents an opportunity for service
providers.
 Under served and poorly served markets: There is a world of difference between the quality of healthcare services available in metro cities
and urban areas compared to some of the semi-urban areas in the country. Patients in such semi-urban areas have the ability and the
willingness to pay for good quality healthcare services, however, due to lack of options end up travelling to the cities in search of
appropriate treatment. Healthcare service providers who are able to offer services of the desired quality in these areas will benefit from a
ready demand for their services.
 Changing Lifestyles: Given the steady increase in disposable incomes and growing health awareness, there has been a expansion in demand
for elective or planned surgeries as well as cosmetic surgeries. Patients are now willing to undergo discretionary and electric treatments to
elevate their standard of living and pursue a lifestyle of their choice. This is steadily developing into a deep and lucrative segment of the
healthcare services market.
 Population on the rise: As India crosses the 100 million mark of its ageing population and is expected to be the home for around 143 million
elderly by 2020, this will also contribute to the increasing demand for healthcare services.
 India is an ideal Medical Value Travel destination: The Indian Healthcare Industry is well poised to address the billion dollar medical
tourism opportunity, with several accredited facilities witnessing a large development boom of private medical healthcare facilities.
Additionally, the inherent cost advantage with prevalence of quality healthcare services makes India a preferred destination among
emerging markets. The opportunity is large and the country will have to take appropriate steps to improve procedural efficiency and
enhance marketing of services to garner a sizeable share.

16. Threats
 Heightened competitive intensity : The increasing trend of entrepreneurs and business hourses to enter into the healthcare business has
resulted in a spike in setting up of greenfield facilities , JVs and acquisitions. There are even pockets of over capacity in certain metros. In
order to make these ventures viable after investing significantly, there is a possibility that some of these players could resort to irrational
pricing in order to gain market share.
 Increasing cost of resources : The emergence of several domestic hospital chains combined with the entry of international players is leading
to an increased number of competitors chasing finite resources such as land, quality medical professionals and potential acquisition targets.
Demand growth is expected to outpace improved supply of these resources. A failure to acquire resources at fair and reasonable rates will
impact the ability to suitably grow and expand our operations . Further, increases in operating costs can impact the Company’s operations
and financials.
 Discontinuation of leases: Lands on which some of our hospital buildings and stand-alone pharmacies are operating on are not owned by
us. In the event of these leased properties not being renewed in our favour or on terms that are not favorable to us, our business
operations may suffer disruptions.
 Potential loss on the Medical Tourism Opportunity : Several countries in the Asia-Pacific region have realized the opportunity of attracting
medical value travelers . These countries provide a number of incentives to domestic service providers in the form of subsidized capital,
ease in permissions and tax benefits, given this fact coupled with their enhanced infrastructure and simplified visa norms, makes them well
positioned to gain a larger share of the opportunity.
 Withdrawal of tax incentives : Since fiscal 2011, we have benefited from the tax deduction of 150% given in respect of capital expenditure
incurred on setting up new hospital projects. The resultant deferment of tax helped us to improve our immediate cash flows allowing us
more resources to fund growth. This has now been reduced to 100% with effect from the financial year ending March 31, 2017. Any further
reduction of tax incentives would result in reduced returns to the business.

17. FUTURE STRATEGIES
Strengthening
presence in key
strategic markets:
They have a dominant share of the hospital beds available in Chennai, New Delhi, Kolkata, Hyderabad,
Bengaluru, Ahmedabad, Pune, Bhubaneshwar, Madurai and Mysore. They intend to increase their
market share in these key strategic markets by establishing new healthcare facilities, including retail
healthcare centers and increasing bed capacity at their existing hospitals. Currently, they have
hospitals located in three out of India’s four key metropolitan cities and are establishing a new
hospital in Mumbai in the 2nd Quarter of FY 17. These key metropolitan cities will continue to have a
strong demand for high quality tertiary care services such as cardiac surgeries, oncology services and
orthopedic surgeries. By strengthening our presence in these markets, we intend to increase our
market share for such tertiary care services.
Geographic expansion
through setting up
hospitals in tier II and
tier III cities:
We have identified a number of Tier II and Tier III cities across the country which are currently under-
served in terms of healthcare services but have a sizable population across the large catchment area
with spending potential.
Focus on continued
growth and stand-
alone pharmacies:
Improving the profitability of existing stand-alone pharmacies by introducing in-house brand products
which have superior profit margins and increasing sales through the bulk distribution of medical
supplies and consumables to hospitals and other healthcare providers. Improving operating
efficiencies by implementing a centralized database and inventory management system to track
inventory and revenue collections across the stand-alone pharmacy network. Improving supply chain
management by standardizing prices across the network and consolidating their vendors. Monitoring
the performance of our stand-alone pharmacies on an on-going basis and closing loss-making and
low-growth pharmacies.
Expansion Plans: Concurrent to our stated strategy of initiating capacity creation, we are executing a multi-pronged
expansion plan. In addition to a strong base of 9,554 beds across 69 hospitals as on March 31, 2016,
we plan to add another 1,045 beds in the coming 3 years across 3 hospitals which will expand the
overall network of hospitals to 72.

18. FUTURE STRATEGIES
Increasing patient touch
points by way of multiple
formats:
They aim to increase their presence and reach across all markets through their retail healthcare
subsidiary – Apollo Health and Lifestyle Limited. They recognize the necessity of and have made
concerted efforts to build additional formats for healthcare services delivery through this
subsidiary which includes primary clinics, lifestyle birthing centers, sugar clinics & short stay
surgery centers. They additionally have a strong presence in standalone pharmacies, health
insurance, medical education, telemedicine and projects & consultancy services. They have
covered the entire spectrum of the healthcare services business enabling higher points of
interactions with patients, better brand equity and referrals into their main hospital.
Focus on a portfolio of
high value clinical
specialties:
To maximize their market share of the tertiary care procedures performed in each Center of
Excellence, they plan to undertake a number of initiatives to ensure that high quality healthcare
services are provided by strengthening each Center of Excellence through the addition of
experienced and skilled surgeons and physicians, expanding each Center of Excellence practice
area to provide comprehensive sub-specialties and treatment services, continually investing in
the latest medical technology and equipment so as to offer high quality healthcare services to
our patients such as construction of the Comprehensive Oncology Center in Chennai which would
be equipped with the Proton Beam Therapy, which would be the first of its kind covering South
Asia and Africa.
Focus on life enhancing
procedures and elective
surgeries :
They believe that with increasing disposable incomes and health awareness, there is a growing
demand for elective or planned surgeries. Hence, they plan to focus on elective procedures to
capture this growing market and build a strong presence in the elective and life enhancing
procedures market. Their hospitals are well-equipped to offer various elective procedures like
knee replacements, hip replacements, cosmetic surgeries, dental services and other similar
procedures. They intend to increase the volume of such procedures performed in their hospitals
by creating specialized centers for such procedures, recruiting more surgeons specializing in such
procedures and investing in the latest medical technology to improve clinical outcomes in these
areas.

19. 
THANKYOU