Apollo Hospitals Enterprise Ltd

GROUP NO.7

Sudhanshu (1321238)
Pavan L (132122)
Antony Davis (1321207)

INTRODUCTION
(Report, 2011-13)Apollo Hospitals Enterprise Limited provides healthcare services primarily in
India, Mauritius, and Bangladesh. The companys healthcare facilities comprise of primary,
secondary, and tertiary care facilities. Its tertiary care hospitals provide care in approximately 50
specialties, including cardiac sciences, oncology, neurosciences, critical care, orthopedics,
radiology, gastroenterology, and transplants, as well as specialize in minimally invasive
surgeries, robotics, and solutions for cancer.
The company also offers pre-commissioning consultancy services, such as feasibility studies,
infrastructure planning, design and advisory, human resource planning, and recruitment and
training services, as well as medical equipment planning, sourcing, and installation services; and
post-commissioning consultancy services consisting of management contracts, franchising, and
technical consultation.
In addition, it operates stand-alone pharmacies that provide medicines, consumables, health
products, and general over-the-counter products, as well as prescription refilling services, health
newsletters distribution, and bundled health insurance plans; and primary care clinics, which
provide clinical and diagnostic services. Further, the company provides healthcare insurance
services, and telemedicine and research services; and conducts education and training programs.
Additionally, it offers medical business process outsourcing and third party administration
services, and services to support businesses. As of March 31, 2013, the company operated 51
hospitals with 8,420 beds in India and internationally; and 1,503 retail pharmacies. Apollo
Hospitals Enterprise Limited was founded in 1979 and is headquartered in Chennai, India.
Apollo Hospitals has received its board`s approval to invest Rs 2,250 crore targeting expansion
over the next three years. The ongoing expansion projects include its entry into cities like
Mumbai, Patna, Vishakhapatnam and Indore as well as strengthening of clusters in Chennai and
Bangalore. It has 1,500 bed capacities in the East and North East region and plans to add another
1,500 beds. The firm plans to open four new hospitals one each in Kolkata, Patna, Raipur and
Guwahati.
Ratios:
Ratio 2010 2011 2012 2013
Return on Assets 3.75% 3.74% 5.07% 5.42%
Return on capital
employed
6.85% 8.17% 13.82% 14.69%
debt to equity
ratio
1.77 2.18 1.91 1.60
EBIT margin 8.21% 9.61% 9.97% 10.28%
inventory
turnover ratio
13.90 14.35 16.45 16.44
current ratio 0.89 0.76 1.39 1.30
quick ratio 0.62 0.62 1.14 1.03
Asset turnover
ratio
0.59 0.54 0.72 0.79
employee
productivity
72,106.26 58,420.37 65,775.51 86,002.04
employee to bed
ratio
4.46 5.2 5.4 5.8
average salary
per employee per
month
10,559 10,600 11,882 11,904
revenue per
patient
41,634 68,687 77,884 81,669
revenue per bed
per day
10,756 18,706 20,455 21,702
AVERAGE LENGHT
OF STAY OR
OCUUPANCY
LENGHT PER
PATIENT

5.25 4.83 4.78 4.65
Source: Own Calculation
INDUSTRY:
(CRISIL, 2013) The healthcare sector is one of the fastest growing sectors of the global economy
that brings with it an equally challenging task for policy makers to contain, manage and direct it
in a sustainable way. As the costs of healthcare continue to out run inflation, efforts to bring new
reforms and cost containment plans make operating a commercial venture in the sector a very
difficult proposition. Given the difficulties, the sector holds even greater benefits driven by the
aging population in developed countries, increasing demand for sophisticated therapies and care
systems in developing countries, rapidly advancing health technologies.
Among emerging nations India ranks second in growth prospect only after China, and has the
potential to become the largest investment destination with huge population having good
purchasing power, diversified resources and low cost labor throughout the country. The Indian
government is also taking necessary steps to enhance the investments by improving
infrastructure, encouraging Public-Private Partnership, liberalizing FDI policies and pumping
money in select sectors to further synergy investments.



Health Care Industry in India
India has one of the most promising markets among the developing countries. The Services
sector constitutes about 57% of the total GDP of India. The Indian Healthcare Industry plays an
important role in adding value to the Services sector contributing 5.2% of the GDP. The Indian
healthcare industry was $ 65 billion during 2011-12 and is expected to reach $ 250 billion by
2020. It is estimated that most of the investments will be made by private sector players which
comprise around 70% of the total market. International organizations are keeping a close eye on
the health and poverty in India which has the world largest population below the poverty line.
Recently World Bank Group has announced annual assistance of $3-5bn to eradicate poverty and
improve healthcare in India. The Indian healthcare sector is in the initial stages of expansion,
promising significant growth. It has occupied center stage on the world map due to surge in
medical tourism.
There is a big disparity between the availability of the beds and required beds in the hospital in
India. India lags behind in matching to the minimum standards of healthcare services. There is
tremendous demand for tertiary care hospitals and specialty hospitals in India. The doctor patient
ratio is merely one fourth of the indicated minimum normal number whereas the same is also
true about the number of hospital beds present.
Government Initiatives: India has a universal healthcare system where the states and the union
territories are entrusted the responsibility to provide and improve public health, the standard of
living and level of nutrition. Compared to other BRICS nations, India spends very less on public
healthcare therefore the general public has to pay more on healthcare out of their own pocket.
The per capita health expenditure by the government of the total is only 28.8%. A huge
percentage of the population is thus left out from medical care due to lack of affordability.
Private Sector: The private sector has brought about a paradigm shift in the way people perceive
at healthcare delivery in India. The same healthcare system has given India a global reputation
whereby people all over the world make it destination for medical assistance. Private sector
covers the health care of more than 66% of the total households in India. A huge number of
enterprises have got hold of the opportunity to setup in the country on the back of the optimistic
atmosphere prevailing particularly in the healthcare sector. These private players are now
tapping the Tier-II and Tier-III cities which have great potential to reap big returns on
investments.
The FDI policy now allows 100 percent foreign direct investment (FDI) for health and medical
services under the automatic route. The hospital and diagnostic centre in India has attracted
foreign direct investment (FDI) worth $ 1,542.35 million, while drugs & pharmaceutical and
medical & surgical appliances industry has registered FDI worth $ 9,783.31 million and $ 584.14
million, respectively during April 2000 to December 2012, according to data provided by
Department of Industrial Policy and Promotion (DIPP).
Major healthcare providers in India are continuously on their quest to upgrade their IT
infrastructure and plan to invest Rs 5,700 crore on IT products and services in 2013. This is a
major move in various healthcare related technologies that will quicken the service delivery
experience for the patients. These will encompass various fields such as centralized storage of
electronic medical records, mobile health treatments, better coordination etc.

MARKET OVERVIEW:
Hospitals are the major component of the Health Care Industry forming more than 74%
of the total health care sectors revenue.
The hospital market in India USD54.7 billion at end-of 2012, with the private sector
accounting for 82%
There are 12,760 hospitals having 5,76,793 beds in the country. 6,795 hospitals are in
rural area with 1,49,690 beds and 3,748 hospital are in Urban area with 3,99,195 beds.
Hospitals are divided into Private and Public Hospitals
Over 200912, the market size of private hospitals is estimated to have increased at a
growth rate of 26.9%
Increase in number of hospitals in Tier-II and Tier-III cities has fuelled the growth of
private sector
Potential growth rate of Indian healthcare is attracting many foreign companies to invest
in India.

Key Players in the market:

COMPANY NO OF BEDS PRESENCE
Apollo Hospital Enterprise
Ltd
8267 Chennai, Madurai, Hyderabad,
Karur, KarimNagar, Mysore,
Visakhapatnam, Bilaspur,
Aragonda,
Kakinada, Bengaluru, Delhi,
Noida, Kolkata,
Ahmedabad, Mauritius, Pune,
Raichur, Ranipet,
Ranchi, Ludhiana, Indore,
Bhubaneswar, Dhaka

Aravind Eye Hospital 3649 Theni, Tirunelveli,
Coimbatore, Puducherry,
Madurai, Amethi, Kolkata

CARE Hospitals

1912 Hyderabad, Vijayawada,
Nagpur, Raipur,
Bhubaneswar, Surat, Pune,
Visakhapatnam

Fortis Healthcare Ltd 12000 Mumbai, Bengaluru, Kolkata,
Mohali, Noida, Delhi,
Amritsar, Raipur, Jaipur,
Chennai, Kota


PORTERS FIVE FORCE:
A model introduced in 1979 by Michael Porter and used by companies for industry analysis and
corporate strategy development. The five forces include competition, supplier strength, customer
power, the potential for new companies joining the industry, and the threat of substitute
products. (Businessdictionary.com)
Competitive Rivalry within an industry:
The competitive rivalry within the healthcare is high as the private sectors are increasing day by
day. The increase in number already increases in competition which gives so many reasons for
the hospitals to give different offer to their customers. As the competitors number is high, the
hospitals have to appoint highly qualified staff.
Bargaining power of Customers:
In the hospital industry, patients are not only the customer. The bargaining power of customers
increases with the increase in hospitals, as different hospitals make many choices for the
customers to look for the best option. So, the bargaining power of customers is high due to
competition in the private healthcare industry.
Bargaining power of suppliers:
The bargaining power of suppliers are low as with the increase in hospitals, the numbers of
suppliers are also increasing. Companies in the pharmaceutical industry produce generics locally
but still import most of the active ingredients from outside. This may drive the cost of raw
materials to be high as a result of intense competition and demand to purchase them. Hence the
bargaining power of suppliers can be said to be high in this industry.

Threats of new Entrants:
As with the increase in number of private hospitals, there is a big threat in private healthcare
industry. New entrants can provide better services & promotion to the customers which can be a
threat for other hospitals.
Threat of Substitute Products:
India is a multi-cultural country with different languages & lifestyle. The threat of substitute
product is high as many of the people don't trust on modern medicines. Still in this era, people
also believe in herbs & different methods of cure used in the old era. This can be a threat that if a
substitute product comes in the industry, the hospitals revenue can be in danger.

REVENUE DRIVERS:
Growing demand
Healthcare infrastructure
Research
Medical tourism
Policy support
Increasing investments
No. of Beds
Occupancy rate
Employee Productivity
Revenue per patients
Revenue per bed per day

Average Length of Stay or Occupancy Length per patient
COST DRIVERS:
Shortage of Medical Professionals
Lack of Investment in IT Infrastructure
Shortage of FDI Inflow in Indian Hospitals
Employee to bed ratio
Average Salary per Employee per Month
ASSUMPTIONS:
(Company)New Beds and better occupancy to drive growth

Driven by strong performance in the existing hospitals and expected addition of 2,000 beds in
the next two years, the hospitals business is expected to log a robust three-year CAGR of
22.3% to 41.8 bn in FY15. The expected capacity addition is broadly on track barring delays
of nine-twelve months in a few projects. EBITDA margin is expected to remain stable at 21%
in FY15 as improvement of 300 bps in the existing hospitals will be offset by projected initial
losses in the new hospitals.

Pharmacy business on track
The pharmacy business has been ramping up well in the past three years with revenues up
at a CAGR of 34% driven by addition of new stores as well as growth in same store sales.
Revenues per store increased to 2 million in Q3FY13 from 1.56 millionn in Q1FY12 while
EBITDA margin improved by 150 bps to 2.7%. Going forward, we expect Apollo to add about
100 new stores every year. This coupled with 15-16% growth in the mature stores is expected to
drive revenues. EBITDA margin is expected to improve to 4% in FY15.

OUTLOOK:
Rising awareness and thereby increase in demand from the huge middle-class population for
standard healthcare is helping in the growth of private sector healthcare. The considerable
number of rural population and its presence in the regions with less expensive land, there is a
huge potential to target such Tier II and Tier III cities and setup state-of-the-art facilities with the
comparatively lesser amount of investments. Rural spaces are quickly transforming into dynamic
towns, where the returns on investments can be exponential.
Achieving public private partnership in the rural region would be a win-win situation to all. The
rural-urban gap is slowly getting diminished due to developments such as PPP initiatives, new
business models and favorable policies by the government.
In some rural regions still the presence of basic amenities for healthcare is considered as a
challenge. Realizing the need to improve health infrastructure and other segments in healthcare
industry the Government is releasing more money into the sector to help it achieve world class
status and help the citizens. More public expenditure would mean that there will be more public
hospitals, more research and drugs would be cheaper and people can avail the service at lower
cost.
More spending on public health care will improve infrastructure, services and systems which will
not only change the way people perceive public healthcare facilities but also pull skilled and
professional workforce to it enhancing its service delivery experience. Investment in hospitals
and other similar infrastructure would benefit the Indian healthcare sector if the ultimate aim is
to expand capacity, improve standards, and make healthcare affordable and accessible to a wider
segment.
With the increasing patient population and surging number of lifestyle related diseases the
pressure of accommodation and treatment demands the existing players to expand. Due to
advancements in the sciences, innovative treatments and faster diagnostic equipments awareness
on preventive healthcare is spreading.
Focus on medical insurance will give big rewards as the large part of the population that stays
away from high cost medical treatment is expected to take advantage of it in the near future. The
growth of Medical Tourism will benchmark internationally acceptable standards for the other
players and will induce influx of appropriate medicines and equipments in the sector.


REFERENCES:
Company. (n.d.). Retrieved from Ace Analyzer.
CRISIL. (2013). CRISIL independent equity research. CRISIL.
Report, A. (2011-13). Annual Report.