2023 04 12 RAIB - Ns HSBC Rainbow Children - S Medicare (RAINBOW In) Initiate at Buy T... 101378008

12 April 2023
Equities
Rainbow Children’s Health Care Providers &
Medicare (RAINBOW IN) Services
Initiate at Buy: The paediatric specialist India
 A compelling investment case to play the niche paediatric Damayanti Kerai*

Analyst, India Healthcare
care market in India HSBC Securities and Capital Markets (India) Private
Limited
 We expect profit after tax to double over FY22-25e damayantikerai@hsbc.co.in
+91 8879335196
 Initiate coverage with a Buy rating and a TP of INR1,025
Kunal Talwar*
Analyst, Healthcare & Consumer Durables
A pioneer in child and mother care: Rainbow Children’s Medicare (Rainbow) is the HSBC Securities and Capital Markets (India) Private
Limited
largest multi-specialty paediatric and mother care chain in India, with 1,655 beds
kunal.talwar@hsbc.co.in
across six cities. The company was set up in 1999 by Dr. Ramesh Kancharla, a +91 9871011045
paediatric specialist who previously worked at Great Ormond Street Children’s
Hospital and King’s College Hospital in London. Despite the emergence of other * Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is
not registered/ qualified pursuant to FINRA regulations.
mother and child care peers, we believe Rainbow’s position as a leading paediatric
care provider is largely unchallenged.
Strong growth opportunities: The private paediatric care segment in India is expected
to grow at a CAGR of 14% to USD17.9bn by 2026e, up from USD8.1bn in 2020, faster
than the 12% CAGR for the overall mother and child (M&C) market. In our view, most
other M&C companies (e.g. Cloudnine and Motherhood) primarily focus on premium
birthing services and initial child care and often don’t have the scale and expertise to offer
the full range of 24/7 paediatric and obstetrics care available at Rainbow’s hospitals. This
indicates significant growth opportunities for Rainbow, in our view.
Earnings set to double over FY22-25e: We believe growth visibility is strong for
Rainbow due to: (1) well-planned capex – 1,000 new beds over the next five years to
boost capacity by 1.5x; (2) demand visibility – c70% of new beds planned for existing
markets; and (3) solid average revenue per operating bed (ARPOB) – a 6-7% annual
price hike and strong revenue mix to sustain 8-10% annual growth. We forecast revenue
and EBITDA CAGRs of 19% and 20.1% over FY22-25e and profit after tax to grow c2x to
INR2.7bn in FY25e from INR1.4bn in FY22, a 25.7% CAGR.
Valuation and risks. We initiate coverage with a Buy rating and a DCF-based target
price of INR1,025, which implies 37.6% upside from current levels. The stock trades at
18x FY24e EV/EBITDA, or c22% discount to larger peers (e.g. Apollo). We believe the
market is yet to fully price in the growth potential of Rainbow’s niche paediatric model. Our
bull-case scenario implies a target price of INR1,243 (66.9% upside) and our bear-case
scenario implies a target price of INR486 (34.8% downside). The key risks are a HSBC 10th Annual China Conference
slowdown in the core Hyderabad cluster and a slow pick-up in newer markets – Chennai 17 – 18 May 2023
and Delhi. We also revise our FY23-25e estimates and roll forward our valuation for
Apollo Hospital and Max Healthcare to March 2025e (from December 2024e). Register
HSBC India hospitals coverage

Current ______ TP _______ __ Rating ___ Upside/ ______ FY22-25e CAGR _______
Company Ticker Currency price Old New Old New downside Market cap 3m ADTV Revenue EBITDA PAT
(USDm) (USDm)
Apollo Hospitals APHS IN INR 4,200.95 5,330 5,100 Buy Buy 21.4% 7,373 23 16.3% 15.1% 21.6%
Max Healthcare MAXHEALT IN INR 419.15 515 505 Buy Buy 20.5% 4,968 10 15.3% 18.7% 20.1%
Rainbow Children’s RAINBOW IN INR 744.65 n/a 1,025 n/a Buy 37.6% 923 1 19.0% 20.1% 25.7%
Medicare
Note: Priced as of 5 April 2023.
Source: HSBC estimates, Refinitiv Datastream
Disclosures & Disclaimer Issuer of report: HSBC Securities and Capital

Markets (India) Private Limited
This report must be read with the disclosures and the analyst certifications in
the Disclosure appendix, and with the Disclaimer, which forms part of it. View HSBC Global Research at:
https://www.research.hsbc.com
2
HSBC India Healthcare coverage overview

Mkt cap 3m-ADTV CMP* New TP Old TP Up/Down-
Company BBG ticker (USDbn) Rating (USDm) (INR) (INR) (INR) side EPS (INR) PE (x) EV/EBITDA (x) ROCE FY22-FY25e CAGR
Pharma FY24e FY25e FY24e FY25e FY24e FY25e FY24e FY25e Revenue EBITDA PAT
Alkem ALKEM IN 5.0 Buy 4 3,408.80 3,760 3,760 10.3% 145.7 177.4 23.4 19.2 17.7 14.5 14.6% 16.1% 11.1% 9.6% 8.5%
Alembic ALPM IN 1.2 Hold 1 498.90 575 575 15.3% 30.4 38.7 16.4 12.9 10.2 8.0 9.2% 11.0% 9.3% 7.0% 3.3%
Aurobindo ARBP IN 3.7 Hold 11 521.50 495 495 -5.1% 45.1 54.7 11.6 9.5 5.8 4.8 9.4% 10.6% 7.3% 7.4% 4.8%
Cipla CIPLA IN 8.8 Buy 22 895.75 1,105 1,105 23.4% 41.8 47.8 21.4 18.7 12.3 10.6 13.8% 14.1% 8.5% 10.4% 10.0%
Divi’s Lab DIVI IN 9.3 Reduce 18 2,889.80 2,575 2,575 -10.9% 82.4 101.5 35.1 28.5 25.6 20.7 15.9% 17.4% 2.8% -3.6% -3.1%
Dr Reddy’s DRRD IN 9.5 Buy 17 4,682.80 5,240 5,240 11.9% 234.0 250.0 20.0 18.7 11.7 10.6 14.7% 14.0% 8.9% 14.8% 16.0%
Glenmark GNP IN 1.6 Hold 6 479.90 460 460 -4.1% 39.7 46.7 12.1 10.3 5.6 4.7 10.0% 10.7% 8.7% 9.1% 9.9%
Ipca Lab IPCA IN 5.0 Hold 3 810.25 935 935 15.4% 37.6 46.1 21.6 17.6 26.8 22.1 13.7% 15.0% 11.3% 11.4% 9.8%
Lupin LPC IN 3.7 Hold 8 658.85 750 750 13.8% 30.8 44.0 21.4 15.0 10.7 7.9 9.2% 12.0% 9.8% 25.5% 27.2%
Sun SUNP IN 29.1 Buy 27 997.15 1,145 1,145 14.8% 37.4 43.1 26.7 23.1 17.3 14.9 14.8% 15.4% 11.9% 12.7% 12.1%
Pharma
Torrent TRP IN 6.5 Hold 4 1,578.10 1,675 1,675 6.1% 46.4 59.1 34.0 26.7 17.5 14.8 15.2% 18.0% 12.7% 15.9% 16.6%
Pharma
Zydus ZYDUSLIF 6.1 Hold 7 493.10 450 450 -8.7% 23.5 26.1 21.0 18.9 11.8 10.5 10.4% 10.9% 10.6% 9.1% 5.2%
Lifescience IN
Average 24.8 21.0 16.1 13.6 13.9% 14.8%
Hospitals EBITDA margin EV/EBITDA (x) ROCE FY22-FY25e CAGR
FY24e FY25e FY24e FY25e FY24e FY25e Revenue EBITDA PAT
Apollo APHS IN 7.4 Buy 23 4,200.95 5,100 5,330 21.4% 13.8% 14.4% 23.0 18.6 15.3% 17.5% 16.3% 15.1% 21.6%
Hospitals
Max^ MAXHEALT 5.0 Buy 10 419.15 505 515 20.5% 27.7% 28.6% 21.4 17.5 15.5% 16.4% 15.3% 18.7% 20.1%
Healthcare IN
Rainbow RAINBOW IN 0.9 Initiate at 1 744.65 1,025 – 37.6% 32.2% 32.2% 18.0 14.9 17.6% 17.7% 19.0% 20.1% 25.7%
Buy
Average 22.4 18.2 15.4% 17.1%
Note: *CMP is based on the closing price of 5 April 2023; ^^Based on pro-forma financials which include financials for partnered healthcare facilities/PHFs whereas F&V is based on consolidated financials which exclude PHFs.
Source: Refinitiv Datastream, HSBC estimates
Equities ● Health Care Providers & Services

12 April 2023

12 April 2023
Contents
Investment summary 4
Company profile 4
Investment thesis 4
Financials forecasts 7
HSBC vs consensus 8
Valuations and risks 9
ESG 11
Financials & valuation: Rainbow
Children’s Medicare 13
Updating our coverage: Apollo
Hospitals and Max Healthcare 14
Financials & valuation: Apollo
Hospitals 16
Financials & valuation: Max
Healthcare Institute 19
A niche paediatric play 21

24/7 paediatric and obstetrics care 21
Focus on metro/tier-1 cities 22
Doctor engagement model 26
Hub and spoke model 26
Well-planned expansion 27
Niche addressable market 28
Financials and valuations 31

Financial forecasts 31
Valuation 35
Appendix 37
Company profile 37
Shareholding structure 38
Structural growth drivers for quality
mother and child care 40
Disclosure appendix 42
Disclaimer 46
3
12 April 2023
Investment summary
 Rainbow, the largest paediatric-centric hospital chain in India, is well

placed to gain from rising demand for quality mother & child care
 Strong growth outlook on demand visibility, a measured capex plan,
and improving revenue mix
 We initiate coverage with a Buy rating and a DCF-based target price
of INR1,025
Company profile
Rainbow Children’s Medicare, the largest paediatric-focused hospital chain in India, offers
24/7 paediatric and obstetrics
care
comprehensive 24/7 paediatric and obstetrics care. As of 31 March 2023, it has 16 hospitals
and three outpatient clinics spread across six cities. It currently has 1,655 beds in its network, of
which c500 are dedicated to neonatal and paediatric intensive care units (NICUs and PICUs).
The Hyderabad cluster, which includes its flagship Banjara facility, accounted for c50% of its
revenues and c67% of EBITDA in FY22.
Rainbow was established in 1999 by Dr. Ramesh Kancharla, a paediatric specialist who worked
in some of the best children’s hospital in the world – Great Ormond Street Children’s Hospital
and King’s College Hospital in London, along with some colleagues. It has replicated a globally
accepted model for children’s hospitals based on three core fundamentals – a child-centric set-
up, multi-disciplinary, and 24/7 doctor engagement.
Rainbow was listed on major stock exchanges in India in May 2022. CDC, the UK’s
development finance institution, was the key investor in Rainbow prior to its IPO, with a 28.8%
stake in the company. As per the shareholding data for the period ending 31 December 2022,
CDC has completely exited its stake in Rainbow.
Investment thesis
There are a number of listed multi-specialty hospitals in India through which investors can gain
exposure to the structural growth potential in the healthcare services sector. So why look at
Rainbow?
While we believe multi-specialty hospitals like Apollo Hospitals are often the preferred way to
play the structural growth story of healthcare services in India, Rainbow offers an opportunity to
access the country’s niche, high-growth paediatric care market.
We see ample growth opportunities for Rainbow in its focus segment of paediatric care. The
total addressable market (TAM) for mother and child/M&C care (also referred as maternity and
paediatric care) in India is expected to grow to USD35.9bn by 2026e from USD18.5bn in 2020
(a CAGR of 12%, similar to the broader hospital market growth) as per a CRISIL report. Within
4
12 April 2023
the M&C market, the private paediatric care segment, the focus for Rainbow, is expected to
grow at a faster CAGR of 14% to reach USD17.9bn by 2026e, up from USD8.1bn in 2020.
Despite the emergence of a number of players in the M&C market over past few years, we
We believe Rainbow’s
position as a leading
believe Rainbow’s position as a leading paediatric care provider is largely unchallenged. Most of
paediatric care provider is the other players in the M&C market (e.g. Cloudnine, Motherhood, and Ovum) are focused on
largely unchallenged premium birthing services and initial child care and often don’t have the scale and expertise to
offer a full-range of paediatric services.
In our view, this indicates significant growth opportunities for Rainbow. It is uniquely placed in
the paediatric market on the back of its scale and comprehensive offerings of paediatric and
obstetric services, including critical ICU for paediatrics and high-risk pregnancies. Furthermore,
Rainbow’s superior mix (70% revenues from paediatric services) and strong focus on costs
result in better operating profitability than peers (Exhibits 2-4).
Most multi-specialty hospitals also offer paediatric and obstetric care; however, in our view,
Rainbow’s dedicated paediatric focused hub-and-spoke model appears to be more compelling
in terms of tapping the mother and child care market.
1: Rainbow is well placed in high-growth 2: Rainbow’s higher EBITDA vs other

paediatric care within the M&C* market mother and child care peers* is attributed
(TAM) to…
TAM: 35.0%
USD35.9bn 31.3%
40 EBITDA margin (FY22)
35 30.0%
4.4
30 TAM: 3.5 25.0% 23.1%
USD18.5bn 21.1%
25 20.0%
10.1
20
2.3 15.0% 12.5% 12.4%
15 2.8
10 5.3 10.0%
17.9
5 8.1 5.0%
0
2020 2026 0.0%
Rainbow Surya Kids Clinic Rhea Apollo
Paediatric care - Private Paediatric care - Public Cradle
Maternity care - Public Maternity care - Private
Note: *Mother and child care or maternity and paediatric care market. Note: *Except Surya, other peers are focused on premium maternity and obstetrics
Source: Company data, CRISIL estimates, HSBC services.
Source: Company data, HSBC
5
12 April 2023
3: …superior revenue mix weighted 4: …a better cost structure vs peers (FY22)

towards paediatrics and…
FY22 revenue mix
90.0%
75.0%
Obstetrics
60.0% 55.1% 49.6%
30% 36.9%
36.8%
45.0%
10.4%
30.0% 18.8%
11.9% 15.5%
Paediatric
70% 15.0% 29.6%
20.0% 17.0% 19.1%
0.0%
Rainbow Surya Rhea Kids Clinic
Materials cost Staff cost Other expenses
Source: Company data, HSBC Source: Company data, HSBC
We expect earnings to grow about 2x over FY22-25e:

We expect Rainbow’s revenues and EBITDA to grow at a healthy CAGR of 19% and 20.1%,
respectively over FY22-25e. Despite its plan to add a significant number of new beds, we
assume Rainbow will sustain healthy EBITDA margins of 32-33%. We forecast profit after tax
(PAT) to grow about 2x to INR2.7bn in FY25e, from INR1.4bn in FY22, a 25.7% CAGR. We see
multiple drivers supporting its growth:
1. Well-defined capex plan: It plans to add c1,000 beds over the next five years (FY23e-27e)
to tap growth opportunities in target markets. Most of the new beds (c70% of total planned
beds) will be added at existing locations to strengthen its hub and spoke model and to cater
to demand, which is currently not served.
2. Faster EBITDA breakeven: As most of the new bed additions are intended to cater to
visible demand in existing markets, we assume faster EBITDA breakeven of new beds. In
cities like Hyderabad, we assume new beds can reach breakeven within 12-18 months
versus the industry average of 36-48 months.
3. Improving presence in newer markets: Rainbow is looking to replicate the success of its
flagship Banjara Hills facility, Hyderabad, in newer markets like Chennai and Bengaluru where
the demographics and socio-economic conditions are similar. High demand visibility in
these markets supports its growth outlook over the medium-to-long term.
4. Scale-up at newer units: Scaling up occupancy rates at relatively newer units – e.g.
Guindy and OMR hospitals in Chennai, Financial District in Hyderabad, Rosewalk in New
Delhi, and Hebbal in Bengaluru – should help to sustain growth.
5. Superior mix to support ARPOB growth: Rainbow’s business model (c70% of revenues
from paediatric services, more than 90% of revenues from metro/tier-1 cities, low exposure
to government/institutional channels) allows it to have better pricing flexibility. We think
improving mix (higher sharer of ICU cases, high-risk pregnancies) along with an expected
6-7% annual price hike should sustain 8-10% annual growth for its ARPOB.
6. Strong execution record: We believe Rainbow has a strong understanding of unit cost
economics for the paediatric care model after 20+ years of operations and this should help
it to sustain a strong growth trajectory in strategic markets.
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12 April 2023
Financials forecasts
Revenues and ARPOB: We estimate revenue to grow at a CAGR of 19% over FY22-25e
driven by a well-defined bed additions plan (c1,000 beds over FY23-27e) to deepen its reach in
existing markets and step-up its presence in newer markets, and healthy trends in ARPOB. We
assume 8-10% annual growth for ARPOB driven by 6-7% annual price hikes and improving mix.
5: A well-defined capex plan (c70% new beds in existing locations) to support growth
3,000
200 2,495
2,400 100 200
80 50 100
50 60
1,800 100
1,500 55
1,200
600
Rajahmundry
Kurnool &
Bed capacity
Bed capacity
Hydernagar
Chennai OMR
Hennur (FY24e)
District (FY23)
Central City
Sarjapur
NCR (FY25-
Anna Nagar
(FY25e)
(FY25-26e)
Nellore
(FY24e)
(FY24e)
(FY24e)
Financial
(FY22)
(FY27)
(FY23)
27e)
Source: Company data, HSBC estimates
6: We expect healthy revenue growth to 7: ...healthy ARPOB trends (led by annual

sustain for Rainbow helped by… price hikes of 6-7% and improving mix)
CAGR 23.2 CAGR
25.0 80
FY22-25e: 19.0% FY22-25e:8.4%
FY22-27e: 18.9% 19.8 70 FY22-27e: 8.2%
20.0 60
16.4
15.0 CAGR FY19-22: 50 6
13.5 8
21.5% 11.3 40
9.7
10.0 63 68
7.2 6.5 30 54 58
5.4 46 50
20 35 41
5.0
10
0.0 0
FY20 FY21 FY22 FY23e FY24e FY25e FY26e FY27e
FY25e
FY23e
FY24e
FY26e
FY27e
FY20
FY22
FY19
FY21
COVID vaccine benefits

Revenue (INRbn) ARPOB ('000 INR/day)- non-COVID
Source: Company data, HSBC estimates Source: Company data, HSBC estimates
EBITDA and PAT: A higher presence in metro/tier-1 cities (which account for >90% of
revenues), favourable payor mix (high share of cash & insured patients and low exposure to
government institutional channels), a high revenue share from paediatric services and strong
cost focus should sustain healthy EBITDA margins of 32-33% despite regular additions of new
beds. We assume its PAT to grow c2x to INR2.7bn in FY25e (25.7% CAGR over FY22-25e) on
strong revenue-growth led operating leverage.
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12 April 2023
8: We expect healthy EBITDA margin 9: We see PAT potentially growing c2x

trends to continue between FY22 and FY25e
35.0% 33.4% 32.2% 4.5 4.0

32.2% 32.3%32.3% ~2x grow th over
4.0
FY22-25e (CAGR 25.7%) 3.3
31.3% 3.5
30.0%
27.4% 27.4% 27.9% 3.0 2.7
26.2% 26.2% 26.3% 2.3
25.0% 2.5
26.3% 1.9
25.0% 26.0% 2.0
21.9% 21.9% 1.4
1.5
20.0% 1.0 0.4 0.6 0.4
0.5
18.2%
0.0
15.0%
FY23e
FY24e
FY25e
FY26e
FY27e
FY19
FY20
FY21
FY22
FY19 FY21 FY23e FY25e FY27e
EBITDA margin (Post IND AS 116)
EBITDA margin (Pre IND AS 116) PAT (INRbn)
Cash flows and returns

Rainbow has a healthy cash balance of cINR5.5bn (including liquid investments) which, along
with cash flow from operations, should fund the planned capex. This in turn should help it to
sustain a healthy balance sheet. Faster breakeven of new beds should ensure healthy free cash
flow and return on invested capital (ROIC) trends, in our view.
10: We assume healthy cash flow trends 11: ROIC trends should also remain
despite substantial bed addition plans healthy
3,500 3,205 26.0% 25.3%

3,000 25.0%
24.0% 23.6% 23.6%
2,500
22.9%
23.0% 22.7%
2,000
22.0%
1,500 1,326
21.0% 21.2%
1,000 790 677 786
421 20.0%
500
19.0%
0 FY22 FY23e FY24e FY25e FY26e FY27e
FY22 FY23e FY24e FY25e FY26e FY27e RoIC
FCF (INRm)
HSBC vs consensus
There are currently only four consensus estimates available on Bloomberg. Our PAT estimates
for FY23-24e for Rainbow are slightly below consensus as we think we have built in higher
depreciation & amortization and interest expense, in line with company’s expanding operations.
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12 April 2023
12: HSBC vs consensus estimates

(INRm) __________ HSBCe __________ ________ Consensus _________ ________ % variance _________
FY23e FY24e FY25e FY23e FY24e FY25e FY23e FY24e FY25e
Revenue 11,305 13,537 16,396 11,197 13,441 16,186 1.0% 0.7% 1.3%
EBITDA 3,778 4,365 5,286 3,791 4,397 5,159 -0.3% -0.7% 2.5%
EBITDA margin 33.4% 32.2% 32.2% 33.9% 32.7% 31.9%
PAT 1,937 2,262 2,746 1,951 2,288 2,688 -0.7% -1.1% 2.1%
Source: HSBC estimates, Refinitiv Datastream (for Consensus)
Valuations and risks
For the valuation of exiting coverage hospital names – Apollo Hospitals and Max Healthcare –
we use a sum-of-parts methodology to explicitly demonstrate the value of their distinct business
segments e.g. hospitals, pharmacy, and diagnostics services.
Rainbow, on the other hand, is solely focused on the paediatric and maternity care segment.
We use a DCF model for Rainbow to reflect the long-term growth visibility for its paediatric care
segment (c70% of revenue). For our DCF, we assume a risk-free rate of 2.0%, an equity risk
premium of 5.5% for India, an inflation differential of 2.5% for India, and a beta of 1.0, which
leads to a cost of equity of 10.0%. We assume a cost of debt at 10% (pre-tax) and long-term
equity to debt at 51:49. These assumptions lead to a WACC of 8.8%. Our terminal growth rate
is 6.25% (the difference between inflation and the growth average for key hospital names).
Our DCF model leads to a target price of INR1,025 per share for Rainbow. This implies 37.6%
upside from current levels, thus we initiate coverage on the stock with a Buy rating.
Our valuation implies an EV/EBITDA multiple of 24.5x for FY24e and 20.2x for FY25e; the stock is
currently trading at an EV/EBITDA of 18x for FY24e and 14.9x for FY25e based on our estimates.
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12 April 2023
13: DCF valuation summary

(INRm) FY22 FY23e FY24e FY25e FY26e FY27e FY37e
Revenues 9,738 11,305 13,537 16,396 19,769 23,154 66,330
% y-o-y 49.8% 16.1% 19.7% 21.1% 20.6% 17.1% 6.3%
EBIT 2,216 2,867 3,300 3,984 4,838 5,804 13,266
EBIT margin 22.8% 25.4% 24.4% 24.3% 24.5% 25.1% 20.0%
NOPAT 1,761 2,275 2,619 3,161 3,840 4,606 10,528
Reinvestment 971 1,598 2,198 2,375 2,513 1,401 3,158
FCFF 790 677 421 786 1,326 3,205 7,370
Terminal growth rate 6.25% WACC

calculation
Kd 10.0%
DCF valuation summary Tax rate 25.17%
PV(Terminal value) 310,922
PV (CF over explicit 18,624 Rf (Global) 2.0%
periods)
Enterprise value 106,752 India Inflation 2.5%
differential
- Debt and lease 5,809 Rp 5.5%
liabilities
- Minority interests 35 Beta 1.00
+ Cash & investments 3,035 Ke 10.0%
Equity value 103,943 Wd 49%
Number of shares (m) 102 We 51%
Target price (INR) 1,025 WACC 8.8%
CMP* (INR) 744.65
Upside 37.6%
Note: *CMP is based on the closing price of 5 April 2023.
Source: Bloomberg, HSBC estimates
14: Sensitivity analysis for target price

WACC Terminal growth rate
5.3% 5.8% 6.3% 6.8% 7.3%
7.8% 1,108 1,378 1,826 2,714 5,317
8.3% 892 1,065 1,324 1,755 2,608
8.8% 738 857 1,025 1,273 1,687
9.3% 624 710 825 985 1,224
9.8% 536 600 683 793 947
Source: HSBC estimates
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12 April 2023
15: Scenario analysis for valuation/share
1,400 FY23e-27e
FY23e-27e: Occupancy: 47%
1,200 Occupancy: 43-45% ARPOB grow th: 9% yoy
ARPOB grow th 8-10% 1,243
1,000 FY23e-27e
Occupancy: 37% 1,025 66.9%
800 ARPOB grow th: 5% yoy 37.6%
744.65
600 -34.8%
400 486
200
0
Worst case CMP Base case Best case
Note: CMP is based on the closing price of 5 April 2023.

Key downside risks: (1) Slowdown in the core Hyderabad cluster, (2) a delay in stepping
utilization of new units, (3) a delay or failure to finalise sites for planned expansion (e.g.
Gurugram and Noida); and (4) regulatory risks (e.g. government intervention in prices for
services offered).
ESG
Policy and Governance: Rainbow has adopted an ESG policy around prevention of pollution,
minimising waste, reducing water consumption, and effective monitoring for identifying health
and safety hazards. The management team ensures adherence to medical protocols, standards
for strong corporate governance, quality assurance, and control systems.
Action plans: It seeks to: (1) reduce greenhouse emissions through energy savings and
production by installing solar panels at some of its hospitals and (2) reduce water wastage
through rainwater harvesting and recycling of water. It has also installed sewage treatment
plants at all of its facilities to minimize and recycle waste.
Highlights: (1) Three hospitals in Rainbow network have received the EDGE certification for
green buildings for their design and operational efficiency; (2) Ten of Rainbow’s hospitals have
NABH certification and one hospital has JCI certification, which supports best practice in
medical and patient care. It has installed electric car chargers at its flagship facility in Hyderabad
with plans to expand it to all of its hospitals.
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12 April 2023
16: Key financials: We assume 19% revenue CAGR and 25.7% PAT CAGR over FY22-25e
FY22-25e
(INRm) FY22 FY23e FY24e FY25e FY26e FY27e CAGR
Revenue 9,738 11,305 13,537 16,396 19,769 23,154 19.0%
Cost of goods sold 1,947 1,696 2,058 2,558 3,143 3,658
Staff cost 1,161 1,381 1,671 1,989 2,367 2,793
Professional fees to doctors 2,038 2,567 3,184 3,852 4,623 5,408
Other expenses 1,543 1,883 2,259 2,711 3,253 3,806
EBITDA 3,049 3,778 4,365 5,286 6,383 7,488 20.1%
EBITDA margin (Post IND AS
116) 31.3% 33.4% 32.2% 32.2% 32.3% 32.3%
Rentals paid 517 622 812 984 1,186 1,389
EBITDA margin (Pre IND AS
116) 26.0% 27.9% 26.2% 26.2% 26.3% 26.3%
Depreciation & amortization 833 911 1,065 1,302 1,545 1,684
Depreciation of PPE 514 544 663 859 1,054 1,145
Amortization of RTU 311 359 395 438 487 535
EBIT 2,216 2,867 3,300 3,984 4,838 5,804 21.6%
Other income 189 306 374 416 453 491
Interest 532 564 631 710 796 893
Lease interest 489 528 595 673 759 855
PBT 1,873 2,608 3,043 3,689 4,496 5,402 25.3%
PAT 1,383 1,937 2,262 2,746 3,349 4,028 25.7%
key balance sheet items
Net PPE 4,187 5,100 6,606 8,108 9,545 9,751
RTU 4,354 4,786 5,305 5,933 6,682 7,537
Other non-current assets 1,515 1,523 1,536 1,561 1,595 1,635
Receivables 404 496 668 943 1,300 1,649

Inventories 148 177 225 294 379 461
Cash and equivalents 1,852 2,668 3,199 4,121 5,455 8,598
Other current assets 498 498 498 498 498 498
Total assets 12,957 15,247 18,037 21,458 25,453 30,129
Shareholders’ equity 6,063 7,724 9,617 11,911 14,605 17,842

Borrowings 417 417 417 417 417 417
Lease liability 5,392 6,130 6,941 7,918 9,042 10,326
Payables 644 534 620 771 947 1,103
Other liabilities 442 442 442 442 442 442
Total liabilities +
shareholders’ equity 12,957 15,247 18,037 21,458 25,453 30,129
Key cash flow items
Capex 622 1,458 2,169 2,360 2,491 1,352
Net increase/decrease in cash
and equivalents 43 816 531 922 1,334 3,143
12
12 April 2023
Financials & valuation: Rainbow Children’s Medicare Buy
Financial statements Valuation data

Year to 03/2022a 03/2023e 03/2024e 03/2025e Year to 03/2022a 03/2023e 03/2024e 03/2025e
Profit & loss summary (INRm) EV/sales 8.1 6.9 5.8 4.8
Revenue 9,738 11,305 13,537 16,396 EV/EBITDA 25.8 20.8 18.0 14.9
EBITDA 3,049 3,778 4,365 5,286 EV/IC 9.0 7.6 6.3 5.3
Depreciation & amortisation -833 -911 -1,065 -1,302 PE* 54.7 39.0 33.4 27.5
Operating profit/EBIT 2,216 2,867 3,300 3,984 PB 12.5 9.8 7.9 6.4
Net interest -343 -258 -257 -294 FCF yield (%) 1.1 0.7 0.3 0.7
PBT 1,873 2,608 3,043 3,689 Dividend yield (%) 0.3 0.4 0.5 0.6
HSBC PBT 1,873 2,608 3,043 3,689 * Based on HSBC EPS (diluted)
Taxation -487 -657 -766 -929
Net profit 1,383 1,937 2,262 2,746
HSBC net profit 1,383 1,937 2,262 2,746 ESG metrics
Cash flow summary (INRm) Environmental Indicators 03/2022a Governance Indicators 03/2023a
Cash flow from operations 2,000 2,618 3,187 3,838 GHG emission intensity* n/a No. of board members 6
Capex -622 -1,458 -2,169 -2,360 Energy intensity* n/a Average board tenure (years) n/a
Cash flow from investment -1,753 -2,249 -3,083 -3,426 CO2 reduction policy Yes Female board members (%) 16.7
Dividends -92 -291 -385 -467
Social Indicators 03/2022a Board members independence (%) 66.7
Change in net debt -281 -78 280 55
FCF equity 862 539 206 494 Employee costs as % of revenues n/a
Balance sheet summary (INRm) Employee turnover (%) n/a
Diversity policy Yes
Intangible fixed assets 55 47 41 35
Tangible fixed assets 8,587 9,932 11,957 14,087 Source: Company data, HSBC
Current assets 2,902 3,838 4,590 5,856 * GHG intensity and energy intensity are measured in kg and kWh respectively against revenue in USD ‘000s
Cash & others 1,852 2,668 3,199 4,121
Total assets 12,957 15,247 18,037 21,458
Operating liabilities 6,406 7,034 7,931 9,059 Issuer information
Gross debt 5,809 6,547 7,358 8,334 Share price (INR) 744.65 Free float 50%
Net debt 3,957 3,878 4,159 4,214 Target price (INR) 1025.00 Sector Health Care Providers
Shareholders’ funds 6,028 7,674 9,552 11,831 RIC (Equity) RAIB.NS Country/Region India
Invested capital 8,708 10,275 12,428 14,746
Bloomberg (Equity) RAINBOW IN Analyst Damayanti Kerai
Market cap (USDm) 923 Contact +91 22 6164 0692
Ratio, growth and per share analysis
Year to 03/2022a 03/2023e 03/2024e 03/2025e
Price relative
Y-o-y % change
Revenue 49.8 16.1 19.7 21.1
880.00 880.00
EBITDA 87.2 23.9 15.5 21.1
Operating profit 147.6 29.3 15.1 20.7
PBT 236.3 39.2 16.7 21.2 830.00 830.00
HSBC EPS 245.5 40.1 16.8 21.4
780.00 780.00
Ratios (%)
Revenue/IC (x) 1.2 1.2 1.2 1.2 730.00 730.00
ROIC 21.2 24.1 23.2 23.3
ROE 26.4 28.3 26.3 25.7
680.00 680.00
ROA 15.0 16.8 16.5 16.7 2021 2022 2023
EBITDA margin 31.3 33.4 32.2 32.2 Rainbow Children’s Rel to BOMBAY SE SENSITIVE INDEX
Operating profit margin 22.8 25.4 24.4 24.3
EBITDA/net interest (x) 8.9 14.6 17.0 18.0 Source: HSBC
Net debt/equity 65.3 50.2 43.2 35.4 Note: Priced at close of 05 Apr 2023
Net debt/EBITDA (x) 1.3 1.0 1.0 0.8
CF from operations/net debt 50.5 67.5 76.6 91.1
Per share data (INR)
EPS Rep (diluted) 13.62 19.08 22.29 27.05
HSBC EPS (diluted) 13.62 19.08 22.29 27.05
DPS 2.04 2.86 3.79 4.60
Book value 59.39 75.61 94.11 116.56
13
12 April 2023
Updating our coverage: Apollo Hospitals and Max Healthcare
Apollo Hospitals (APHS IN, Buy; lower TP to INR5,100 from INR5,330)

We maintain our Buy rating on the stock given a strong outlook for its hospitals business and
the scaling-up potential for 24/7 (digital health platform). We believe the current investment for
24/7 is justified in order to achieve scale in the competitive but high-potential digital health
space in India.
We see drivers to sustain healthy trends for the hospitals segment (c53% of consolidated
revenues for 9MFY23), such as an international patient volume pickup, improving case mix, and
scope to improve payor mix in Tier 2 town hospitals. We expect hospital EBITDA margins to
remain healthy at mid- to high-20% level over FY23-25e as mature hospitals (MH) are likely to
sustain margins at current levels (28-29%) on a better case mix, improving volume for
international patients, and cost efficiencies. New hospitals (NH) should see a margin pick-up,
driven by improving scale, better payor mix, and additions of specialties. In the existing network,
it aims to improve occupancy to 75% in next 18 months (from 65% in 3Q) to support volume
growth. It plans to add c2,000 beds over the next 3-5 years to sustain long-term growth.
Apollo Health and Lifestyle Limited (AHLL) segment, which offers retail healthcare comprising
diagnostics, primary care (clinics, sugar clinics, dental, and dialysis centres), and specialty care
(birthing centres and day-care surgery centres), has now achieved critical scale and should see
higher profitability and returns.
Its digital health platform, Apollo 24/7, continues to gain traction since its launch in June 2020
and it has now scaled up operations with 23m-plus registered users, deliveries of up to 35k e-
pharmacy orders per day, and 5-6k online consultations per day. It is currently in the build-up
phase for 24/7 to improve reach, product, and service offerings and user reach.
Apollo HealthCo Ltd (AHL), the wholly owned subsidiary of Apollo Hospitals, housing its offline
pharmacy distribution segment, digital platform Apollo 24/7, and a 25.5% stake in the front-end
stores segment is currently incurring losses due to investment in the 24/7 platform. Apollo
assumes an EBITDA loss of INR2.25-2.3bn for AHL in FY23e (loss of INR1.3bn in 9MFY23e).
AHL losses should narrow to INR1.7-1.8bn in FY24e with breakeven achieved in 4Q.
17: Apollo Hospitals: Change in estimates

(INRm) _______ New estimates _______ _______ Old estimates ________ ____ % chg. in estimates _____
Revenues 167,220 196,934 230,811 168,543 201,923 238,750 -0.8% -2.5% -3.3%
EBITDA 21,113 27,102 33,301 22,174 28,759 35,680 -4.8% -5.8% -6.7%
EBITDA margin 12.6% 13.8% 14.4% 13.2% 14.2% 14.9%
Adj. net profit 7,723 11,542 15,296 8,560 12,496 16,564 -9.8% -7.6% -7.7%
EPS (INR) 53.74 80.32 106.45 59.57 86.96 115.27 -9.8% -7.6% -7.7%
We adjust our revenue estimates for the key business segments, including hospitals,
pharmacies, and AHLL (retail health). We also adjust our operating cost and EBITDA margins
across all segments. Hospital margin trajectory remains healthy; however, we build in higher
spend for Apollo 24/7 in view of its ongoing efforts to improve consumer reach and products and
services. We build in a slower pick-up for its diagnostic business in view of continued hyper-
competition in the market.
We also adjust items below the EBITDA level (depreciation, interest expenses, and taxes) as per
the current business outlook.
Overall, these changes lead to cuts of 9.8%/7.6%/7.7% to our EPS estimates for
FY23e/FY24e/FY25e, respectively.
14
12 April 2023
Our FY23-25e EPS estimates are now 13.8%, 9.2%, and 9.5% below Refinitiv Datastream’s
latest forecasts.
Valuation and risks

We value Apollo Hospitals using a sum-of-the-parts (SOTP) approach by assigning distinct
valuations for different segments (hospitals, pharmacy, etc.) and applying the target valuation
multiples to our updated estimates for March 2025e (rolled forward from December 2024e).
See Exhibit 18.
We use a cost of equity (COE) of 7.9% (unchanged) to discount back the forward business
value to arrive at fair value. COE is based on a risk-free rate of 2.0%, an ERP of 5.5% for India,
a beta of 0.61 (latest value for two-year average), and an inflation differential of 2.5% for India.
Except beta, our inputs for the COE are as per HSBC’s equity strategists’ assumptions.
Reflecting the changes to our estimates for FY23-25e and the rolling forward of our valuation,
we lower our SOTP-based target price to INR5,100 (from INR5,330). Our new target price
implies 21.4% upside from current levels.
Key downside risks: (1) A slowdown in key clusters, such as Chennai and Hyderabad, and a
delay in the scale-up of operations in other clusters due to competition. (2) A slowdown in
international patient volumes. (3) Adverse market development (either regulatory or competition)
for Apollo 24/7. (4) Higher-than-expected increase in operating costs for the Apollo 24/7 digital
platform, which can hit margins of the core business. (5) Failure/delays in increasing the further
utilisation level for key segments in AHLL (mainly diagnostics).
18: Apollo Hospitals: Sum-of-the parts valuation approach

INRm except per APHS’s FY25e EBITDA EV/EBITDA EV Fair value* Fair value (old) Remarks
share value ownership (x)
Hospitals business 100% 30,523 22 671,510 577,260 596,997 Our valuation multiple of 22x (previously 23x) is in
line with its 5-year average, and we believe this is
sustainable due to visible drivers with a healthy
margin outlook.
Pharmacy 100% 7,779 23 178,913 153,802 160,271 Our valuation multiple of 23x (lower earlier value of
distribution 26x to account for intense pricing competition) is in
Pharmacy front end 26% 1,963 23 11,511 9,896 11,416 line with the market valuation for asset-light highly
AHLL 68% 1,708 23 26,795 23,035 28,394 scalable healthcare offerings, such as diagnostic
labs, pharmacies, etc. Listed diagnostic
companies, such as Dr Lal PathLab (DLPL IN,
INR1,853.55, Not Rated), Metropolis
(METROHL IN, INR1,252.00, Not Rated), etc., are
trading at consensus EV/EBITDA of 20-30x for
FY23-24e.
Indraprastha 22% 1,607 1,607 1,663 CMP implied
Total EV 890,337 765,600 798,742
Net debt (FY22) 30,323 30,323
Minority (FY22) 2,543 2,543
Equity valuation 732,734 765,876
No of shares (m) 144 144
Fair value TP (INR) 5,100.00 5,330.00
CMP (INR) 4,200.95 Based on closing price of 5 April 2023.
Upside 21.4%
Note: *Discounted forward value at cost of equity.
15
12 April 2023
Financials & valuation: Apollo Hospitals Buy

EBITDA 21,851 21,113 27,102 33,301 EV/IC 7.2 6.7 6.3 5.8
Depreciation & amortisation -6,007 -6,104 -7,129 -8,332 PE* 71.0 78.2 52.3 39.5
Net interest -3,786 -3,748 -3,188 -2,875 FCF yield (%) 1.0 0.8 0.9 1.4
Taxation -3,888 -3,708 -5,675 -7,390
Net profit 10,556 8,997 11,542 15,296
Cash flow from operations 12,387 14,979 16,559 20,695 GHG emission intensity* n/a No. of board members 11
Capex -6,572 -10,000 -11,000 -12,000 Energy intensity* n/a Average board tenure (years) n/a
Dividends -433 -1,575 -2,354 -3,120
Change in net debt -3,328 -3,404 -3,204 -5,574
FCF equity 5,815 4,979 5,559 8,695 Employee costs as % of revenues 12.2
Intangible fixed assets 10,313 10,313 10,313 10,313
Cash & others 10,359 10,563 10,567 12,941
Total assets 132,142 137,481 145,688 158,548
Net debt 30,323 26,919 23,714 18,140 Target price (INR) 5100.00 Sector Health Care Providers
Shareholders’ funds 56,452 63,873 73,060 85,235 RIC (Equity) APLH.BO Country/Region India
Bloomberg (Equity) APHS IN Analyst Damayanti Kerai
Market cap (USDm) 7,373 Contact +91 22 6164 0692
Year to 03/2022a 03/2023e 03/2024e 03/2025e
Price relative
Y-o-y % change
Revenue 38.9 14.0 17.8 17.2
5900.00 5900.00
EBITDA 92.1 -3.4 28.4 22.9
5400.00 5400.00
Operating profit 180.8 -5.3 33.1 25.0
4900.00 4900.00
PBT 575.0 -8.5 32.1 30.2
4400.00 4400.00
HSBC EPS 847.1 -9.1 49.4 32.5
3900.00 3900.00
Ratios (%)
3400.00 3400.00
Revenue/IC (x) 1.8 1.8 2.0 2.2 2900.00 2900.00
ROIC 15.6 13.5 15.3 17.4 2400.00 2400.00
ROE 16.6 12.8 16.9 19.3
1900.00 1900.00
ROA 11.2 9.4 10.3 11.9 2021 2022 2023
EBITDA margin 14.9 12.6 13.8 14.4 Apollo Hospitals Rel to BOMBAY SE SENSITIVE INDEX
EBITDA/net interest (x) 5.8 5.6 8.5 11.6 Source: HSBC
Net debt/equity 51.4 40.0 30.7 20.1 Note: Priced at close of 05 Apr 2023
Net debt/EBITDA (x) 1.4 1.3 0.9 0.5
CF from operations/net debt 40.9 55.6 69.8 114.1
EPS Rep (diluted) 73.46 62.61 80.32 106.45
HSBC EPS (diluted) 59.13 53.74 80.32 106.45
DPS 11.75 9.14 13.65 18.10
Book value 392.86 444.50 508.44 593.17
16
12 April 2023
Max Healthcare (MAXHEALT IN, Buy; lower TP to INR505 from INR515)

We maintain our Buy rating on the stock as we believe Max Healthcare Institute Limited (MHIL)
has the potential to offer consistent healthy margins over the next few years, driven by multiple
factors, including improving payor mix, recovery in international patient volumes, and cost
efficiencies.
Its hospital business (96% of FY22 revenues) remains on a growth trajectory led by well-
calibrated capex and a strong execution record. Its capex plan to add 4,000 beds over the next
few years (from a base of 3,412 beds in FY22) will be mostly funded through internal cash and
thus shouldn’t be a drag on margins and returns (it is generating free cash of cINR8bn p.a.). In
view of strategic locations of new beds and demand visibility, it should achieve faster EBITDA
breakeven for new units versus industry norms.
We assume a pick-up in revenues to continue for Max Lab (non-captive pathology services) and
Max@Home (home care services) which are currently small but scalable segments.
MHIL reports standalone and consolidated financials for the company, its subsidiaries, and
managed healthcare facilities under operation and management (O&M) agreements. The
statutory filings do not include financials for partnered healthcare facilities (PHFs).
MHIL provides exclusive healthcare services to PHFs in various specialities (e.g. oncology,
cardiac sciences, orthopaedics) in return for a service fee, comprising a fixed fee and/or a variable
percentage of revenues under long-term agreements. Although PHFs are not owned by MHIL,
these are operationally no different than other hospitals in the network due to their long-term
medical service agreements (MSAs) with MHIL and its subsidiaries. MHIL has significant exposure
to PHFs, which accounted for c30% of total pro-forma revenues for FY22. Thus, we believe it is
prudent to base our discussions and valuations on pro-forma financials that include PHFs.
19: MHIL: Change in estimates (pro-forma financials*)

(INRm) _______ New estimates _______ _______ Old estimates ________ _ % change vs old estimates __
Revenues 60,411 68,197 79,880 60,237 68,400 79,828 0.3% -0.3% 0.1%
EBITDA 16,427 18,874 22,825 16,367 19,200 23,315 0.4% -1.7% -2.1%
EBITDA 27.2% 27.7% 28.6% 27.2% 28.1% 29.2%
margins
PAT 10,517 11,923 14,389 10,625 12,341 14,950 -1.0% -3.4% -3.8%
EPS (INR) 10.85 12.30 14.84 10.96 12.73 15.42 -1.0% -3.4% -3.8%
Note: *Including financials for partnered healthcare facilities/PHFs which are not part of consolidated financials shown in the F&V.
We adjust our sales assumptions across segments, as well as our operating costs and items
below the EBITDA level (other income, depreciation, interest expense, and tax), in line with the
current outlook.
These changes lead to us adjusting our FY23-25e EBITDA estimates by 1-2% and lowering our
FY23-25e EPS estimates by 1-3.8%.
Our FY23e and FY24e EPS estimates are 4.8% and 1.9% below Refinitiv Datastream’s
consensus estimates, while our FY25e EPS estimate is 6.4% above consensus.
Valuation and risks: We value MHIL using a sum-of-the-parts (SOTP) approach to assign distinct
valuations for different segments (hospitals, Max Lab, etc.), applying target valuation multiples to
our updated estimates for March 2025e (rolled forward from December 2024e). See Exhibit 20.
17
12 April 2023
We use a cost of equity (COE) of 8% (unchanged) to discount back the forward business values
to arrive at our fair values. The COE is based on a risk-free rate of 2%; an equity risk premium
of 5.5% for India; a beta of 0.64 (latest two-year average beta, unchanged); and an inflation
differential of 2.5% for India. Except for the beta, the inputs for the COE are as per HSBC’s
equity strategists’ assumptions.
Reflecting the changes to our estimates for FY23-25e and the rolling forward of our valuation,
we lower our SOTP-based target price to INR505 (from INR515). Our new target price implies
20.5% upside from current levels.
Key downside risks: (1) Escalation of operating costs; (2) a delay in optimising payor mix; (3) a
delay in capacity additions and slowdown in volume for international patients; (4) adverse
regulatory updates (e.g. government price controls on procedures or surgeries); and (5) adverse
changes in terms of agreements with partnered healthcare facilities (PHFs).
20: MHIL: Sum-of-the-parts (SOTP) valuation summary

INRm except per share data FY25e EBITDA EV/EBITDA (x) EV Fair value* Earlier fair value Remarks
MHIL and subsidiaries hospitals 16,579 27 447,628 383,627 389,784 Our valuation multiple of 27x (previously
(incl. O&M) 28x) is largely in line with the current
Partnered healthcare facilities 3,711 27 100,190 85,865 86,393 valuation and at an 11.7% premium to the
(PHFs) 1-year average. Our valuation multiple of
27x appears rich; however, we believe it
is justified in view of the strong outlook for
operating profitability driven by visible
catalysts (e.g. improving payor mix, better
case mix, cost optimisations and bed
additions in strategic locations).
Max Lab 179 23 4,122 3,532 4,477 Our valuation multiples of 23x (earlier
Max@Home 604 25 15,100 12,941 14,423 25x) for Max Lab and 25x (earlier 30x) for
Max@Home are in line with market
valuations for asset-light, highly scalable
healthcare offerings such as diagnostic
labs and pharmacies. Listed diagnostic
companies, such as Dr. Lal PathLab
(DLPL IN, INR1,853.55, Not Rated),
Metropolis (METROHL IN, INR1,252.00,
Not Rated), etc., are trading at consensus
EV/EBITDA of 20-30x for FY23-24e We
lowered our valuation multiple for both
Max Lab and Max@Home to account for
intense pricing competition.
Total EV 567,040 485,965 495,078
Net debt (9MFY23) -3,720 -3,720
Equity valuation 489,685 498,798
No of shares (m) 970 970
Fair value TP 505.00 515.00
CMP 419.15 Based on closing price of 5 April 2023.
Upside 20.5%
Note: *Discounted forward value at cost of equity.
18
12 April 2023
Financials & valuation1: Max Healthcare Institute Buy

EBITDA 9,426 12,383 14,219 17,362 EV/IC 6.4 5.7 5.1 4.6
Depreciation & amortisation -2,211 -2,365 -2,811 -3,467 PE* 66.2 49.7 46.6 38.4
Net interest -305 125 -5 -20 FCF yield (%) 0.1 0.8 0.0 0.4
Taxation -1,339 -2,172 -2,904 -3,525
Net profit 6,051 10,613 8,712 10,574
Cash flow from operations 6,069 11,167 10,986 13,336 GHG emission intensity* 72.3 No. of board members 7
Capex -5,613 -7,718 -10,912 -11,611 Energy intensity* n/a Average board tenure (years) n/a
Dividends 0 0 0 0
Change in net debt -166 -3,642 18 -1,667
FCF equity 456 3,449 75 1,725 Employee costs as % of revenues 19.3
Intangible fixed assets 51,104 50,585 50,066 49,548
Cash & others 4,993 7,835 7,016 7,834
Total assets 91,891 100,909 108,879 119,220
Net debt 3,975 333 352 -1,316 Target price (INR) 505.00 Sector Health Care Providers
Shareholders’ funds 62,825 73,437 82,150 92,724 RIC (Equity) MAXE.NS Country/Region India
Bloomberg (Equity) MAXHEALT IN Analyst Damayanti Kerai
Market cap (USDm) 4,968 Contact +91 22 6164 0692
Year to 03/2022a 03/2023e 03/2024e 03/2025e
Price relative
Y-o-y % change
Revenue 57.0 16.8 13.4 17.9 499.00 499.00
EBITDA 133.4 31.4 14.8 22.1 449.00 449.00
Operating profit 214.0 38.9 13.9 21.8 399.00 399.00
PBT 73.0 -9.1 21.4 349.00 349.00
HSBC EPS 536.3 33.1 6.6 21.4
299.00 299.00
Ratios (%)
249.00 249.00
Revenue/IC (x) 0.6 0.7 0.7 0.7 199.00 199.00
ROIC 10.1 12.6 11.7 12.7 149.00 149.00
ROE 10.3 12.0 11.2 12.1
99.00 99.00
ROA 7.8 11.7 9.0 9.9 2021 2022 2023
EBITDA margin 24.0 27.0 27.3 28.3 Max Healthcare Institute Rel to BOMBAY SE SENSITIVE INDEX
EBITDA/net interest (x) 30.9 2843.7 868.1 Source: HSBC
Net debt/equity 6.3 0.5 0.4 -1.4 Note: Priced at close of 05 Apr 2023
Net debt/EBITDA (x) 0.4 0.0 0.0 -0.1
CF from operations/net debt 152.7 3348.6 3123.4
EPS Rep (diluted) 6.24 10.95 8.99 10.91
HSBC EPS (diluted) 6.33 8.43 8.99 10.91
DPS 0.00 0.00 0.00 0.00
Book value 64.80 75.74 84.73 95.63
______________________________________
1 F&V is based on consolidated financials, which exclude partnered health
facilities (PHFs); our discussion and valuation for Max are based on pro-forma
financials, which includes PHFs.
19
20
21: Hospitals: Peer comps

_____________________________ Multi-Specialty Hospitals _____________________________ ___ Maternity and Paediatric Super-Speciality Hospitals ____
Rainbow Apollo Max Health Narayana Aster DM KIMS Surya Kids Clinic Rhea Apollo Cradle
BBG ticker RAINBOW IN APHS IN MAXHEALT IN NARH IN ASTERDM IN KIMS IN n/a n/a n/a n/a
Market cap (USDm) 921 7,357 4,968 1,895 1,461 1,382 n/a n/a n/a n/a
Rating Buy Buy Buy Not Rated Buy Not Rated n/a n/a n/a n/a
CMP* (INR) 744.65 4,200.95 419.15 768.65 241.25 1,346.10 n/a n/a n/a n/a
TP (INR) 1,025 5,100 505 n/a 264 n/a n/a n/a n/a n/a
Upside/Downside 37.6% 21.4% 20.5% n/a 10.2% n/a n/a n/a n/a n/a
Key KPIS (FY22)
No. of hospitals 15 44 12 25 15 12 3 25 17 10
No. of operating beds 1,147 7,875 3,271 5,901 2,899 2,590 322 1100 650 278
ARPOB per day (INR) 45,711 45,327 58,500 32,329 33,500 25,323
ALOS (day) 2.8 4.0 4.7 4.8 3.7 4.8
Occupancy 44.6% 63.0% 75.0% 52.5% 66.0% 79.9%
EBITDA/Operating bed (INRm) 2.7 2.3 4.2 0.6 1.4 2.0 0.2 0.8 0.7 2.8
Key financials (INRbn) – FY22
Revenue 9.7 146.6 52.2 37.0 103.0 16.5 0.3 7.5 3.8 3.7
Hospital revenue 9.7 79.9 50.1 29.7 23.8** 16.5 0.3 7.5 3.8 3.7
EBITDA 3.0 21.9 13.9 6.5 15.3 5.2 0.1 0.9 0.5 0.8
Hospital EBITDA 3.0 18.0 13.7 3.6 3.9** 5.2 0.1 0.9 0.5 0.8
EBITDA margin (%) 31.3% 14.9% 26.6% 17.7% 14.9% 31.2% 23.1% 12.5% 12.4% 21.1%
Hospital EBITDA margin (%) 31.3% 22.6% 27.4% 12.1% 16.5% 31.2% 23.1% 12.5% 12.4% 21.1%
Ratios
Net Debt^/EBITDA (FY22) 1.3 1.2 0.4 0.6 3.1 0.1 1.3 5.3 8.0
EV/EBITDA (FY24e) 18.0 23.0 21.4 15.1 9.5 16.1
EV/EBITDA (FY25e) 14.9 18.6 17.5 13.7 8.3 14.3
ROIC (FY24e) 23.2% 15.3% 12.1% 7.8
ROIC (FY25e) 23.3% 17.4% 13.2% 8.8
Historical performance
Revenue (CAGR FY19-22) 21.5% 15.1% 14.3%^ 9.0% 8.8% 21.6% 24.3% 21.1% 27.9% 18.3%
EBITDA (CAGR FY19-22) 27.1% 27.1% 56.5%^ 31.4% 19.8% 89.7% 41.5% n/m n/m n/m
PAT (CAGR FY19-22) 45.8% 53.3% 77.1% 17.6% n/m 72.5% n/m n/m n/m
ROIC (FY22) 21.2% 15.6% 13.5% 18.1% 8.1% 22.7% 17.2% nm n/m
Growth (CAGR) estimates
Revenue (FY22-25e) 19.0% 16.3% 15.3% 13.6% 11.5% 22.2%

EBITDA (FY22-25e) 20.1% 15.1% 18.7% 20.9% 12.3% 16.3%
PAT (FY22-25e) 25.7% 21.6% 20.1% 25.1% 19.0% 9.7%
Note: *CMP is based on the closing price of 5 April 2023. ^Includes lease liabilities. ^FY20-22 CAGR.
Source: HSBC estimates, Company data, Bloomberg for non-rated names
12 April 2023

12 April 2023
A niche paediatric play
 Rainbow offers exposure to the relatively untapped paediatric care

market in India
 Bed additions, mainly in existing markets, and healthy ARPOB
trends offer strong growth visibility
 Key catalyst – quick turnaround of new beds in strategic markets
24/7 paediatric and obstetrics care
Rainbow is the largest paediatric multi-specialty healthcare chain in India, offering a

The largest paediatric multi-
specialty healthcare chain in
comprehensive suite of 24/7 paediatric and obstetrics care.
India Rainbow was established in 1999 by Dr. Ramesh Kancharla, a paediatric specialist who worked
and King’s College Hospital in London. Rainbow has replicated a globally tried and validated
model for children’s hospitals based on three core fundamentals – a child-centric set-up, multi-
disciplinary, and 24/7 doctor engagement.
It operates through a unique doctor engagement model, where doctors work exclusively on a full-
time, retainer basis. The model is particularly suitable for children’s emergency care and night-
time cases are frequent. The company follows a hub-and-spoke operating model where the hub
hospital provides comprehensive outpatient and inpatient care, with a focus on tertiary and
quaternary services (advanced levels of specialised care) and spokes provide secondary care.
This asset-light model enables it to offer last-mile service connectivity in a cost effective manner.
Rainbow offers a comprehensive suite of 24/7 paediatric, perinatal, and obstetrics care. Its core
specialities include paediatrics, neonatal and paediatric intensive care, paediatric multi-
specialty, and quaternary care including organ transplantation. Its “Birthright by Rainbow” is one
of the largest integrated obstetrics and gynaecology service offerings in India within the
children’s hospital, covering both normal and risky pregnancy cases, multi-disciplinary foetal
care, perinatal genetic, and fertility care.
Its network consists of 16 hospitals and three outpatient clinics spread across six cities as of 31
March 2023. It has 1,655 beds in its network, of which c500 are for critical care (ICU).
Its hospitals are accredited by various national and international bodies – 10 of its network
facilities have National Accreditation Board for Hospitals (NABH) and Healthcare Providers in
India accreditations, three hospitals have EDGE certification, and its standalone fertility centre
has Joint Commission International (JCI) accreditations.
Its flagship hospital in Banjara Hills, Hyderabad offers a full range of mature paediatric services
such as comprehensive neurological services (for holistic neurodevelopmental interventions),
haemato-oncology and bone-marrow transplant, liver and kidney transplant services, and other
paediatric and perinatal services.
21
12 April 2023
Rainbow Children’s Heart Institute is one of the largest of its kind in India. Its team of paediatric
specialists including cardiologists, CT surgeons, cardiac anaesthesia, and intensivist provide
comprehensive treatment for children with congenital and acquired cardiac problems.
The company also conducts India’s largest paediatric Diplomate of National Board (DNB)
training programme in private healthcare, offering post graduate residential DNB and fellowship
programmes.
22: Rainbow network (as of 31 December 2022*)
15 Hospitals 3 Outpatient
clinics
6 Cities 1,555 Total beds

capacity
907K+ 63k+ In-patient

Outpatient visits admissions
INR49K ARPOB 54.23%

Occupancy
11k+ Deliveries
annually 685+ Doctors
Note: *Rainbow opened a 100-bed hospital at Financial District on 1 March 2023. At which point the number of hospitals it operates and total bed capacity increased to 16 and
1,655, respectively.
Focus on metro/tier-1 cities
Rainbow’s focus is on metro/tier-1 cities with c85% of its total bed capacity in cities like
Hyderabad, Bengaluru, Chennai, Delhi, and the National Capital Region (NCR). These markets
have attractive demographics (high per capita income, high level of awareness, and demand for
quality paediatric care). Its operational network is currently spread across five key clusters:
1. Hyderabad: This is the most mature cluster for Rainbow where it started operations at the
Banjara Hills facility in 1999. Occupancy in this cluster is c5% higher than the network
average. Furthermore, this cluster accounts for c55% of revenues and c70% of EBITDA in
FY22. It currently consists of seven hospitals with 830 beds (c50% of total bed capacity) –
Banjara Hills (flagship hub), Vikrampuri, Kondapur, Hydernagar, LB Nagar, Rainbow
Children’s Heart Institute, and Financial District (opened on 1 March 2023). It plans to add
one hospital at Central City.
2. Bengaluru: Three hospitals with 352 beds (c22% of total bed capacity) – Marathahalli
(hub), Bannerghatta (BG) Road, and Hebbal. It is planning to add two spokes at Hennur
(closer to Hebbal) and Sarjapur.
3. Andhra Pradesh: Two hospitals at Vijayawada and Vizag. It plans to add regional spokes
at Rajahmundry, Nellore, and Kurnool.
4. Tamil Nadu: Two hospitals at Guindy (Hub) and OMR (opened in September 2022). It
plans to add hospitals at Anna Nagar and Coimbatore.
5. Delhi NCR: Hospitals at Malviya Nagar and Rosewalk. The Malviya Nagar facility is owned
by Madhukar Trust and Rainbow has a medical service agreement with it. It consolidates
32.5% of revenue from inpatient operations (IPD) and 100% of OPD (outpatient) revenues.
22
12 April 2023
Rainbow has lent working capital to Madhukar Trust, which it books as inter-corporate
deposits (ICDs) on its books (INR430.5m excluding interest in FY22). It plans to add two
hospitals (each 100-150 beds) at Gurugram and Noida.
It generally takes a minimum of five years to achieve optimum scale and KPIs for a new
hospital. As shown in Exhibit 23, mature hospitals (those in operation for more than five years)
deliver higher KPIs metrics than new hospitals (in operation for less than five years).
23: Key KPIs by maturity of hospitals

FY19 FY20 FY21 FY22 9MFY23
Bed capacity 1,162 1,296 1,475 1,500 1,555
Mature hospital 1,027 1,027 1,027 1,052 1,052
New hospital 135 269 448 448 503
Operational beds 931 1,001 1,132 1,147 1,171
Mature hospital 819 819 819 835 838
New hospital 112 182 313 313 333
Occupancy rate (%) 54.1% 56.3% 34.2% 44.6% 54.2%
Mature hospital 55.9% 60.8% 37.1% 48.3% 59.1%
New hospital 23.2% 34.4% 24.1% 34.6% 42.0%
ALOS (days) 3.20 3.05 2.57 2.83 2.76
Mature hospital 3.17 2.93 2.45 2.67 2.59
New hospital 5.91 4.67 3.56 3.65 3.59
Inpatient volume
Mature hospital 52,753 62,263 45,380
New hospital 669 4,608 5,785
Outpatient volume
Mature hospital 749,189 862,554 545,213
New hospital 38,156 78,495 78,898
Source: Company data
23
12 April 2023
24: Summary of existing facilities and planned expansions

Total Bed As % of
Starting capacity existing bed
Facility Type of facility Period (March 2023) capacity Comments
Hyderabad cluster
Existing units 830 50.2%
Banjara Hills (Flagship) Hub 1999 250 First hospital and flagship facility of Rainbow. It is the most mature hospital with
occupancy of more than 70%. It provides quaternary paediatric care.
Vikrampuri Spoke 2007 110 Tertiary care paediatric hospital that offers comprehensive foetal medicine.
Kondapur Spoke 2013 50 Has an exclusive maternity care unit providing foetal medicine, neonatal and general
paediatric care services.
Hydernagar Spoke 2014 110 Tertiary care paediatric hospital offering advanced gynaecology and laparoscopic
services.
LB Nagar Spoke 2016 100 Paediatric hospital providing primary, secondary, and tertiary level paediatric care.
Rainbow Children’s Hub 2019 110 An exclusive heart centre for children with congenital and other cardiac ailments.
Heart Institute (RCHI)
Financial District Spoke March 2023 100 The facility opened on 1 March 2023.
Planned units 110
Hydernagar (New block) Spoke 2QFY24e 50 Addition of new 50 bed block to cater to existing demand.
Central City Spoke 3QFY24e 60 Expect completion in 3QFY24.
Bengaluru cluster
Marathahalli Hub 2015 200 Tertiary care hospital and a major referral centre for nearby districts and states.
Bannerghatta (BG) Road Spoke 2016 102 Tertiary care paediatric hospital that holds an exclusive maternity care unit.
Hebbal Spoke 2020 50 Provides perinatal services for expectant mothers and new-borns.
Planned units 130-150
Hennur Spoke FY24-26e 50
Sarjapur Spoke FY24-26e 80-100
Andhra Pradesh cluster
Vijayawada Regional spoke 2007 130 Provides comprehensive paediatric neurology services along with a full suite of foetal
medicine services and maternal intensive care. It also serves as a referral centre for
high-risk pregnancies from the neighbouring districts.
Visakhapatnam (Vizag) Regional spoke 2020 129 Tertiary paediatric hospital with a built up capacity of 175 beds of which only 110 are
operational. It also offers foetal medicine and high risk obstetrics services.
Rajahmundry Regional spoke FY25e 100 Work is expected to be completed towards the end of FY25e.
Nellore Regional spoke Likely after 80-100 Strategic location between Chennai and Hyderabad.
FY25e
Kurnool Regional spoke Likely after 80-100 Strategic location between Bengaluru and Hyderabad.
FY25e
New Delhi-NCR cluster
Existing units 24* 1.5%
Malviya Nagar* Hub 2017 130* The hospital is owned by Madhukar Trust, and its inpatient operations are managed
by Rainbow under a medical service agreement (MSA). It consolidates 32.5% of
revenue from inpatient operations (IPD) and 100% of OPD (outpatient) revenues.
Rosewalk Spoke 2019 24 Reorganisation of format from luxury birthing centre to ‘BirthRight’ service centre
under the Rainbow model. The facility will remain a 24 bed birthing facility with no
scope for new bed additions.
Gurugram FY25-26e 100-150 Rainbow is in the due diligence phase and is likely to finalise sites in another six-
Noida FY25-26e 80-100 months. It would then take another 8-10 months to commission the facilities.
Management may share further details during the 4Q FY23 call. We expect these
facilities to start operations in FY25-26e.
Tamil Nadu cluster
Guindy Hub 2018 135 It has an exclusive maternity care unit providing foetal medicine & neonatal care.
OMR Road Spoke 2022 55 Commenced operations in September 2022.
Anna Nagar, Chennai Spoke 3QFY24e 80 Under construction. Expected to become operational in FY24e (likely in 3QFY24e).
Coimbatore Regional spoke 125-150 Planned.
Note: *Malviya Nagar facility is under a Medical Service agreement and Rainbow doesn’t consolidate its financials, thus not taken as part of network hospital.
24
12 April 2023
25: Key KPIs by cluster

FY19 FY20 FY21 9MFY23
Bed capacity
Group 1,162 1,296 1,475 1,555
Hyderabad 595 705 705 730
Bengaluru 302 302 352 352
Andhra Pradesh 130 130 259 259
Chennai 135 135 135 190
New Delhi 24 24 24
Operational beds
Group 931 1,001 1,132 1,198
Hyderabad 445 495 495 508
Bengaluru 246 246 296 304
Andhra Pradesh 128 128 209 209
Chennai 112 112 112 157
New Delhi 20 20 20
Occupancy rate (%)
Group 54.1% 56.3% 34.2% 54.2%
Hyderabad 68.6% 71.2% 42.9% 59.2%
Bengaluru 32.6% 41.7% 23.6%
Andhra Pradesh 56.5% 50.9% 30.3%
Chennai 23.2% 36.4% 29.6%
New Delhi 10.5% 19.7%
ALoS (days)
Group 3.20 3.05 2.57 2.76
Hyderabad 3.07 2.94 2.51
Bengaluru 2.77 2.73 2.24
Andhra Pradesh 4.44 3.76 3.09
Chennai 5.91 4.58 3.66
New Delhi 1.74 1.43
Inpatient volume
Group 53,422 66,871 51,165 63,323
Hyderabad 36,264 43,176 30,910
Bengaluru 10,550 13,724 10,411
Andhra Pradesh 5,939 6,337 5,536
Chennai 669 3,260 3,305
New Delhi 374 1,003
Outpatient volume
Group 787,345 941,049 624,111 907,572
Hyderabad 523,703 610,913 402,669
Bengaluru 136,306 157,560 89,365
Andhra Pradesh 89,180 101,235 66,769
Chennai 5,876 26,884 28,918
New Delhi 32,280 44,457 36,390
25
12 April 2023
Doctor engagement model
Rainbow operates through a unique doctor engagement model, whereby doctors work
exclusively on a full-time retainer basis. Its network of more than 640 full-time doctors work as
part of multidisciplinary team with 24/7 commitment. This model ensures that core specialists
are available 24/7 on a roster basis, which is particularly important for children’s emergency and
neonatal and paediatric intensive care services (c60% of admissions happen at night for
paediatric patients).
The company signs retainer contracts with newly hired doctors covering an initial 2-3 years.
Most of the doctors hired by Rainbow are those who have relocated to India after training at
foreign universities (e.g. the US, UK, Canada, and Australia). Rainbow provides retainer fees to
doctors in the early phase of their career and later offers career opportunities in the Rainbow
network. The company says that due to strong brand recognition patient footfall is not focused
around any “star” doctor.
In addition, Rainbow conducts the largest training programme in the private sector in India,
approved by the National Board of Examinations. These incentives ensure the availability of
well-trained medical talent and a high level of retention for the company.
26: Rainbow’s doctor engagement model
Outstanding professional Best-in-class training Enriching career Brand Rainbow

capabilities program development
• Two decades of pioneering
• 640+ full time doctors • Recognized as MRCPCH • Retainer/Support in work
Examination Centre beginning years
• A number of doctors trained or • One of the advanced
possess qualifications from the • Recognized as training • Competitive compensation institutes offering all
UK, USA, Canada, Australia center by National Board of and rewards Paediatrics specialties under
Examinations one roof including
• Modern infrastructure and clinical • Opportunities to grow, quaternary care
back-up to provide quality care • Leading training program in absorb in the Rainbow
India approved by National network • One of the leading
Board of Examinations comprehensive perinatal
• Multidisciplinary approach to centres
create comprehensive
clinical environment and
better work life balance
Hub and spoke model
Rainbow operates a hub and spoke model across its network – the hub hospital provides
Rainbow uses a hub and
spoke model to optimise comprehensive outpatient and inpatient care, with a focus on tertiary and quaternary services
reach and gain from and the spoke hospitals provide secondary care in paediatric, obstetrics & gynaecology, and
operational synergies emergency services. This model helps Rainbow in terms of optimal service delivery and prudent
network expansion. The model is used at both the city and the regional level to enhance
economies of scale and synergies from operational efficiencies.
The hub and spoke model operates successfully in Hyderabad and is gaining traction in
Bengaluru. The aim is to replicate this approach in Chennai and across the National Capital
Region. Subsequently, Rainbow intends to expand into Tier-2 cities in southern India.
City level hub and spoke model: Rainbow establishes 1-2 hubs in a metro/city consisting of
150-250 beds for tertiary and quaternary care paediatric services. These hubs connect to 4-5
26
12 April 2023
spokes, which provides primary, secondary, and basic tertiary care services. The spokes act as
a connecting bridge and refer complex cases to hubs.
This model has been implemented in Hyderabad, with Banjara Hills (250 beds) being the hub,
which is connected to spokes (Secunderabad, LB Nagar, Kondapur, Hydernagar, and Financial
District). It is replicating this model in Bengaluru, Chennai, and Delhi-NCR clusters.
Regional level model: Rainbow is mainly present in the southern part of India where it has
implemented a “South Connect” model. Under this hub and spoke model, major cities act as the
hub and the spokes are major cities/towns within a 200-250km radius from a city hub. These
regional spokes provide quality paediatric and obstetrics services in Tier-2 towns and act as a
bridge to address a large regional market. These spokes are connected through a robust
transport network to serve high-risk cases.
Rainbow is planning to set up a spoke in Nellore, which will be connected to major hubs in
Hyderabad and Chennai. Similarly, it has plans for a spoke in Kurnool, which will be connected
to Hyderabad and Bengaluru.
27: City level hub and spoke model

HUB
Spoke • Ty pically 150-250 beds
• 1-2 hubs / metro city
• Comprehensiv e in-patient and outpatient care
• Tertiary & quaternary care
• Pediatrics super specialists
Spoke Spoke
Hub Spokes
• Ty pically 50-100 beds
• 4-5 spokes around a hub
• Primary , secondary and basic tertiary care
• Ref er complex cases to hub
• Regional spokes at 200-250 kms f rom city
Spoke Spoke hubs
• Regional pokes prov ide pediatric, obstetrics,
and gy naecology at tier-11 cities
Well-planned expansion
Rainbow has grown from 50 beds in 1999 to 1,500 beds in 2022 (a CAGR of 16.7%). It intends
Rainbow plans to add c1,000
beds over next five years
to expand through both greenfield and brownfield sites. After establishing a strong presence in
key cities in South India, such as Hyderabad, Vizag, and Vijaywada, Rainbow is now expanding
into newer markets such as Chennai and Delhi-NCR. It is also exploring opportunities in
northeast India where it sees reasonable demand for quality paediatric and obstetrics care.
It plans to add c1,000 beds over the next five years (FY23-27e) to tap growth opportunities in
target markets. The expected average cost per bed is INR5-6m for a spoke and cINR6.5m in a
hub (below the average cost per bed of INR10-12m in multi-specialty non-paediatric hospitals).
The focus will be on adding bed capacity at existing hubs or spokes in order to add on more
specialities, rather than creating new hubs. Of the planned 1,000 bed additions, 70% will be in
existing locations, and 30% in newer markets like Nellore, Kurnool, and Coimbatore. Bed
additions at existing locations help to strengthen the hub and spoke model and to cater for
demand currently not met by existing facilities (e.g. 90 beds in Hyderabad). This, in turn, should
help it achieve faster EBITDA breakeven for new beds. Rainbow hopes that new beds catering
to existing demand (e.g. some beds in Hyderabad) will be immediately EBITDA positive.
27
12 April 2023
This will mainly be funded by existing cash levels of cINR5.5bn (including liquid investments)
and cash flow from operations and the company expects no borrowings to fund capex projects.
In addition to new bed additions, it has headroom to scale-up centres in Delhi and Chennai,
which are currently operating at occupancy rates of 35-40% vs 70%+ occupancy in mature units
like the Banjara Hills facility in Hyderabad.
28: A well-defined bed additions plan to support growth over the next few years
3,000
200 2,495
2,400 100 200
80 50 100
50 60
1,800 100
1,500 55
1,200
600
Rajahmundry
Kurnool &
Bed capacity
Bed capacity
Hydernagar
Chennai OMR
Hennur (FY24e)
District (FY23)
Central City
Sarjapur
NCR (FY25-
Anna Nagar
(FY25e)
(FY25-26e)
Nellore
(FY24e)
(FY24e)
(FY24e)
Financial
(FY22)
(FY27)
(FY23)
27e)
29: c70% of total new beds to be added at 30: Capex overview

existing locations, which ensures faster
EBITDA breakeven
Planned bed additions 3,000 300
2,500 250
500
2,000 500 200
New 500
markets
30% 1,500 150
450
1,000 1,991 500 100
1,669 1,860
500 1,008 852 50
Ex isting
markets
70%
0 0
FY23e FY24e FY25e FY26e FY27e
Maintenance capex (INRm)
Expansionary capex (INRm)
# Beds planned-RHS
Source: Company data, HSBC Source: Company data, HSBC estimates
Niche addressable market
The total addressable market (TAM) for paediatric and maternity care in India is expected to
grow to USD35.9bn by 2026e from USD18.5bn in 2020 (a CAGR of 12%, similar to the broader
hospital market growth) as per a CRISIL report. However, the private paediatric care segment,
the focus for Rainbow, is expected to grow at a faster CAGR of 14% to reach USD17.9bn by
2026e, up from USD8.1bn in 2020.
28
12 April 2023
The demand outlook for the paediatric and mother care market is supported by structural growth
The demand outlook for the
paediatric and mother care
drivers: rising per capita income, demographic changes (rise in maternity age, rise of nuclear
market is supported by families), rising demand for quality paediatric care, growing health insurance penetration.
structural growth drivers
A number of companies have emerged in the mother and child care segment over the past few
years. They offer dedicated maternity care including luxury/boutique birthing centres and initial
paediatric care (e.g. Cloudnine, Motherhood Hospitals, and Ovum). Unlike Rainbow, however,
most of these companies don’t have the scale, focus, and expertise to offer a comprehensive
range of paediatric services.
Hence, we believe Rainbow is uniquely positioned in the mother & child care market as it offers
both a comprehensive range of paediatric services (including critical ICU cases) and obstetric
services, including high-risk pregnancies. The scale of operations and services are higher for
Rainbow than most peers and Rainbow has a superior mix (c70% revenues from paediatric
services).
Most multi-specialty hospitals also offer paediatric and obstetric care but we think Rainbow’s
dedicated paediatric focused hub-and-spoke model appears to be more compelling in terms of
tapping the mother and child care market.
31: Rainbow is uniquely positioned in the high-growth paediatric care market
40 Total paediatric and mother care market (TAM) CAGR:12%

TAM:35.9
35 4.4
30 3.5
25
TAM:18.5 10.1
20
2.3
15 2.8 14% CAGR
10 5.3
17.9
5 8.1
0
2020 2026
Paediatric care - Private Paediatric care - Public Maternity care - Public Maternity care - Private
Source: Company data, CRISIL estimates, HSBC
29
12 April 2023
32: Rainbow stands out vs other mother and child care hospitals in most parameters
KPIs* Rainbow Surya Kids Clinic Rhea Apollo Cradle
Number of hospitals 15 3 25 17 10
Number of clinics 3 1 3 17
Total number of beds 1,555 322 1,100 650 278
ICU beds as % of total beds 32.1% 56.5% 9.3% 29.7% 19.5%
No. of doctors 685 259 601 438 119
No. of paediatrics doctors 600+ 88 128 88 35
Key financials (INRm)-FY22
Revenue 9,738 256 7,498 3,845 3,657
EBITDA 3,049 59 935 476 770
EBITDA margin 31.3% 23.1% 12.5% 12.4% 21.1%
Profit after tax (PAT) 1,383 37 -472 -308 -194
PAT margin 14.2% 14.3% -6.3% -8.0% -5.3%
Net debt (excluding lease liabilities) -1,436 76 1,163 901
Net debt (including lease liabilities) 3,957 76 4,930 3,807
Net debt/EBITDA 1.3 1.3 5.3 8.0
CAGR (FY19-22)
Revenue 21.5% 24.3% 21.1% 27.9% 18.3%
EBITDA 27.1% 41.5% n/m n/m n/m
PAT 45.8% 72.5% n/m n/m n/m
Note: *KPIs as of 31 December 2022.
30
12 April 2023
Financials and valuations
 We expect healthy revenue and PAT CAGR of 19% and 25.7%,

respectively over FY22-25e
 We assume its ARPOB to grow 8-10% p.a. over FY22-25e, led by a
6-7% annual price hike and healthy revenue mix
 Initiate coverage with a Buy rating and a TP of INR1,025; slowdown
in key Hyderabad cluster is the key risk
Financial forecasts
Revenues
We estimate revenue to grow at a CAGR of 19.0% over FY22-25e, driven by well-defined bed
addition plans (12.7% CAGR) that will broaden the company’s reach in existing markets and
expand its presence in newer markets, and a consistent growth in average revenue per
operating bed (ARPOB). A stronger presence in metro/tier-1 cities (>90% of revenues) and a
favourable mix (high share of cash and insured patients and low exposure to government
institutional channels) provides good growth visibility over the next few years.
33: We expect healthy revenue growth 34: …bed additions in strategic markets
driven by… and a pick-up in revenues at new units
CAGR 23.2
25.0
FY22-25e: 19.0%
FY22-27e: 18.9% 19.8 90.0% 22.0% 23.5% 23.0% 23.4% 28.6%
20.0 30.5%
16.4 75.0%
15.0 CAGR FY19-22: 13.5
21.5% 11.3 60.0%
9.7
10.0 7.2 45.0%
6.5
5.4 78.0% 76.5% 77.0% 76.6% 71.4%
69.5%
5.0 30.0%
0.0 15.0%
FY25e
FY23e
FY24e
FY26e
FY27e
FY20
FY22
FY19
FY21
0.0%
FY22 FY23e FY24e FY25e FY26e FY27e
Revenue (INRbn) Mature Hospitals New Hospitals
Average revenue per operating bed (ARPOB): Due to a superior business mix (healthy case
mix with c70% revenues from paediatric services, more than 90% revenues from metro/tier-1
cities, and a healthy payor mix with high exposure to cash/health insured patients), Rainbow
reports higher ARPOB than most peers, including multi-specialty hospitals.
31
12 April 2023
ARPOBs for tertiary and quaternary care, obstetrics, and intensive care services are higher than
the company average and c60% above the ARPOB of INR30-35k for secondary paediatrics.
Its ARPOB improved from INR27k in FY19 to INR48-50k currently, driven by the addition of
newer tertiary and quaternary care services and surgical deliveries at key hospitals. While there
would be q-o-q variability, Rainbow expects healthy trends for its ARPOB. It has a healthy payor
mix, with revenue split evenly between cash patients and patients covered by insurance. In the
cash patient segment, Rainbow is confident about sustaining a 5-6% price hike for selected
therapies every year. In the insurance segment, the contracts are signed for two years and it
generally increases prices 10-12% when renewing contracts. Overall, it remains confident about
an annual price hike of 6-7%, which would be the key contributor to its revenue growth.
We assume ARPOB to grow 8-10% p.a. over FY22-25e, led by a 6-7% annual price hike and
healthy mix.
35: We assume healthy growth trends for 36: Consistent annual price hikes and mix
ARPOB should drive ARPOB (’000 INR)
80 CAGR 70
FY22-25e:8.4%
70 FY22-27e: 8.2% 2-3%
60 6-7%
60
50 50
6
8
40 40
63 68
30 54 58
50 30 58
20 41 46
35 46
10 20
0 10
FY20 FY21 FY22 FY23e FY24e FY25e FY26e FY27e
0
COVID vaccine benefits FY22 Annual price Mix change FY25e
ARPOB ('000 INR/day)- non-COVID hike
Annual price hike Mix change
Occupancy and seasonality: Prior to COVID-19, Rainbow was operating at an occupancy rate
of 55-56%, which declined to as low as 34% (on a blended basis for mature and new hospitals)
in FY21 due to the pandemic. As of 9MFY23, occupancy improved to 54% as people moved
back to their workplaces in cities like Bangalore and Hyderabad after the pandemic.
Demand for paediatric services are highly seasonal in nature – March (4Q) and June (1Q)
quarters are low season due to school examinations and then school holidays, which often lead
to the deferral of elective surgeries. September (2Q) and December (3Q) quarters are higher
seasons due to higher incidences of cold, fever, and infections as a result of the rainy and
winter season, leading to higher demand for secondary care. 2Q and 3Q account for 57-60% of
revenue and 1Q and 4Q 40-43% of revenue during a year. Rainbow has a relatively lower
occupancy rate than multi-specialty hospitals, due to high seasonality.
Rainbow expects occupancy levels to steadily improve, led by normalised patient footfall. Over
the medium-to-long term, it estimates occupancy levels of 60-65% (its flagship facility in Banjara
Hills is currently operating at 70%). Occupancy rates are improving in both normal and ICU
beds – 33% of its beds are ICU, where occupancy is currently 30-35%.
Focus on paediatric and obstetrics care, however, keeps its average length of stay (ALoS) at
low levels vs multi-specialty hospitals.
32
12 April 2023
37: Despite high business seasonality… 38: …Rainbow should sustain healthy
occupancy at mature hospitals and a pick-
up in occupancy at new hospitals
70.0%
70.0% 62.2% 40.0% 60.8%
60.0%
57.1% 60.0% 55.0% 54.0% 54.5% 54.8%
55.9% 48.3%
51.6% 30.0% 50.0% 54.3%
50.0%
43.1% 37.1%
40.0% 46.7% 40.0% 35.0%
34.4%
40.3% 20.0% 31.3%31.5%31.7%
30.0% 39.6% 30.0% 34.6%
31.0%
20.0% 10.0% 20.0% 23.2% 24.1%
10.0% 10.0%
0.0% 0.0% 0.0%
1QFY22 3QFY22 1QFY23 3QFY23 FY19 FY21 FY23e FY25e FY27e
Occupancy-RHS Revenue contribution*
EBITDA margins Mature Hospitals New Hospitals
Note: *Contribution to full-year revenues. Source: Company data, HSBC estimates
EBITDA and PAT

Most of the planned bed additions (70% of total c1,000 beds over the next five years) are in
existing locations, which should result in faster EBITDA breakeven.
Faster breakeven of new beds, a healthy business mix, and strong cost control measures
should help the company sustain EBITDA margins of 32-33%, in our view (based on post IND
AS 116 accounting standards). We assume its PAT to grow about 2x to INR2.7bn in FY25e
(25.7% CAGR over FY22-25e) on strong revenue-growth led operating leverage.
39: Strong focus on operating costs to 40: Healthy EBITDA margins trends
continue (ratio as % of revenues)
80.0% 35.0% 33.4% 32.2%

32.2% 32.3%32.3%
18.8%
60.0% 15.8% 16.7% 16.7% 16.5% 16.5% 16.4% 31.3%
30.0%
27.4% 27.4% 27.9%
24.5% 20.9% 26.2% 26.2% 26.3%
40.0% 22.7% 23.5% 23.5% 23.4% 23.4% 25.0%
25.0% 26.0% 26.3%
11.9%
20.0% 15.7% 12.2% 12.3% 12.1% 12.0% 12.1% 21.9% 21.9%
15.9% 20.0% 15.0% 15.2% 15.6% 15.9% 15.8% 20.0%

0.0%
18.2%
FY21 FY22 FY23e FY24e FY25e FY26e FY27e
15.0%
Other costs Professional fees to doctors FY19 FY21 FY23e FY25e FY27e
EBITDA margin (Post IND AS 116)
Staff Cost Materials cost
EBITDA margin (Pre IND AS 116)
33
12 April 2023
41: We see PAT potentially growing about 42: D&A charge as a % of revenue
2x over FY22-25e
4.5 4.0 12.0%

~2x grow th over 11.1%
4.0 11.3%
FY22-25e (CAGR 25.7%) 3.3 11.0%
3.5
3.0 2.7
10.0%
2.5 2.3
1.9 9.6%
2.0 9.0% 8.6%
1.4 8.1% 7.9% 7.9%
1.5 8.0% 7.8%
1.0 0.4 0.6 0.4
0.5 7.0% 7.3%
0.0
6.0%
FY23e
FY24e
FY25e
FY26e
FY27e
FY19
FY20
FY21
FY22
FY19 FY21 FY23e FY25e FY27e

PAT (INRbn) Depreciation & amortization as % of revenues
Balance sheet and cash flows

Rainbow has a healthy cash balance of cINR5.5bn (including liquid investments) which, along
with cash flow from operations, should fund the planned capex project. This, in turn, should help
it sustain a healthy balance sheet.
Faster breakeven of new beds should ensure healthy free cash flow and return on invested
capital (ROIC) trends, in our view.
43: Most of its liabilities are in the form of 44: Balance sheet should sustain healthy
lease liabilities trends
12.0 5.0 3.0

0.4 4.2 4.2 4.2
4.0
10.0 2.6 4.0 3.9 2.5
0.4 4.0
0.4
8.0 0.4 2.0
0.4 3.0
0.4 2.1 1.5
6.0 0.5
10.3 2.0 1.3
9.0 1.0
4.0 7.9 1.0
6.9 1.0
5.4 6.1 1.0 0.8
4.7 0.6 0.5
2.0
0.0 0.3 0.0
0.0 FY21 FY22 FY23e FY24e FY25e FY26e FY27e
FY21 FY22 FY23e FY24e FY25e FY26e FY27e
Lease liabilities Debt Net debt* (INRbn) Net debt/EBITDA (x)
Source: Company data, HSBC estimates Note: *Including lease liabilities.
34
12 April 2023
45: We assume healthy FCF on faster 46: ROIC should remain healthy
turnaround of new beds
3,500 3,205 26.0% 25.3%

3,000 25.0%
24.0% 23.6% 23.6%
2,500
22.9%
23.0% 22.7%
2,000
22.0%
1,500 1,326
21.0% 21.2%
1,000 790 677 786
421 20.0%
500
19.0%
0 FY22 FY23e FY24e FY25e FY26e FY27e
FY22 FY23e FY24e FY25e FY26e FY27e RoIC
FCF (INRm)
Valuation
We use a DCF model for Rainbow to reflect the long-term growth visibility for its paediatric care
segment (c70% of revenue). For our DCF we assume a risk-free rate of 2.0%, an equity risk
premium of 5.5% for India, an inflation differential of 2.5% for India, and a beta of 1.0, which
leads to a cost of equity of 10.0%. We assume a cost of debt at 10% (pre-tax) and long-term
equity to debt at 51:49. These assumptions lead to a WACC of 8.8%. Our terminal growth rate
is 6.25% (the difference between inflation and the growth average for key hospital names).
Our DCF model leads to a target price of INR1,025 per share for Rainbow. This implies 37.6%
upside from current levels, thus we initiate coverage on the stock with a Buy rating.
Our valuation implies an EV/EBITDA multiple of 24.5x for FY24e and 20.2x for FY25e; the stock is
currently trading at an EV/EBITDA of 18x for FY24e and 14.9x for FY25e based on our estimates.
35
12 April 2023
47: DCF valuation summary

(INRm) FY22 FY23e FY24e FY25e FY26e FY27e FY37e
Revenues 9,738 11,305 13,537 16,396 19,769 23,154 66,330
% y-o-y 49.8% 16.1% 19.7% 21.1% 20.6% 17.1% 6.3%
EBIT 2,216 2,867 3,300 3,984 4,838 5,804 13,266
EBIT margin 22.8% 25.4% 24.4% 24.3% 24.5% 25.1% 20.0%
NOPAT 1,761 2,275 2,619 3,161 3,840 4,606 10,528
Reinvestment 971 1,598 2,198 2,375 2,513 1,401 3,158
FCFF 790 677 421 786 1,326 3,205 7,370
Terminal growth rate 6.25% WACC

calculation
Kd 10.0%
DCF valuation summary Tax rate 25.17%
PV(Terminal value) 310,922
PV (CF over explicit 18,624 Rf (Global) 2.0%
periods)
Enterprise value 106,752 India Inflation 2.5%
differential
- Debt and lease 5,809 Rp 5.5%
liabilities
- Minority interests 35 Beta 1.00
+ Cash & investments 3,035 Ke 10.0%
Equity value 103,943 Wd 49%
Number of shares (m) 102 We 51%
Target price (INR) 1,025 WACC 8.8%
CMP* (INR) 744.65
Upside 37.6%
Note: *CMP is based on the closing price of 5 April 2023.
48: Scenario analysis for valuation/share
1,400 FY23e-27e
FY23e-27e: Occupancy: 47%
1,200 Occupancy: 43-45% ARPOB grow th: 9% yoy
ARPOB grow th 8-10% 1,243
1,000 FY23e-27e
Occupancy: 37% 1,025 66.9%
800 ARPOB grow th: 5% yoy 37.6%
744.65
600 -34.8%
400 486
200
0
Worst case CMP Base case Best case
Note: CMP is based on the closing price of 5 April 2023.

Key downside risks: (1) Slowdown in the core Hyderabad cluster, (2) a delay in stepping
utilization of new units, (3) a delay or failure to finalise sites for planned expansion (e.g.
Gurugram and Noida); and (4) regulatory risks (e.g. government intervention in prices for
services offered).
36
12 April 2023
Appendix
Company profile
Rainbow was established in 1999 by Dr. Ramesh Kancharla, a paediatric specialist who worked
and King’s College Hospital in London – along with some of his colleagues. Rainbow provides
mother and child care in metros and Tier-1 cities.
The total addressable market (TAM) for the M&C market in India is expected to grow to
USD36bn by 2026e from USD18.5bn in 2020, as per CRISIL and various other industry
estimates. Within the M&C market, private paediatric and maternity care (the main focus for
Rainbow) is expected to grow to USD22.3bn in 2026e from USD10.4bn in 2020 (a CAGR of
14%), higher than the expected 12% CAGR for multi-specialty hospitals.
The growth should be driven by structural drivers – rising per capita income, demographic
changes (increase nuclear families, rise in maternity age, rise in pregnancy complications),
rising demand for quality paediatric care, and growing health insurance penetration.
49: Key managerial personnel

Name Role Professional profile
Dr. Ramesh Kancharla Chairman & Managing Director Dr. Kancharla is the founder member of Rainbow Medicare. He is
a specialist in paediatric Gastroenterology, Hepatology and
Nutrition with over 30 years’ experience in the healthcare sector.
Prior to Rainbow, he worked in prestigious hospitals such as
King’s College Hospital and Great Ormond Street Children’s
Hospital in London. He holds an MD in paediatrics from
Mangalore University.
Mr. Mahesh Madduri Head of strategy Mr. Madduri is a chartered accountant and holds a MS degree
from Carnegie Mellon University, in Pittsburgh, Pennsylvania. He
was previously associated with ICICI and the merchant banking
division of Morgan Stanley (Private Equity).
Mr. R Gowrisankar Chief Financial Officer Mr. Gowrisankar is a chartered accountant with over 21 years’
professional experience. He was previously associated with
leading corporates like Apollo Hospitals, Takshasila Healthcare
and Research Services, Manipal Health, Yashomati Hospital, and
Yashoda Healthcare.
Mr. Ashish Kapil Company Secretary and Mr. Kapil is an associate member of the Institute of Company
Compliance Officer Secretaries of India and has over 11 years’ experience in legal,
compliance, and company secretarial matters. He was previously
associated with Dr. Lal Pathlabs, DEN Networks, Technofab
Engineering and Dalmia Cement.
Dr. Dinesh Kumar Chirla Director Intensive Care Services Dr. Chirla is a qualified neonatologist and a director of intensive
care services at Rainbow. He has over 18 years’ experience in
the healthcare industry and is a national faculty in many teaching
programmes in Neonatology and Paediatric critical care. He holds
an Doctor of Medicine in paediatrics from Dr. B Ambedkar
Marathwada University, and Doctor of Medicine in Neonatology
from the university of Mumbai.
37
12 April 2023
50: Board of Directors

Name Designation Year of Professional profile
Appointment
Dr. Ramesh Kancharla Chairman & Managing Director Founder Dr. Kancharla is the founder member of
Rainbow Medicare. He is a specialist in
paediatric Gastroenterology, Hepatology and
Nutrition with over 30 years’ experience in the
healthcare sector. Prior to Rainbow, he
worked in prestigious hospitals such as King’s
College Hospital and Great Ormond Street
Children’s Hospital in London. He holds an
MD in paediatrics from Mangalore University.
Dr. Dinesh Kumar Chirla Whole-time Director Dr. Chirla is a qualified neonatologist and a
director of intensive care services at
Rainbow. He has over 18 years’ experience
in the healthcare industry and is a national
faculty in many teaching programmes in
Neonatology and Paediatric critical care. He
is a Doctor of Medicine in paediatrics from Dr.
B Ambedkar Marathwada University, and
Doctor of Medicine in Neonatology from the
University of Mumbai.
Mr. Aluri Srinivasa Rao Independent Director 2019 Mr. Rao serves on the board of several
pharma companies and has over 22 years’
experience. In the past, he has worked with
Natco Pharma; ICICI ventures; and was the
Managing Director at Morgan Stanley Private
Equity Asia. He is an MBA from Osmania
University, Hyderabad.
Prof. Anil Dhawan Independent Director 2018 Prof. Dhawan is a healthcare professional
with over 25 years’ experience in the industry.
He serves as director of Paediatric Liver GI
and Nutrition at Kings College, Hospital,
London. He is an MD in paediatrics from the
Post Graduate Institute of Medical Education
and Research (PGIMER), Chandigarh.
Mr. Santanu Mukherjee Independent Director 2021 Mr. Mukherjee has over 37 years’ experience
in the banking sector. He serves on the board
of various companies (including Bandhan
Bank, Muthoot Housing Finance and Suven
Life Sciences) and was previously the
Managing Director of the State Bank of
Hyderabad.
Ms. Sundari Raviprasad Independent Director 2021 Ms. Pisupati is a licensed lawyer with over 27
Pisupati years’ experience. She advises companies
across IT, financial services, funds,
biotechnology, and pharma. She holds a
Masters in Law degree from Columbia
University School of Law, New York.
Shareholding structure
CDC, the UK’s development finance institution, was the key investor in Rainbow prior to its IPO,
with a 28.8% stake in the company. As per the shareholding data for the period ending 31
December 2022, CDC has completely exited its stake in Rainbow.
38
12 April 2023
51: Shareholding structure
7.5%
90.0% 8.5% 15.5%
24.0%
28.8% 14.5%
75.0% 20.8%
10.9%
60.0% 23.9% 5.0%
10.3% 13.9%
45.0%
30.0% 63.7%
49.8% 49.8% 49.8%
15.0%
0.0%
Mar-22 Jun-22 Sept-22 Dec-22
Promoters DIIs CDC (FII) Other FIIS Others
Source: Bombay Stock Exchange (BSE)
39
12 April 2023
Structural growth drivers for quality mother and child care
52: Rising GDP per capita to support demand 53: Rising health insurance coverage
for quality health services
3,147
3,500
2,911
2,691
100.0%
3,000
2,466
2,280
80.0%
2,072
1,998
1,981
2,500
1,933
37.0%
36.5%
36.2%
34.9%
1,733
34.0%
36.7%
33.0%
60.0%
1,606
27.4%
2,000
22.3%
40.0%
1,500
20.0%
1,000
0.0%
500 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
Govt. policy
0 Group (other than govt)
2015 2017 2019 2021 2023E 2025E Individual
% of population with health insurance coverage
GDP per capita, current prices (USD) - India
Source: IMF estimates, HSBC Source: Insurance Regulatory and Development Authority of India, HSBC
54: Urbanisation of demography 55: Increase share of women in techforce
40.0% 2.0 1.8 37%

35.0% 36%
1.4 36%
30.0% 1.5 36%
25.0%
35%
20.0% 1.0
35%
15.0%
0.5 34% 34%
10.0%
5.0% 34%
0.0% 0.0 33%
1991 1996 2001 2006 2011 2016 2021 FY19 FY21
Women IT professionals (million)
Share of urban population in India
Share of women in techforce (%)
Source: World Bank, HSBC Source: NASSCOM, HSBC
56: Rise in maternity age 57: Rise in cases with complications during
pregnancy
2,500
21.5%
21.2% 1,913
21.0% 2,000
1,489 1,587
21.0%
1,500
20.5% 1,000
483 519 553
20.0% 19.8% 500
0
19.5% FY18 FY19 FY20
19.0% # of cases of pregnant women with obstetric complications

(2005-2006) (2015-2016) (2019-2021)
Median age at first birth among women age 25-49 in India # of cases of complicated preganancies with blood
transfusion
Source: Company data, HSBC Source: HIMS, Company data, HSBC
40
12 April 2023
58: Key mother and child care providers in major cities of India
Maternity and childcare Maternity and childcare Multi-specialty hospitals with
Cities hospitals chains maternity offerings
Mumbai and Navi Mumbai Nowrosjee Wadia Maternity Cloudnine, Motherhood Fortis Hospital, Sevenhills,
Hospital, Hospitals Lilavati Hospital, Tata Memorial
Currae Gynaec IVF Birthing Hospital, Breach Candy,
Hospital Kokilaben Dhirubai Ambani
hospital, L Raheja Hospital,
Hinduja Healthcare, Jaslok
Hospital
Bangalore Dr Rao’s Maternity Clinic, Cloudnine, Motherhood Fortis Hospital (The Nest),
Offspring Maternity & Childcare Hospitals, Rainbow Children’s Apollo (Cradle) , Manipal
Hospital, Ovum Hospitals, Hospital, Mallya Hospitals,
Kangaroo Care Aster- Women and Children
Chennai Kanchi Kamakoti Child’s Trust Cloudnine, Rainbow Children’s Apollo (Cradle), Soorya
Hospital, Metha Children’s Hospital, Motherhood hospital, Fortis Hospitals,
Hospital, Neolife Hospital Billroth hospitals, St.Thomas
hospital, Prashanth Hospital,
Gleaneagles Global Health City
Hospital
Delhi and NCR Mother’s Nest at Moolchand, Cloudnine, Motherhood Fortis (La Femme), Artemis
SCI Hospital, Rosewalk Luxury Hospitals, Rainbow Children’s Women & Child Center,
Hospital for Women Hospital, Mother’s Nest - Columbia Asia, Adiva Super-
Moolchand Hospital specialty, Apollo hospitals, BLK
Super Specialty Hospital,
AIIMS, Indraprastha, Medantha
Hospital, Max Healthcare,
Columbia Asia, Sri Ganga Ram
Hospital
Hyderabad Ankura Hospitals, Fernandez Rainbow Children’s Hospital, Apollo hospitals, KIMS
Hospitals, HOPE Children’s Motherhood Hospital, Lotus hospitals, Sunshine hospitals,
Hospital, Safe Children’s Hospitals Yashoda hospitals, Ozone
Hospital, Sai Shiva Children’s hospitals, Virinchi hospitals,
Hospital, Shine Children’s Vijay Mariee Hospital,
Hospital, Krishna Women and Medicover hospitals
Children’s Hospital, Suraksha
Women and Child Care
Pune Gupte Hospitals Cloudnine, Motherhood ONP Hospitals, Columbia Asia
Hospitals Hospital, Sahyadri Hospital,
Ruby Hall Clinic, Deenanath
Mangeshkar Hospitals and
Research Center, Aditya Birla
Indore Verma Nursing Home, Pranshu Cloudnine, Motherhood Chothiram Hospital & Research
Surgical & Maternity Center, Hospitals Center, Arihant Hospital &
Angel Women’s Hospital Research Center, Jyoti Multi
Speciality Hospital
Vijayawada Mother and Child Family Rainbow Children’s Hospital Manipal hospitals, Latha super
Hospital, Vennela Mother and specialities hospital, Sentini
Child hospital, Blossom’s hospital, Kamineni hospital
Mother and Child Hospital
Chandigarh Dr Jagit Singh (Chandigarh Motherhood Hospitals Ivy Hospital
Children & Maternity Hospital),
Bedi Hospital, Chaitanya
Hospital
Visakhapatnam Krishna Children’s Hospital, Rainbow Children’s Hospital, Medicover Hospitals (Woman &
Padmavathi Nursing Home Lotus Hospitals Child)
41
12 April 2023
Disclosure appendix
Analyst Certification
The following analyst(s), economist(s), or strategist(s) who is(are) primarily responsible for this report, including any analyst(s)
whose name(s) appear(s) as author of an individual section or sections of the report and any analyst(s) named as the covering
analyst(s) of a subsidiary company in a sum-of-the-parts valuation certifies(y) that the opinion(s) on the subject security(ies) or
issuer(s), any views or forecasts expressed in the section(s) of which such individual(s) is(are) named as author(s), and any other
views or forecasts expressed herein, including any views expressed on the back page of the research report, accurately reflect
their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific
recommendation(s) or views contained in this research report: Damayanti Kerai and Kunal Talwar
Important disclosures
Equities: Stock ratings and basis for financial analysis
HSBC and its affiliates, including the issuer of this report (“HSBC”) believes an investor's decision to buy or sell a stock should
depend on individual circumstances such as the investor's existing holdings, risk tolerance and other considerations and that
investors utilise various disciplines and investment horizons when making investment decisions. Ratings should not be used or
relied on in isolation as investment advice. Different securities firms use a variety of ratings terms as well as different rating
systems to describe their recommendations and therefore investors should carefully read the definitions of the ratings used in
each research report. Further, investors should carefully read the entire research report and not infer its contents from the rating
because research reports contain more complete information concerning the analysts' views and the basis for the rating.
From 23rd March 2015 HSBC has assigned ratings on the following basis:
The target price is based on the analyst’s assessment of the stock’s actual current value, although we expect it to take six to 12
months for the market price to reflect this. When the target price is more than 20% above the current share price, the stock will
be classified as a Buy; when it is between 5% and 20% above the current share price, the stock may be classified as a Buy or a
Hold; when it is between 5% below and 5% above the current share price, the stock will be classified as a Hold; when it is between
5% and 20% below the current share price, the stock may be classified as a Hold or a Reduce; and when it is more than 20%
below the current share price, the stock will be classified as a Reduce.
Our ratings are re-calibrated against these bands at the time of any 'material change' (initiation or resumption of coverage, change
in target price or estimates).
Upside/Downside is the percentage difference between the target price and the share price.
Prior to this date, HSBC’s rating structure was applied on the following basis:
For each stock we set a required rate of return calculated from the cost of equity for that stock’s domestic or, as appropriate,
regional market established by our strategy team. The target price for a stock represented the value the analyst expected the
stock to reach over our performance horizon. The performance horizon was 12 months. For a stock to be classified as Overweight,
the potential return, which equals the percentage difference between the current share price and the target price, including the
forecast dividend yield when indicated, had to exceed the required return by at least 5 percentage points over the succeeding 12
months (or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight, the stock was
expected to underperform its required return by at least 5 percentage points over the succeeding 12 months (or 10 percentage
points for a stock classified as Volatile*). Stocks between these bands were classified as Neutral.
*A stock was classified as volatile if its historical volatility had exceeded 40%, if the stock had been listed for less than 12 months
(unless it was in an industry or sector where volatility is low) or if the analyst expected significant volatility. However, stocks which
we did not consider volatile may in fact also have behaved in such a way. Historical volatility was defined as the past month's
average of the daily 365-day moving average volatilities. In order to avoid misleadingly frequent changes in rating, however,
volatility had to move 2.5 percentage points past the 40% benchmark in either direction for a stock's status to change.
42
12 April 2023
Rating distribution for long-term investment opportunities

As of 31 December 2022, the distribution of all independent ratings published by HSBC is as follows:
Buy 59% (14% of these provided with Investment Banking Services in the past 12 months)
Hold 34% (13% of these provided with Investment Banking Services in the past 12 months)
Sell 6% (7% of these provided with Investment Banking Services in the past 12 months)
For the purposes of the distribution above the following mapping structure is used during the transition from the previous to current
rating models: under our previous model, Overweight = Buy, Neutral = Hold and Underweight = Sell; under our current model Buy
= Buy, Hold = Hold and Reduce = Sell. For rating definitions under both models, please see “Stock ratings and basis for financial
analysis” above.
For the distribution of non-independent ratings published by HSBC, please see the disclosure page available at
http://www.hsbcnet.com/gbm/financial-regulation/investment-recommendations-disclosures.
Share price and rating changes for long-term investment opportunities

Apollo Hospitals (APLH.BO) share price performance Rating & target price history
INR Vs HSBC rating history
From To Date Analyst
Neutral Buy 17 Apr 2015 Girish Bakhru
Target price Value Date Analyst
5927 Price 1 1486 29 May 2015 Girish Bakhru
Price 2 1500 12 Aug 2015 Girish Bakhru
4927 Price 3 1542 02 Oct 2015 Girish Bakhru
Price 4 1611 15 Feb 2016 Girish Bakhru
3927 Price 5 1581 26 May 2016 Girish Bakhru
Price 6 1565 06 Sep 2016 Girish Bakhru
2927 Price 7 1555 14 Nov 2016 Girish Bakhru
Price 8 1475 01 Dec 2016 Girish Bakhru
1927 Price 9 1455 15 Feb 2017 Girish Bakhru
Price 10 1422 23 May 2017 Girish Bakhru
927 Price 11 1364 17 Aug 2017 Girish Bakhru
Apr-18
Apr-19
Apr-20
Apr-21
Apr-22
Apr-23
Price 12 1300 29 Nov 2017 Damayanti Kerai

Price 13 1100 04 Jun 2018 Damayanti Kerai
Source: HSBC Price 14 1275 13 Aug 2018 Damayanti Kerai
Price 15 1600 15 Jan 2019 Damayanti Kerai
Price 16 1500 22 Apr 2019 Damayanti Kerai
Price 17 1525 31 May 2019 Damayanti Kerai
Price 18 1600 31 Oct 2019 Damayanti Kerai
Price 20 1875 19 Feb 2020 Damayanti Kerai
Price 21 1550 31 Mar 2020 Damayanti Kerai
Price 23 1875 16 Sep 2020 Damayanti Kerai
Price 29 5225 30 Sep 2021 Damayanti Kerai
Price 31 6400 01 Dec 2021 Damayanti Kerai
Price 34 6250 05 Apr 2022 Damayanti Kerai
Price 35 4600 27 May 2022 Damayanti Kerai
Price 36 4810 18 Jul 2022 Damayanti Kerai
Price 37 5020 14 Aug 2022 Damayanti Kerai
Source: HSBC
43
12 April 2023
Max Healthcare Institute (MAXE.NS) share price Rating & target price history
performance INR Vs HSBC rating history
From To Date Analyst
N/A Buy 01 Dec 2021 Damayanti Kerai
Target price Value Date Analyst
503
453 Price 1 440.00 01 Dec 2021 Damayanti Kerai
Price 2 460.00 17 Jan 2022 Damayanti Kerai
403 Price 3 430.00 05 Apr 2022 Damayanti Kerai
353 Price 4 407.00 30 May 2022 Damayanti Kerai
303 Price 5 435.00 18 Jul 2022 Damayanti Kerai
Price 6 425.00 15 Aug 2022 Damayanti Kerai
253 Price 7 465.00 10 Oct 2022 Damayanti Kerai
203 Price 8 500.00 03 Nov 2022 Damayanti Kerai
153 Price 9 515.00 10 Jan 2023 Damayanti Kerai
Source: HSBC
103
Apr-18
Apr-19
Apr-20
Apr-21
Apr-22
Apr-23
Source: HSBC
To view a list of all the independent fundamental ratings disseminated by HSBC during the preceding 12-month period, please
use the following links to access the disclosure page:
Clients of HSBC Private Banking: www.research.privatebank.hsbc.com/Disclosures
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HSBC & Analyst disclosures

Disclosure checklist
Company Ticker Recent price Price date Disclosure

APOLLO HOSPITALS APLH.BO 4271.30 11 Apr 2023 7
MAX HEALTHCARE INSTITUTE LIMIT MAXE.NS 450.90 11 Apr 2023 –
RAINBOW CHILDREN’S MEDICARE RAIB.NS 732.10 11 Apr 2023 –
Source: HSBC
1 HSBC has managed or co-managed a public offering of securities for this company within the past 12 months.
2 HSBC expects to receive or intends to seek compensation for investment banking services from this company in the next 3
months.
3 At the time of publication of this report, HSBC Securities (USA) Inc. is a Market Maker in securities issued by this company.
4 As of 31 March 2023, HSBC beneficially owned 1% or more of a class of common equity securities of this company.
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and/or paid compensation to HSBC in respect of investment banking services.
and/or paid compensation to HSBC in respect of non-investment banking securities-related services.
and/or paid compensation to HSBC in respect of non-securities services.
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securities in respect of this company
12 As of 06 Apr 2023, HSBC beneficially held a net long position of more than 0.5% of this company’s total issued share
capital, calculated according to the SSR methodology.
13 As of 06 Apr 2023, HSBC beneficially held a net short position of more than 0.5% of this company’s total issued share
capital, calculated according to the SSR methodology.
44
12 April 2023
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12 April 2023
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[1211146]
46
Global Healthcare Research Team
Europe
Head, European Life Sciences & Healthcare
Research
Rajesh Kumar +44 20 7991 1629
rajesh4kumar@hsbcib.com
Sezgi Oezener, CFA +49 211 910 3290

sezgi.oezener@hsbc.de
Shubhangi Gupta, PhD +91 80 6737 3629

shubhangi.gupta@hsbc.co.in
Asia
Damayanti Kerai +91 22 3396 0692
damayantikerai@hsbc.co.in
Charlene Liu +65 6658 0615

charlene.r.liu@hsbc.com.sg
Jeremy Chen +8862 6631 2866

jeremy.cm.chen@hsbc.com.tw
Kunal Talwar +91 22 6174 3116

kunal.talwar@hsbc.co.in
Jessie Lu +852 2996 6570

jessie.x.lu@hsbc.com.hk
Nicholas Lai +886 2 6631 2867

nicholas.yl.lai@hsbc.com.tw
Jess Hsieh +886 2 6631 2871

jess.ch.hsieh@hsbc.com.tw
Latin America
Santhosh Seshadri, CFA +91 80 4555 2758
santhosh.seshadri@hsbc.co.in

2023 04 12 RAIB - Ns HSBC Rainbow Children - S Medicare (RAINBOW In) Initiate at Buy T... 101378008

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12 April 2023

Initiate at Buy: The paediatric specialist India

 A compelling investment case to play the niche paediatric Damayanti Kerai*

HSBC India hospitals coverage

Disclosures & Disclaimer Issuer of report: HSBC Securities and Capital

HSBC India Healthcare coverage overview

Equities ● Health Care Providers & Services

A niche paediatric play 21

Financials and valuations 31

 Rainbow, the largest paediatric-centric hospital chain in India, is well

1: Rainbow is well placed in high-growth 2: Rainbow’s higher EBITDA vs other

3: …superior revenue mix weighted 4: …a better cost structure vs peers (FY22)

We expect earnings to grow about 2x over FY22-25e:

6: We expect healthy revenue growth to 7: ...healthy ARPOB trends (led by annual

COVID vaccine benefits

8: We expect healthy EBITDA margin 9: We see PAT potentially growing c2x

35.0% 33.4% 32.2% 4.5 4.0

Cash flows and returns

3,500 3,205 26.0% 25.3%

12: HSBC vs consensus estimates

Valuations and risks

13: DCF valuation summary

Terminal growth rate 6.25% WACC

14: Sensitivity analysis for target price

15: Scenario analysis for valuation/share

Note: CMP is based on the closing price of 5 April 2023.

Receivables 404 496 668 943 1,300 1,649

Total assets 12,957 15,247 18,037 21,458 25,453 30,129

Shareholders’ equity 6,063 7,724 9,617 11,911 14,605 17,842

Financials & valuation: Rainbow Children’s Medicare Buy

Financial statements Valuation data

Updating our coverage: Apollo Hospitals and Max Healthcare

Apollo Hospitals (APHS IN, Buy; lower TP to INR5,100 from INR5,330)

17: Apollo Hospitals: Change in estimates

Valuation and risks

18: Apollo Hospitals: Sum-of-the parts valuation approach

Financials & valuation: Apollo Hospitals Buy

Financial statements Valuation data

Max Healthcare (MAXHEALT IN, Buy; lower TP to INR505 from INR515)

19: MHIL: Change in estimates (pro-forma financials*)

20: MHIL: Sum-of-the-parts (SOTP) valuation summary

Financials & valuation1: Max Healthcare Institute Buy

Financial statements Valuation data

21: Hospitals: Peer comps

Equities ● Health Care Providers & Services

A niche paediatric play

 Rainbow offers exposure to the relatively untapped paediatric care

24/7 paediatric and obstetrics care

Rainbow is the largest paediatric multi-specialty healthcare chain in India, offering a

22: Rainbow network (as of 31 December 2022*)

6 Cities 1,555 Total beds

907K+ 63k+ In-patient

INR49K ARPOB 54.23%

Focus on metro/tier-1 cities

23: Key KPIs by maturity of hospitals

24: Summary of existing facilities and planned expansions

25: Key KPIs by cluster

Doctor engagement model

26: Rainbow’s doctor engagement model

Outstanding professional Best-in-class training Enriching career Brand Rainbow

Source: Company data, HSBC

Hub and spoke model

27: City level hub and spoke model