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Apollo Hospital Swot
Apollo Hospital Swot
AND
REPORTING
SUBMITTED BY-
Harshit Goel
PGPM (2010-11)
Investment
Memorandum
&
Investment Pitch-book
OF
Apollo Hospitals
Table of Contents
INTRODUCTION ......................................................................................................................... 1
Medical Milestones
ECONOMY ANALYSIS ................................................................................................................. 3
INDUSTRY ANALYSIS……………………………………………………………………………………………………………4
Company Financials
SWOT Analysis
Competitors
RECOMMENDATION.............................................................................................................19
LETTER OF TRANSMITTAL
March 3,2011
I am submitting to you the report, due March 3, 2011. The report is entitled as the investment
memorandum for Apollo Hospitals. The purpose of the report is to inform the prospective investors
about the company’s profitability and future prospects of Apollo Hospitals. The content of this report
primarily concentrates on the EIC analysis of the company. This report covers technical analysis of
Apollo Hospital.
Yours sincerely,
Harshit Goel
PGPM 2010-11
EXECUTIVE SUMMARY
The Apollo Hospitals Group, has over 10,000 employees across the country,
represents the changing face of healthcare in India contemporary and corporatized.
It has been the first private company to administer health insurance in the country
and Indraprastha Apollo Hospital in Delhi is the fourth largest corporate hospital in
the world.
There is a growing consensus amongst policymakers across countries that the world
economy is on a rebound after having plummeted into a recession following the
financial crisis of 2007-2009. Most economies have started to stabilise and grow
after an interruption of nearly 2 years with Asia leading the rebound. India has
emerged relatively unscathed from the global crisis, growing at 7.2 per cent in 2009-
10 and 8.6% in 2010-2011. Industry has rebounded sharply and exports have turned
positive. Private consumption is picking up and more importantly investment is
showing signs of resurgence.
Currently, the Indian healthcare sector is valued at US $34 billion roughly 6 per cent
of GDP. The healthcare business is projected to grow to over US $40 billion or 8.5
per cent of GDP by 2012, and is expected to become a US$280 billion industry by
2020.(According to Price Waterhouse Coopers report, 'Healthcare in India: Emerging
market report 2007’ )
Apollo holds a strong position in the Indian healthcare delivery market. With a
network of over 2,654 owned beds, 1,890 beds operated through subsidiaries, JVs
and associates; and 3,100 managed beds, Apollo stands as the largest healthcare
provider in the country. Its widespread presence helps the company to tap business
opportunities in the growing healthcare sector, as well as enables it to absorb losses
from new hospitals, without significant adverse impact.
Apollo has huge expansion plans over the next 3-5 years where in it plans to set
beds in the next three to five years up over 2,500 hospital beds with a capital
expenditure of over Rs 15 billion, bulk of which is expected in next three years.
Apollo’s strategy is to expand in large cities such as Mumbai and Chennai as well as
in Tier II cities such as Trichy and Nellore through its ‘Reach’ initiative.
Introduction
• Today, with over 8500 beds across 53 hospitals in India, rest of Asia and
Africa, Apollo Hospitals is one of Asia’s largest healthcare groups.
Commenced as a 150 bed hospital, today the group has grown exponentially
both in India and overseas.
• The Company also has a pan India footprint of 873 standalone pharmacies.
In India, Apollo hospitals can be grouped into the following categories based on their
stage of maturity and occupancy levels:
The Apollo Hospitals Group, has over 10,000 employees across the country,
represents the changing face of healthcare in India contemporary and corporatized.
It has been the first private company to administer health insurance in the country
and Indraprastha Apollo Hospital in Delhi is the fourth largest corporate hospital in
the world.
Medical Milestones
Performed over 7,50,000 major surgeries and over 10,00,000 minor surgical
procedures with exceptional clinical outcomes.
The most worrying aspect of this otherwise fast improving economic outlook is
faster than expected pick up in inflation which is now a serious concern. The
consumer price inflation has been in double digits since the beginning of 2010
and Wholesale Price Index (WPI) based inflation is fast approaching double
digits.
Health care Industry in developed nations
The health care industry is one of the world's largest and fastest-growing
industries.
For United States, the health share of gross domestic product (GDP) is
expected to reach 19.6 percent of GDP by 2016.
In 2001, for the OECD countries the average was 8.4 percent with the United
States (13.9%), Switzerland (10.9%), and Germany (10.7%) being the top
three.
The industry is expected to grow at the rate of 13 percent for the next six
years which amounts to an addition of Rs 9,000 crores each year.
The population to bed ratio in India is 1 bed per 1000, in relation to the WHO
norm of 1 bed per 300.
Private insurance will drive the healthcare revenues. Considering the rising
middle and higher middle income group we get a conservative estimate of 200
million insurable lives.
Over the last five years, there has been an attitudinal change amongst a
section of Indians who are spending more on healthcare.
Factors Attracting Corporate In the Healthcare Sector
Recognition as an Industry :In the mid 80’s, the healthcare sector was recognized
as an industry. Hence it became possible to get long term funding from the Financial
Institutions. The government also reduced the import duty on medical equipment’s
and technology, thus opening up the sector. Since the National Health Policy (the
policy’s main objective was ‘Health For All’ by the Year 2000) was approved in 1983,
little has been done to update or amend the policy even as the country changes and
the new health problems arise from ecological degradation. The focus has been on
epidemiological profile of the medical care and not on comprehensive healthcare.
Socio-Economic Changes: The rise of literacy rate , higher levels of income and
increasing awareness through deep penetration of media channels, contributed to
greater attention being paid to health. With the rise in the system of nuclear families,
it became necessary for regular health check-ups and increase in health expenses
for the bread-earner of the family.
Recognition as an Industry :In the mid 80’s, the healthcare sector was recognized
as an industry. Hence it became possible to get long term funding from the Financial
Institutions. The government also reduced the import duty on medical equipment’s
and technology, thus opening up the sector. Since the National Health Policy (the
policy’s main objective was „Health For All‟ by the Year 2000) was approved in 1983,
little has been done to update or amend the policy even as the country changes and
the new health problems arise from ecological degradation. The focus has been on
epidemiological profile of the medical care and not on comprehensive healthcare.
Socio-Economic Changes: The rise of literacy rate , higher levels of income and
increasing awareness through deep penetration of media channels, contributed to
greater attention being paid to health. With the rise in the system of nuclear families,
it became necessary for regular health check-ups and increase in health expenses
for the bread-earner of the family.
Apollo has huge expansion plans over the next 3-5 years where in it plans to
set beds in the next three to five years up over 2,500 hospital beds with a
capital expenditure of over Rs 15 billion, bulk of which is expected in next
three years. Apollo’s strategy is to expand in large cities such as Mumbai and
Chennai as well as in Tier II cities such as Trichy and Nellore through its
‘Reach’ initiative.
Mar '06 Mar '07 Mar '08 Mar '09 Mar '10
Application Of Funds
Gross Block 508.45 601.13 759.18 940.67 1,255.51
Less: Accum. Depreciation 168.25 198.29 234.83 277.99 331.47
Net Block 340.2 402.84 524.35 662.68 924.04
Capital Work in Progress 13.32 42.46 74.75 245.15 293.65
Investments 255.53 263.98 646.45 538.05 489.79
Inventories 45.72 55.19 79.09 108.84 134.34
Sundry Debtors 89.04 97.89 126.16 160.74 205.53
Cash and Bank Balance 29.63 46.59 84.5 51.8 174.88
Total Current Assets 164.39 199.67 289.75 321.38 514.75
Loans and Advances 200.56 243.69 327.75 442.66 496.83
Fixed Deposits 6.81 17.82 20.06 22.81 110.68
Total CA, Loans & Advances 371.76 461.18 637.56 786.85 1,122.26
Current Liabilities 156.01 182.52 199.26 215.36 337.25
Provisions 89.31 91.21 140.48 197.09 260.74
Total CL & Provisions 245.32 273.73 339.74 412.45 597.99
Net Current Assets 126.44 187.45 297.82 374.4 524.27
Miscellaneous Expenses 1.77 0.78 0.31 0.05 0.01
Total Assets 737.26 897.51 1,543.68 1,820.33 2,231.76
500
0
Mar '06 Mar '07 Mar '08 Mar '09 Mar '10
0
Mar '06 Mar '07 Mar '08 Mar '09 Mar '10
Earning Per Share (Rs)
24.6
25
19.38 19.6
20 17.34
15 11.9
10
5
0
Mar '06 Mar '07 Mar '08 Mar '09 Mar '10
100
50
0
Mar '06 Mar '07 Mar '08 Mar '09 Mar '10
We can clearly see from the above charts that sales, operating profit and book value
of the company is rising every year. Even EPS has seen a high jump in FY2010.
Profit Margins
18
16
14
12 Operating Profit
Axis Title
10 Margin(%)
8
6 Net Profit
4 Margin(%)
2
0
Mar '06 Mar '07 Mar '08 Mar '09 Mar '10
As we can see from the above figure the margins are more or less same for the past
five years.
SWOT Analysis
STRENGTHS WEAKNESS
OPPOURTUNITIES THREATS
In India for every 1000 persons, there Medical equipment accounts for 40-45%
are only 1.11 beds available. To make of the total expenditure in hospitals. And
this ratio even 1.85 by 2012, an this industry requires constant
investment of Rs. 3480 billion is needed investment in new healthcare devices
which is beyond the control of public i.e. in upgrading the technology. Failure
sector. if this may be a reason of losing patients.
Max India After selling of his stake in Hutchison Max Telecom, Analjit Singh
has decided to invest around 200 crores, for setting up worldclass healthcare
services in India. Max India plans a three tier structure of medical services –
Max Consultation and Diagnostic Clinics, MaxMed, a 150 bed multispeciality
hospital and Max General, a 400 bed hospital. The company has already tied
up with Harvard Medical International, to undertake clinical trials for drugs,
under research abroad and setting up of Max University, for education and
research.
Escorts EHIRC located in New Delhi has more than 220 beds. The hospital
has a total 77 Critical Care beds to provide intensive care to patients after
surgery or angioplasty, emergency admissions or other patients needing
highly specialized management including Telecardiology (ECG transmission
through telephone). The EHIRC is unique in the field of Preventive Cardiology
with a fully developed programme of Monitored Exercise, Yoga and
Meditation for Life style management.
Apollo will increase its footprint by adding over 2,500 beds in the next 3-
5 years
Apollo plans to add over 2,500 beds in the next three to five years with an
investment of Rs 15 Bn, a bulk of which will be spent in the next three years. It
is setting up hospitals in Chennai, Mumbai, Hyderabad as well as in smaller
cities such as Trichy and Nellore through its ‘Reach’ initiative wherein the
company is setting up 100-200 bed acute care hospitals in Tier II cities so as
to capture the under served market in these locations.