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71% 9% 3% 12% 5%
Indian Healthcare is among the fastest growing globally… …poised to become a US$160bn industry by 2017
2011-15 CAGR
Global average – 5.6% 160
17.0%
10.0%
8.4%
6.3%
5.2% 80
2.2% 68
60
45 52
India
America
Western
America
Asia Pacific
Middle East
Europe
North
Latin
& Africa
Source: BMI Report, Frost & Sullivan, LSI Financial Services, IBEF Research, Hospital Market – India by Research on India, JP Morgan
Page 6
Robust Fundamentals
Growing Demand
1
Underpenetrated Under-penetrated healthcare delivery market expected to provide a long-term
Market sustainable growth opportunity
3 Shift from Lifestyle related diseases have led to an increase in the demand for specialized care
communicable to
lifestyle diseases Currently, c.50 per cent of spending on in-patient beds is for lifestyle diseases
4 Gross healthcare insurance market has expanded at a CAGR of 28% from US$ 1.2bn
Enhanced penetration of from FY09 to US$ 2.8bn in FY13
healthcare insurance
Private insurers contributed c.38% of the total health insurance market in FY13
5
Increasing Trend of India is gradually emerging as a destination for elective and critical treatment on
Medical Tourism account of lower costs, better patient care and sophisticated medical technology
Low expenditure on Healthcare as % of GDP1 … …with low per capita Healthcare expenditure1
12.0% 6,000
9.6% 9.0% Global average – 9.4%
8.0% 4,000 3,480 3,204 Global average – 990
5.1%
4.1%
4.0% 2,000 1,028
379 132
0.0% -
US UK Brazil China India US UK Japan Brazil China India
India has one of the lowest bed densities.. ..With low physician and nursing staff density
Beds per 10,000 people Physician Global average – 14.2
Low bed density mostly due to low Nursing Global average – 28.1
government investment on Healthcare Physicians Nursing
160 120 101
137 98
100 85
120 97
Global average – 30
80 64
59
80 60
42 41 43
33 31 30 24 40 27
40 13 21 18 24 20
6 1414 18
20 710 3
0
0
UK
US
Japan
China
Brazil
India
Indonesia
Russia
Singapore
UK
US
India
Japan
China
Singapor
Brazil
Russia
Indonesia
e
Source: Barclays Research
Page 8 Note 1: WHO Statistics 2012
2 Accelerated Urbanisation
Growing middle class with higher disposable income… …Resulting in enhanced Healthcare share of
wallet
Income in US$
>16,700
Page 9
3 Shift from Communicable to Lifestyle diseases
► This segment of population is expected to have ► Lifestyle diseases accounted for 48 per cent of the
greater requirement for healthcare services in-patient revenue in 2013 (c.US$ 17bn)
Page 10
4 Enhanced penetration of healthcare insurance
► The health insurance industry expanded at a CAGR Indian health insurance market size (US$ bn)
of 23% from FY09–13
► Lower cost,
1.1 2.2
► Availability of skilled doctors/nursing staff,
2012 2015
► World class hospitals Revenues (US$ bn) Medical tourists (mn)
► Sophisticated medical technology and
290 300
► High influx of patients from Africa, CIS countries, 250
Gulf and SAARC nations, Pakistan, Bangladesh and 200
Source: Ministry of Health, RNCOS, KPMG, LSI Financial Services, Apollo Investor Presentation, CRISIL
Page 12
6 Favourable investment environment
Promotion of
100% FDI Public –
medical Healthcare Fiscal
(Automatic Private Tax benefits
tourism Infra Financing incentives
Route) Partnership
oriented cities
Multi-specialty Single-specialty
Investment in such
Minimal involvement Diversified specialty
centres to reduce
of private players in mix with higher Niche play
ALOS of tertiary care
this segment patient volume
centres
Low share of govt. spending and strong demand trends has led to increasing investment by private players
Page 16
Private and confidential
Kamineni 1,000
Public Medanta 1,000
Miot 1,000
92%
CA 1,000
92% 90%
Other Private Sterling 1,500
KIMS 1,650
Max 1,850
Global 2,000
Care 2,400
61%
Fortis 4,800
8%
Private Manipal 4,900
NH 6,200 8% 10%
Private chains
Apollo 8,600
2013 Private chain Other private 2020
Total beds Private beds Private chains growth growth
► Despite the strong growth in bed capacity expected by private chains over the next few years, these are
likely to remain a small proportion of the hospital delivery landscape
Capital Investment Low - <US$2 - 5mn per centre High - >US$12 -15mn for 100 bed hospital
Particulars
Region Focus Pan India Pan India S-W India South India S-W India North India S-W India North India
Total Beds 9,000 4,500 7,100 5,000 1,200 1,560 1,912 1,250
Capacity
71% 74% NA NA 45% 74% NA >85%
Utilization
Operating Parameters
ARPOB (US$/
463 512 NA NA 1304 c.533 NA c.500
Day)
Fragmented industry set to enter the consolidation phase with top 8 players currently controlling
c.25% of the organized private healthcare market in India
Source: EY Research, Research report (HSBC, Nomura, Axis Capital, D&B, Barclays, Investor presentation of Fortis and Apollo, Economic Times)
Page 21 Note: US$/INR 60
Healthcare Services / Hospitals in India
Single Specialty – Overview
Emergence of single specialty and short – stay format hospitals as an attractive healthcare segment
ENT General
10% 5%
Oncology Average Operating Margins Across MSHs
Plastic 4%
Surgery
and various SSHs
3%
27-30%
Gyne
25-28%
7% Urology 22% - 25%
19% - 20%
25% 17%
Ortho
8%
Gastro
14%
Opthal
24%
Eye Cardiac Care Urology Cancer MSH
Significant growth & scale potential amongst various short – stay format medical specialities
Source : Espicom Q4’2013 Indian Medical Devices Report
Page 23 Assumed US$/INR 60
Healthcare Services / Hospitals in India
Ophthalmic Care: Industry Landscape
Revenue
Financi (13 – US$mn)
100 31 12.5 7.2 10(1) 2.8
al
Summ Revenue
ary Growth 34% 22% 32% 87% — 41%
(Y-o-Y)
Sequoia Listed Company Matrix Partners Song Investments TVS Capital Sequoia India
GIC, Singapore Market Cap – US$ Nexus Partners ePlanet Ventures
Private Equity Westbridge 15mn Helion Ventures
Investors Ventures Evolvence Life
Sciences
Both greenfield & Greenfield & Majorly acquisition Both greenfield & Recently merged Greenfield
brownfield Brownfield based brownfield with Hyderabad
Recently raised
Diversifying into based eye care
Looking to raise Recently acquired Plans to invest to US$10 mn for
dental chain Maxivision
US$ 20mn of New Vision Laser US$ 20mn to open expansion
Business Model Hospitals
Focusing on primary investment Centre and Shree 40 new hospitals in
Highlights Target to have 30
expansion in from PE investors Hi-Tech Clinics tier II and tier III Looking to raise
centres operating
northern region towns in states of US$30mn through
plans to increase Looking to raise by 2014 in North &
SA's Net Care Punjab, Gujarat, PE for expansion
the network to 100 US$30mn PE Central India
recently in talks for Haryana and Uttar
over the next 3yrs
a majority stake Pradesh by FY16
Location
Uro-endoscopy Urologic Oncology Combines management of both surgical as well as non-surgical problems:
(US$1,300-2,000) (US$4,200-6,700) – Surgical conditions include correction of congenital abnormalities, cancers
and correction of stress incontinence among others
TURP Pediatric Urology
(US$1,000-1,160) (US$1000-1,700) – Non-surgical problems include benign prostatic hyperplasia and urinary
tract infections among others
Andrology Cystoscopy
(US$1,000-1,700) (US$800-2,500) Recent trends observed in India:
PCNL – Keyhole – Urological conditions have witnessed the fastest advent & growth of robotic
Laparoscopy surgery driven procedures in India
Surgery
(US$1,300-1,700)
(US$1,300-1,700) o Accounts for 60-70% of overall robot-assisted procedures performed
in India
Urethral Strictures
Radical Prostatectomy o Currently, 23 Da Vinci Si robots, used for performing high-precision
Treatment
(US$2,500-3,300) robot-assisted surgeries, are installed in India(1)
(US$800-1,700)
Urological Procedure Volume – MSH (2013)(2) Leading Private Sector Urological care hospitals in India
No. of Centers 16 26 14 8 25
FY13 Sales
17 1(1) 1.7(1) NA 2.3
(US$mn)
Bessemer invested
IEP -40% stake (2010) US$5mn in Dec-2011 NEA, Da Vita Inc. invested
Private Equity
ICICI Ventures – Erstwhile US$ 8.3mn for 45% stake Vattikuti Foundation NA
Investors investor IFC & Bessemer invested in 2012
US$ 10mn Jun’14
Nephrology, Lithotripsy, Nephrology, HD, CAPD, Nephrology, HD, CAPD, Robot-Assisted Urological
Specialty Focus Uro-Oncology, Endo- Minor Urology based Minor Urology based procedures, MAS, Endo- Nephrology, HD, CAPD
Urology Procedures Procedures Urology
Location
Caters to low realization / low ARPOB generating Caters to high realization / high ARPOB generating
minor investigations & low – risk procedures complex procedures
Segments on the priority list of government’s Limited government presence, with private players
healthcare initiatives expected to dominate this segment
Page 29
Healthcare Services / Hospitals in India
Multi Specialty - Key transaction linked sector insights
Date Target Acquirer/Investor Deal Value (US$ mn) Stake
Private Equity
Jun-14 KIMS, Hyderabad ICICI Ventures 36 28%
Dec-13 Medica Synergie Quadria, Swedfund, DEG 34 60%
Oct-13 Medanta Carlyle 163 28%
May-13 Fortis Healthcare IFC 146 17%
Aug-12 Manipal Hospitals India Evolving Fund, IVF 107 32%
Mar-12 Quality Care India Advent 105 80%
Jan-12 Aster DM Healthcare Olympus Capital 97 26%
May-10 Fortis Healthcare GIC 100 8%
M&A Transactions
Jul-14 Max Healthcare Institute Life Healthcare Group 66 20%
Feb-14 Soni Hospitals Manipal Health Enterprises 20 100%
Jan-13 Saket City Hospital Spice Global Investment 74 100%
Jun-12 Imperial Hospital and Research Apollo Hospitals Enterprise 18 49%
Oct-11 Max Healthcare Institute Life Healthcare Group 105 26%
Page 30
Healthcare Services / Hospitals in India
Single Specialty – Key transaction linked sector insights
Key PE Deals in Singe Specialty Hospitals (2010-YTD14)
Page 31
Diagnostic Services
Overview
Key Highlights Diagnostic Service Industry
The Indian diagnostic industry, including clinical US$bn
pathology, imaging and radiology, accounts for 27.6% 26.8%
Overall 1.0 4.3 13.9
3% of the healthcare industry CAGR CAGR
The diagnostics industry expected to grow at a 25%
CAGR of 27.5% (2009-2015) to US$4.2bn CAGR 3.8
Factors driving growth include:
— growing incidence of lifestyle diseases
— increasing consumer awareness
10.2
— importance of preventive healthcare 1.2
0.3 3.0
The industry is unregulated, unorganized and
highly fragmented with over 50,000 path labs 0.7
due to low entry barriers and no specific 2009 2015 2020
accreditation requirements Radiology Pathology
The organised players account for only c.9%, and Indian Diagnostic Industry Market Break-up
operate under a hub and spoke model
Thyroc
Key Players Metrop are, 7%
SRL is the largest player in the Indian diagnostics olis,
Unorga 20%
industry with ~48% share
nised, SRL,
Other key players include Dr. Lal Path Labs, 91% Dr Lal 48%
Metropolis and Thyrocare Organis Path
ed, 9% Labs,
25%
Source : Espicom Q4’2013 Indian Medical Devices Report
Page 34 Assumed US$/INR 60
Diagnostic Services
Benchmarking
1
No. of Labs 280 150 120
Central Lab - Navi Mumbai
International Presence
SAARC
Middle East
Others
Other services
Wellness
Clinical Research
Lab Management
Source : Company websites, VCC Edge, secondary search
Page 35 Assumed US$/INR 60
Diagnostic Services
Investment proposition – Strategic evaluation
Offers standard diagnostics & basic radiology Critical service offerings such as high-end
services - low value proposition diagnostics & imaging acts as the key differentiator
Lack of high-end infrastructure, regional Pan-India footprint backed by state-of-the art central
presence & limited opportunity to scale up – Low labs leading to extremely to low error rates & faster
market share & restricted customer base turnarounds – High market share & sticky
institutional client base
Witnessed low / negligible interest from growth
capital funding perspective All leading pan-India chains have witnessed
significant PE interest over the years
Facing extreme competition from bigger players
The landscape is poised to enter the consolidation
phase, to derive next phase of growth, presenting an
attractive investment opportunity
Page 37
Diagnostic Services
Key Transactions
Key Transactions in Diagnostic Services Segment (2010-YTD14)
Deal Value
Date Target Acquirer Stake
(US$mn)
Private Equity
Feb-13 Dr. Lal PathLabs Westbridge, TA Associates 45.5 15.8%
Sep-12 Thyrocare Technologies Norwest Venture Partners 22.7 11.7%
Jun-12 SRL Ltd. IFC, NYLIM Jacob Ballas 65.4 23.5%
May-11 SRL Ltd. Spring Healthcare Fund 11.1 4.2%
Apr-11 SRL Ltd. Avigo Capital Partners 22.1 9.3%
Dec-10 Thyrocare Technologies CX Partners, Samara Capital 45.5 26.6%
Aug-10 Dr. Lal PathLabs TA Associates Advisory 35.0 15.9%
Jun-10 Metropolis Healthcare Warburg Pincus India 85.0 26.9%
M&A Transactions
Mar-14 Medinova Diagnostic Vijaya Diagnostic Centre 0.3 36%
Mar-14 Medinova Diagnostic (Bangalore) Chaparral Health Services 1.2 100%
May-13 Ekopath Metropolis Lab Services Metropolis Healthcare n/a 100%
Feb-13 Quest Diagnostics India DHR Holding India n/a 100%
Feb-13 Amins Pathology Laboratory Metropolis Healthcare n/a 100%
Dec-12 Eins Edutech Westfield Apparels 0.2 65%
Apr-12 Primex Healthcare and Research Mr. Agnivesh Aggarwal n/a 60%
Aug-11 Vijaya Diagnostic Vijaya Diagnostic Centre n/a 96%
Apr-11 SRL Ltd. Fortis Healthcare 178.8 75%
1. Almost all sizeable diagnostic player in India is backed by multiple PE funds – a testimony of high
interest in this segment
2. M&A on the other hand is limited to small deals with larger players acquiring single lab companies to
either increase market share or penetrate into newer geographies
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Orthopaedic
Limb, hip, knee, shoulder, ear, nose, throat and mouth implants; jaw 29%
Implants & 287 1,036
prosthetics; and orthopaedic braces, plates, supports and shoes
Prosthetics
Dental equipment and supplies, dental implants and prosthetics, dental 25%
Dental 128 399
cements, teeth and other fittings, dental drills etc.
Portable aids, including hearing aids and pacemakers & Therapeutic 27%
Patient Aids 377 1,241
appliances, including mechano-therapy and artificial respiration apparatus
This segment includes all other devices including stents, wheelchairs, 17%
Others 970 2,085
ophthalmic devices etc.
50
FY13 Revenues (US$ mn)
20
10
Hospital Furniture and Others Diagnostic Imaging and IV Medical Consumables Cardiac Stents, Pacemakers,
Growth 14.6% Diagnostics Growth 17.4% Implants
Growth 15.3% Growth 34.4%
Segment Growth Rate (2008-13)
Note:
1. Opto Circuits derives only c.4% revenues from India
2. Hospital furniture and others’ segment include hospital furniture, wheelchairs, ophthalmic instruments, dental products, amongst others
3. Cardiac stents, pacemaker and implants’ segment includes orthopaedics & prosthetics devices and patient aids segment
4. Revenue figures are approximate and have been sourced from public sources
Source : Espicom Q4’2013 Indian Medical Devices Report, Medical Buyer, Market Research
Page 43 Assumed US$/INR 60
Medical Devices
Investment proposition – Strategic evaluation
Low - end High - end
High-end segments such as implants, diagnostics imaging & equipment manufacturer offers a high growth,
high value proposition
o However, limited number of investment opportunities currently available in this segment including key
players such as TTK Healthcare, BPL Healthcare, Trivitron, Transasia etc. to name a few
Certain fast growing & sizeable medical consumable platforms such as Polymed & Sutures India also offer a
attractive investment opportunity in the medical devices segment
Page 45
Medical Devices
Key Transactions
Key Deals in Medical Devices Segment (2010-YTD14)
Deal Value (US$
Date Target Investor Stake
mn)
Jun-14 Prognosys Medical Sys. Somerset Indus Healthcare 3.3 n/a
Jun-14 Cura Healthcare Peepul Capital LLC 6.0 n/a
Dec-13 Forus Health IDG, Accel, Asian Healthcare Fund 8.0 n/a
Nov-13 Trivitron Healthcare India Value Fund 24.6 n/a
Sep-13 Lotus Surgical Specialities Samara Capital Partners 24.2 n/a
Sep-13 Panacea Medical Tech New Enterprise Associates 5.6 49%
Aug-13 Sutures India TPG Capital Inc. 22.5 22%
Aug-13 Skanray Technologies Ascent India Fund 12.4 40%
May-13 BPL Medical Technologies Goldman Sachs 20.2 49%
Dec-12 Perfint Healthcare Norwest Venture 11.0 12%
Oct-12 Trivitron Healthcare Fidelity Growth Partners 74.1 n/a
Sep-12 Sutures India CX Partners Fund 38.4 36%
Total 250.3
1. Around 30 private equity investments have been made in the Indian medical devices sector with a
combined deal value of USD 275 mn
2. Investments have picked up in the last 2 years with CY12 and CY13 accounting for 20 such
investments with total deal value of USD 260 mn.
3. Segments which have got funded primarily include diagnostic imaging and medical consumables