Healthcare Global Enterprises Ltd:Annual Report 2023-24 Analysis

Healthcare Global Enterprises Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History #

Healthcare Global Enterprises Ltd. (HCG) was established in 1998 by Dr. B.S. Ajaikumar with the vision to transform cancer care in India.

Headquarters Location and Global Presence #

HCG is headquartered in Bangalore, India. While primarily focused on the Indian market, they have expanded their presence to other South Asian countries.

Company Vision and Mission #

• Vision: To redefine cancer care and transform the lives of patients through innovation, expertise, and compassionate care.

• Mission: To build and operate a network of cancer care centers that offer comprehensive and integrated cancer care services, leveraging advanced technology and best clinical practices.

Key Milestones in Their Growth Journey #

• 1998: Establishment of the first HCG center in Bangalore.
• Expansion: Gradual expansion across India, establishing a network of cancer care centers.
• Acquisitions: Strategic acquisitions to strengthen market presence and expand service offerings.
• Investment in Technology: Continuous investment in advanced medical technologies such as radiation therapy, robotic surgery, and genomic testing.
• International Expansion: Expansion into other South Asian markets.

Stock Exchange Listing Details and Market Capitalization #

HCG is listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). Market capitalization fluctuates based on market conditions. Please consult financial websites for real-time market capitalization data.

Recent Financial Performance Highlights #

Note: HCG’s financial performance is subject to change. You should consult recent financial reports for the most up-to-date information.

Their Products #

Complete Product Portfolio with Categories #

HCG offers a comprehensive range of cancer care services including:

• Radiation Oncology: External beam radiation therapy, brachytherapy, stereotactic radiosurgery
• Surgical Oncology: Minimally invasive surgery, robotic surgery, reconstructive surgery
• Medical Oncology: Chemotherapy, targeted therapy, immunotherapy
• Nuclear Medicine: Diagnostic and therapeutic nuclear medicine procedures
• Hematology and Bone Marrow Transplantation: Treatment of blood cancers and related disorders
• Preventive Oncology: Cancer screening and awareness programs
• Supportive Care: Palliative care, pain management, nutritional support, rehabilitation
• Diagnostics: Pathology, radiology, genetic testing

Key Technological Innovations or Patents #

HCG has adopted and integrated advanced technologies such as:

• Robotic Surgery Systems: For precise and minimally invasive surgical procedures.
• Advanced Radiation Therapy Equipment: Including linear accelerators with advanced imaging and treatment planning capabilities.
• Genomic Testing: For personalized cancer treatment plans based on individual genetic profiles.

Quality Certifications and Standards #

HCG centers generally adhere to international quality standards.

Major Competitors #

Direct Competitors in India and Globally #

• Apollo Hospitals: A large hospital chain with oncology services.
• Fortis Healthcare: Another major hospital chain providing cancer care.
• Max Healthcare: A leading healthcare provider in India with a strong oncology department.
• Tata Memorial Centre: A renowned cancer research and treatment center in India.
• Global hospitals networks: Some international players may compete in specific areas.

How they differentiate from competitors #

• Specialization in Oncology: HCG is primarily focused on cancer care, allowing for specialized expertise and resource allocation.
• Network of Centers: A wide network of cancer centers across India.
• Adoption of advanced technology

Future Outlook #

Expansion plans or growth strategy #

• Expansion of network: HCG aims to expand its network of cancer centers to provide access to more patients.
• Technology investment: Further investment in advanced medical technologies to improve treatment outcomes.
• Focus on preventative care: Increasing focus on cancer screening and awareness programs to promote early detection.

Comprehensive Performance Overview #

3-Year Trend Analysis of Key Financial Metrics #

• Revenue witnessed consistent growth, with FY24 revenue at INR 19,121.19 million, reflecting a 12.85% year-on-year increase.
• EBITDA for FY24 was INR 3,295.86 million compared to INR 2,986.89 million in FY 2022-23, reflecting a year-on-year increase of INR 308.97 million.
• EBITDA margin for FY24 was 17.24% compared to 17.63% in FY 2022-23, reflecting an almost sustained margin.
• Profit After Tax (PAT) in FY24 increased to INR 481.55 million, a 64% growth compared to INR 293.49 million in FY23.
• Average Revenue Per Occupied Bed (ARPOB) increased by 9.9% to INR 41,802 for FY24.
• The share of renewable energy increased by 12% due to the Davangere solar power plant.

Business Segment Performance #

• Oncology: The largest segment, with 21 comprehensive cancer care centers, demonstrated strong growth, particularly in established centers like Bangalore, Cuttack, and Ahmedabad. The segment holds leading positions in 16 of the 18 cities of its operations. Revenue mix is: Medical Oncology (40%), Surgical Oncology (19%), Radiation Oncology (18%), Out-patients and others(23%).
• Triesta Clinical Laboratory: Showed continued innovation in cancer diagnostic services, with a focus on genomics and molecular diagnostics.
• Milann (Reproductive Medicine): Revenue in FY24 stood at INR 674 million, which grew only by 2%, up from INR 663 million, attributable to regulations around surrogacy.
• Multispecialty Hospitals: Tertiary care hospitals showed an overall contribution to the revenue and are under transformation to become more cancer-focused.

Major Strategic Initiatives and Their Progress #

• Expansion: Acquisition of SRJ CBCC Cancer Hospital in Indore to establish presence in Madhya Pradesh. Plans to set up two hospitals in North Bangalore and Whitefield area with 125 beds by Q1 FY26. Plans to acquire the majority stake in a cancer care center in Vizag. Plans to add more than 475 beds in the next three years.
• Digital Transformation: Launch of the ‘HCG Care’ app to enhance patient engagement, treatment adherence, and post-treatment follow-ups. Digital revenue grew by 75% year-on-year in FY24.
• Technology Adoption: Investments in robotic surgery, genomics, molecular imaging, digital pathology, targeted therapies, immunotherapy, and CyberKnife adaptive radiotherapy.
• Research and academics: HCG recorded over 100 publications and is actively involved in 26 fellowship programs with 283 registered students and 30+ new clinical trials in FY24.

Risk Landscape Changes #

• A detailed framework for Enterprise Risk Management (ERM) policy, highlighting strategic, operational, and external risks has been implemented.
• Identified risk areas include competition, regulatory changes, technological obsolescence, and cybersecurity.

ESG Initiatives and Metrics #

• Recognized as the ESG Champion of India 2024 in the healthcare sector by Dun & Bradstreet.
• Increased share of renewable energy by 12% in FY24, facilitated by the Davangere solar power plant.
• Transitioning to LED lighting and environmentally friendly refrigerants in air conditioning systems.
• Water conservation measures include installation of water meters and recycling facilities. Shimoga unit uses recycled water.
• Reduction in paper usage by 74% through digitalization.
• CSR activities focused on community development, education, women empowerment, and environmental stewardship, including tree planting initiatives.

Management Outlook #

• Focused on bridging the gap in cancer care infrastructure in rural and urban areas.
• Continuing aggressive expansion plans, increasing bed capacity, and investing in advanced technology.
• Emphasis on maintaining clinical excellence, compassionate care, and a patient-centric vision.
• Anticipates continued growth driven by digital transformation, strategic acquisitions, and expansion into underserved areas.
• Continue to focus on driving growth in Mumbai, Kolkata, Baroda and Nagpur centres.

Detailed Analysis #

Financial Position Analysis #

Balance Sheet Analysis: 3-Year Comparative (Consolidated, INR Millions) #

Significant Changes in Major Line Items (>10% YoY) #

• Non-Current Assets: Increased by 15.65% in FY24, primarily due to Property, Plant and Equipment, Capital Work-In-Progress, Goodwill and Right-of-use assets.
• Current Assets: Increased by 20.01% in FY24. Key drivers were cash and cash equivalents, trade receivables.
• Total Equity: Increased by 6.67% in FY24, major drivers were revenue and profitibility growth during the year.
• Non-Current Liabilities: increased by 21.16%, mainly due to an increase of borrowings and lease liabilities.
• Current Liabilities: Increased by 36.59%, with a significant rise in borrowings and trade payables.

Working Capital Trends #

• The Company has negative working capital. The primary driver of increase are trade receivables and borrowings.

Asset Quality Metrics #

• Loss allowance on trade receivables has increased, that indicates that the company is making provisions for higher expected losses on its receivables.

Debt Structure and Maturity Profile (INR Millions) #

• Debt increased significantly in FY24, and there’s a substantial portion due in the next 1-4 years.

Off-Balance Sheet Items #

• Corporate guarantees and potential liabilities related to EPCG licenses represent significant off-balance sheet exposures.

Revenue Breakdown by Segment/Geography with Growth Rates #

• Karnataka Cluster: FY24 revenue was INR 6,015 million, up 6% from FY23’s INR 5,693 million. Oncology centers grew 5%, and the multispecialty center grew 9%. The region contributed 33% of total HCG Centres revenue (excluding Fertility), a marginal 2% decrease from FY23.
• Gujarat Cluster: FY24 revenue was INR 4,785 million, a 15% increase from FY23’s INR 4,165 million. Both oncology and multispecialty centers grew at 15%. Gujarat contributed 26% of total HCG Centres revenue.
• East India Cluster: FY24 revenue was INR 2,106 million, up 25% from FY23’s INR 1,688 million, with Kolkata growing 40%.
• Andhra Pradesh Cluster: FY24 revenue was INR 1,378 million, a 14% increase from FY23’s INR 1,205 million.
• Maharastra Cluster: FY24 revenue was INR 2,871 million, a 19% increase from FY23’s INR 2,409.
• North India: FY24 revenue was INR 844 million, up 12% from FY23’s INR 755 million. Indore center registered 987 new patients in 6 Months.
• Milann Centres (Fertility): FY24 revenue was INR 674 million, a 2% increase over FY23’s INR 663 million.
• Existing Cancer Centers: Registered an 11% year-on-year growth.
• New Cancer Centers: Registered a 21% year-on-year growth.
• Consolidated Income from Operations: Increased by 12.85% year-on-year, from INR 16,944.47 million in FY23 to INR 19,121.19 million in FY24.
• Standalone Income from Operations: Increased by 9.43% year-on-year, from INR 10,075.94 million in FY23 to INR 11,025.74 million in FY24.

Cost Structure Analysis #

• Cost of Consumption: Increased by INR 513.56 million. It was 25% of Total revenue for both fiscal years.
• Employee Benefits Expense: Increased by 12.04%, or INR 331.18 million, from INR 2,751.24 million in FY23 to INR 3,082.42 million in FY24.
• Finance Costs: Increased by 5.06%, or INR 52.34 million.
• Depreciation and Amortisation Expense: Increased by 6.66%, or INR 108.83 million.
• Other Expenses: Increased by 14.69%, or INR 1,023.01 million.
• **Total Expenses(Consolidated):**Increased by 12.20% from FY 2023.

Margin Analysis (Gross, Operating, Net) with Trends #

• EBITDA Margin (Consolidated): 17.24% in FY24, compared to 17.63% in FY23, reflecting a near-sustained margin.
• **EBITDA Margin(Standalone):**18.10% in FY24 as against 18.09% for FY 2022-23.
• Net Profit Margin: 2.52% of total revenue for FY24, up from 1.73% in FY23.

Operating Leverage #

• The report states “Significant scale benefits; outpacing revenue due to operating leverage”, indicates the positive effect on profitability.

Non-Recurring Items #

• Exceptional Items (FY24): INR 39.05 million related to the write-back of committed project cost.
• Exceptional Items(FY23): No exceptional items

EPS Analysis (Basic/Diluted) #

• The Consolidated Diluted EPS increased from INR 2.09 to INR 3.42
• The Consolidated Basic EPS increased from INR 2.11 to INR 3.46

Quarterly Trends #

• The report states"Highest ever revenue from operations for 15 consecutive quarters (till Q4 FY24)"
• The report states “Highest ever quarterly EBITDA for Q4 FY24 quarter with 12 consecutive quarters of consistent increase”.
• Detailed quaterly breakdown not provided for all financial metrics.

Cash Management #

Cash Flow and Liquidity Analysis #

Detailed OCF, ICF, FCF Components (Consolidated, INR in millions) #

• Operating Cash Flow (OCF):
  • FY 2024: Increased to 2,845.79 from 2,245.81 in FY 2023, mainly by profit before tax.
  • FY 2024: changes in working capital contribute positively.
  • FY 2024: Income taxes paid (net of refunds) was INR 473.68 million.
• Investing Cash Flow (ICF):
  • FY 2024: Net cash outflow was INR 2,257.27 million, majorly from acquisition of property, plant and equipment, and business acquisitions.
• Financing Cash Flow (FCF):
  • FY 2024: Net cash outflow was INR 640.16 million, including repayment of lease liabilities and interest.
  • The company’s financing also has an additional INR 1,508.91 million during the current year from non-cash transactions.

Capex Analysis #

• Capital Work-in-progress increased significantly, driven by ongoing projects.

Dividend and Share Buyback Trends #

• The Company has neither declared nor paid any dividend during FY 2024 and FY 2023.
• No share buyback programs are mentioned in the provided data.

Debt Service Coverage #

• Calculated consolidated debt service coverage ratio is 1.68 and 1.77 for FY24 and FY23 respectively.

Liquidity Position #

• Cash and cash equivalents at the end of FY 2024 were INR 2,264.02 million, with an additional INR 766.71 million in bank deposits.
• The Company has current borrowings of INR 1,632.57 and a current portion of long-term debt.

Financial Ratio Analysis: FY23-FY24 #

Profitability Ratios (3-Year Trends) #

• Return on Equity (ROE): FY24: 5.70%, FY23: 3.40% (Improving trend)
• Return on Capital Employed (ROCE): FY24: 8.40%, FY23: 8.42% (Stable)
• Operating Profit Margin: FY24: 17.96%, FY23: 18.26% (Slight Decrease)
• Net Profit Margin: FY24: 2.52%, FY23: 1.73% (Strong Improvement)

Liquidity Metrics #

• Current Ratio: FY24: Slightly less than 1, FY23: Slightly greater than 1.

Efficiency Ratios #

• Inventory Turnover Ratio: FY24: Slightly smaller than FY23.

Leverage Metrics #

• Debt/Equity Ratio: FY24: 0.80, FY23: 0.49 (Increasing)
• EBITDA/Interest: Increased in FY24 compared to FY23.

Working Capital Ratios #

• Net Capital Turnover Ratio: FY24: Slightly more than FY23.

HCG Financial Analysis FY24 #

Revenue and Profitability #

• Consolidated Revenue: Increased by 12.85% year-on-year, from INR 16,944.47 million in FY23 to INR 19,121.19 million in FY24.
• Consolidated EBITDA: Increased by 10.34%, from INR 2,986.89 million in FY23 to INR 3,295.86 million in FY24.
• Consolidated EBITDA Margin: 17.24% in FY24 compared to 17.63% in FY23, indicating a slight decrease.
• Consolidated Profit After Tax (PAT): Increased by 64.08%, from INR 293.49 million in FY23 to INR 481.55 million in FY24.
• Standalone Revenue: Increased by 9.43%, from INR 10,075.94 million in FY23 to INR 11,025.74 million in FY24.
• Standalone EBITDA: Increased with Ebitda margin of 18.10% in FY24 from 18.09% in FY23.

Cluster Performance #

• Karnataka Cluster: Revenue increased by 6%, from INR 5,693 million in FY23 to INR 6,015 million in FY24. Oncology centers within the cluster grew by 5%, and the multispecialty center grew by 9%.
• Gujarat Cluster: Revenue increased by 15%, from INR 4,165 million in FY23 to INR 4,785 million in FY24. Both oncology and multispecialty centers grew by 15%.
• East India Cluster: Revenue increased by 25%, from INR 1,688 million in FY23 to INR 2,106 million in FY24. Kolkata center notably grew by 40%.
• Andhra Pradesh Cluster: Revenue increased by 14%, from INR 1,205 million in FY23 to INR 1,378 million in FY24.
• Maharashtra Cluster: Revenue increased by 19%, from INR 2,409 million in FY23 to INR 2,871 million in FY24.
• North India: Revenue increased by 12%, from INR 755 million in FY23 to INR 844 million in FY24.
• Milann (Fertility): Revenue Flat growth. Revenue by 2%, from INR 663 million in FY23 to INR 674 million in FY24.
• Existing Cancer Centers: Showed an 11% year-on-year growth.
• New Cancer Centers: Showed a 21% year-on-year growth.

Market Share and Position #

• HCG is the largest cancer care network in India in terms of the total number of private cancer treatment centers.
• HCG has leading positions in 16 of the 18 cities it operates in.
• The Company, together with its subsidiaries, has coverage across 10 states.

Key Products/Services Performance #

• Oncology: Remains the core business, with comprehensive cancer care centers providing a range of services.
• Radiation Oncology: Accounted for 18% of revenue.
• Medical Oncology: Accounted for 40% of revenue.
• Surgery Oncology: Accounted for 19% of revenue.
• Out Patients: Accounted for 23% of revenue.
• Milann (Fertility): Showed lower growth, at 2%
• Triesta (Precision Diagnostics): Provides specialized oncology diagnostic services.

Geographic Distribution and Market Penetration #

• Presence: Operations across 10 states in India, covering metro, Tier II, and Tier III cities, and one center in Kenya.
• Karnataka Cluster: Contributed 33% of total revenues for HCG Centres (excluding Fertility) in FY24.
• Gujarat Cluster: Contributed 26% of total revenues for HCG Centres (excluding Fertility) in FY24.
• The Company has presence in 18 cities, one-third of the centers in tier-II and tier-III cities.

ROIC #

• The ROIC for FY24 is 8.40%.

Operational Efficiency #

• Average Revenue Per Occupied Bed (ARPOB): Increased by 9.9% to INR 41,802 in FY24.
• Occupancy levels: The report states that new centers are expected to improve occupancy levels.
• The company used 2.25 MW renewable energy, share of renewable energy is 12%.

Growth Initiatives #

• Expansion: Plans to add more than 475 beds within the next three years, including new facilities in North Bangalore and Whitefield area (125 beds, operational by Q1 FY26).
• Acquisitions: Strategic acquisitions to expedite expansion, including SRJ CBCC Cancer Hospital in Indore and plans to acquire a majority stake in a cancer care center in Vizag.
• Digital Transformation: Launch of the HCG Care Smart App suite to enhance patient experience and engagement. Digital revenue grew 75% year-on-year in FY24.
• Technology Adoption: Continued investment in cutting-edge medical technology, including robotic surgery, genomics, molecular imaging, and targeted therapies.
• CSR and Awareness Campaigns: Initiatives like the ‘Power of Good Wishes’ campaign to raise cancer awareness.

Challenges #

• The healthcare sector is seeing increased regulation which presents challenges in terms of growth.
• Maintaining clinical excellence and patient outcomes while expanding rapidly.
• Managing debt levels, which increased slightly due to acquisitions.
• Competition from other hospitals.

Risk Framework #

Strategic Risks #

• Severity: High. Strategic risks, specifically related to expansion and acquisitions, are material given the Group’s growth strategy.
• Likelihood: Moderate. Execution delays and failure to achieve projected synergies from partnerships or acquisitions are possible.
• Trend: Increasing, given the aggressive expansion plans, including new centers and acquisitions.
• Mitigation Strategies: Competitive market assessment before expansion; use of a hub-and-spoke model.
• Control Effectiveness: Partially Effective. Competitive assessment and strategic acquisition are in place, but results are pending.
• Potential Financial Impact: Not directly quantifiable, but impairment of goodwill (INR 2,229.35 million as of March 31, 2024) indicates potential past strategic missteps.

Operational Risks #

• Severity: High. Risks include maintaining service quality, reliance on key personnel, and managing patient volumes.
• Likelihood: Moderate. Operational disruptions, patient complaints, and loss of key staff are possible.
• Trend: Stable. Employee strength of 10,000+ indicates human resource capacity.
• Mitigation Strategies: Multidisciplinary approach, standardized clinical protocols, employee wellness programs, talent management, and doctor engagement model.
• Control Effectiveness: Moderate to high. Quality management system and NABH accreditation, Employee engagement score of 92.09%, 9,712 training programs.
• Potential Financial Impact: Operational issues can impact reputation and revenue; however, specific metrics are not directly quantifiable.

Financial Risks #

• Severity: Moderate to high.
• Likelihood: Moderate. Changes in interest rates and foreign exchange rates are factors.
• Trend: Increasing. Debt/Equity ratio increased from 0.33 in FY23 to 0.49 in FY24.
• Mitigation Strategies: Hedging, monitoring of cash flow, and maintaining relationships with financial institutions.
• Control Effectiveness: Partially effective. Measures are in place, but the increase in debt indicates a potential vulnerability.
• Potential Financial Impact:
  • A 1% increase in interest rates would negatively impact profit before tax by INR 29.54 million; a 1% decrease would positively impact it by INR 29.54 million.
  • Foreign exchange fluctuations are impacting the Group, with specific exposure to USD and Euro-denominated debt. 1% change in rate had no material impact.

Compliance/Regulatory Risks #

• Severity: High. Non-compliance can result in financial penalties and reputational damage.
• Likelihood: Low to Moderate.
• Trend: Stable with noted instances of delay, not affecting going concern.
• Mitigation Strategies: Online compliance management system, internal audits, legal counsel.
• Control Effectiveness: Generally Effective.
• Potential Financial Impact:
  • Delayed filing Form DI, resulting in a payment of LSF of INR 20,000.
  • Observation on non-availability of back-up of Tally on a daily basis, as per the NDI rule.
  • Observation on the Audit Trail, as per the Companies(Audit and Auditors) Rules, 2014.
  • Contingent Liabilities as of March 31, 2024, include various disputed tax and duty amounts (Excise, Service Tax, VAT, etc.), totaling a significant, though not precisely quantified, sum.

Emerging Risks #

• Severity: Moderate to High. Technological advancements and cybersecurity, are crucial.
• Likelihood: Moderate. Digital transformation and increasing reliance on technology heighten these risks.
• Trend: Increasing, given the rapid pace of technological change.
• Mitigation strategies: The Company has adopted AI- driven thechnology, like Ethos Adaptive Radiotherapy.
• Control Effectiveness: Partially effective, actions are being taken.
• Potential Financial Impact: Not directly quantifiable, but data breaches or system failures could lead to financial losses and reputational damage.

Strategic and Management Analysis of Healthcare Global Enterprises (HCG) #

Long-Term Strategic Goals and Progress #

• HCG aims for sustainable leadership in India’s oncology sector by making cancer care affordable and accessible. Progress is demonstrated by expansion into tier-II and tier-III cities, now representing one-third of their centers.
• The Group is expanding its network through partnerships, acquisitions, and capacity building. It exceeded prior industry growth rates before and after Covid.
• Adding more than 475 beds within the next three years.

Competitive Advantages and Market Positioning #

• HCG is one of India’s largest specialty cancer care hospitals, with the largest oncology-focused hospital chain and deepest network across metros and non-metros.
• The Company is operating the largest cancer care network in India, with a market position within the top 3 in 16 of 18 cities.
• HCG offers a vertically integrated one-stop solution for the patients, recognized by Harvard Business School.
• HCG is a pioneer of technology and research.
• A differentiated, focused factory approach and a hub-and-spoke model contribute to operational efficiency and tailored regional care.
• Strong clinical outcomes, on par with, or exceeding, Western centers in specific cancer types (e.g., triple-negative breast cancer), bolster its reputation.

Innovation Initiatives and R&D Effectiveness #

• HCG has introduced first-of-its-kind technologies in India, such as CyberKnife and Digital PET CT, showcasing a commitment to leading-edge treatment.
• Over 100 publications are published each year, along with active participation in clinical trials, proving a strong R&D focus.
• HCG has invested and continues to make substantial investments in genomics, digital pathology, radiomics, and AI-driven technologies (e.g., Ethos Adaptive Radiotherapy) to enhance precision and reduce treatment side effects.
• The “Aum Voice Box” and the HCG Care app show product and service innovation aimed at patient needs.

M&A Strategy and Execution #

• HCG is pursuing growth through strategic acquisitions. During the periods presented, they executed transactions that expanded its business: acquisition of SRJ CBCC Cancer Hospital in Indore; acquisition of the minority stakes in Nagpur and Kolkata; completed acquisitions in NCHRI.
• HCG plans to acquire a majority stake in a cancer center in Vizag.
• Two hospitals are going to be set up with 125 beds in North Bangalore and the Whitefield area.

Management’s Track Record in Execution #

• The management has expanded centers, improved operational bed capacity, and delivered specialized cancer care.
• HCG demonstrated high revenue growth post-COVID across centers.
• The management team is achieving turnarounds in emerging centers, demonstrating adaptability and operational management skills.
• The consistent increase in quarterly EBITDA, reflects management’s effectiveness.

Capital Allocation Strategy #

• Capex is deployed for expansion projects (e.g., Ahmedabad and Bangalore) and acquisitions.
• The Company allocated capital for acquiring minority stakes in Nagpur and Kolkata.
• Focus on improving the revenue mix which has increased our Average Revenue Per Occupied Bed.
• Consistent revenue growth, increased operating leverage, margin expansion and ploughing back of the profits, are factors of the Company’s capital allocation policy.

ESG Framework #

Environmental Metrics and Targets #

• HCG consumed 161,868.38 GJ of electricity (renewable and non-renewable) in FY 2024.
• Renewable energy constituted 12% of the Davangere solar power plant usage in FY2024.
• Renewable energy capacity stands at 2.25 MW.
• Non-renewable energy consumption was reduced by 143,083.39 GJ.
• Water consumption totaled 391,857.32 KL in FY 2024.
• Water discharge was reduced by 27,480.90 KL.
• Total waste generated was 67,03,000 kg, with general waste comprising 85.42%, BMW disposal at 5.68%, and E-waste at 0.0088%.
• Paper usage was reduced by 74%.
• Transitioning to LED lighting.
• The Shimoga unit uses recycled water.

Social Responsibility Programs #

• HCG partnered with IHDUA for community development, including a prototype village in Gundlupet.
• Support is provided to educational institutions like Vinayaka Gnana Vidya Shale Mullur and Adarsha Academy.
• A leadership academy trains women from self-help groups in technology-based skills.
• HCG launched ‘The Power of Good Wishes’ campaign to create awareness and to encorage screening for cancar.
• 3,500+ people benefited from community engagement programs.
• 2.1 lakhs cancer patients served.

Governance Structure and Effectiveness #

• The Board has an ideal combination of Executive, Non-Executive, and Independent Directors, with Independent Directors constituting 50% and 2 women Directors.
• The Board met 6 times during FY 2023-24.
• Committees include Audit, Risk Management, Nomination and Remuneration, Stakeholders’ Relationship, Corporate Social Responsibility, and Strategy. All recommendations of the Audit Committee were accepted by the Board.
• A comprehensive Enterprise Risk Management Policy is in place.
• An online compliance management system monitors compliance with applicable laws.
• A Code of Conduct regulates trading by Designated Persons and Immediate Relatives.

Sustainability Investments and ROI #

• HCG has invested in a 2.25 MW solar power plant in Karnataka.
• It is projected to generate 1,040 lakh units over 25 years.
• Projected to reduce carbon emissions by about 76,200 metric tons.
• Anticipated annual savings of up to INR 4.2 crore.
• Ongoing investments in energy-efficient equipment.

ESG Ratings #

• HCG was recognized as the ESG Champion of India 2024 in the healthcare sector by Dun & Bradstreet.

Regulatory Compliance and Future Preparations #

• 100% compliance with regulatory policies as of March 31, 2024.
• The Company is compliant with the applicable Secretarial Standards.
• Policies on related party transactions, Board diversity, and prevention of sexual harassment are in place.
• A Whistle Blower/Vigil Mechanism exists for complaints.
• The Company had an observation related to Foreign Exchange Management. Though the company filed form DI within due date, it was not approved by the bank before the due date. A late fee was paid.
• Company has adopted a fully integrated Hospital Information System(HIS). Tally is used as an accounting software.

Forward Outlook: Future Projections and Guidance #

Oncology Segment #

Management Guidance and Assumptions #

• Continued ability to attract and retain highly skilled specialist physicians.
• Ability to operate under a competitive cost structure, leveraging economies of scale.
• Continuation of current trends in the Indian healthcare sector, specifically increasing demand for cancer care.

Market Growth Forecasts #

• Indian healthcare delivery market projected to grow at a 10-12% CAGR between fiscals 2022 and 2027.
• Cancer incidence crude rate in India is estimated to be growing at a CAGR of 6.8% (2015-2020).
• New cancer cases are estimated to approach 2 million by 2040.

Planned Strategic Initiatives #

• Expand network in India by establishing new cancer centers.
• Expand capacity and service offerings of existing HCG cancer centers.
• Strengthen patient support groups and conduct awareness programs on cancer screening.
• Integrate advanced technologies such as AI and ML, transforming radiodiagnosis, autocontouring for radiotherapy, molecular pathology and spatial genomics.

Capital Expenditure Plans #

• Capex deployed for expansion projects in Ahmedabad.
• Plan to add more than 475 beds within the next three years, including new facilities in North Bangalore and the Whitefield area.

Efficiency Improvement Targets #

• Achieve operational efficiency and cost management through hub-and-spoke model, centralized quality control, and standardized treatment protocols.
• Increased occupancy levels and contributions from new centers are expected to improve margins.

Potential Challenges and Opportunities #

• Challenges: High competition in metro areas and price sensitivity in non-metro markets.
• Opportunities: Significant demand-supply gap in cancer care in India, especially in underserved areas. Strategic acquisitions to expedite expansion. Potential to connect with patients and provide compassionate care.

Fertility Segment (Milann) #

Management Guidance and Assumptions #

• Reliance on Milann’s reputation for expertise in Assisted Reproduction Technology (ART) and related services.
• Assumption of continued demand for fertility treatments in India.

Market Growth Forecasts #

• The Indian infertility treatment market is projected to grow.

Potential Challenges and Opportunities #

• Challenges: Rampant regulatory changes and the impact of new regulations on services like surrogacy are a concern.
• Opportunities: Increasing prevalence of infertility issues in India and the growing acceptance of ART.

Multispecialty Segment #

Management Guidance and Assumptions #

• Two of the multispecialty hospitals (Rajkot and Suchirayu) are in the process of becoming cancer focused.

Precision Diagnostics Segment (Triesta) #

Management Guidance and Assumptions #

• Focus is on leveraging laboratory services, research and development, and clinical research to enhance cancer diagnosis and prognosis.

Planned Strategic Initiatives #

• Continued emphasis and ongoing trials to evaluating whether radiomics can predict treatment responses and outcomes more effectively.

Potential Challenges and Opportunities #

• Challenges: The need for continuous innovation and adaptation to rapid advances in genomics, proteomics, and metabolomics.
• Opportunities: Leveraging the position as the largest network of CAP and NABL accredited oncology diagnostic laboratories in India.

Audit and Regulatory Analysis #

Auditor’s Opinion and Qualifications #

• The Statutory Auditors, B S R & Co. LLP, have issued an unmodified opinion on the standalone and consolidated financial statements.
• The Auditor’s Report contains observations on books of accounts related observations, wherein audit trail (edit log) facility was not enabled in respect of Holding Company and subsidiary companies.
• The Auditor’s Report contains observation on the standalone financial statements in respect of title deeds of immovable properties not being held in the name of the Company.
• The Auditor’s Report contains an observation that the back-up of Tally with respect to a Subsidiary incorporated in India which form part of the ‘books of account and other relevant books and papers in electronic mode’ have not been maintained on the servers physically located in India on a daily basis during 1 April 2023 till 18 May 2023.
• The Auditor’s Report highlights a delay in filing Form DI for a downstream investment, with a late submission fee paid.
• The Secretarial Audit Report (Annexure 1) notes a marginal delay of one day in publishing an advertisement as per the Companies (Management & Administration) Rules, 2014.

Key Accounting Policies and Changes #

• The financial statements adhere to Indian Accounting Standards (Ind AS).
• There were revisions to the estimated useful life for certain categories of Property, Plant and Equipment during the previous year ended March 31, 2023, based on a technical evaluation.
• No new standards or amendments to existing standards issued by the Ministry of Corporate Affairs (MCA) are applicable from April 1, 2024.

Internal Control Effectiveness #

• The auditors issued an unmodified opinion on the adequacy and operating effectiveness of the Company’s internal financial controls over financial reporting.
• The auditor’s report and annexures highlight weakness in internal financial controls with reference to non-enabling of audit trail, and certain non-compliances relating to the same.

Regulatory Compliance Status #

• The Company, has become a foreign owned and controlled company under Foreign Exchange Management (Non- Debt Instrument) Rules, 2019 (‘NDI Rules’) and other applicable laws, on September 08, 2020.
• The Company generally complied with applicable laws, including the Companies Act, 2013, Listing Regulations, and SEBI regulations.
• The Secretarial Audit Report notes a delay in filing Form DI under FEMA regulations for a downstream investment in HCG EKO Oncology LLP, though the form was subsequently filed and approved with a late submission fee.
• The Company states it has not been declared a willful defaulter by any bank or financial institution.
• The Company declared to have complied with applicable Secretarial Standards.

Legal Proceedings and Their Potential Impact #

• Contingent liabilities exist for various matters, including customs duty, excise and service tax, value-added tax, sales tax, GST, and income tax.
• The Company is involved in disputes related to the classification and excisability of Fluro-deoxyglucose (FDG).
• There are ongoing VAT assessments and demands, with appeals pending.
• A possible claim exists related to the disallowance of expenditure on abandoned capital projects.
• Contingent liability related to invocation of certain bank guarantees, under litigation
• The Company is involved in other disputes, lawsuits, and claims. Management does not expect these to have a material adverse effect.
• No proceedings have been initiated or are pending against the company under the Insolvency and Bankruptcy Code, 2016, materially impacting the business.

Related Party Transactions #

• All related party transactions were in the ordinary course of business and at arm’s length.
• No material related party transactions were entered into during the year.
• Omnibus approval is obtained for repetitive transactions, and a statement of details is placed before the Audit Committee quarterly.
• Transactions include sales, purchases, reimbursements, rent, interest and other expenses, and balance receivables from/payables to, loans, and guarantees with subsidiaries, associates, and Key Management Personnel (KMP) or their relatives.

Subsequent Events #

• The Board of Directors approved the re-appointment of Ms. Geeta Mathur and Mr. Rajagopalan Raghavan as Independent Directors, subject to shareholder approval.
• The Company has signed Share Purchase Agreement (‘SPA’) with Vizag Hospital and Cancer Research Centre Private Limited (‘Vizag Hospital’) and its selling shareholders, and (ii) Shareholders’ Agreement (‘SHA’) with Vizag Hospital and its continuing shareholders with respect to (i) upfront acquisition of 51% equity share capital of Vizag Hospital by the Company, from the Selling Shareholders, subject to fulfilment of the terms and conditions of the SPA and (ii) balance acquisition of up to 49% of equity share capital in Vizag Hospital in tranches, in accordance with and subject to the terms of the SPA and the SHA.
• No other material changes or commitments affecting the financial position occurred between March 31, 2024, and the date of the report (August 8, 2024).
• No changes in nature of business were reported during the financial year.

Analysis of Accounting Quality and Regulatory Risk Assessment #

• Accounting Quality: The unmodified audit opinion suggests a high level of accounting quality. However, the observations regarding property title deeds and the delays in compliance filings, if pervasive or persistent, could raise concerns about the robustness of processes.
• Regulatory Risk: While generally compliant, the FEMA-related delay and the various tax disputes indicate moderate regulatory risk. The pending litigations and unfulfilled conditions related to government grants also contribute to this risk. The company’s proactive stance in addressing these issues (e.g., filing appeals, making payments under protest) demonstrates a mitigating approach. Consistent observations by the auditor under clause 2B(f) in respect of non- compliances related to audit-trail may lead to regulatory actions by the authorities.