Max Healthcare Institute Ltd:Annual Report 2023-24 Analysis

Max Healthcare Institute Ltd.: A Comprehensive Overview #

About the Company #

• Year of Establishment and Founding History: Max Healthcare Institute Ltd. was established in 2000 by Analjit Singh.
• Headquarters Location: New Delhi, India.
• Company Vision: To be the most admired healthcare organization in India.
• Key Milestones in Their Growth Journey:
  • Early 2000s: Establishment of initial hospitals.
  • Expansion through acquisitions and greenfield projects.
  • Focus on specialized medical programs and advanced technology.
  • Partnerships with leading international medical institutions.
• Stock Exchange Listing Details and Market Capitalization: Listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). Market capitalization fluctuates based on market conditions.
• Recent Financial Performance Highlights: Review current financial reports for latest information.
• Management Team and Leadership Structure: Abhay Soi is the Chairman and Managing Director.
• Notable Awards or Recognitions: Max Healthcare facilities have received accreditations and awards related to quality of care and patient safety.

Primary Customers #

• Geographic Markets: Primarily operates in India.
• Major Client Segments: Individuals seeking primary, secondary, and tertiary healthcare services. Includes both domestic and international patients.
• Distribution Network and Sales Channels: Network of hospitals, outpatient clinics, diagnostic centers, and online appointment booking.

Major Competitors #

• Direct Competitors in India: Apollo Hospitals, Fortis Healthcare, Narayana Hrudayalaya, Manipal Hospitals.
• Competitive Advantages: Strong brand reputation, focus on specialized medical programs, presence in key metropolitan areas.
• Industry Challenges and Opportunities: Increasing healthcare costs, regulatory changes, growing demand for quality healthcare services, rise of medical tourism in India.

Future Outlook #

• Expansion Plans or Growth Strategy: Focus on expanding network through acquisitions and greenfield projects in underserved markets. Investment in technology and digital healthcare solutions.
• Industry Trends Affecting Their Business: Increasing prevalence of chronic diseases, growing awareness of preventive healthcare, technological advancements in medical treatments, government initiatives to improve healthcare access.

Comprehensive Performance Overview #

3-Year Trend Analysis of Key Financial Metrics #

• Revenue:
  • Consolidated revenue increased from ₹4,051 Crore in FY22 to ₹5,581 Crore in FY24.
  • Standalone revenue increased from ₹1,901 Crore in FY22 to ₹2,611 Crore in FY24.
• Operating Profit:
  • Consolidated operating profit grew from ₹1,065 Crore in FY22 to ₹1,676 Crore in FY24.
  • Standalone operating profit grew from ₹570 Crore in FY22 to ₹1,038 Crore in FY24.
• Profit After Tax (PAT):
  • Consolidated PAT increased from ₹605 Crore in FY22 to ₹1,057 Crore in FY24.
  • Standalone PAT grew from ₹335 Crore in FY22 to ₹684 Crore in FY24.
• Total Equity:
  • Consolidated total equity increased from ₹6,285 Crore in FY22 to ₹8,408 Crore in FY24.
  • Standalone total equity increased from ₹6,312 Crore in FY22 to ₹7,687 Crore in FY24.
• Debt Equity Ratio:
  • Consolidated debt-equity ratio increased from 0.09 in FY23 to 0.15 in FY24.
  • Standalone debt-equity ratio decreased from .08 to .06 from FY23 to FY24.

Business Segment Performance #

• The Group operates primarily within a single reportable business segment: “Medical and Healthcare Services.”
• Both the consolidated and standalone entities showed significant revenue and profitability growth in this segment.

Major Strategic Initiatives and Their Progress #

• Acquisitions:
  • During FY24, the Group acquired Alexis Multi-Speciality Hospital Private Limited and Starlit Medical Centre Private Limited.
  • This strengthened its presence in Western and Northern India, respectively.
  • The purchase price allocations are complete, with goodwill recognized for both acquisitions.
• Scheme of Amalgamation:
  • During the year ended March 31, 2023, the liquidator of SCHL appointed by the Company distributed the entire business undertaking of SCHL to the Company on a going concern basis, with effect from close of business hours on August 31, 2022.
  • NCLT ordered the dissolution of SCHL during the year ended March 31, 2024.
• Capital Expenditure:
  • Ongoing projects include developments in Gurugram and Lucknow.
  • Significant capital work-in-progress reported.
  • Interest costs on borrowings for these projects have been capitalized.

Risk Landscape Changes #

• Credit Risk:
  • Exposure to credit risk remains a factor, primarily related to trade receivables from government bodies and other healthcare service providers.
  • The Group actively manages this risk through credit limits and creditworthiness assessments.
• Liquidity Risk:
  • The Group maintains flexibility in funding through committed credit lines to manage liquidity risk.
• Market Risk:
  • Exposure includes foreign currency risk, interest rate risk, and equity risk.
  • The Group uses derivative financial instruments to mitigate some of these risks.

ESG Initiatives and Metrics #

• Environmental:
  • The Group has disclosed information related to energy, emissions, and waste.
• Social:
  • Corporate Social Responsibility (CSR) expenses were ₹544 lakhs in FY24.
  • Demonstrates a commitment to social initiatives, specifically towards healthcare for economically weaker sections.
• Governance:
  • The Board of Directors includes independent directors.
  • Compliance with the Companies Act and SEBI regulations is stated.

Management Outlook #

• The management has demonstrated a strategy focused on expanding market presence through acquisitions and strategic partnerships.
• The positive trends in key financial metrics suggest an optimistic outlook, barring any unforeseen regulatory or market changes.
• Capital expenditure, investment in TDR and commitment to providing financial and operational support to subsidiaries, represents business expansion.

Detailed Analysis #

Financial Position Analysis of Max Healthcare Institute Limited #

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

(INR in Lakhs)

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

(INR in Lakhs)

• Property, Plant & Equipment (2024 vs. 2023): Increased by 51.58%, from 203,559 to 3,08,565.
• Goodwill and Intangibles (2024 vs. 2023): Increased by 18.95%, from 5,25,868 to 6,25,490.
• Other Assets (2024 vs 2023): Decreased by 25.91%, from 147,419 to 1,09,240.
• Total Debt (2024 vs. 2023): Increased by 103.53%, from 56,482 to 1,14,962
• Total Equity (2024 vs. 2023): Increased by 13.48%, from 7,40,671 to 8,40,552.

Working Capital Trends #

(INR in Lakhs)

Debt Structure and Maturity Profile #

(INR in Lakhs)

Off-Balance Sheet Items #

(INR in Lakhs)

Corporate guarantees have increased significantly, posing a potential contingent liability.

Operating Performance - Income Statement Analysis #

Revenue Breakdown #

• The Group operates primarily within a single reportable business segment: “Medical and Healthcare Services.”
• Geographically, the Group operates solely in India.
• Consolidated revenue from operations for FY24 was ₹5,40,172 lakhs, a 18.4% increase from FY23’s ₹4,56,131 lakhs.
• Healthcare services revenue (net) increased by 17.9% to ₹5,17,185 lakhs from 4,38,647
• Sale of drug and pharmaceuticals supplies are up to 5,942 from 5,197 for a total of 14.33%
• Operation and Management Service Fee increased to 8197 from 2702 which totals a 203.36%
• 9% of the Total Turnover is contributed by exports.

Cost Structure Analysis #

• Consumption of drugs, consumables, and implants constituted a significant cost, amounting to ₹1,11,487 lakhs in FY24, representing a YOY growth of 20.36%.
• Employee benefits expense was ₹93,186 lakhs in FY24, a 15.44% YOY growth.
• Other expenses (including professional and consultancy fees) were ₹1,86,969 lakhs representing an increase of 17.22%

Margin Analysis #

• Operating Profit (EBITDA) was ₹1,67,386 lakhs in FY24 compared to ₹1,37,827 lakhs in FY23 which represents a 21.4% YOY increase.
• Profit Before Tax (PBT) margin improved, with PBT at ₹1,36,153 lakhs in FY24 from 106572 lakh, indicating an increasing trend.
• Net Profit margin was 19.56% in FY24, a small decrease compared to FY23’s 24.19%, which reflects higher revenue with a slight reduction in net profit.

Non-Recurring Items #

• During FY23, there was a deferred tax credit of ₹28,250 lakhs due to the voluntary liquidation of Saket City Hospitals Limited (SCHL) and subsequent distribution of its business undertaking. A capital gains tax of ₹3,828 lakhs was also recorded, related to this event.
• Reversal of deferred tax liability on indexation of land and investments in subsidiaries impacted both FY24 and FY23.
• Gain on Sale of Property, Plant and equipment represents another non-recurring item which totaled 408 lakh in FY24 compared to 99 lakh in FY23.

EPS Analysis #

• Basic EPS for FY24 was ₹10.88, while diluted EPS was ₹10.84.
• Basic and Diluted EPS were slightly lower than FY23 with basic = 11.40 and Diluted = 11.37.

Quarterly Trends #

• Information with regards to “trade receivables ageing” reflects an overall decline in the receivable turnover ratio.

Cash Management #

Cash Flow and Liquidity Analysis #

Operating Cash Flow (OCF) #

• Year ended March 31, 2024: Profit before tax (1,36,666) + Depreciation and amortization (24,766) + Finance cost (5,972) - Interest income (17,612) + Other non-cash adjustments & Working Capital Changes.
• Year ended March 31, 2023: Profit before tax (1,06,280) + Depreciation and amortization (23,494) + Finance cost (8,162) - Interest income (13,188) + Other non-cash adjustments & Working Capital Changes.

Investing Cash Flow (ICF) #

• Year ended March 31, 2024: Major components include additions to property, plant, and equipment, right-of-use, and CWIP and investment in subisidiaries.
• Year Ended March 31, 2023. Major components include addtions to property, plant and equipment, right of use-assets and capital work in progress

Free Cash Flow (FCF) #

• Not directly calculable from the provided data, but is derived as OCF less net capital expenditures (which are included in ICF).

Working Capital Management Efficiency #

Inventory Turnover Ratio #

• Year ended March 31, 2024: 6.95%
• Year ended March 31, 2023: 7.47%
• Inventory turnover is slightly decreased, showing less inventory management efficiency.

Trade Receivables Turnover Ratio #

• Year ended March 31, 2024 shows an increase from year ended March 31, 2023. The increase in the ratio indicates some improvements in collection efficiency.

Trade Payables Turnover Ratio #

• Year ended March 31, 2024 shows an increase from year ended March 31, 2023. The change is a slight increase.

Dividend and Share Buyback Trends #

Dividend #

• Year ended March 31, 2024: proposed H 1.50 per share
• Year ended March 31, 2023: H 1 per share

Share Buybacks #

• No share buyback activity is mentioned in the provided financial data.

Debt Service Coverage #

• The debt service coverage ratio decreased by 23.52%.

Liquidity Position #

Current Ratio #

• Year ended March 31, 2024 shows a decrease from Year ended March 31, 2023, indicates lower current assets available to cover current liabilities.

Cash and Cash Equivalents #

• As at March 31, 2024: INR 97,151 lakhs.
• As at March 31, 2023: INR 1,37,076 lakhs.
• The Group’s liquidity decreased over the year, as reflected in the higher total debt and lower cash and cash equivalents.

Financial Analysis: Key Performance Indicators (KPIs) #

Profitability Ratios (3-Year Trends) #

Return on Equity (ROE) #

• FY24: 13.37%
• FY23: 16.12%
• FY22: Not Meaningful
• ROE has decreased in FY24 compared to FY23.

Return on Assets (ROA) #

Calculated as Net Profit After Tax / Average Total Assets

• FY24: (105996 / ((1199574 + 1010754)/2)) = 9.6%
• FY23: (110381/((1010754+918582)/2) = 11.4%
• FY22: (59578 / ((918582+854469)/2)) = 6.77%
• ROA has decreased in FY24 in comparison to FY23.

Profit Margins #

Operating Profit Margin #

• FY24: (167769 / 558786) * 100 = 29.97%
• FY23: (137659 / 470887) * 100 = 29.23%
• FY22: (106363 / 405107) * 100 = 26.25%
• The group’s operating profitability is improving yearly.

Net Profit Margin #

• FY24: (105996 / 558786) * 100 = 18.96%
• FY23: (110381 / 470887) * 100 = 23.44%
• FY22: (59578 / 405107) * 100 = 14.70%
• Net profit margin decreased significantly in 2024 compared to 2023, although it is higher than 2022.

Liquidity Metrics #

Current Ratio #

• FY24: 549445/ 459610= 1.20
• FY23: 527088/410729=1.28
• FY22: 562419 / 355326= 1.58
• Current ratio is declining over the past three financial years.

Quick Ratio #

Assuming all inventories are subtracted for quick assets:

• FY24: (549445- 76612) / 459610= 1.03
• FY23: (527088-71447) / 410729=1.11
• FY22: (562419- 48889)/ 355326= 1.44
• Quick ratio is declining over the past three financial years.

Cash Ratio #

• FY24: 97664/ 459610= 0.21
• FY23: 137031/ 410729= 0.33
• FY22: 171010 / 355326=0.48
• Cash ratio is declining over the years

Efficiency Ratios #

Asset Turnover #

• FY24: 558786 / ((1199574 + 1010754)/2) = 0.50
• FY23: 470887/ ((1010754+918582)/2)=0.49
• FY22: 405107/ ((918582+854469)/2)=0.46
• Asset turnover is relatively consistent, indicating a stable level of asset utilization to generate revenue.

Inventory Turnover #

Using cost of materials consumed as a proxy for Cost of Goods Sold:

• FY24: 111660 / ((76612 + 71447)/2) =1.50
• FY23: 92279/ ((71447+48889)/2)=1.53
• FY22: 92157/((48889+50286)/2))=1.86
• Inventory turnover is decreasing slightly, meaning the group is becoming a bit less efficient in selling its inventory.

Receivables Turnover #

• FY24: 540582 / ((55925 + 43896)/2) = 10.82
• FY23: 456776/((43896+ 33696)/2))=11.80
• FY22: 367224/ ((33696+31922)/2)) = 11.19
• Receivable turnover ratio is stable over the presented three financial years.

Leverage Metrics #

Debt/Equity Ratio #

• FY24: 129648 / 840080 = 0.15
• FY23: 68754 / 740720 = 0.09
• FY22: 92195/628875=0.15
• The Group has low financial leverage as indicated by low debt to equity ratio.

Interest Coverage Ratio #

• FY24: (167769 / 5761) = 29.12
• FY23: (137659 / 8249) = 16.69
• FY22: (106363 / 10491) = 10.14
• Interest coverage ratio has significantly improved, meaning the group’s ability to meet its interest obligations has increased significantly.

Working Capital Ratios #

Working Capital #

• FY24: 549445-459610 =89835

• FY23: 527088-410729=116359

• FY22: 562419-355326=207093

• Working Capital has been decreasing over the period of three years, implying enhanced operational efficiency.

Max Healthcare Institute Limited: Financial Analysis #

Revenue and Profitability Metrics #

• Consolidated Revenue Growth: FY24 revenue increased by 18% to ₹5,400 crore from FY23’s ₹4,560 crore.
• Consolidated Operating Profit Growth: FY24 operating profit grew by 22% to ₹1,670 crore from FY23’s ₹1,370 crore.
• Consolidated Profit After Tax: FY24 increased to 1050, and a decrease of approximately 10% to 1,100 for FY23.
• Healthcare Services Revenue (FY24): ₹5,170 crore.
• Pharmacy and Pharmaceutical Supplies Revenue(FY24): ₹130 crore.
• Standalone Revenue Growth: FY24 revenue increased by 28% to ₹2,610 crore from FY23’s ₹2,040 crore.
• Standalone Operating Profit Growth: FY24 operating profit grew by 43% to ₹1,030 crore from FY23’s ₹720 crore.
• Standalone Profit After Tax: FY24 profit after tax was ₹680 crore, while FY23 saw a profit after tax of ₹690 crore.
• Earning per Share Basic: The Consolidated and Standalone EPS indicates an increase compared to the previous year.

Geographic Distribution and Market Penetration #

• National Presence: Operations are primarily located in India, with 51 healthcare facilities and 55 offices.
• Revenue by geography: Revenue from India’s 5,30 crore.

Key Products/Services Performance #

• Healthcare Services: This segment contributed 98.21% of the total turnover.
• Operation and Management service fee: Account for an increase in the total income, with 8000 of FY24.
• Revenue Recognition: Healthcare services revenue is recognized over time based on the performance of related services.

Segment-wise CAPEX and ROIC #

• The amount of contracts to be executed is 71,000 for FY24, and 41,000 for FY23.
• Capitalized Expenses: During FY24, some employee benefit expenses, finance costs, and other expenses were capitalized.
• Interest cost on borrowing for Sector-56 has increase to 833, for ongoing project.

Operational Efficiency Metrics #

• Debt-Equity: The ratio for both consolidated and Standalone decreased for 2024, with 0.08 and 0.06 respectively.

Growth Initiatives and Challenges #

• Acquisitions: The acquisition of Alexis Multi-Speciality Hospital Private Limited and Starlit Medical Centre Private Limited has been completed.
• Expansion Projects: Ongoing capital work-in-progress projects, including new hospital developments and expansions, are present.
• Regulatory and litigations: It presents a challenge to growth as noted with existing challenges in restoration of land.

Risk Assessment: Medical and Healthcare Services #

Strategic Risks #

• Severity: High
• Likelihood: Medium
• Mitigation Strategies: Focus on expanding service offerings.
• Potential Financial Impact: Significant investments and acquisitions (e.g., acquisition of Alexis Multi-Speciality Hospital for ₹37,175 Lakhs, Starlit Medical Centre acquisition, Lucknow land acquisition for ₹16,826 lakhs).

Operational Risks #

• Severity: High
• Likelihood: Medium
• Trend: Stable, some projects are ongoing, others are being suspended.
• Mitigation Strategies: Maintenance of adequate committed credit lines. Prudent management of collections.
• Control Effectiveness: Moderate
• Potential Financial Impact: Capital work-in-progress projects are significant. Capital commitments for contracts remaining to be executed, net of advances, were ₹26,851 lakhs as of March 31, 2024.

Financial Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Improving. Debt: Equity ratio improved from 0.08 (March 31, 2023) to 0.06 (March 31, 2024).
• Mitigation Strategies: Maintenance of sufficient cash and committed credit facilities. Limits set to minimize the concentration of risk.
• Control Effectiveness: Good.
• Potential Financial Impact: Cash and cash equivalents were at 71,449 Lakh at march 31, 2024, with a large increase in bank deposits.
  • Foreign Currency Risk: A 1% increase/decrease in foreign exchange rates would impact profit before tax by a small amount.
  • Interest Rate Risk: A 0.50% increase/decrease in interest rates would affect profit before tax by a significant amount.

Compliance/Regulatory Risks #

• Severity: High
• Likelihood: Medium
• Trend: The company is litigating with the Goverment of Haryana’s HSVP.
• Mitigation Strategies: Ongoing legal recourses, professional indemnity insurance, and engagement with tax advisors.
• Control Effectiveness: Uncertain, given ongoing litigation.
• Potential Financial Impact: Contingent liabilities not provided for include claims against the Group not acknowledged as debts: civil cases (₹11,932 lakhs as of March 31, 2024), VAT cases, and income tax cases (₹5,902 lakhs as of March 31, 2024).

Strategic and Management Analysis #

Long-Term Strategic Goals and Progress #

The Group aims to be a prominent integrated healthcare service provider, expanding reach and enhancing services. Progress is evident in the increased number of healthcare facilities (51) and workforce (~19,500+), with a turnover of J 5,406 Crore. The Group successfully executed two acquisitions.

Competitive Advantages and Market Positioning #

The Group holds a leading position in providing comprehensive healthcare services, including diagnostics, ambulatory care, and various specialized medical procedures. It operates in India.

Innovation Initiatives and R&D Effectiveness #

Max Healthcare is committed to improving the patient’s experience using technology.

M&A Strategy and Execution #

The Group actively pursues acquisitions to strengthen its market position. During the reported period, it completed acquisitions of Alexis Multi-Speciality Hospital Private Limited and Starlit Medical Centre Private Limited. Voluntary liquidation of Saket City Hospitals Limited was carried out to integrate operations and improve efficiency.

Management’s Track Record in Execution #

Management demonstrates a track record of executing strategic acquisitions and business combinations, as seen with Alexis and Starlit, and the prior integration of operations of Saket City Hospitals. Management had successfully completed the voluntary liquidation of Saket City Hospital.

Capital Allocation Strategy #

Capital allocation prioritizes expansion, as seen in capital work-in-progress for new hospital projects and acquisitions. There is an allotment to improve floor space index. The Group invests in subsidiaries. Investments in subsidiaries were pledged against loan/working capital taken by subsidiary company from bank.

Organizational Changes and Their Impact #

The voluntary liquidation and integration of Saket City Hospitals Limited (SCHL) with Max Healthcare Institute Limited (MHIL) aimed to achieve operational efficiencies and synergies. Reorganization of CGU structure, consolidating Max Lab and SCHL operations with Max Super Speciality Hospital, Saket. The Group made two acquisitions.

ESG Analysis #

Environmental Metrics and Targets #

• Scope 1 emissions are not fully detailed, limiting a complete quantitative analysis.
• Water withdrawal and discharge volumes are not provided limiting assessment of water use efficiency.

Social Responsibility Programs #

• CSR spending for FY 2024 was INR 544 lakhs, exceeding the mandated 2% of average net profit, indicating a strong commitment to social responsibility.
• CSR activities focused on healthcare for the economically weaker sections, skill training, and environmental projects.

Governance Structure and Effectiveness #

• The Board includes a Nomination and Remuneration Committee, and a Stakeholders Relationship Committee. There is no indication that Board effectiveness evaluations directly focused on ESG criteria have been mentioned.

Regulatory Compliance and Future Preparations #

• The Group is subject to the Companies Act, 2013, including Section 135(5) regarding CSR spending, and appears to be compliant.
• The Group references the Business Responsibility and Sustainability Report (BRSR) requirements, indicating preparations for evolving ESG disclosure regulations.
• The reported voluntary liquidation of Saket City Hospitals Limited, with financials consolidated, shows adaption to changing business structures that may have compliance components.

Future Projections and Guidance: Medical and Healthcare Services (India) #

Management Guidance and Assumptions #

• Value-in-use calculations for goodwill impairment testing utilize a discount rate of 14.47% and a long-term growth rate of 5%.
• Cash flow projections are based on internal management budgets and estimates, spanning six years or the balance tenure of operation and management agreements.
• Terminal value is derived using the sixth year’s forecasted cash flows, projected to perpetuity with a constant long-term growth rate, considering macroeconomic data.
• Employee attrition assumptions, discount rates, salary growth rate, and mortality rate are used in gratuity calculations.

Market Growth Forecasts #

• The company factors macroeconomic data into its long-term growth rate calculations.

Planned Strategic Initiatives #

• Expansion of service offerings under medical service agreements to enhance revenue and profitability.
• Consolidation of operations with subsidiaries (e.g., Saket City Hospitals Limited) to achieve operational efficiencies.
• Seeking legal recourse to restore the cancelled ~6.11 acres of land in Gurugram.
• Seeking to deepen their footprint in western India.

Capital Expenditure Plans #

• Ongoing hospital projects in Gurugram (Sector 53 & 56) and Lucknow.
• Utilization of Transferable Development Rights (TDR) for a hospital project in Gurugram.
• Long-term service agreement with Muthoot Hospitals Private Limited for a 300+ bed hospital in Dwarka, New Delhi.
• Capital commitments for the purchase of property, plant, and equipment: ₹ 26,424 lakhs (net of advances).
• Acquisition of a land parcel in Lucknow, Uttar Pradesh (₹ 16,826 lakhs).
• Continued financial and operational support is committed to several subsidiaries.
• A hospital is in its planning phases in Nigeria, Africa.

Efficiency Improvement Targets #

• Consolidating operations with subsidiaries to improve efficiency and operational synergies.

Potential Challenges and Opportunities #

Challenges #

• Ongoing litigation regarding land allotment cancellation in Gurugram, which could affect project timelines and costs.
• Claims and litigation related to consumer disputes, VAT, and income tax could impact operations and financial position.
• Numerous interpretative issues exist about the Supreme Court’s PF Judgement on the inclusion of allowances and its date of effectivity.

Opportunities #

• Expansion of healthcare services, leveraging existing and new medical service agreements, presents opportunities for revenue and profitability growth.
• The reorganization, acquisitions of subsidiaries, and potential synergies could lead to cost efficiencies and increased operational performance.
• Service exports under “Service exports from India Scheme” and “Export promotion capital goods scheme.”

Scenario Analysis and Sensitivity to Key Assumptions #

• Sensitivity analysis on defined benefit obligation (gratuity) shows the impact of changes in discount rates, salary growth rates, and attrition rates.
  • A 1% discount increase leads to a ₹ 476L decrease. A 1% decrease leads to a ₹ 533L increase.
  • A 1% salary growth increase leads to a ₹ 527L increase. A 1% decrease leads to a ₹ 480L decrease.
  • A 50% increase in attrition rate leads to a ₹ 367L decrease. A 50% decrease would lead to a ₹ 655L increase.
• Management assumes there is no impairment of goodwill because there would be no reasonably possible further change on which the recoverable amount is based that would cause the carrying amount of the goodwill related to each of the significant units to exceed its recoverable amount.

Audit and Regulatory Analysis #

Auditor’s Opinion and Qualifications #

• The auditor’s opinion is unmodified, indicating a true and fair view of the consolidated financial statements in conformity with Ind AS and other generally accepted accounting principles in India.
• No key audit matters were noted in the Standalone audit.
• One key audit matter was noted in the consolidate audit, being Business Combination, that was addressed.
• The audit report includes an “Other Matters” paragraph referencing reliance on other auditors for 4 subsidiaries and 1 step down subsidiary, and the conversion of two foreign subsidiaries’ financial statements from their local GAAP to Ind AS.
• Audit trail requirement was not complied with.

Key Accounting Policies and Changes #

• The Group uses historical cost convention, with some financial instruments and defined benefit plans measured at fair value or amortized cost.
• Uniform accounting policies were applied consistently, except where new or revised standards required changes.
• Revenue recognition follows Ind AS 115, recognizing revenue when control of goods or services is transferred.
• Property, plant, and equipment are depreciated using the straight-line method, with useful lives as per Schedule II of the Companies Act, 2013, or based on technical evaluation.
• Intangible assets with indefinite lives (Goodwill and Trademarks) are tested for impairment annually.
• Business combinations are generally under acquisition method and pooling of interest method for common control.
• Leases are accounted for under Ind AS 116, recognizing right-of-use assets and lease liabilities.
• There is only one reportable segment.

Internal Control Effectiveness #

• The auditor’s report expresses an unmodified opinion on the adequacy and operating effectiveness of the Group’s internal financial controls over financial reporting (IFCoFR), except for not complying with audit trail requirement.

Regulatory Compliance Status #

• The consolidated financial statements comply with Ind AS.
• Proper books of account have been maintained as required by law, except for not complying with audit trail requirement.
• The balance sheet, statement of profit and loss, statement of cash flows, and statement of changes in equity are in agreement with the books of account.
• Directors are not disqualified from being appointed.
• Remuneration to directors is in accordance with Section 197 of the Act.
• The Company has disclosed the impact of pending litigations on its financial position.
• No material foreseeable losses on long-term contracts, including derivatives.
• No amounts were required to be transferred to the Investor Education and Protection Fund.
• The dividend is in accordance with section 123 of the Act.

Legal Proceedings and Their Potential Impact #

• Contingent liabilities exist for civil cases, VAT cases, and income tax disputes.
• The Group, with its legal advisors, expects favorable outcomes and does not anticipate a material adverse effect on financial position or operations.
• A contingent liability of a subsidiary company related to an order dating 25 September, 2017.
• The Group has taken Professional Indemnity Insurance for claims pending against the Group.
• HSVP land allotment cancellation is under litigation.
• Crosslay Remedies Limited received a demand from GDA for infrastructure surcharge. The management believes the demand is not tenable.

Related Party Transactions #

• Transactions and balances with related parties exist, including loans, security deposits, healthcare services, and management fees.
• Transactions with related parties are stated to be on arm’s length terms and approved by the Audit Committee.
• Corporate guarantees have been provided on behalf of related parties.
• Details of loans, investments, and guarantees to related parties and other entities are disclosed, complying with Section 186(4) of the Companies Act, 2013.

Subsequent Events #

• State authority confirmed allotment of land, upon payment of additional amount on April 5, 2024.
• A final dividend of H 1.50 per share was recommended by the Board of Directors, subject to shareholder approval.
• The board appointed an additional director, subject to shareholder approval.

Analysis of Accounting Quality #

• The use of fair value measurements for certain assets and liabilities (business combinations, financial instruments) introduces a degree of judgment and estimation.
• The reliance on management’s assessment and legal advice for contingent liabilities indicates a potential area of subjectivity.
• The reliance on management’s assessment for unbilled revenue.

Regulatory Risk Assessment #

• Ongoing disputes with tax authorities present a regulatory risk.
• The Micro, Small and Medium Enterprise Development Act,2006, compliance.
• Litigation related to land allotment cancellation represents a regulatory and operational risk.
• The Company is subject to regulations governing the healthcare industry, adding another layer of regulatory risk.