Narayana Hrudayalaya Ltd:Annual Report 2023-24 Analysis

Narayana Hrudayalaya Ltd. - A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

Narayana Hrudayalaya Ltd., now known as Narayana Healthcare, was established in 2000 by Dr. Devi Prasad Shetty, a renowned cardiac surgeon.

Headquarters Location and Global Presence:

The company is headquartered in Bengaluru, Karnataka, India. While primarily focused on the Indian market, Narayana Healthcare has a small international presence, with hospitals in the Cayman Islands.

Company Vision and Mission:

• Vision: To provide quality healthcare that is accessible and affordable to all.
• Mission: To deliver high-quality, affordable healthcare services through a network of hospitals and clinics.

Key Milestones in Their Growth Journey:

• 2000: Narayana Hrudayalaya established in Bengaluru.
• Expansion: Rapid expansion across India with multiple hospitals and clinics.
• International Presence: Establishment of a hospital in the Cayman Islands.
• Specialized Services: Development of specialized cardiac care, cancer care, and other tertiary care services.
• Affordable Healthcare Model: Pioneering the concept of affordable healthcare, making quality treatment accessible to a broader population.

Stock Exchange Listing Details and Market Capitalization:

Narayana Hrudayalaya Ltd. is listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). The ticker symbol is “NARAYANA.” Market capitalization fluctuates based on stock performance; refer to current financial data sources for the most up-to-date information.

Recent Financial Performance Highlights:

Refer to the latest annual reports, quarterly results, and financial news articles for the most accurate and up-to-date financial performance highlights, including revenue, profit margins, and growth rates.

Management Team and Leadership Structure:

• Dr. Devi Prasad Shetty: Founder and Chairman
• The leadership team includes experienced professionals in healthcare management, finance, and operations. The company has a board of directors with independent directors and executive management.

Notable Awards or Recognitions:

Narayana Healthcare has received numerous awards and recognitions for its contributions to healthcare, including awards for quality, patient safety, and corporate social responsibility.

Their Products: #

Complete Product Portfolio with Categories:

Narayana Healthcare provides a comprehensive range of medical services including:

• Cardiac Sciences: Cardiology, Cardiac Surgery, Pediatric Cardiology, Pediatric Cardiac Surgery
• Oncology: Medical Oncology, Surgical Oncology, Radiation Oncology, Hemato-Oncology
• Neurosciences: Neurology, Neurosurgery
• Orthopedics: Joint Replacement, Spine Surgery, Sports Medicine
• Gastroenterology: Medical Gastroenterology, Surgical Gastroenterology
• Nephrology & Urology: Dialysis, Kidney Transplant, Urology
• Organ Transplantation: Heart, Lung, Liver, Kidney
• General Medicine: Internal Medicine, Family Medicine
• Emergency Services: 24/7 Emergency Care
• Diagnostics: Pathology, Radiology, Imaging

Flagship or Signature Product Lines:

• Cardiac Care: Narayana Healthcare is renowned for its cardiac care, performing a high volume of cardiac surgeries.
• Affordable Healthcare Model: Their flagship product is a comprehensive healthcare system designed to be accessible to all socioeconomic levels.

Key Technological Innovations or Patents:

Narayana Healthcare continually adopts and implements advanced medical technologies, including:

• Minimally Invasive Surgery: Utilizing minimally invasive techniques to reduce recovery times.
• Robotic Surgery: Implementing robotic-assisted surgery for enhanced precision.
• Telemedicine: Employing telemedicine to reach patients in remote areas.
• Advanced Imaging: Using state-of-the-art imaging technologies for accurate diagnosis.

Manufacturing Facilities and Production Capacity:

Narayana Healthcare primarily focuses on service delivery rather than manufacturing.

Quality Certifications and Standards:

Narayana Healthcare hospitals adhere to international quality standards and accreditations, such as:

• NABH Accreditation
• JCI Accreditation (for select facilities)

Any Unique Selling Propositions or Technological Advantages:

• Affordable Healthcare: Delivering high-quality healthcare at significantly lower costs compared to other providers.
• High Volume, High Expertise: Performing a large number of complex procedures, leading to specialized expertise.
• Pan-India Presence: Wide network of hospitals and clinics across India.

Recent Product Launches or R&D Initiatives:

Recent initiatives may include the expansion of specialized clinics, the introduction of new medical technologies, or participation in clinical trials.

Primary Customers: #

Target Industries and Sectors:

Narayana Healthcare serves a wide range of patients across all sectors of society.

Geographic Markets (Domestic vs. International):

The primary geographic market is domestic (India). They have a smaller presence in the international market (Cayman Islands).

Major Client Segments (agricultural, industrial, residential, etc.):

Narayana Healthcare caters to patients from all demographic and socioeconomic backgrounds.

Distribution Network and Sales Channels:

The distribution network includes:

• Network of hospitals and clinics
• Online appointment booking
• Tie-ups with insurance companies
• Corporate health programs

Major Competitors: #

Direct Competitors in India and Globally:

• Apollo Hospitals: Major pan-Indian healthcare provider.
• Fortis Healthcare: Another leading hospital chain in India.
• Max Healthcare: Prominent healthcare provider in North India.
• Manipal Hospitals: Significant player in South India.
• Global Hospitals: Multi-specialty healthcare chain.

Comparative Market Share Analysis:

Market share data is dynamic and varies. Researching current market reports from industry analysis firms is essential.

How they differentiate from competitors:

• Affordability: Lower cost structure compared to competitors.
• Cardiac Care Expertise: Reputation as a leading cardiac care provider.
• Pan-India Network: Wide geographic reach across India.

Industry Challenges and Opportunities:

• Challenges: Rising healthcare costs, shortage of skilled healthcare professionals, regulatory compliance.
• Opportunities: Growing demand for quality healthcare, increasing medical tourism, adoption of telemedicine.

Market Positioning Strategy:

Narayana Healthcare positions itself as a provider of quality healthcare accessible to all socioeconomic groups through its affordable healthcare model.

Future Outlook: #

Expansion Plans or Growth Strategy:

Future plans may include:

• Expanding the network of hospitals and clinics across India.
• Strengthening its presence in Tier II and Tier III cities.
• Investing in new medical technologies.

Upcoming Products or Innovations:

Focus on expanding specialties and integrating technology into healthcare delivery.

Sustainability Initiatives or ESG Commitments:

May include initiatives for environmental conservation, community health programs, and ethical business practices.

Industry Trends Affecting Their Business:

• Telemedicine Growth: Increasing adoption of telemedicine for remote consultations.
• Health Insurance Penetration: Growing awareness of health insurance.
• Technological Advancements: Integration of AI, robotics, and other technologies in healthcare.

Long-Term Vision and Strategic Goals:

To become a leading healthcare provider globally, known for affordability, quality, and innovation.

Comprehensive Performance Overview #

3-Year Trend Analysis of Key Financial Metrics #

• Consolidated Revenue: Grew consistently, with a 10.9% YoY increase from FY23 to FY24 (H45,902 million to H50,934 million), and a further increase from FY22.
• EBITDA: Demonstrated consistent YoY growth, with EBITDA margin improving from 21.35% (FY23) to 24.5% (FY24).
• Profit After Tax (PAT): Increased from FY23 to FY24. PAT margin also increased from 13.41% (FY23) to 15.7% (FY24).
• Debt to Equity Ratio: Increased from 0.41 (FY23) to 0.56 (FY24), indicating higher leveraging.
• Return on Equity (ROE) Decreased from 33.50% at FY23 to 30% at FY24.
• Debtors Turnover: Increased from 10.42 (FY23) to 11.76 (FY24).
• Inventory Turnover: Decreased from 15.29 (FY23) to 11.83 (FY24)
• Interest Coverage Ratio:Decreased from 11.82 (FY23) to 10.17 (FY24)
• Standalone Revenue: Increased from H30,660.28 million (FY23) to H33,891.07 million (FY24).

Business Segment Performance #

• Medical and Healthcare Services: This segment is the primary revenue driver, contributing 92.02% of the total turnover in FY24.
• NH India: Revenue grew by 11% YoY, driven by increased patient footfall, specialty mix, and payor mix.
• HCCI (Cayman Islands): Revenue increased by 15.8% YoY to USD 126.5 million, attributed to increased patient footfall.
• Cost of Material Consumed: Improved by 60 basis points to 23.2% for NH India in FY24, and from 15.6% to 13.6% for HCCI, due to operational efficiencies.
• Other Expenses (Overheads): Saw variations across different categories, with operating rent/revenue share, repair, maintenance, and business promotion expenses increasing in line with revenue growth.

Major Strategic Initiatives and Their Progress #

• Digital Transformation: Ongoing investment in digital platforms (ATHMA, Medha AI) to improve operational efficiency, patient care, and data analytics. The implementation of self-help kiosks and queue management systems.
• Capacity Expansion: Investments of H20,000 million over the last three years, including H9,000 million in FY24, for capacity expansion, facility upgrades, and digital transformation in India and Cayman. Land parcels acquired in Bangalore & Kolkata for greenfield expansion.
• Clinical Excellence Initiatives: Expansion in specialized areas such as Bone & Joint, Neurosciences, Renal Sciences, and Oncology, including the deployment of robotic systems.
• New Business Ventures: NH Integrated Care (NHIC) has performed to expectations, crossing INR 219 million in revenue with 7 clinics.
• Health insurance: Securing of health insurance license from IRDAI in January 2024 through NHIL.

Risk Landscape Changes #

• Cyber Risks: Increased focus on cybersecurity due to the vulnerable nature of patient data, with continuous investments in people, processes, and technology.
• Regulatory Compliance: Preparation for the implementation of the Digital Personal Data Protection Act, with efforts to ensure compliance.
• Shortage of Nurses: Is described as a major challenge.
• Competition: Increased competition in the healthcare services market.

ESG Initiatives and Metrics #

Environmental #

• Reduction of carbon footprint by 14,963 tons/year through renewable energy use (26% of total energy from renewable sources).
• Reduction in energy consumption by approximately 14%.
• Water conservation measures, including STP and ETP.
• Paper usage reduction initiatives (saving 38 million sheets annually).
• Commitment to achieve 35% renewable energy mix by 2030 and carbon neutrality by 2040.
• Recycling wastewater initiatives.

Social #

• Initiatives focused on employee well-being, training, and development.
• Community engagement through CSR activities.
• UDAAN Scholarship program to support students.
• Feeding programs in Government schools.
• Clinical research focused on addressing Sustainable Development Goals (SDGs).

Governance #

• JCI Enterprise Accreditation achieved, making Narayana Health the first in India and sixth globally.
• Implementation of Narayana Academy for Safety, Quality, and Risk Programme (NASQAR) to standardize care.
• Digitization of processes.
• Establishment of a Clinical Governance Framework.
• Women consitute 60% of the total work force.

Management Outlook #

• Continued focus on digital transformation for operational efficiency, improved patient care, and data analytics.
• Expansion of capacity and capabilities in both India and the Cayman Islands.
• Focus on clinical excellence and specialization in key areas.
• Commitment to ESG initiatives and sustainable healthcare practices.
• Further development of NH Integrated Care and the new health insurance business.
• Address Acute shortage of nurses.

Detailed Analysis #

Financial Analysis of Narayana Hrudayalaya Limited #

3-Year Comparative Analysis (Standalone) #

(₹ in million)

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

(₹ in million)

• Non-Current Assets: Increased by 21.36% (₹4,777.30 million) from FY23 to FY24, mainly due to increase in Property, plant and equipment, Capital work-in-progress, Right of use assets, Investments and Other non-current assets.
• Current Assets: Increased by 44.66% (₹2,403.08 million) from FY23 to FY24, primarily due to significant increase in inventories, investments, and cash and bank balances.
• Non-Current Liabilities: Increased by 45.48% (₹3,082.83 million) from FY23 to FY24, largely due to increases in borrowings. * Current Liabilities: Increased by 6.09% (₹382.84 million) from FY23 to FY24
• Other Equity: Increased by 29.38% (₹3,714.71 million) from FY23 to FY24, driven primarily increase in retained earnings.

Working Capital Trends (Standalone) #

(₹ in million)

• Working capital has improved, turning from a defecit to a surplus primarily because of increase in current assets

Debt Structure and Maturity Profile (Standalone) #

(₹ in million)

• The Company has significantly increased its non-current borrowings, with a notable portion from unsecured Non-Convertible Debentures (NCDs).
• The provided data does not offer a detailed maturity schedule beyond the current maturities of long-term debt.

Off-Balance Sheet Items (Standalone) #

• Contingent Liabilities:
  • Customs Duty: ₹1.74 million (same as previous year)
  • Income Tax: ₹30.19 million (same as previous year)
  • Goods and Service Tax: ₹22.71 million (increased from previous year)
• Guarantees: The Company has issued corporate guarantees to its subsidiaries, with a remaining amount of H810.00 Million.

Business Segments: Narayana Hrudayalaya Limited Analysis #

Segment Performance Analysis #

Revenue and Profitability Metrics with Growth Rates #

• Consolidated Revenue: Grew by 10.9% year-on-year, reaching INR 50,182 million.
• NH India Revenue: Grew by 11% to INR 41,686 million, driven by increased patient footfall, improved specialty mix, and better payor mix.
• HCCI Revenue: Increased by 15.8% to USD 126.5 million because of greater patient footfall.
• Consolidated EBITDA: Grew by 19% reaching INR 12,275 million, with a margin of 24.5%.
• NH India EBITDA: Grew by 23% year-on-year, achieving INR 8,214 million (19.7% of revenue).
• HCCI EBITDA: Grew from USD 45 million (40.8% margin) to USD 58 million (45.8% margin).
• Consolidated PAT: Margin stood at 15.7%, with a reported PAT of INR 7,896 million.
• ROE: Greater than 30% at Group level.

Market Share and Competitive Position #

• Cardiac Care: Narayana Health performs approximately 15% of all heart surgeries in India. It houses India’s largest Pediatric Cardiac Program.
• Oncology: The Haemato-Oncology program is among the largest in India, with over 2,700 Bone Marrow Transplants (BMT) performed to date.
• Renal Sciences: Leading position with over 7,000 renal transplants performed to date, including 600+ transplants performed in FY24.
• Operating Segments: Company operates under one operating segment ‘Medical and Healthcare Related Services.’

Key Products/Services Performance #

• Cardiac Sciences: Over 500,000 consultations, 76,000+ IP admissions, 38,000+ cardiac diagnostic procedures, 23,000+ cardiac interventions, and 21,000+ cardiac surgeries.
• Oncology: Over 83,000 chemotherapies administered, over 7,000 surgeries conducted, and over 2,700 Bone Marrow Transplants performed to date.
• Robotics Program: 85% YoY growth, crossing 1,000 procedures in FY24, totaling over 3,000 to date.
• Image Guided Therapy: Over 5,000 procedures in FY24, with a cumulative total exceeding 25,000.
• Bone & Joint and Neurosciences: Over 160,000 OP consultations and 12,000+ IP volumes in Bone & Joint; over 200,000 OP consultations, 18,000+ IP admissions, and 5,000+ neurosurgeries in Neurosciences.
• Renal Sciences and Gastro Sciences: Over 7000 renal Transplants. Over 300,00 maintenance haemodialysis performed.

Geographic Distribution and Market Penetration #

• India: Operations across multiple states with facilities in Bengaluru, Mysore, Delhi, Gurugram, Jaipur, Katra, Howrah, Raipur, Guwahati, Jamshedpur, Mumbai, and Barasat.
• Cayman Islands: Significant presence with Health City Cayman Islands, contributing significantly to revenue.
• New: Facilities planned at Kolkata, Shimoga, & Ahmedabad.

Segment-wise CAPEX #

• CAPEX: Approximately INR 9,000 million invested in FY24, part of a larger INR 20,000 million investment over the last three years.

Operational Efficiency Metrics #

• Cost of Material Consumed (NH India): Improved by over 60 basis points to 23.2% in FY24.
• Cost of Material Consumed (HCCI): Improved from 15.6% to 13.6%.
• Manpower Expenses (NH India): Increased by 60 basis points to 40.4% of income, due to the addition of doctors and annual inflation.
• Group Cash and liquid investments: Over INR 12.58 billion against gross borrowings of INR 14.41 billion, resulting in a net debt position of INR 1.84 billion
• Net debt to equity ratio: Stands at 0.06.

Growth Initiatives and Challenges #

Growth Initiatives #

• Capacity expansion through greenfield projects in Bangalore and Kolkata.
• New greenfield hospital in Camana Bay, Cayman Islands, with the radiation oncology block commissioned in FY24.
• Expansion of the Bone & Joint and Neurosciences programs.
• Investment in advanced technologies such as robotics (Da Vinci and Cuvis systems) and AI in stroke imaging.
• Launch of ‘InsidER’ medical docuseries to raise healthcare awareness.
• New venture, Narayana Health Integrated Care (NHIC).
• Expansion of Radiation Oncology with new centers.

Challenges #

• Acute shortage of nurses in India due to a limited number of nursing colleges.
• Competition.
• Dependence on government and regulatory approvals.
• Cyber Security: Health care industry subject to cyber risks, including risks related to confidential patient information.

Risk Assessment #

Strategic Risks #

• Severity: High, due to potential impacts on long-term growth and market position.
• Likelihood: Medium, given competitive pressures and evolving healthcare models.
• Trend: Increasing, as evidenced by expansion into new ventures (NHIC) and geographic areas (Cayman Islands).
• Mitigation Strategies: Diversification through new ventures (Health Insurance, Integrated Care), geographic expansion, and investment in technology (ATHMA, Medha AI).
• Control Effectiveness: Moderate to high.
• Potential Financial Impact: Investments in new ventures (e.g., H 9,000 Mn in FY 2024) represent a significant financial commitment with uncertain returns.

Operational Risks #

• Severity: Medium to High, potential disruptions in service delivery, and quality.
• Likelihood: Medium, given the complexities of healthcare operations and reliance on skilled labor.
• Trend: Stable, with improvements due to process standardization.
• Mitigation Strategies: Implementation of standardized care protocols (NASQAR), JCI accreditation, internal quality and safety audits (NIQSA), investment in digital technologies (ATHMA, NAMAH, AADI), employee training, and business continuity plans.
• Control Effectiveness: High.
• Potential Financial Impact: Operational inefficiencies could lead to increased expenses (as seen in the rise in manpower expenses to 40.4% of income for NH India).

Financial Risks #

• Severity: Medium.
• Likelihood: Medium.
• Trend: Increasing borrowing levels suggest a growing risk profile, offset by strong revenue growth.
• Mitigation Strategies: Diversification of revenue streams, cost management, and maintaining liquidity. Monitoring of interest rate and currency fluctuations. The company has a Financial Risk Management Policy, and derivative instruments are used to control for the risk.
• Control Effectiveness: High, the Group’s overall balance sheet and liquidity profile at the group level remains strong.
• Potential Financial Impact:
  • Increased borrowings: Total Borrowings for NH India increased from INR 5,725 Mn (FY23) to INR 9,338 Mn (FY24). HCCI borrowings increased from USD 23.1 Mn to USD 61.2 Mn.
  • Increased finance costs: NH India’s finance costs increased from H 606 Mn (FY23) to H 691 Mn (FY24). HCCI’s finance costs increased from $1.11 Mn to $3.35 Mn.
  • Fluctuations in financial instrument valuations.
  • Foreign exchange rate fluctuations (USD, other currencies).
  • Debt-to-equity ratio increase: Consolidated level increased from 0.41 (FY23) to 0.56 (FY24).
  • Inventory value increase: For India from INR 333 Million to INR 745 Million.

Compliance/Regulatory Risks #

• Severity: High, due to stringent healthcare regulations.
• Likelihood: Low to Medium.
• Trend: Stable, with an emphasis on maintaining compliance.
• Mitigation Strategies: Robust internal control systems, compliance monitoring by an internal audit team and Audit, Risk, and Compliance Committee, adherence to national and international standards (JCI, NABH), and a Whistle Blower Policy.
• Control Effectiveness: High.
• Potential Financial Impact: Non-compliance could lead to penalties, legal disputes, and reputational damage, with financial implications.

Emerging Risks #

• Severity: Medium to High.
• Likelihood: Medium.
• Trend: Increasing, given the rapid advancements.
• Mitigation Strategies: Continuous investment in technology and cybersecurity, development of data protection policies, and employee training.
• Control Effectiveness: Moderate.
• Potential Financial Impact: Data breaches or system failures could disrupt operations, leading to financial losses and reputational damage. Costs associated with enhancing cybersecurity and data protection.

Strategic and Management Analysis #

Long-Term Strategic Goals and Progress #

• The Group aims for carbon neutrality by 2040 and 100% wastewater recycling by 2030. 26% of energy requirements were met by renewable sources, with a target of 35% mix by 2030.
• A long-term goal is to expand healthcare access, illustrated by a target of 5,000 child heart procedures annually and performing over 2,100 bone marrow transplants to date.
• The company aims at reaching an Annual run rate of 70 million surgeries.
• Geographical expansion included acquired land parcels in Bangalore & Kolkata, plus a new hospital commissioning in the Cayman Islands.
• The company’s goal is to reduce the carbon footprint and as part of that paper usage optimization initiatives have been implemented.

Competitive Advantages and Market Positioning #

• Narayana Health operates one of the world’s largest and most comprehensive cardiac programs, including India’s largest pediatric cardiac program.
• The Group holds a leading position in several quaternary care specialties, including bone marrow transplants (over 2,700 performed), and renal transplants (over 7,000 performed).
• The radiation oncology block of the proposed new greenfield hospital at Camana Bay got commissioned.
• HCCI Generated revenue of USD 124 Million.
• NH is the first healthcare provider in India and sixth worldwide to receive JCI Enterprise accreditation

Innovation Initiatives and R&D Effectiveness #

• Significant investment in digital transformation, including the ATHMA healthcare operating system, Medha AI platform, and patient/caregiver apps.
• Deployment of multiple Da Vinci Robotic Systems across centers, and Cuvis Ortho Robotic Systems for orthopedic procedures (over 1000 robotic procedures performed in FY24).
• Pioneering use of AI in stroke imaging (RAPID Systems) and cryoablation.
• Published 188 research papers in the past year, totaling close to 2,000 publications.
• The Company has been granted US Patent for ‘System and Method for facilitating Delivery of Patient Care’.

M&A Strategy and Execution #

• Acquisition of land parcels in Bangalore and Kolkata for greenfield expansion.
• Acquisition of operational assets, including acquisition of orthopaedic and trauma hospitals in India and ENT in Cayman Islands.

Management’s Track Record in Execution #

• Successfully navigated the COVID-19 pandemic and achieved a swift turnaround and healthy business growth.
• Achieved JCI Enterprise Accreditation, signifying high-quality care across the network.
• Demonstrated operational efficiency and a strong focus on continuous clinical excellence.

Capital Allocation Strategy #

• Invested INR 20,000 million over the last three years, including INR 9,000 million in FY 2024, in capacity expansion, new capabilities, facility upgrades, and digital transformation.
• Funded expansion through a mix of borrowing and internal accruals, maintaining a net debt to equity ratio of 0.06.

Organizational Changes and Their Impact #

• Automation of HR functions with Success Factors.
• Setting up leadership team for NHIC enabled getting health insurance license from IRDA.
• Being spread across geographical locations has helped to leverage the expertise across the Group entities.

Narayana Hrudayalaya Limited: ESG Analysis (FY2023-24) #

Environmental Metrics and Targets #

• Energy Consumption Reduction: Achieved a ~14.0% reduction in energy consumption and a reduction of CO2 footprint by ~14,963 tons/year.
• Renewable Energy: 26% of the Group’s energy requirements are met from captive Wind and Hydro energy. Increased Renewable energy mix by 85-90% in Karnataka Facilities. Targets 35% renewable energy (electricity) mix by 2030.
• Water Management: Over 95% of wastewater is recycled for non-contact purposes. Reduction of water intensity by 2% (Water withrawal (KLs)/Occupied Bed/Day), SMVDNSH Hospital has water savings of approximately 50,162 kiloliters.
• Waste Management: 100% waste segregation at source is implemented across all locations.
• Paper Reduction: Aiming for 50% less paper use across patients by 2025, and current performance stands at 6.28 (pages/patient).
• Carbon Neutrality: Target to become carbon neutral by 2040.

Social Responsibility Programs #

• Udaan Scholarship Program: Supported 435 students with NEET coaching and 280 MBBS students with scholarships.
• Feeding Program: Provided breakfast in government schools and supported orphanages, covering 2,028+ children, noting an improvement in school attendance and BMI.
• Safe Drinking Water and Sanitation: Improved facilities in 52+ government schools, benefiting over 19,000 students.
• Pediatric Cardiac Care: Annually, Narayana Health provides care for over 5,000 children, many from underprivileged backgrounds.
• Bone Marrow Transplants: Performed over 215 pediatric allogeneic hematopoietic stem cell transplants in the reporting year. Supported 203 patients in receiving BMT through funding from Coal India, the Prime Minister’s Fund, and various Chief Minister’s Funds.
• Community Engagement: Conducted 18 BMT awareness talks, reaching over 3,300 individuals.
• Employee Well-being Programs: Implemented programs like “Sampark,” “Sammaan,” “Swastha,” “Samruddhi,” and “Sportify” to address employee engagement, emotional, financial, and physical well-being.

Governance Structure and Effectiveness #

• Board Composition: The Board has a combination of Executive, Non-Executive, and Independent Directors, with Independent Directors constituting 50%.
• Committees: Four Board Committees: Audit, Risk and Compliance; Nomination and Remuneration; Corporate Social Responsibility; and Stakeholders’ Relationship.
• JCI Enterprise Accreditation: Narayana Health is the first healthcare provider in India and the sixth worldwide to receive this accreditation.
• Compliance: Adherence to all applicable SEBI regulations and the Companies Act, 2013.
• Whistle Blower Policy and Prevention of Sexual Harassment Policy: Actively in place and monitored.
• Risk Management: A Risk Management Policy is implemented, overseen by the Audit, Risk and Compliance Committee.

Sustainability Investments and ROI #

• Energy Conservation: Investment in energy-efficient equipment and renewable energy sources contributed to cost savings. Savings of H 497 lakhs were reported due to renewable energy consumption and H 327 lakhs from other energy-efficient projects.
• CSR Expenditure: H 33.80 million spent on CSR activities, focusing on healthcare and education.
• Technology Adoption: Continuous investment in technologies such as molecular diagnostics, next-generation sequencing (NGS), and AI-based diagnostics for cancer care.

ESG Ratings and Peer Comparison #

• Explicit ESG ratings from external agencies were not detailed in the document, but a strong emphasis on compliance with national and international standards (NABH, NABL, JCI, CAP, and ISO 13485) indicates robust operational standards.
• The company had previously secured recognitions and awards for excellence in various sustainability and healthcare operations.

Regulatory Compliance and Future Preparations #

• Full Compliance: The Company is compliant with all applicable environmental laws and regulations, including the Water Act, Air Act, and Environment Protection Act.
• Digital Personal Data Protection Act: Preparation is underway for compliance, with efforts to establish robust processes at all levels.
• SEBI Regulations: Complied with mandatory Corporate Governance requirements under the SEBI Listing Regulations.
• Audit Trail: The Company uses accounting software with audit trail feature, although issues with database-level enablement were noted in some software, without instances of tampering.

Forward Outlook: Future Projections and Guidance #

Medical and Healthcare Services Segment Analysis #

Management Guidance and Assumptions #

• Continued growth driven by increased patient footfall, improvements in specialty and payor mix, and operational efficiencies.
• Leveraging brand equity for talent acquisition, engagement, and retention.
• Continued investment in technology and digital transformation will enhance customer experience and operational efficiency.

Market Growth Forecasts #

• India’s healthcare industry is projected to grow at a CAGR of around 22% since 2016, expected to reach over $670 billion by 2026.
• India’s healthcare digitization is forecasted to accelerate tenfold, from $2.7 billion in 2022 to approximately $37 billion by 2030.

Planned Strategic Initiatives #

• Capacity expansion through greenfield projects in Bangalore & Kolkata and other pipeline projects, constructing upwards of 1 Mn sq. ft area over the next 3-4 years.
• Expansion of the Cayman Islands business, with a new hospital at Camana Bay expected to be commissioned by August 2024.
• Continued investment in Bone & Joint, Neurosciences, Renal Sciences, Oncology, and other quaternary care programs.
• Growth of Narayana Health Integrated Care (NHIC) clinics.
• Further development and deployment of the ATHMA hospital operating system and Medha AI.
• Expansion of Radiation Oncology centers with three new centers planned for FY25.
• Deployment of additional Da Vinci Robotic Systems for surgical procedures.

Capital Expenditure Plans #

• Investment of up to INR 20,000 Mn over the last three years, including INR 9,000 Mn in FY 2024, in India and Cayman Islands for capacity expansion, new capabilities, facility upgrades, and digital transformation.
• Acquisition of land parcels in Bangalore & Kolkata for greenfield expansion.

Efficiency Improvement Targets #

• Further improvement in consumption costs through operational efficiencies.
• Optimization of power costs through increased use of renewable energy and reduced power consumption.
• Paper usage optimization, targeting more than 70% of transactions to move to a digital platform.
• Automation of processes using digital tools, such as the In-Patient Companion chatbot, to improve staff efficiency.
• Simplifying feedback, aiming 60% improvement

Potential Challenges and Opportunities #

• Challenges: Acute shortage of nurses due to a shortage of nursing colleges. Cyber risks and risks associated with the Digital Personal Data Protection Act. Maintaining compliance with evolving regulations.
• Opportunities: Potential for India to achieve universal healthcare through affordable health insurance. “Brain Gain” from training healthcare professionals, creating job opportunities. Leveraging technology (AI, automation, digital platforms) to enhance patient care, optimize operations, and improve efficiency.

Scenario Analysis and Sensitivity to Key Assumptions #

• Scenario 1 (Optimistic): Successful execution of expansion plans, combined with strong market growth and achievement of efficiency targets, could lead to revenue and profitability growth exceeding current projections. Sensitivity: Highly sensitive to market demand and the successful commissioning of new facilities.
• Scenario 2 (Base Case): Continued growth in line with historical trends and industry forecasts, with successful implementation of strategic initiatives. Sensitivity: Moderately sensitive to changes in patient footfall, payor mix, and the cost of medical consumables.
• Scenario 3 (Pessimistic): Significant challenges in nurse recruitment, delays in expansion projects, or increased regulatory burdens could negatively impact growth and profitability. Sensitivity: Highly sensitive to the availability of trained medical professionals and the regulatory environment.