6 ben mathias-healthcare-sector-investment-in-india_ncas_2011

Evolution of Indian healthcare services Growth Boom Phase  New corporate houses Increased enter the sector with large Corporatization investment plans Improving  Consolidation and Situation  Middle class emergence expansion of existing and need for high medical corporate chains Poor State of and service standards  Well developed health  Mushrooming nursing Healthcare  Private insurance insurance system homes companies begin  Improved healthcare in  Largely govt. driven  First signs of corporate operations rural India activity  Seen as a social/  Multifold growth in  Need for long distance charitable activity  Adoption of technology corporates, but a few number of large hospitals travel eliminated and emergence of sub-  Long distance travel specialities even for simple  Long distance travel only procedures  Long distance travel only for sub-specialities for secondary care 1947-1970s 1970s-1991 1991-Current Post 2010 Timeline Healthcare Services in India has entered a boom phase 2confidential

Growth is driven by several demand factorsRising HouseholdIncomeIncrease in proportion ofmiddle classIncreasing Percentage ofSenior Citizens 3confidential

Growth is driven by several demand factorsPrevalence oflifestyle diseases Growth of health insurance Treatment Cost USD India USA Bone Marrow Transplant $30,000 $400,000 Growth of medical Liver Transplant $40,000 $500,000 tourism Open Heart Surgery $4,400 $50,000 Knee Surgery $4,500 $16,000 4 Neuro Surgery $8,000 $290,000confidential

Along with a large demand-Supply mismatch Shortage of Medical Professionals in India Beds per ‘000 Doctors per ‘000 Nurses per ‘000 Global Global Average 1.5 Average 3.0 5confidential

Which will drive large investments in Healthcare  Current healthcare spend of ~$75 Billion to double to $150 Billion in next 5 years  650,000 beds to be added over next 10 years, 20% of which will be for complex procedures  More than $40 Billion in capital expenditure needed  New and innovative business models (vs. multi-specialty tertiary care hospitals) will get an increasing share of the investment 6confidential

Key factors that PE/VC Firms look for  Capital efficient and asset light business modelsBusinessModel  Examples: day care surgeries, hub and spoke modelsManagement  Demarcation of responsibilities between management and deliveryQuality  Capable second line of management under promotersVerticalization  Focus on building strong capabilities in verticals  Examples: Orthopedics, OncologyBrand  Balance of power shifting to hospital brands from doctor driven franchisesStrength  Brand consciousness increasing among middle classCorporate  Effective checks and balances to avoid revenue leakagesGovernance  Strong MIS systems in place to track financial performance 7confidential

More than $1.6 Billion invested since 2008 Some representative transactions Company Amount ($m) Investors Date Max India 115.0 Goldman Sachs Dec-09 Narayana Hrudayalaya 100.0 JP Morgan, PineBridge Feb-08 Metropolis Healthcare 85.0 Warburg Pincus Jun-10 SevenHills Hospital 72.0 JP Morgan May-08 DM Healthcare 50.0 India Value Fund Feb-08 Thyrocare Technologies 45.5 CX Partners Dec-10 Radiant Life Care 44.4 Halcyon Group Jan-11 Sahyadri Hospitals 35.0 ICICI Venture Jan-08 Dr. Lal PathLabs 32.0 TA Associates Aug-10 Max Healthcare Institute 31.3 IFC Jul-09 Max India 30.0 IFC May-09 Manipal Health Enterprises 28.8 Kotak PE Sep-10 Max India 27.0 Temasek Dec-10 Vikram Hospital & Heart Care 24.0 ICICI Venture Jan-08 Super Religare Laboratories 23.0 Avigo Capital Apr-11 Care Hospitals 22.5 Ashmore Jan-08 Zulekha Hospitals Group-SPV 21.0 IFC Jan-10 Diwan Chand Medical Services 20.0 Asian Healthcare Fund Mar-10 HealthCare Global 20.0 PremjiInvest, Others May-08 8confidential

And have given investors healthy returns  Ranbaxy promoters sell their 34.8% stake for 10,000 Crore to Daiichi  Sequoia sell 16% stake in Dr. Lal Pathlabs. Company valued at 1000 Crore  Warburg Pincus invests 392 Crore in Metropolis Healthcare. Used partially to buy ICICI Ventures stake which was acquired in 2006 for 35 Crore  Apollo and Fortis both valued at 15X-20X EBITDA compared to ~6X in developed economies 9confidential

Summary  Healthcare in India is an attractive investment destination given the macro drivers  PE & VC firms will continue to invest in this sector over the next few years  New, innovative business formats will get a higher share of investments and also higher returns  Upside will be shared by all shareholders: Financial Investors, Promoters, Doctors & Employees. 10confidential

6 ben mathias-healthcare-sector-investment-in-india_ncas_2011

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