Changing Financial

Landscape – Healthcare

Perspective

Dr. Pervez AhmedChairman & Managing Director

Aapka Urgicare Pvt. Ltd.

“Before you start some work, always ask yourself 3 Questions –

• Why am I doing it?• What the result might be?• Will I be successful?

Only when you think deeply and find satisfactory answers, then go ahead”

……Chanakya, 350 BC

The Right Mix

Advantage India

Market size: USD65 billion

2011

Market size: USD280 billion

2020E

Strong demand• Healthcar

e establishments are expected to grow at 26 – 29% per annum

• Rising incomes, greater health awareness, lifestyle diseases, and increasing insurance penetration will contribute to growth

Attractive opportunities• Greater

investment in healthcare infrastructure is needed to increase the number of doctors and hospital beds to meet the demand gap

• Indian Government allocated Rs. 30,702 crores (US$ 5.9 billion) in 2012-13 on health, an increase of 14% from the previous fiscal year. Only 1.8% of GDP

Policy support• Government of

India’s aim is to develop India as a global healthcare hub

• No FDI cap on healthcare investments

• Tax incentives for healthcare investments in Tier II & Tier III cities

• There has been a wide array of policy support in the form of reduction in exercise duties and higher budget allocation for the healthcare sector

Quality and affordability• Strong

emphasis on Accredition of Healthcare facilities by agencies like NABH, NABL, ISO, etc.

• There is a large pool of well-trained medical professionals in the country

• Compared to peers in the West and Asia, India has a comparative advantage in cost

A Growing Industry

2005 2006 2007 2008 2009 2010 2011 2012

22.8

34.237.6

45

51.7

59.5

68.4

78.6

Size of the Indian Healthcare Industry

In US$ Billions

Supply & Demand

USA UK Brazil China India Global

7164

3771

721146 45

854

Per Capita Spending (USD)

Brazil China India UK USA Global Average

9.0%

5.1%4.1%

9.6%

17.9%

8.1%

Healthcare Expenditure as % of GDP

• The healthcare sector emerged as a sector of growth in a contracting PE industry in 2012, and this is expected to continue to grow this year.

• Investments in healthcare almost tripled over the past year, rising from $0.46 billion in 2011 to around $1.3 billion in 2012. Deal volume also rose 50%, with 44 deals done in the sector in 2012.

• The overall Indian healthcare market is around $65 billion and has grown 11% in the past five years. However, India remains a highly underpenetrated market in terms of healthcare spending per capita and offers huge growth potential. India's growing population, increased incidence of diseases, greater affordability, expanding insurance coverage and supportive government schemes are the key drivers of high double-digit growth expectations of the PE industry.

• About 140 healthcare companies have received investment over the past five years, with 15% to 20% raising more than one round of capital. What this points to is the increasing confidence in the value creation potential of the sector. Even in terms of exits, the picture is promising. Of the $5 billion invested in healthcare, $2.8 billion has been returned, with an average holding period of five years for the top 25 deals.

-- Bain & Company Indian Private Equity Report 2013

Bain & Company’s Finding

Top Five Deals in healthcare - 2013

Series1

Fortis Healthcare IFC 100.0

Dr. Lal Pathlabs TA Associates 44.0

Global Hospitals IFC, Sabre Capital 42.0

Vikram Hospital Multiples PE 31.9

Healthcare Global Temasek 26.0

Company Investors Amount($Mn)

Source: Venture Intelligence

Top Five Deals in healthcare, Segment wise - 2013

Series1

Hospitals 12 282.04

Medical Devices 3 54.00

Clinics 4 29.13

Pharmaceuticals 6 17.28

Others 7 83.61

Sector No of Deals Amount($Mn)

Source: Venture Intelligence

NH - Model

Cardiac surgeries in the United States can cost up to US$50,000. In India, they typically cost around US$5,000-US$7,000

Depending on the complexities of the procedure and the length of the patient’s stay at the hospital, the price tag increases

At Narayana Hrudayalaya, however, surgeries cost less than US$3,000, irrespective of the complexity of the procedure or the length of hospitalization.

About 45% of NH patients pay even less. Of these, about 30% are covered under a micro-insurance plan for health care called Yeshasvini that reimburses Narayana Hrudayalaya at about US$1,200 a surgery.

Those who are not covered under the insurance are given discounts depending on the their financial condition

NH - Today

•From 1 Hospital of 225 beds in 2001 to 25 Hospital with 6386 bed

•Presence in 14 Cities and 2 overseas locations

•Employee Strength of 125000 and 1300 Doctors

•Discounts of 15% of the revenue on an average / month

•Double digit revenue growth year on year

Source: NH Website

Smart Exits in 2013

Apax Partners from Apollo with return of around 3X

Actis and Sequia Capital from Paras Pharmaceuticals with return of 3.21X and 6.82X

respectively.

Sequoia Capital India from Dr. Lal’s Pathlabs with return of

6.52X.

According to Venture Intelligence Data

Proof is in the pudding and talk of the town

Carlyle Group bought Avenue Capital’s 27.9% stake in Medanta Medcity for Rs 960 Crore

-- The Financial Express. December 19, 2013

• Avenue Capital’s Investment returned 4.3x their initial investment on valuation alone not accounting for any dividends

• The investment generated IRR of 21%, compare that to the average IRR for the last 30 years for the US private equity firms on their investments of 11% and the 10 year Indian private equity investment IRR average of 7%

Thank You