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Confidential Information Memorandum Jan 18, 2014 Fortis Healthcare limited Prepared By: Mohit Oberoi Greensea Capital 40, Cannon Street London

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Confidential Information Memorandum

Jan 18, 2014

Fortis Healthcare limited

Prepared By:

Mohit Oberoi

Greensea Capital

40, Cannon Street


Company background:

Fortis Healthcare Ltd is one of the largest private healthcare companies in India. Fortis

Healthcare Limited is a leading, pan Asia-Pacific, integrated healthcare delivery provider. The

healthcare verticals of the company span diagnostics, primary care, day care specialty and

hospitals, with an asset base in 5 countries, many of which represent the fastest-growing

healthcare delivery markets in the world The Company is having a network of 62 healthcare

facilities with about 4000 beds capacity. These hospitals include multi-specialty hospitals as well

as super-specialty centers providing tertiary and quaternary healthcare to patients in areas such as

cardiac care, orthopedics, neurosciences, oncology, renal care, gastroenterology and mother and

child care. They are delivering quality healthcare services to patients in modern facilities using

advanced technology. Fortis Healthcare Ltd was incorporated on February 28, 1996. The

company commenced their commercial operation by setting up the Fortis Heart Institute and

Multi-Specialty Hospital at Mohali in the year 2001. The company has alliance with international

partners such as Aetna, Bupa, Cigna, GMC Services, HTH Worldwide, Vanbreda and World

Access. These alliance helps the company provide quality, cost effective healthcare, medical

expertise, and related health services.

The team of physicians at Fortis Healthcare has accomplished a landmark of 18,000 cardiac

procedures. The company has also installed IT enabled HIS and PACS Systems that links every

facilities available at any part of India leading to speedier diagnosis. The company has

maintained a standard ratio of nurse-patient as 1:1 in ICUs. The company has subsidiaries

namely Escorts hear Institute and Research Centre, International Hospital, Fortis Hospotel and

Hiranandani Healthcare. The company has acquired Malar Hospitals, Chennai which has 180

beds, is multi-specialty hospital focusing on area such as Gastroenterology, neurology,

gynecology, pediatrics, diabetology, orthopedics and nephrology. Fortis has also acquired Fortis

Clinique Darne in Mauritius and Apollo RM Hospital in Bangalore.

The Company has received accreditations and certifications for certain of its hospitals from the

Joint Commission International (“JCI”) based in the United States of America, National

Accreditation Board for Hospitals and Healthcare Providers (“NABH”) in India, National

Accreditation Board for Testing and Calibration Laboratories (“NABL”) in India and the

International Organization for Standardization (“ISO”) Standards 9001 and 14001

Management Team:

The company is led by an experienced and able management a brief profile of which is as under

1. Malvinder Mohan Singh, Executive Chairman: Malvinder incubated and established

Fortis Healthcare Limited, in the late 1990's. Since then, he has been instrumental in

transforming it into a leading healthcare delivery company in India and more recently in

Asia, as the largest emerging healthcare organization. Previously, Malvinder was

Chairman, MD and CEO of Ranbaxy Laboratories. He led the expansion of Ranbaxy

through a series of strategic partnerships and acquisitions resulting in Ranbaxy becoming

a top 10 generic pharmaceutical company, globally. He spearheaded the coming together

of Ranbaxy and Daiichi Sankyo, to create the world's fifteenth largest pharmaceutical

company. Malvinder is a member of the Board of Visitors at the Fuqua School of

Business (Duke University, USA) and the Board of the Indian Council for Research on

International Economic Relations (ICRIER). He was a member of the first batch of the

Young Global Leaders initiative of the World Economic Forum. A graduate in

Economics, he earned his MBA from the Fuqua School of Business, Duke University,


2. Shivinder Mohan Singh, Executive Vice Chairman: Shivinder has done his MBA with

specialization in health sector management from the Duke University Business School,

USA. His significant contribution to Indian Healthcare is widely acknowledged. His

strategy for Fortis, and its execution, has been recognized by the Harvard Business

School as a case study. For over a decade, Shivinder has led from the front in shaping the

private healthcare space in India. He is an alumnus of Doon School and an Honors

Graduate in Mathematics from St. Stephens College, Delhi. He has lead various

healthcare bodies and state level initiatives for the industry. He is also the Chairman of

the Membership Committee of FICCI (Federation of Indian Chambers of Commerce and

Industry). While healthcare is a passion for Shivinder, his dream is to contribute in

building a vibrant India. He is involved in a number of initiatives focused on social

change - a better future for the girl child, HIV education, quality healthcare in Rural India

and more. Shivinder is on the board of visitors of Fuqua School of Business, Duke

University, USA and the board of trustees of Aspen India. He is also on the national

board of advisors for AIESEC, a global, non-political and independent, not-for-profit

organization run by students and graduates from institutions of higher education

3. Vishal Bali, Group Chief Executive Officer: Vishal has dedicated more than 2 decades in

building global healthcare delivery organizations and his previous assignments include

spearheading the growth of Wockhardt Hospitals as one of the largest specialty hospital

chains in India as its CEO & MD. His expertise in successfully integrating healthcare

strategy, operations and management through Information technology has set industry

benchmarks. He completed his Bachelors in Science and Masters in Business

Administration from Bombay University and completed an advance program in hospital

management from Boston. He sits on the board of leading healthcare organizations and is

an invited member of the Strategic Initiatives group of Joint Commission International,

US and on the Global Agenda Healthcare Council of the World Economic Forum. His

keen interest in education and globalization of healthcare takes him to leading Healthcare

Education Institutes and Business Schools globally, which includes a case study at the

Harvard Business School. He is an active member of various Industry bodies and globally

recognized industry public speaker

4. Aditya Vij, Chief Executive Officer, India: Aditya is a Chartered Accountant from

Institute of Chartered Accountants of India and an MBA from International Institute for

Management Development (IMD), Lausanne, Switzerland. He has rich management

experience spanning three decades in the corporate world with a proven track record of

developing and turning around businesses in various leadership positions. Currently, he is

the CEO of Fortis Healthcare Ltd., prior to which he was with Punj Lloyd where he held

the position of Group President - Defense, a role in which he was responsible for setting

up the Defense and Nuclear Power verticals for the Group. Prior to joining Punj Lloyd,

Aditya had a distinguished innings of 18 years with General Motors, across five countries

in Europe and Asia. Some of the key positions he held with GM include General Director

- Opel Southeast Europe, Hungary, Chairman & Managing Director - GM India and

Regional Executive Director - Nordic, Benelux & Switzerland. Among his significant

achievements at GM were the turnaround of the India business into a profitable entity, the

successful launch of the Chevrolet brand in India, the expansion of production capacity at

the car manufacturing plants several-fold, the establishment of an engineering & R&D

Centre for Global competitiveness and the setting up of a shared services centre for GM

Units worldwide

Indian Healthcare Industry Overview: The Indian healthcare industry

consists of the following sub industries:

Hospital Industry

Pharmaceutical Industry


Medical Insurance

Medical Equipment Manufacturers.

Domestic market:

India is the second most populous country in the world with a population of 1.2 billion

(approximately 17.3% of the world’s population) in 2011.India’s population is projected to grow

by 1.0% to 1.5% annually going forward and is expected to surpass the People’s Republic of

China as the world’s most populous nation by 2030. In addition, due to the gradual increase in

life expectancy, Frost and Sullivan India Private Limited, the independent industry consultant

(“F&S” or the “Independent Industry Consultant”) has projected the proportion of aged

population (defined as population aged 65 years and above) in India to increase from 5.0% in

2010 (approximately 58.1 million people) to 5.2% (approximately 65.0 million people) in

2015.This large and growing population would provide a sizable base demand for healthcare

services in India. The ageing population would also increase the expected growth in demand for

healthcare services in India.

The rising national income, coupled with an expected increase in the proportion of healthcare

expenditure relative to other household expenditures from 7.5% in 2005 to 10.0% in 2015 is

expected to translate into higher healthcare spending in India. Further, the growing economy is

driving expansion in the upper middle class segment (defined as households with an annual

income of between US$2,500 and US$13,000) which is now estimated to account for nearly

60.0% of the Indian population in 2011, compared to approximately 50.0% of the Indian

population in 2007.

The growing urbanization has seen an increase in chronic lifestyle and non-communicable

diseases. This growth in the upper middle class segment as well as an increased awareness of

health-related issues is likely to lead to an increase in healthcare-related discretionary

expenditure. While there is a strong demand for healthcare services in India, there is a chronic

shortfall of healthcare infrastructure within India to meet such demand. India currently accounts

for nearly 6.0% of the world’s hospital beds but shares 20.0% of the world’s disease burden

Growth in Medical Tourism Industry in Asia Pacific including India:

It is expected that the medical tourism industry in the Asia Pacific region will grow rapidly, with

the number of medical tourists visiting the Asia Pacific region to increase by approximately

15.0% to 20.0% annually to 2015 due to various factors

• increasing adoption of sophisticated medical technology;

• rising affluence of the middle income class population seeking quality medical care;

• availability of skilled doctors and Para-medical staff;

• increasing willingness of patients to travel overseas to access specialized treatments which are

not available in hospitals in their home countries;

• expected shorter waiting times relative to western countries for elective surgeries; and

• availability of cost effective treatment.

It is expected that India’s medical tourism market will grow more than 30.0% annually to

become a US$2.1 billion industry by 2015.1 The Independent Industry Consultant has also

estimated the number of medical tourists visiting India to increase at a CAGR of 14.0% from

270,000 per annum in 2010 to 520,000 per annum in 2015.

Porter’s 5 forces analysis of Indian healthcare sector:

So we find the industry highly attractive on the porter model.

Fortis facilities in India:

Rivalry between Existing players(LOW): Hospitals

ususlly face less competetive rivalry as

there are few hospitals in a given area and also

patients are not very price sensitive.

Threat Of new Entrants(LOW): Being capital and technology

extensive not many players enter the market. Also heavely regulated by


Bargaining Power of Suppliers(LOW):

Suppliers include medical equipment and pharma

industry. Already very competetive so no real

threat. Also huge number of players sell mainly to

Hospital Industry

Threat of Substitutes(LOW): Only natural treatments are distant substitutes of

hospital industry

Bargaining Power of buyers(LOW): Patients

have little to no bargaining power

Amritsar 153 Operational Beds 166 Installed Bed Capacity

Ludhiana 75 Potential Bed Capacity Operational: 2QFY2015

Gurgaon 450 Installed Bed Capacity 1,000 Potential Bed Capacity

Faridabad 210 Operational Beds 210 Installed Bed Capacity

Jaipur 207 Operational Beds 320 Installed Bed Capacity

Mumbai, Kalyan 44 Operational Beds 52 Installed Bed Capacity

Mumbai, Mulund 236 Operational Beds 567 Installed Bed Capacity

Bangalore, Rajajinagar 31 Operational Beds 31 Installed Bed Capacity

Bangalore, Nagarbhavi 45 Operational Beds 45 Installed Bed Capacity

: Clinical Establishments

: Greenfield Clinical Establishments

: Operating Hospitals

New Delhi, Shalimar Bagh 130 Operational Beds 350 Installed Bed Capacity

Noida 191 Operational Beds 200 Installed Bed Capacity

Greater Noida 350 Potential Bed Capacity Operational: 4QFY2016

Kolkata 126 Operational Beds 373 Installed Bed Capacity

Hyderabad 400 Potential Bed Capacity Operational: 4QFY2016

Chennai, Malar 170 Operational Beds 178 Installed Bed Capacity

Chennai 45 Potential Bed Capacity Operational: 1QFY2015

Bangalore, BG Road 239 Operational Beds 255 Installed Bed Capacity

Source: Fortis Healthcare Limited.

Competition Analysis:

The Indian healthcare market is highly fragmented, with nearly 95.0% of private hospitals being

standalone small or medium-sized hospitals and nursing homes as of 2010. There are only a few

hospitals with a pan India position. Following are the major Hospital chains in India.

S. No Company name Number of



1 Fortis Healthcare 10307 Chennai, Bangalore, Hyderabad, Jaipur,

Pune,Noida, Kolkata, Delhi,Gurgaon,

Amritsar, Mumbai

2 Apollo Hospitals 8717 Chennai, Hyderabad, Madurai, Mysore,

Noida, Pune, Indore, Delhi, Ranchi,

Vishakhapatnam, Ludhiana

3 Max HealthCare 1100 Delhi and NCR

4 Aravind Eye Hospital 3649 Coimbatore, Pondicherry, Madurai,

Amethi, Kolkata, Theni

5 CARE Hospital 1912 Hyderabad, Raipur, Nagpur,Surat,

Pune, Vishakapatnam,Bhubnashewar

Emerging trends in Indian Healthcare industry: The Indian healthcare industry has witnessed

the following trends recently

Hub and spoke model: In this model a super specialty hospital is set up in a major city

and small day care and specialty centers are set up in neighboring towns. This helps in

cost control as the facilities in the tier 2 cities come cheaper. In case of need patients can

be transferred to the hub for better treatment

Operating Contracts: In this model big hospitals enter into a management contract with

small hospital normally run by a trust. The trust gets a fixed annual sum or a share in the

revenues of the hospital. This model helps the big hospitals to expand rapidly without

incurring major capital expenditure. As a result they are able to turn to an asset light


Structure of Indian Hospital Industry:

So Indian healthcare is highly fragmented and has smaller players who enjoy brand loyalties and

patient confidence. There is also the Government Sector most of which remain in deplorable

conditions. We also have big chains expanding and also managing a lot of locally entrenched

hospitals. This strategy is giving access to lot of patients and established facilities.

Growth Potential

There is immense growth potential in the industry. There is a latent demand increase due to the

growth in population also due to the increasing health awareness, rising disposable income and

lifestyle diseases would be the key drivers. In-spite of a recalibrated growth in India’s GDP of 5%,

the demand supply gap for healthcare delivery services in the country remains considerable. The

Indian healthcare market is expected to reach US$ 119.6 Bn by 2015, reflecting a CAGR of 15.0%.

The following growth strategies are being adopted by the players

Organic Growth: Here established companies are developing Greenfield projects to reach

newer markets. Also a growth driver is the operational efficiencies which can help to

Goverment Hospitals

• include both day care and IPD

Small Hospitals

and Clinics

• small day care clinics

• small hospitals with presence in few locations

Big private hospitals • national presence

streamline costs and increase revenues. A few of them are increase in occupancies and

revenue pr occupies bed (ARPOB).

Inorganic Growth: The industry players are also looking for inorganic growth through

upright takeover or entering into contracts for the management of hospitals

Diversification across value chain: Some companies are also getting into ancillary industries

like diagnostics and pharmacy retailing. This opens new revenue generation avenues for the


Challenges to the Hospital Industry:

1. Hospitals will always have a community / charitable angle to them, so will face constant

government regulation and scrutiny and thus super-profits will always raise eyebrows

2. Many hospitals and healthcare providers are struggling with outdated information technology in

India today

3. A major challenge for the nation and the healthcare industry would be not only to retain the

healthcare workforce but also to develop an environment, which would attract those abroad to return

(reverse brain drain)

4. The growing demand for quality healthcare and the absence of matching delivery mechanism pose

a great challenge

5. There is an acute shortage of faculty of medical teachers all over the country. One of the pivotal

factors to sustain the projected growth of the healthcare industry in India would be the availability of

a trained workforce, besides cheaper technology, better infrastructure etc

6. Another challenge will be to find good talent in India to provide the ancillary healthcare services;

especially the voice based ones which require not only good English communication skills but also

very good analytical skills

Company Analysis:

Fortis healthcare enjoys a special place in the Indian healthcare Industry. It’s a well integrated player

with pan India presence. The company enjoys tremendous brand loyalty amongst the upper and

middle class population. Fortis Healthcare Limited is a leading, pan Asia-Pacific, integrated

healthcare delivery provider.

The healthcare verticals of the company span diagnostics, primary care, day care specialty and

hospitals, with an asset base in 5 countries, many of which represent the fastest-growing healthcare

delivery markets in the world. Currently, the company operates its healthcare delivery services in

India, Singapore, Dubai, Mauritius and Sri Lanka with 65 healthcare facilities (including projects

under development), over 10,000 potential beds, over 240 diagnostic centers and a team strength of

more than 17,000 people. The company ventured into diagnostics by acquiring Super Ranbaxy Labs

(SRL) in 2012.

The company operates in 3 main business segments:

India Hospital Operations

India Diagnostic Operations(SRL ltd)

International Operations (Fortis healthcare International pte ltd)

India Hospital Operations:

The India hospital operations have continued on growth trajectory and witnessed 20% revenue

growth to ` 2,293 Crore compared to 1,909 Crore in the previous year. International patient

revenues for the year across the network stood at 167 Crore, a growth of 24% over the previous

period. The growth in the India hospital business was primarily due to improvement in operating

metrics across various hospitals in the network. For the year 2013, the Average Revenue Per

Occupied Bed (ARPOB) was ` 1.04 Crore compared to ` 0.93 Crore in FY12, a growth of

12%Average occupancy rates have increased to 74%. Fortis Healthcare’s network has a total of

62 healthcare facilities across India. Fortis has hospital clusters in the National Capital Region of

Delhi Mumbai and Bangalore, with eight, four and three hospitals respectively, taking the idea of

patient proximity and convenience forward. The group is steadily building capacity and domain

strength in the specialties of cardiac sciences, neurosciences, orthopedics, oncology, renal

sciences, gastroenterology, maternal and child health, organ transplant and minimally invasive

surgery, among others. This is based on a careful observation and analysis of current and future

healthcare opportunities, presented by the country’s changing demographics, lifestyle as well as

disease patterns. They have equipped our hospitals with the latest technologies and adopted

international protocols to ensure world-class patient care. An outstanding team, comprising some

of the finest doctors, nurses, paramedics, medical technology experts and administrators, work

relentlessly to deliver superior medical care at all our facilities.

SRL Ltd:

For the fiscal year 2013, SRL Ltd reported net revenues of ` 579 Crore (net of inter-company

sales) compared to ` 434 Crore reported during FY2012 (from May 2011 to March 2012). SRL

consolidated its position as one of the leading players in the Indian diagnostics space through

market penetration, especially in Tier II and Tier III towns, reaching out to the prescribers and by

expanding its customer base. As a part of the endeavor to enhance its presence and increase its

customer base, SRL started 17 new labs and appointed 200 new collection centers across the

country. SRL introduced more than 40 new tests during the year, of which nine have been

released for the first time in India and are exclusively offered by SRL. In addition to routine

tests, the focus was on high-end tests, including new tests and technologies, and certain specific

disease segments like lifestyle disorders, oncology and gynecology. With the aim of improving

customer experience at various touch points and enhancing the brand equity of the Company,

SRL has launched various initiatives focused on channel improvement and support to various

business associates of the Company

Fortis healthcare International pte ltd:

The revenue for the international business from continuing operations was at ` 1,371 Crore and

contributed 32% to the total revenues in Fy 13. The largest contributor to the international

operations is the Company’s primary care business in Hong Kong, Quality Healthcare, which

recorded revenues of ` 955 Crore, a growth of 26% against FY12 proforma revenues of ` 755

Crore. The revenue from international operations, including the revenues from the discontinued

operations, i.e., Dental Corporation Holding Limited, stood at ` 3,180 Crore. Quality Healthcare

has received the Reader’s Digest Trusted Brands Survey Platinum Award for the two

consecutive years for outstanding customer satisfaction and brand recognition. Fortis Hoan My

Medical Corporation (FHMC) reported revenues of ` 250 Crore, a growth of 58% over the

proforma revenues in FY2012. In order to strategically realign its resources with its priorities in

high-growth markets in Asia, especially India, the Company decided to divest select international

businesses. The Company’s business in Australia and New Zealand – Dental Corporation

Holdings Limited – were divested to Bupa for a consideration of Aus $ 276 Mn in December

2012. The transaction was concluded on May 31, 2013. The Company, in June 2013, also

announced the divestment of its entire stake in the hospital business vertical in Vietnam, i.e.,

Fortis Hoan My Medical Corporation, to the Chandler Corporation for US$ 80 Mn. The

Company continues to evaluate its portfolio of overseas businesses to ensure the right strategic

fit and adequate realization of synergistic benefits.

In India, Fortis has the advantage of scale and size and a leadership position. Therefore, an India

focus works to its advantage as it can ramp up its businesses faster at far lesser incremental

expense by leveraging its existing infrastructure in the country To strengthen the sustainability of

this model, the company has taken several strategic measures to reduce the debt burden and

strengthen our balance sheet. It has successfully listed the Religare Health Trust (RHT) on the

Singapore stock exchange, as its main sponsor, and raised gross proceeds of approximately `

2,200 Crore. With this vehicle, they have created a perpetual source of funding for the business

and made the move to an asset light model. In addition, they are seeking operate & manage

projects and leasing options for growth. This will put the company in a stronger position to

capitalize on future opportunities in an asset light manner. The diagnostics business in India,

SRL, witnessed strategic investments from high quality global investors such as the International

Finance Corporation (IFC) and the NYLIM Jacob Ballas India Fund. Fortis has also received

further investments at the beginning of FY14, via the subscription of equity and equity linked

instruments, from institutional investors, to part fund growth and to further strengthen the

balance sheet. IFC, which has a long- term horizon and commitment to healthcare, has

cumulatively invested more than US$ 100 Mn in the Company. These measures will together

bring down overall debt, enhance profitability and create room for further growth. The priority

for the business going forward is to work towards achieving a significantly higher level of

operating leverage that will have a substantial positive impact on its performance and results

Fortis, with its large network of 62 healthcare facilities spread across India, has created a highly

respected brand, well recognized for comprehensive services and quality. It enjoys a leadership

position with a very strong platform of operational capability, deep experience and knowledge of

the Indian market-place. The greatest strength lies in its people – the pool of doctors, paramedics,

nurses and managerial talent – and our processes. This talent pool and knowledge of processes

can be easily scaled up and replicated giving us the unique ability to ensure quality growth whilst

keeping costs low. Additionally, capacity enhancements at our existing hospitals can be achieved

with marginal investment only, enabling it to grow faster. The company plans to ramp up bed

capacity from 4,000 operational beds to about 10,000 operational beds before the end of this

decade. With the recent developments in divesture of international business and fresh issuance of

equity the company has created a war chest for aggressive growth in future growth.

SWOT Analysis for Fortis

Brand loyality Experianced and

able management team

Pan India Presence

Talent Pool Of Doctors


Higher operating costs

Not able to capitalize on

foreign operations


Market size growing at 15% CAGR

Growing Middle class and health awareness

Rupee devaluation gives boost to business from

International Patients

PE and Investor interest in sector


Sector is heavely regulated by Goverment.

Rising Real Estate prices Increase the land cost and lease


Increase in Employee benefit

cost and shortage of quality manpower

Improvements in Public health Care