Growth is Passion - Best Multispecialty Hospital in India...and India. Serving as Director,...
Transcript of Growth is Passion - Best Multispecialty Hospital in India...and India. Serving as Director,...
Growth is Passion
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Highly Capital IntensiveLow Double-digit EBITDA
levels
Single digit ROCE Long Payback Period
H
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Result - Investor Disinterest
Shalby is Different
Healthcare Industry Scenario
• Over two and a half decades of professional work experience across UK, USAand India. Serving as Director, Department of Knee Replacement at ShalbyHospitals since 1993
• Dr. Shah innovated zero ‘0’ Technique in 2011. This has resulted in reductionof surgery time from 2.5 hours to 8 minutes and patient stay from 15 days to3 days
• Invented the OS Needle, which is thick bore reverse cutting needle used inattaching soft tissues to the bone. Before the invention of the Needle,surgeons had to use complicated soft tissue procedures that had a very highfailure rate. The needle can be attached with commonly available vicrylthread
• President of Indian Society of Hip & Knee Surgeons (ISHKS) for the year 2010-11
• Part of joint international faculty for development of new joints by ZimmerInc., USA
• Receiver of several awards and accolades by reputed organizations:
Hercules Award – The Gujarat Innovation Society (2014) Nilkanth Patang Nagar Pratibha Award – AMC and Dharmadev Infrastructure (2012) Pathbreaking services in the field of Joint Replacement and Orthopaedic Surgery for 15 years
– Rotary International Outstanding work in the medical field by Ahmedabad Medical Association (2005) Dr. B. C. Roy International Award for Joint Replacement Surgery (2003) Double Helical Award for the innovation of the ‘0’ Technique (2017) 3
Dr. Vikram ShahChairman & Managing DirectorAcademic Qualifications:• MBBS• MS (Orthopaedics)Professional Qualifications• AO Basic Course (London)• F.A.O.A.A (Switzerland)• F.A.I.S.F (Germany)
Promoter
Our Journey so far…
1994
Started professional practice with a 6-
bed facility
2004
• Revenue growth -100 times in first 10years.
• Incorporation ofCompany
2007
Operationalized First Multispecialty
Hospital of the group
2017
Bed capacity grown 10 times in 10 years
– to 2012 beds
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Introduction to Shalby Limited (1 of 2)
1. Shalby’s first hospital, Vijay Shalby, was established by Shalby Orthopaedic Hospital and Research Centre, one of its Group Entities, in the year 1994. From the year 2004, the operations of Vijay Shalby have been undertaken by the Company; 2. As on June 30, 2017; 3 Had an aggregate operational bed count of 841 beds as on June 30, 2017
Company Overview
Background: Established in 20041, Shalby Limited (“Shalby” or the “Company”) is one of the
leading multi-specialty chain of hospitals in India (Source: F&S Report)
• Had a 15% market share of all joint replacement surgeries conducted by private corporate
hospitals in India in 2016 (Source: F&S Report)
• Since March 2007, Shalby has conducted an aggregate of 92,100 surgeries, and provided
healthcare services to an aggregate of 1,025,533 patients
Healthcare network
• 11 operational hospitals, having an aggregate bed capacity of 2,012 beds (as on November
24, 2017)3
• 47 outpatient clinics (as on November 24, 2017)
• 10 shared surgery centres within third party hospitals, called Shalby Arthroplasty Centre of
Excellence (SACE), where it offers orthopaedic healthcare services including surgeries (as
on November 24, 2017)
Ancillary services
• Shalby Academy – Offers educational programmes including diplomas and fellowships in
medical and para-medical disciplines
• Shalby Homecare – Offers home-based healthcare services
• Clinical research trials – Undertaken since 2006 and are conducted at SG Shalby and
Krishna Shalby
Accreditations
• Krishna Shalby, SG Shalby, Shalby Indore and Shalby Jabalpur are accredited by the NABH
• Krishna Shalby and SG Shalby are also accredited by the NABL
• In addition, the Company has submitted an application to the NABH for accreditation of
Vijay Shalby
Network of Hospitals in India with bed capacity2
Ahmedabad
SG – 201 beds
Krishna – 220 beds
Vijay – 27 beds
Vapi – 146 beds
Jabalpur – 233 beds
Jaipur – 237 beds
Ahmedabad (Naroda) – 267 beds
Surat – 243 beds
Nashik – 113 beds
Mumbai – 50 beds, to be increased to 150
Mohali – 145 beds
Indore – 243 beds
Vadodara – 150 beds
Has a total bed capacity of 2,012 beds across 11 multi-specialty hospitals
Hospital (recently set up)
Hospital (upcoming)
Hospital (operational)
1. As on November 24, 2017
Network of Outpatient Clinics in India1 International Footprint1
International footprint consists of 5 outpatient clinics and 1 SACE in Africa, and 2 SACEs in UAE
Dar es Salaam (2)
EldoretKisumu
Addis Ababa (1)
Kampala (1)
Presence in Africa
Nairobi (1)Nairobi (1)
UAE (2)
Presence in UAE
Kenya
Uganda
Tanzania
Ethiopia
SACE
Outpatient clinics
SACE
Has a network of 42 patient outreach centres and 7 SACEs in India
OPD Clinics
SACE
Introduction to Shalby Limited (2 of 2)
Strong record of consistently being
EBITDA positive
Profits reinvested for growth - No
dividend payouts
Growth until recently, financed
only through internal accruals. In recent times debt used for
aggressive expansion
Current turnover and EBITDA
largely contributed by
older units. Growth from
newer units to begin now
Shalby’s unique business outcomes
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8
193.6
482.2
745.4
1029.6
1332.2
1820.0
2298.0
2616.0
2776.1 2925.0
3328.3
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Revenue [Rs mn]
22.176.7
106.7142.2
261.6
451.9
462.1
654.2696.8
576.3
797.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
EBITDA [ Rs mn]
Revenue CAGR – 33% for 10 years
Years represent Financial YearsEBITDA calculated on total revenueFY 12 to FY 17 – Data as per restated consolidated financials
Financials - Best in class
Dip due to new units
EBITDA CAGR – 43% for 10 years
Growth achieved without any outside equity funding
Double Digit return ratios against industry trend of single digit
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Robust Return Ratios
2%
9%
17%
28%31%
18%
32%
17.0%
20.0%
28%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
RoE %
15%26%
51%
88%
66%
20%
36%
22%14% 13%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
RoCE %
OpexCycle
Operational Efficiency due
to better capex
planning
Leveraging economies of scale through
centralized procurement
Low consumable
cost
Capex Cycle
Optimize capex
planning with In-house
projects team
Better utilization of space [and expensive
real estate]
Utilities planning to
optimize capex
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EBITDA upwards of 20% which is higher than
industry average
• Cost per bed ~ Rs. 4.5 millions for fully owned set-up.
• Lower for leased premises
How are we able to do this?
Operating Models
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Fully owned
Operate and Manage
[Revenue Sharing]
AcquisitionOperate SACE
and Outpatient Clinics
Business Model
No fixed rental
No security deposit
No minimum guarantee
Unique revenue sharing model
Shalby’s disruptive model
Only player in the industry to grow 2000+ beds without any non-promoter equity funding. Growth funded entirely through internal accruals and debt recently
Payback Period best in class
Double digit PAT and best in class EBITDA levels. Consistent EBITDA upwards of 20% against industry average of 12-15%
ROCE consistently superior in the past. Decreased in recent times due to aggressive expansion
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Plans to strengthen
presence in West and expand
further to Central, Eastern and
Northern India
Started from West and spread
towards Central India and North of
Delhi
Expansion strategy across the country
Typical concept of 200 (±20%) bed capacity set-up
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Local and Natural Footfalls from 4-5 kms radius helps to fill up ~70-80 beds
Balance ~70-80 beds –patients come in the name of doctors reducing thereby dependency on star doctors thus controlling doctor payout %
Facilities 10-15 kms away
So we can start the facility with
low branding budget but high
brand recall
Simultaneously hire local doctors and train them at Ahmedabad who conduct OPDs in and around that
city
We analyze patient trends
and accordingly decide where to
expand
Patients visit our clinics across
India and abroad
Expansion Strategy - We go where we are relevant
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Set-up outpatient clinics where we
have a strong brand recall
Operating such Outpatient clinics for 15 years now
Why to Expand
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2014 ~ 2,00,000
surgeries and ~ 8,00,000
angioplasties
2004 ~ 50,000 surgeries
1994 ~5000
surgeries
1984 ~500
surgeries
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Cardiac Sciences Growth Story in India
CAGR – 29% in 30 years. Currently growing @ 2-3%
Wide procedure penetration– to Tier 2 and 3 cities
Source: Industry reports
1994 ~300 surgeries
2000~6000 surgeries
2010~54,000 surgeries
2017~1,75,000 surgeries
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Knee Replacements Growth Story in India
Last year, In United States ~0.8 mnknee replacements in a population
of ~300 mn
India has a similar affording population. Hence direct potential
to grow to 8 lacs knee replacements
Asian population 15 times more prone to Arthritis of knee than
their western counter parts
Hence huge potential for growth based on incidence rates
Source: Industry reports
Surgery Count CAGR @32% in 23 years
India is a multi class society
Advantage Shalby
Shalby is pioneer in Joint Replacements in
the country
Best positioned to capitalize on the
growth opportunity in Joint Replacements
Orthopedics specialties such as
Spine, Ortho-trauma, Arthroscopy and
Pediatric Orthopedics growing fast
Experienced good growth in other
specialties
Way forward to move to other potential
markets
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Swastha Bharat, Smriddha Bharat. Demographic dividend realization impossible without proper healthcare
Rashtriya Samaj Beema Yojana: 10 crore families will get 5 lakh per year for their families to cover secondary and tertiary hospital expenses
National Health Policy 2017 , Rs 1200 crore allocation; Rs 600 crore corpus set up to help TB patients
Health and wellness centres to bring healthcare closer and more accessible to people
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Key Highlights FM Speech, Union Budget 2018
Central Government Benefits for Healthcare Sector
• 100% depreciation on capex incurred
• MAT credit can be availed for 15 years
• All healthcare education and training services exempted from GST
• Section 80 JJAA. Applicable for wages less than Rs 25,000 per month. For additional staff, rebate in Income Tax for 3 years for amount equivalent to 30% of such additional payout thus amounting to rebate of 90% in 3 years Hence around 30% benefit
Tax Incentives
• 100% FDI allowed under automatic route for greenfield projects
• For brownfield projects up to 100% FDI permitted under government route
FDI
• Pradhan Mantri Rojgar Protsahan Yojana – 8.33% - employer contribution to EPS will be paid by the government for new employment for 3 years [Scheme available for all sectors]
Other
22Source – IBEF Report and industry reports
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• 25 percent Capital Investment subsidy on establishing multi or super specialty hospital, medical college subject to maximum limit of Rs. 50 mn in cities with population more than 1 mn and Rs. 30 mn in cities/rural areas.
• Interest subsidy on Term loan taken for establishment of eligible health institutions subject to maximum limit of Rs. 3 mn
• Other Benefits
Madhya Pradesh
• Reimbursement of 75% amount of VAT paid on purchases of plant and machinery or equipment up to 7 years
• 75% exemption from payment of Entry Tax on equipment
• Other benefits
Rajasthan [Special Package
for Shalby]
• 10% capital subsidy for purchase of medical equipment [ Max Rs. 100 mn ]
• 4% interest subvention for up to 7 years
• Reimbursement of electricity duty for 5 years
• Other benefits
Gujarat
State Government Benefits for Healthcare Sector
Leverage
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• Bed Capacity 113
• Capex – Rs. 250 mnNashik
• Bed Capacity 150
• Capex – Rs. 350 mnVadodara
• Bed Capacity 175
• Capex – Rs. 1 bnMumbai
[Santa Cruz]
• Current bed capacity 50. Addition 100 beds
• Capex – Nil
Mumbai [Ghatkopar]
Investment Plans for Upcoming facilities
Total capex planned – Rs. 1.6 bn for addition of 538 beds @ Cost per bed – ~Rs. 3 mn
~Rs 1.5 bn surplus from IPO proceeds
Enough room for leverage. Can raise ~ Rs 6.5 bn
Thus a financial leverage available to double the current bed capacity
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Financial Results Review
Q3 FY2018 and YTD ended 31.12.17
Particulars
Quarter Ended
31-12-17 % of Revenue
Quarter Ended
31-12-16 % of Revenue Growth
Total Revenue 1019.99 100% 769.81 100% 32.50%
Total EBITDA 257.55 25.25% 203.00 26.37% 26.87%
Bed Capacity (Nos.) 2,012 1,215 65.60%
Operational Beds (Nos.) 951 762 24.80%
Average Length of Stay 3.75 days 3.97 days N.A.(
Occupancy (Beds) 358 254 41.24%
In-Patient Count (Nos.) 8,788 5,873 49.63%
Out patient Count (Nos.) 55,271 37,590 47.04%
ARPOB ( In Rs.) 30,507 32,250 (5.40)%
Operational Performance Synopsis
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(INR in million)
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Financial Highlights Q3FY18
ParticularQuarter Ended
31-12-17
% of
Revenue
Quarter Ended
31-12-16 % of Revenue Growth Variation
Revenue from Operations 1,005.95 100.0% 752.51 100.0% 33.7%
Expenses
Materials & Consumables 276.71 27.5% 177.45 23.6% 55.9% 3.9%
Fees to Doctors and Consultants 221.96 22.1% 179.80 23.9% 23.4% (1.8)%
Other Operative Expenses 83.90 8.3% 58.59 7.8% 43.2% 0.6%
Employee Costs 116.28 11.6% 93.87 12.5 23.9% (0.9)%
Administrative Expenses 63.59 6.3% 49.82 6.6% 27.6% (0.3)%
Total Operational Expenses 762.45 75.8% 559.53 74.4% 36.3% 1.4%
Operational EBITDA 243.50 24.2% 192.98 25.6% 26.2% (1.4)%
Other Income 14.05 10.02 40.2%
Total EBITDA 257.55 203.00 26.9%
Finance Cost 38.18 47.36 (19.4)%
Depreciation & Amortization Expense 66.67 37.20 79.2%
Profit before tax (PBT) 152.70 118.44 28.9%
Minimum Alternate Tax (MAT) 31.30 27.00 15.9%
MAT Credit Entitlement (31.30) (183.50) (82.9)%
Deferred Tax (Non Cash Charge) 44.86 51.29 (12.5)%
Profit after tax (PAT) 107.84 223.65 (51.8)%
Normalized PAT 107.84 67.15 60.6%
(INR in million)
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192.98
243.50 25.64%
24.21%
Q3FY17 Q3FY18
Operational EBITDA (in millions) EBITDA Margin
67.15
107.84
8.80%
10.60%
Q3FY17 Q3FY18
Normalized PAT (in millions)
Normalized PAT Margin
Financial Performance Comparison
• Operational EBITDA grew by 26.2% due to increase in
revenue
• EBITDA margin reduced by 1.4% due to geographical
expansion and change of specialty mix
• Normalized PAT grew by 60.6%
• Normalized PAT margin expanded by 1.8% due to
higher revenue and operating leverage
Revenue Composition Q3 FY18
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55.9%
10.6%
9.0%
5.9%
4.2%
14.4%
Specialty Mix
Arthroplasty General Medicine & Critical Care
Cardiac Sciences Other Ortho
Onco Sciences Others
58.5%24.6%
14.9%
2.0%
Payee Profile
Selfpay TPA Corp-Govt Corp-Private
Operational Performance Synopsis
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(INR in million)
Particulars YTD Dec’17 % of Revenue YTD Dec’16 % of Revenue Growth
Total Revenue 2831.99 100% 2416.15 100% 17.21%
Total EBITDA 758.58 26.79% 579.76 24.00% 30.84%
Bed Capacity (Nos.) 2,012 1,215 65.60%
Operational Beds (Nos.) 951 762 24.80%
Average Length of Stay 3.8 days 4.0 days N.A.
Occupancy (Beds) 324 271 17.41%
In-Patient Count (Nos.) 22,969 18,886 21.62%
Out patient Count (Nos.) 158,781 124,459 27.58%
ARPOB ( In Rs.) 32,495 31,509 2.57%
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Financial Highlights YTD Dec’17
Particular YTD Dec’17
% of
Revenue YTD Dec’16 % of Revenue Growth Variation
Revenue from Operations 2,809.84 100.00% 2,388.65 100.00% 17.63%
Expenses
Materials & Consumables 728.72 25.93% 633.98 26.54% 14.94% (0.61)%
Fees to Doctors and Consultants 597.93 21.28% 552.28 23.12% 8.27% (1.84)%
Other Operative Expenses 241.12 8.58% 197.58 8.27% 22.04% 0.31%
Employee Costs 308.89 10.99% 277.38 11.61% 11.36% (0.62)%
Administrative Expenses 196.75 7.00% 175.18 7.33% 12.31% (0.33)%
Total Operational Expenses 2,073.41 73.79% 1,836.39 76.88% 12.91% (3.09)%
Operational EBITDA 736.43 26.21% 552.26 23.12% 33.35% 3.09%
Other Income 22.15 27.50 22.15
Total EBITDA 758.58 579.76 758.58
Finance Cost 124.46 75.68 64.46%
Depreciation & Amortization Expense 160.19 115.08 39.20%
Profit before tax (PBT) 473.93 389.00 21.83%
Minimum Alternate Tax (MAT) 99.20 89.00 11.46%
MAT Credit Entitlement (99.20) (183.50) (45.94)%
Deferred Tax (Non Cash Charge) 216.63 44.95 381.94%
Profit after tax (PAT) 257.30 438.55 (41.33)%
Normalized Deferred Tax 56.70* 44.95
Normalized PAT 417.23 344.05 21.27%
* Normalized and restated as per the “ Restated Audited Standalone Financials” on pg. 290 of the RHP filed by our Company
(INR in million)
30.44% 28.99% 25.57% 25.93%
24.90% 26.12%23.98% 21.28%
6.94% 7.85%8.13% 8.58%
7.20% 9.96%12.06% 10.99%
6.02%7.98%
8.01%7.00%
75.50%80.89%
77.76%73.78%
FY15 FY16 FY17 9mFY18
Cost Structure
Administrative and Other Expenses
Employee Benefit Expenses
Other Operative Costs
Fees to Doctors and Consultants
Materials & Consumables
73.11% 71.19% 67.77%61.76%
26.89% 28.81% 32.23%38.24%
FY15 FY16 FY17 9mFY18
Revenue Mix
Orthopaedic Others
Revenue Composition & Cost Structure
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33
695
576
735 736
26.44%
20.09%
22.68%
26.21%
FY15 FY16 FY17 9mFY18
Operational EBITDA (in millions) EBITDA Margin
Performance Analysis
2,627
2,868
3,240
2,810
8.94% 9.17%
12.95%
17.63%
FY15 FY16 FY17 9mFY18
Revenue from Operations (in millions)
Revenue Growth YoY
34
593
823 781
951
FY15 FY16 FY17 9mFY18
Operational BedsFY15 FY16 FY17 9mFY18
Operational Matrix
907
1,295
2,012 2,012
FY15 FY16 FY17 9mFY18
Bed CapacityFY15 FY16 FY17 9mFY18
35
39,904
34,173 33,032 32,495 40.95%
31.75%
34.48%36.47%
FY15 FY16 FY17 9mFY18
ARPOB Occupancy %
196
252 271
324
4.03
4.14
3.99
3.76
FY15 FY16 FY17 9mFY18
Occupied Beds ALOS (Days)
Operational Matrix
Historically highest revenue during the quarter
Successful conclusion of the IPO of INR 5,048 million and listing on the stock exchanges
Surat and Naroda units operationalized in Q2FY18
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Key Developments
Thanks
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