HDFC Bank Ltd

Presentation
on

Healthcare Business/Opportunities
 Objectives
• Overview on Healthcare Industry

• To estimate healthcare growth and funding

requirements
 India Demographics
Indian Population

• Total Population – 1.50

1.15 Billion
1.40
1.40
1.34
1.30 1.28

• National Gross
In Bn 1.21
1.20
1.13

Domestic Product –
1.10
1.03
1.00
2001 2007 2012P 2017P 2021P 2026P

1.2 (Trillion $)
• Health care per Demographic Age Concentration (%)

capita spend at USD

60+yrs
7 8 8 9 11 12
11 12 14 15 45-59 yrs
94$
16 16
20 20 20 21
23 24
30-44 yrs
27

• 1.04 beds per 1000

28 29 28 26 24
15-29 yrs

population
35 32 29 27 25 23
0-14 yrs
2001 2007 2012P 2017P 2021P 2026P
 Update on Healthcare Industry in India

Current Scenario:- Estimates Fuelling Growth:-

 Estd Current mkt size USD 40 Bn  Projected size by 2012 : USD 75 -85 Bn

 30,000 hospitals approx  15,000 Hospitals addition by 2012

 11,78,576 beds  3,31,082 hospital beds by 2012

 50,00,000 doctors  6,60,801 doctors by 2012

 229 Medical colleges  170 New Medical colleges

 3,50,000 retail chemist outlets  24,000 retail chemist outlets

Healthcare market : Concentration

Medical Diagnostics
equipment / 10%
Insurance
15%

Pharmaceuticals Healthcare
20% Delivery
55%
 Public Spending
• Government Investments & Allocation of resources is just 0.87% of GDP

• Mostly preventive & promotive plans like Family planning, AIDS etc

• Public spending is Rs. 31,700 Cr - 17.3% of total spend.

• Public financing of Healthcare:

- 80% from State Govt. budgets

- 12% from Union Govt.

- 8% from Local Govt. bodies.

• Social insurance supports 55 million users spending close to Rs.3000 cr

• Fiscal deficit of close 10% to 11% in both Central & State finance
to limit healthcare investments and spend in future.
 Private Health Sector
• Uncontrolled, Rapid development of an unregulated growth mostly unorganized.

• Private healthcare main stay in curative health care

• Private Spending is 82.7% of health care spend in India at Rs.1,51,548 Cr.

• Private financing is mostly out of pocket funded out of savings, debt and
sale of assets.

• Private sector contribute

 67% of total number of 30,000 hospitals
 33% of total Number of 1Million beds
 60 % of 5 million doctors.

• Capacity utilisation is over 80% among pvt sector, ample scope for rapid
expansion of Hospitals.

• Private insurance spending in health care is just at less than 1% for 11 million
users.
Healthcare Industry – Growth Prospects
• Expansion of hospitals both organic & inorganic

• Expansion in Tier I & II towns by large corporate for OPD expansion to act as
feeding points for tertiary hospitals

• Setting up of specialised wellness centers in terms of Chain of Dialysis Clinic

(Apollo /Trivitron), Oncology centers – Cyberknife / Linear Accelerators, Eye
care day center with Laser and modern equipments – for instance, Vasan eye
care has opened 40 such centers across South India.

• Consolidation of Diagnostic / Pharmacy retailing

• Hospitals expanding value chain relating to their Diagnostic / pathological labs

and pharmacy business.

• Most super speciality hospitals are operating at a capacity utilisation of 75-

80%, with a per bed revenue of Rs.25-30 lacs , hence are expanding their bed
capacity by more than 150% with their existing infrastructure.
 Chronic Ailments – on increasing trend
• Cardiovascular, oncology and diabetes put
together accounts for 13% of the reported
cases as at 2007.

• It is opined that the incidence of these 3

ailments is expected to increase
significantly in future on account of:
- changes in diatery habits
- a more sedentary lifestyle adopted by
people.

• As per market estimation, these 3 ailments

are expected to be a contributing factor at
16.7% and 19.4% resp. of the total
hospitalised cases in 2012 and 2017.
Cardiovascular diseases Oncology
• Apparently, the age group of 15-44 years
Diabetes Gastro intestinal are prone to fall to these ailments which is
Accidents Fever the major chunk of our age demographic
Gynaec disorders Urology classification, avg to 48% of the total
population.
Others
 Key Factors influencing Healthcare Growth in India
Recently enacted tariff and non-tariff measures by the Government.
 Reduction in import duty on medical equipment from 25 % to 5 %

 Depreciation limit on such equipments raised upto 40 % from 25 % to

encourage imports.

 Custom duty reduced to 8 % from 16 % for medical, surgical, dental and

Veterinary furniture.

 Tax exemption under sec 80 1 B for the first 5 yrs to the hospitals ( with 100
beds or more ) set up in rural areas

 Launch of new group insurance scheme thru public sector non life insurance
companies.
 Key Demand Drivers
• Growing middle class from current 38% to around 50% by 2010-11

• Rapid urbanisation

• Growth in Tier I & II towns due to tax holidays.

• Steep growth in health insurance particularly private insurance

• Funding constraints not a problem any more

• Medical tourism

• Chronic ailments on the increase

• Changing life styles

 Bank Credit to Healthcare

 Total Bank Credit Outstanding – Estimated Rs. 40,000 - Rs 50,000 Crs

including funding to Doctors/ Pharmacies / Medical colleges etc.,

 Share of Health Care - To industry credit - approx 2%

 P/E Investments deployed so far - USD 0.6 billion

 Quantum of Medical Equipment funding by Banks and NBFC’s - Rs.

1750 cr. To Rs. 2000 cr.

 Scope for scaling up Medical Equipment Funding - an Issue

Funding Pattern and Potential lending
Opportunity for Banks / FI’s

Overall Investment in the Next 5 Yrs

USD 24 Bn to 30 Bn (Rs. 1.20 lac crs to Rs.
1.50 cr)

Current Spending Pattern

Govt Spending -17.3% Pvt Spending – 82.7%

Rs.20400 Crs Rs.99600 Crs
 Distribution of funds - Segmentwise
Total Debt of Rs.20033 crs Per Annum

Manufacturers & Hospitals /Diagnostic

Traders Rs.8500 Crs Centres Rs.11533Crs

Infrastructur
Equipment Wholesaler Importers & e
Manufacturers of Medicines Distributors

Eqpmt.
Software Solution Finanace
Formulation
Providers
& bulk Drug
Manufacture
r
 Capex Projections – Healthcare
• Estimated investment next 5 yrs - Rs. 1,20,000 crs to Rs. 1,50,000 cr
• Segment-wise break up of capex debt per annum is detailed below

Segment wise Capex Amount (Rs in Crs / p.a.)

Medical equips / devices 5663

Pharma (wholesale/Retail 3000

incl. Captive units)
Hospital Infra (bed counts) 4370

Pharma Mfrs, R&D 5500

Others* 1500

Total 20033

*Incl. Medical colleges / labs & consumables / Medical BPOs

 Hospital Infra - Funding
About 56% of the Hospital capex in multi speciality is on
imports. Typical capex in such hospital is as under:

Departmental
Building / civil infra 40%
Specific equipments 18%
Imaging equipments 16%
Furniture / IT 13%
Elecl / Mechanical 6%
Pathology lab 5%
Clinical instruments 2%
 Hospital – Bed counts / Proj. Investment

Existing Proj.Growth
Hospitals set up 2012
     
Total No of beds 1178576 1509658
Private Infrastructure (66%)
777860 996374
Govt Infrastructure (34%)
400716 513284
Addition of beds p.a.over the next 5
yrs (Nos)   43703
Avg cost per bed   1000000
Tot inv per annum. (in crs)   4370
 Pharmacy – Funding
Pharmacy unit No of units Avg WC / unit WC rqmt in crs Margin @ 25% WC debt

Pharma 325000        

Captive hospital units 97500 1000000 9750 2438 7313

Community units 227500 200000 4550 1138 3413

        Total 10725
 No of Pharmacies : 3,25,000 units
 Industry Size/sales : Rs. 1,19,000 cr

 No of Captive units @ 30% : 97,500


Margin : 15% to 20%
 Store size : 200 sq ft

 No of Community units @70% : 2,27,500


Margin : 25% to 30%

Store Size : 400 sq ft

 Most of the stores are on ownership basis, It is estimated that close to Rs. 5000 cr
would be the home / store loan for this sector
 Total loan including WC / TL will be approximately Rs. 15,000 cr.
 Growing at a rate of 20%
 Medical equipment – overview / concentration

Total Market Size :Rs. 12000 crs

Medical equipments Lab equipments Medical Devices Consumables

Rs. 5000 crs Rs. 2500 crs Rs. 2500 crs Rs. 2000 crs

• Entry of Global players on JV tie-up :

• Recently the following JVs have been established in India:
 Parkway group of Singapore – With Apollo chain of hospitals
 Aloka - Japanese Tied-up with Trivitron group for mfg of medical equipments
 Bio-systems - Spanish company setting up mfg unit at Chennai

Though India is considered a favourable mfg hub by globally estd players for advantages
of low production cost, SEZ benefits etc., future JV partnership are dependent on
favourable Govt policies which is being represented by the industry.
 Medical Devices - Funding
Rs. In Crs
Major Proj. Proj. Mkt Size Govt Sales Opportunity
capex Growth @ ( 09-10 ) ( Approx 35 for Banks /
Existing 20 % %) FI's
Market
Size
MRI 500 100 600 210 390
CT 600 120 720 252 468

Ultrasound 600 120 720 252 468

X-ray 160 32 192 67 125
Ophthalmic
/`Dialysis/O
ncology
Etc 5400 1080 6480 2268 4212
Total 7260 1452 8712 3049 5663
 Way Forward
• Land & building cost are up to 45% to 65% of capex cost of hospitals, Hospitals can look
at investors to fund the same so as to reduce capital cost per bed and reduce break even
period to less than 18 months.

• Expensive medical equipment like MRI, Cyber knife etc will also be invested by
specialised companies / Investors on a referral / commission basis in the hospital premises
there by reducing Capex cost.

• Consolidation of highly fragmented secondary practice, particularly in Tier II & III towns
rich in OPD acting as for tertiary hospitals. Couple of successful models working well in
Kerala.

• Debt servicing to improve with Industry becoming more organised.

• Government spending to increase ( target to achieve 3% of GDP by end of 11th plan.

• High FDI , Easier access to international funding, P/E, NRI investments ( reversal of brain
drain )

• Financial institution becoming very aggressive, higher bank credit flows in recession to
rapidly push growth in health care perceived to be recession free.

• Public Private partnership with state government allotting land at conccessional rates &
management of primary & secondary health care units by private sector.
 Challenges
 Large portion of the Pvt sector health care segment is
unorganised

 Highly fragmented

 Expanding reach & accessibility in rural India.

 Lower GDP growth

 Insurance penetration very poor.

 HDFC Bank - Synopsis
• Largest product offering – Whole sales, retail, treasury and
advisory
• Most diverse client base including Pvt sector, PSU’s, MNC
companies
• Largest branch network among private banks– Over 1412
branches , 3200 ATMs, in over 530 locations
• Low cost of funds & cost of operations across banks
• Capital adequacy comfortable at 13.7%
• Net NPA one of the least at 0.6%
• Balance sheet size at approx Rs, 1,90,000 cr.
• All Processing on line , real-time
• All Branches Inter-connected
• Centralised database - anywhere and any time Banking
• State of the art system and technology
 Over view of HDFC banks Health
care business
• HDFC bank offer’s total solution to the entire gamut of healthcare segment viz.
Hospitals, Medical Equipment, Pharmacy , Medical Colleges, etc

• Large credit appetite and well positioned to cater to the specific need of the health
care Industry

• We offer all the funding options as mentioned below under one roof
 Working capital
 Term loans for Capex
 Equipment Funding
 Securitisation of receivables
 Store expansion funding for retailers
 Funding for Doctors
 Private Banking
 Trade Finance for Medical Equipment Vendors / Hospitals
 Merchant banking services
THANK YOU