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

7

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


• Capex – Rs. 350 mnVadodara


• 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

2

(INR in million)

27

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)

28

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

29

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

7

(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%


Revenue Mix

Orthopaedic Others

Revenue Composition & Cost Structure

9

33

695

576

735 736

26.44%

20.09%

22.68%

26.21%


Operational EBITDA (in millions) EBITDA Margin

Performance Analysis

2,627

2,868

3,240

2,810

8.94% 9.17%

12.95%

17.63%


Revenue from Operations (in millions)

Revenue Growth YoY

34

593

823 781

951


Operational BedsFY15 FY16 FY17 9mFY18

Operational Matrix

907

1,295

2,012 2,012


Bed CapacityFY15 FY16 FY17 9mFY18

35

39,904

34,173 33,032 32,495 40.95%

31.75%

34.48%36.47%


ARPOB Occupancy %

196

252 271

324

4.03

4.14

3.99

3.76


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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growth is passion - best multispecialty hospital in india...and india. serving as director,...

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