2009

INDUSTRY ANALYSIS
ON APOLLO HOSPITAL
AN ASSIGNMENT ON CORPORATE STRATEGY
SUBMITTED BY--- GROUP 2. G-02
SUDEEP SHAURYA
SHORABH BHATTACAHRJEE
GAGANDEEP SINGH
VINAY KUMAR
BHARDWAJ VIJAYVARGIA
RAJOJYOTI BANIK

SUBMITTED TO --- Prf. RAJESH VERMA

12/8/2009

Industry analysis of Apollo hospital

Health care Industry in India
In India, the Healthcare system is split into a public sector, a private sector and a wide network of informal
healthcare providers operating together in a large and unregulated network. This irregularity has caused wide
disparities in access, especially in regional and rural distribution of healthcare infrastructure. Currently, the
Indian healthcare sector is valued at Rs.1, 360 (US $34) billion roughly 6 per cent of GDP. The healthcare
business is projected to grow to over Rs.1, 600 (US $40) billion or 8.5 per cent of GDP by 2012, according to
Price Waterhouse Coopers (PwC) report, 'Healthcare in India: Emerging market report 2007'.

The Hospital Industry

Some Facts

Indias healthcare industry is currently worth Rs 73,000 crore which is roughly 4 percent of the GDP.

The industry is expected to grow at the rate of 13 percent for the next six years which amounts to an addition of
Rs 9,000 crores each year.

The national average of proportion of households in the middle and higher middle income group has

increased from 14% in 1990 to 20 % in 1999.

The population to bed ratio in India is 1 bed per 1000, in relation to the WHO norm of 1 bed per 300.

In India, there exists space for 75000 to 100000 hospital beds.

Private insurance will drive the healthcare revenues. Considering the rising middle and higher middle

income group we get a conservative estimate of 200 million insurable lives

Over the last five years, there has been an attitudinal change amongst a section of Indians who are

spending more on healthcare.

Corporate hospitals mushroomed in the late eighties. The boom remained short-lived and out of the 22 listed
hospital scrips, most are being trading below par. An increasingly fragmented market, lack of statistics, capital
intensive operations and a long gestation period are all wise reasons to shy away from investing in the
healthcare industry. Government and trust hospitals dominate the scene. Many of the trust hospitals suffer from
poor management. Good corporate hospitals are still too few to amount to a critical mass.

Corporate hospitals failed a decade ago because they emerged in isolation and werent part of a larger
phenomenon. However, now, there are the insurance companies, the hospital hardware and the software
companies that have come together to create the boom.

Factors Attracting Corporate In the Healthcare Sector

Recognition as an industry: In the mid 80s, the healthcare sector was recognized as an industry. Hence it
became possible to get long term funding from the Financial Institutions. The government also reduced the
import duty on medical equipments and technology, thus opening up the sector.
Since the National Health Policy (the policys main objective was Health For All by the Year 2000) was
approved in 1983, little has been done to update or amend the policy even as the country changes and the new
health problems arise from ecological degradation. The focus has been on epidemiological profile of the
medical care and not on comprehensive healthcare.
Socio-Economic Changes: The rise of literacy rate , higher levels of income and increasing awareness through
deep penetration of media channels, contributed to greater attention being paid to health. With the rise in the
system of nuclear families, it became necessary for regular health check-ups and increase in health expenses for
the bread-earner of the family.
Brand Development: Many family run business houses, have set-up charity hospitals. By lending their name to
the hospital, they develop a good image in the markets which further improves the brand image of products
from their other businesses.
Extension To Related Business: Some pharmaceutical companies like Wockhardt and Max India, have
ventured into this sector as it is a direct extension to their line of business.
Opening Of The Insurance Sector: In India, approx. 60% of the total health expenditure comes from self paid
category as against governments contribution of 25-30 %. A majority of private hospitals are expensive for a
normal middle class family. The opening up of the insurance sector to private players is expected to give a shot
in the arms of the healthcare industry. Health Insurance will make healthcare affordable to a large number of
people. Currently, in India only 2 million people ( 0.2 % of total population of 1 billion), are covered under
Mediclaim, whereas in developed nations like USA about 75 % of the total population are covered under some
insurance scheme. General Insurance Company, has never aggressively marketed health insurance. Moreover,
GIC takes upto 6 months to process a claim and reimburses customers after they have paid for treatment out of
their own pockets. This will give a great advantage to private players like Cigna which is planning to launch
Smart Cards that can be used in hospitals, patient guidance facilities, travel insurance, etc.
The Consultants, Financiers and Insurance Agencies are to benefit from this boom. The insurers will use PPOs,
that will grow into HMOs, to assume insurance risks on clients behalf. Medical Equipments, Medical Software
and Hospitals will see the biggest boom.

SOME PLAYERS
- Fortis Healthcare
Fortis is the late Ranbaxys Parvinder Singhs privately owned company. The company is a 250 crore, 200 bed
cardiac hospital, located in the town of Mohali. The company also has 12 cardiac and information centers in and
around the town, to arrange travel and stay for patients and family. The company has plans of increasing the
capacity to around 375 beds and also plans to tie up with an overseas partner.

Max India
After selling of his stake in Hutchison Max Telecom, Analjit Singh has decided to invest around 200 crores, for
setting up worldclass healthcare services in India. Max India plans a three tier structure of medical services
Max Consultation and Diagnostic Clinics, MaxMed, a 150 bed multispeciality hospital and Max General, a 400
bed hospital. The company has already tied up with Harvard Medical International, to undertake clinical trials
for drugs, under research abroad and setting up of Max University, for education and research.

Escorts
EHIRC located in New Delhi has more than 220 beds. The hospital has a total 77 Critical Care beds to provide
intensive care to patients after surgery or angioplasty, emergency admissions or other patients needing highly
specialized management including Telecardiology (ECG transmission through telephone). The EHIRC is
unique in the field of Preventive Cardiology with a fully developed programme of Monitored Exercise, Yoga
and Meditation for Life style management.

WOCKHARDT and DUNCANS GLENEAGLES INTERNATIONAL

also have major expansion plans.

Chairman's Profile
Dr. Prathap C Reddy, Chairman
Apollo Hospitals Group
His dream is to make India the Healthcare Destination of the World.
Two decades ago, Dr. Reddy lost a patient who couldn't make it to Texas for an open heart surgery. This was
the milestone in the Indian Healthcare Industry. Today people have the opportunity in India to receive the best
that healthcare has to offer worldwide.
Driven by a deep urge to create world-class medical infrastructure in India and make it more accessible and
affordable to a large cross section of our people, Dr. Prathap Reddy opted to give up his successful practice in
the US to return to India in the early eighties.
Thus, Dr. Reddy began what was truly the process of revolutionizing the path of the Indian Healthcare Industry.
Undeterred by initial constraints Dr. Reddy succeeded in setting up the first center of the Apollo Hospitals
Group in Chennai in 1983.

Apollo Hospitals Enterprise Limited

Apollo Hospitals Enterprise Limited (AHEL) is a leading private sector healthcare provider in
Asia. It was incorporated as a Public Limited Company in the year 1979, a comprehensive 250-bed hospital
with an emphasis on speciality and super specialties in over fifty departments at Chennai. Dr. Prathap C Reddy
promoted it. Apollo Hospitals Enterprise Limited (AHEL) owns and operates a network of leading primary,
secondary and tertiary hospitals and clinics across India. The Company also has a pan India footprint of 873
standalone pharmacies. The Apollo Hospitals group today includes over 7500 beds across 43 hospitals in India
and overseas, neighbourhood diagnostic clinics, an extensive chain of Apollo Pharmacies, medical BPO and
health insurance services and clinical research divisions that are working on the cutting edge of medical science.
In India, Apollo hospitals can be grouped into the following categories based on their stage of maturity and
occupancy levels: Mature hospitals at Chennai, Hyderabad, Madurai, Bilaspur, Mysore, and Visakhapatnam
have occupancy levels exceeding 75%. New hospitals at Bangalore, Ahmedabad, have occupancy levels of
60%. Two Hospitals were commissioned during the year, Apollo Loga Hospital at Karur, Tamil Nadu, having
70 beds and a Hospital at Karim Nagar, Andhra Pradesh with 120 beds. As per the Accounting Standard 17

issued by The Institute of Chartered Accountants of India, AHEL has two reportable segments, healthcare
services and Standalone Pharmacies, Healthcare services segment comprises hospitals, hospital-based
pharmacies and Consultancy Division. The other segment comprises standalone pharmacies.

The Apollo Group of Hospitals

Driven by its line of being the architect of

healthcare in

India, the Apollo Hospitals Group, comprising of

one

of

the

largest networks of 26 hospitals, 10 clinics and over

10,000

employees across the country, represents the

changing face

of

healthcare

in

India

contemporary

and

corporatized.

It has been the first private company to administer

health

insurance in the country and Indraprastha Apollo

Hospital

in

Delhi is the fourth largest corporate hospital in the world.

The Apollo group is Indias first corporate hospital, the first to set-up hospital outside the country and the first
to attract foreign investment. With 2600 beds, Apollo is one of Asias largest healthcare players. The recent
merger between its 3 group companies, Indian Hospitals Corporation Ltd., Deccan hospitals Corporation
Limited and Om Sindoori Hospitals Limited, will help the group raise money at a better rate and by
consolidating inventory, it will save around 10% of the material cost. The group is planning to invest Rs. 2000
crore , to bulid around 15 new hospitals, in India, Sri Lanka, Nepal and Malaysia.
Apollo claims to maintain the best of medical standards with a record of over 7.4 million treated patients,
3,15,000 preventive health checks done, 98.5 percent success rate in 45,000 cardiac surgeries, etc. And helping
the company maintain a balance between the corporate culture and rigorous medical excellence is recognition of
IT as intrinsic to every process, whether it is day-to-day running of hospitals, education or telemedicine.
The application of IT in the day-to-day working of the largest hospital of the group, Indraprastha Apollo, throws
light on the extent of the automation drive within the company. The management realised the fact that in order
to have a modern hospital in place all the work processes had to be related to IT. Hence, the need for an end-toend integrated solution. This led to the implementation of the Hospital Information System (HIS), which was an
integral part of the hospital inception project.
The hospital today boasts of an integrated HIS, which provides for end-to-end integration of the various
processes and functional areas within the hospital to make for a seamless workflow. The work processes of the

hospital are primarily divided into two areas the patient (comprising of in-patient and out-patient) and the nonpatient all the back-end departments like housekeeping, engineering, finance, materials, purchase and HRD.
The workflow process starts with the patient seeking an appointment with the doctor. HIS contains all the
information relating to appointment schedules of the doctors. Depending on the availability of the doctor, the
patient is given the date and time of appointment. This information is then fed into the system and the updated
information is available to the doctor in real-time.
On the date of his appointment, the patient registers himself at the counter by filling up of a form, which
contains all the basic information related to the patient. This data is feeded into the system with a Unique
Hospital Identifier (UHI) number allotted to the patient so that by the time the patient meets the doctor, he
already has all the required basic information. This is followed by 15 minutes of consultation with the doctor
after which the doctor gives his prescription, the data is again keyed into the system as a patient record under
his UHI and is accessible for quick reference.
One of the biggest advantages of HIS is that any medically relevant information related to the patient is
available at the click of a button, thereby saving precious time, which means a lot when it comes to saving a
life. HIS also acts as a kind of ERP for the hospital with its automation of various back-end areas like financial,
accounting and inventory, which are integrated with the patient areas wherever required.
The hospital has also developed a very effective mailing system for its employees, which is based on Microsoft
Exchange. The companys Intranet is being used to run mailing applications as well as information relating to
company policies, leave information and basic information relating to the company.

Other business units

Apollo Hospitals
Apollo Hospitals Enterprise Limited has over 8065 beds across 46 hospitals in India, rest of Asia and Africa.
The hospitals are multi specialty tertiary care facilities with centres-of-excellence in medical disciplines
including cardiology, cardio-thoracic surgery, gastroenterology, orthopedics & joint replacement surgery,
neurology, critical care medicine, nephrology, oncology, hand & micro surgery and reproductive medicine.

Apollo Global Projects Consultancy

Apollo offers project and operations management consultancy services with the support of operational and
functional specialists. The pre & post commissioning consultancy services include feasibility studies, strategic
planning, infrastructure consultation, human resource recruitment, training and medical equipment consultancy,
management contracts, establishment of medical and administrative protocols etc.
Apollo Health and Lifestyle Limited
Apollo Health and Lifestyle Limited, has established over 100 Apollo Clinics across the country, is an
integrated model and offers facilities for specialist consultations, diagnostics, preventive health checks and 24hour Pharmacy, all under one roof.

Apollo Pharmacy
Apollo Pharmacy is India's first and largest branded pharmacy network; with over 750 retail outlets in key
locations across the country. The group adds one pharmacy every 23 hours.

Apollo Hospitals Education and Research Foundation

AHERF was set up to establish, maintain and support educational institutions in promoting medical,
paramedical and hospital management courses. The Institute offers over 18 post graduate teaching programmes,
including ones certified by the Royal College of Edinburgh. MedVarsity Online Limited is backed by two
giants; Apollo in medicine and NIIT Limited in the field of electronic-education. MedVarsity has developed inhouse, over 1500 hours of medical content that is accessible to the medical community, anytime and anywhere.
The research division currently undertakes diverse projects from clinical trials in multiple locations to molecular
biology, stem cell transplants, epidemiological studies, and in the future identification of genetic Biomarkers.

Apollo Telemedicine Networking Foundation

In 1999, Apollo launched its first model Telemedicine Unit at Aragonda village in the Chittoor district. Since
then, Apollo has witnessed a steady growth in terms of delivering quality healthcare and reaching out to the
masses. Telemedicine is a potent means of harnessing telecommunication technology to deliver healthcare and
education to patients in regions that are geographically less accessible. It also saves time and the cost of travel
to access quality care. Apollo has pioneered the concept of telemedicine in India and Asia, and has over 100
telemedicine centres in India and overseas.
Apollo Insurance Company Limited
Apollo DKV is a joint venture of the Apollo Hospitals Group and DKV AG, Europe's largest private health
insurer and a Munich Re Group company. The company offers innovative health insurance, wellness solutions
and disease management to meet customer needs.
Apollo Wellness Plus
Apollo Hospitals launched the first Wellness Centre at Apollo Hospitals Chennai in Feb 2005. Wellness Plus is
the perfect blend of modern and complementary medicine like aromatherapy, pranic healing, yoga, and
meditation that fits the modern lifestyle.
Apollo Reach Hospitals
An endeavor to bring world class healthcare to semiurban and rural India - every Apollo Reach Hospitals will
be a specialty hospital, designed to complement existing private and public healthcare facilities in the proposed
towns and villages. Construction of hospitals, procurement of land and identification of cities are underway to
set up the first phase of 25 Apollo Reach Hospitals over the next two years across India. With an initial bed
strength of 100 - 150 beds, each Apollo Reach Hospital can be ramped up to a 200 bedded specialty hospital

Other Services offered by Apollo:

-Apollo Pharmacy
Apollo Pharmacy operates round the clock catering to all your medicine needs.
-Caf Apollo
Caf Apollo is a sit down dining facility of the hospital. It offers a wide selection of snacks and a variety of
meals.
-Apollo Food Plaza
There is food facility located in the atrium of the hospital serving a delightful array of delicacies.
Timings : 8.00am - 9:00pm
-Fast Food Cafe
For the convenience of ICU attendants there is a 24 hours cafe in the ICU lobby.
-Gift Shop
The Gift Shop carries a wide range of gifts including Confectionery, Cards, Books, Newspapers, Magazines and
other novelties.
-Bank Facilities
-The Oriental Bank of Commerce
The Indraprastha Apollo Branch of the Oriental Bank of Commerce is located at one of the Gates.
Bank Hours
Monday to Friday : 10:00am - 2:00pm
Saturday : 10:00am - 12:00pm
The bank remains closed on Sundays and National Holidays.
-The ICICI ATM Counter
The ICICI ATM counter is also located in the hospital.

Operations:
The hospital has recorded a significant growth within a short span of five years. During the
financial year 2000-01, the performance highlights are:
Average daily bed occupancy increased by 8 % from 295 last year to 319 this year
Number of in-patients increased by 28 % from 18066 last year to 23114 this year.
Total income increased by 23 % from Rs. 11267.13 lakhs last year to Rs. 13842.97 lakhs
this year.
Profit increased by 85 % from Rs. 648.77 lakhs to Rs. 1197.51 lakhs this year.
The hospital has performed 1507 open-heart surgeries with growth of 09 % over the
previous year.
The hospital has performed 903 Neuro surgeries with growth of 46% over the previous
year.
The hospital has performed 224 Transplant surgeries with growth of 35% over the
previous year.
The hospital continued to show rising trend during first quarter of current financial year.
With the total net profit after tax 401.70 lakhs which is higher by 54 % over the
corresponding quarter of previous year.
At present, 520 beds have been commissioned.

Medical Milestones
Employs over 4000 specialists and super-specialists and 3000 medical officers spanning 53 clinical
departments in patient care.
Achieved a 99.6% success rate in cardiac bypass surgeries, over 91% of these were beating heart
surgeries.
Conducted over 55,000 cardiac surgeries - one of only 10 hospitals in the world to achieve these
volumes.
First Indian hospital group to introduce new techniques in Coronary Angioplasty, Stereotactic
Radiotherapy and Radiosurgery.
Performed over 7,50,000 major surgeries and over 10,00,000 minor surgical procedures with
exceptional clinical outcomes.
Pioneered orthopaedic procedures like hip and knee replacements, the Illizarov procedure and the
Birmingham hip re-surfacing technique.
Pioneered the concept of preventive healthcare in India successfully completed over 700,000
Preventive Health Checks.
First hospital group to bring the 64 Slice CT-Angio scan system.
First hospital group in South-East Asia to introduce the 16 Slice PET-CT Scan.
First to perform liver, multi-organ and cord blood transplants in India.
Equipped with the largest and most sophisticated sleep laboratory in the world.

The Apollo Expertise

One of the most respected hospitals in the world, Apollo hospitals specializes in cutting-edge medical
procedures. With the evident boom in Medical tourism, we have a lot of health tourists choosing us as their
ultimate Health Tourism destination for medical services.They have pioneered many revolutionary procedures
and technologies in India, and a whole lot of health tourists come to opting either for medical care or elective
procedures. Some of the health procedures are-

Cardiac Surgeries
Total Knee /Hip Surgery Replacements
Birmingham Hip Resurfacing Procedure
Liver, Multi-Organ, and Cord Blood Transplants
Coronary Angioplasty
Stereotactic Radiotherapy and Radio surgery
Cosmetic Surgery
Bariatric Surgery - laparoscopic
Laparoscopic Hernia Repair
Laparoscopic Adrenalectomy

Group Companies

The Apollo Hospitals Group today is not only an acknowledged leader in the world of super-specialty based
quality healthcare delivery in Asia, but is also considered as the largest integrated healthcare delivery company,
complete in every sense of the term.

Apollo Hospitals Enterprise Limited

Keimed.com Limited

AHEL Pharmacies Business

Online Hospital Equipment Services
Private Limited (Equipment World)

Apollo Health & Lifestyle Limited

Apollo Health Street Limited

Med Varsity Online Limited

Apollo Telemedicine Enterprises Limited

Apollo Hospitals Education and

Research Foundation

Family Health Plan Limited

Revenue Analysis
In this economic slowdown, health care industry has got least affected. Apollo Hospitals limited has also
increased its revenue from Rs. 1123.81 crores to 1457.98 crores. Yearly sales growth
rate has increased by 29.74 % which was 26.13% in the year ended 200803. Revenue from
healthcare services increased by 22% to Rs 1123.80 crore and pharmacy business went up by
65% to Rs 334.33 crore. This revenue growth rate is quite higher than the industry standard
growth rate.
Yearly sales growth rate has increased during the year 2008-09 due to the result of an increase in
occupancy and revenue per bed day (RPBD) for hospitals and higher number of SAPs (Stand
Alone Pharmacies). In most of the pharmacies have nursing stations attached. The Nursing
stations provide basic medical services like measuring blood pressure, dressing, etc.
RPBD increased from Rs. 8,767 to Rs. 9,667. The increase in RPBD is largely a result of
changes in the acuity of the patients as well as better price realizations.

Balance sheet Audited Financial Results for the quarter and year ended 31.03.2008
Amount ( Rs. In Lacs )
PARTICULARS
S.

Nine

Quarter ended

Financial

Financial

Months

year

year ended

ended

ended

No.

(Audited)

(Audited)

31.12.2007

31.03.2008

31.03.2007

31.03.2008

31.03.2007

Income from operations

23503.48

7967.25

5803.26

31470.73

23271.35

Other Income

1959.58

796.88

553.50

2756.46

2103.76

Total Income

25463.06

8764.13

6356.76

34227.19

25375.11

Expenditure
a) Increase/decrease in stock in trade and wip

b) Consumption of stores & spares

7110.27

2371.94

1641.15

9482.21

6690.90

c) Purchase of traded goods

d) Staff cost

4617.87

1748.79

1225.42

6366.66

4591.91

e) Consultation fee paid to Doctors

6408.60

2234.66

1533.67

8643.26

6225.38

f) Depreciation

1193.89

423.22

175.86

1617.11

1183.73

g) Other expenditure

3696.58

1211.50

998.91

4908.08

3876.53

Total

23027.21

7990.11

5575.01

31017.32

22568.45

Interest

447.39

180.12

134.33

627.51

509.49

Exceptional items

Profit from ordinary activity before tax (PBT)

1988.46

593.90

647.42

2582.36

2297.17

Provision for taxation

729.66

237.92

232.53

967.58

824.83

Profit from ordinary activity after tax (PAT)

1258.80

355.98

414.89

1614.78

1472.34

10

Extraordinary items ( Net of tax expense)

11

Net profit for the period

1258.80

355.98

414.89

1614.78

1472.34

12

Paid-up Equity share capital

9167.30

9167.30

9167.30

9167.30

9167.30

(Face value Rs. 10/- each)

13

Reserves excluding revaluation reserves

2,232.86

2176.40

14

EPS-Basic and Diluted (Rs.)

1.37

0.39

0.46

1.76

1.61

15

Aggregate of Non-Promoter shareholding:

Number of shares

45281993

45314709

45007683

45314709

45007683

Percentage of Shareholding

49.40

49.43

49.10

49.43

49.10

Porters five force model for industry analysis

New Market
Entrants, eg:
entry ease/barriers
geographical factors
incumbents resistance
new entrant strategy
routes to market

Competitive Rivalry,
eg:

number and size of

firms
industry size and trends
fixed v variable cost
bases
product/service ranges
differentiation, strategy

Buyer Power, eg:

Supplier Power, eg:

. buyer choice
1brand reputation.
2geographical coverage.
3product/service level
quality.
4relationships with
customers
bidding
processes/capabil
ities

Product and
Technology
Development,
eg:
alternatives
price/quality
market
distribution
changes
fashion and
trends
legislative
effects

buyers
size/number
change
cost/frequency
product/service
importance
volumes, JIT
scheduling

worries Apollo hospital.

The threat of new entry is quite high: if anyone looks as if theyre making a sustained profit, new competitors can

come into the industry easily, reducing profits;

Ex.- Fortis , Max, Escort , WOCKHARDT and DUNCANS GLENEAGLES INTERNATIONAL

Competitive rivalry is extremely high: if someone raises prices, theyll be quickly undercut. Intense competition

puts strong downward pressure on prices;

Buyer Power is strong, again implying strong downward pressure on prices; and

There is some threat of substitution.

Ex Telemedicine or shifting to other medicine like ayuraveda or natural care

Unless it is difficult to find some way of changing this situation, this looks like a very tough industry to survive in. Maybe
he'll need to specialize in a sector of the market that's protected from some of these forces, or find a related business that's
in a stronger position.
Key points:
Porter's Five Forces Analysis is an important tool for assessing the potential for profitability in an industry. With a little
adaptation, it is also useful as a way of assessing the balance of power in more general situations.
It works by looking at the strength of five important forces that affect competition:

Supplier Power: The power of suppliers to drive up the prices of your inputs;

Buyer Power: The power of your customers to drive down your prices;

Competitive Rivalry: The strength of competition in the industry;

The Threat of Substitution: The extent to which different products and services can be used in place of your own;

and

The Threat of New Entry: The ease with which new competitors can enter the market if they see that you are

making good profits (and then drive your prices down).

By thinking through how each force affects you, and by identifying the strength and direction of each force, you can
quickly assess the strength of the position and your ability to make a sustained profit in the industry.

Opportunities in hospital
With global revenues of approximately US$ 2.8 trillion, the healthcare industry is the worlds largest industry
and India is emerging as a major player in this industry, because of its high population. As per the Insurance
Regulatory and Development Authority (IRDA), the Indian healthcare industry has the potential to show the
same exponential growth that the software and pharmaceutical industries have shown in the past decade.
Further, as per the IRDA, only 10 percent of the market potential has been tapped till date and market studies
indicate a 35 percent growth in the coming years.
A big opportunity for the industry emerges from the privatization of the insurance segment, which would
extrapolate into a new delivery system in India. There is a vast insurable population in India, given that only 2
million people i.e. 0.2 percent of the total population are covered under Med claim. According to a recent study,
there are 315 million potentially insurable lives in the country. First, there are economic factors that make India
an exciting market. Since healthcare is dependent on the people served, Indias huge population of a billion
people represents a big opportunity. Today, people are spending more on healthcare and preferring private
services to government ones. Hospitals in India are running at 80-90% occupancy. With the demand for
healthcare far exceeding supply, Indias health care industry is expected to grow by around 15% a year for the
next six years. Hospitals in India conduct the latest surgeries at very low cost. Corporate entities entering the
healthcare sector, introducing managerial practices and tools are showing a marked preference for professionals,
leading to the expansion of the hospital management education industry.
Threats
The cost burden is set to increase due to the limited resources, and rising incomes will translate to higher wages, supply
and capital costs. Real estate prices have become prohibitively high and a deterrent to take on new projects. This will add
to higher costs of Healthcare delivery which has to be borne by the consumer. Medical equipment accounts for 40-45% of
the total expenditure in hospitals. Any change in technology will make existing medical equipments obsolete. High rate of
advancement in medical technology is leading to shorter lifespan, obsolescence of medical equipment, requiring medical
professionals to upgrade their skills on a constant basis. The density of doctors per 10,000 population in India is 6 while
the world average is 13. There could be a shortfall of over 450,000 doctors in the year 2012.Density of nurses per 10,000
population is 13 in India while world average is 28. The migration of skilled technicians and nursing personnel to
developed countries due to higher compensation levels leaves behind a void in quality of personnel at the disposal of
hospitals. Apollo is one of the strongest brands with minimal threats in the near time. This means, easier access to capital,
continuing with the current leadership position in the market and comprehensive services with relatively greater margin.
Apollos success has been drawn from the fact that it has added a number of synergic revenue streams to its business. As a
result, its multi-income inflow has helped it cover its fixed investments faster than the other companies in the sector.

Strengths
Apollo is an integrated healthcare organization with a comprehensive span of healthcare capabilities, enabling us to
provide end-to-end services to patients. We provide seamless delivery of services at every level of care primary,
secondary and tertiary. Being the largest purchaser and consumer of medical consumables in the private sector, we are
able to leverage on cost and benefit from our group bargaining position to obtain better terms from our suppliers and
service providers. Our quality consciousness and patient-centric approach has improved our operational and clinical
efficiency, and led to numerous accolades in the medical arena in India. We have implemented clinical governance
measures that have gone a long way in ensuring and improving the quality of clinical care at all levels of healthcare
provision in Apollo Hospitals. We have obtained 4 JCI accreditations across all specialties, the first in the country to do
so. Also, our quality programmes are registered by the Indian Council of Medical Research, ISO 9002, from Bureau of
Indian Standards & British Standards of India. We have focused on the provision of high-quality healthcare at affordable
rates. Our brand name has helped us to expand our operations in India and overseas, besides extending our range of
services. High-quality medical facilities and services are offered at cost competitive rates when compared to the Western
and European regions making India the preferred choice for medical travel. We have consistently invested in medical
technology and equipment so as to offer the highest quality healthcare services to our patients. The availability of
sophisticated medical equipment, such as the PET-CT scan, 320 Slice CT Scanner, Cyber knife ensures that we are among
the few healthcare providers in India capable of offering advanced healthcare procedures such as stereo tactic radio
surgery and bone marrow transplants to our patients. The major strength contribution to the success of Apollo Hospitals
has been the clinical excellence governed by strong medical value system and ethics. Our Medical success rates have been
world class. Apollo stands unique among the few providers of quaternary care for complicated medical conditions, and is
saving more and more lives every day. We have a professional management team with a strong performance culture. We
maintain strong, enduring relationships with doctors and medical professionals. This has attracted medical professionals
returning from abroad to work with us. We believe one of the pillars of our success is our huge talent of approximately
811 doctors across 50 specialties. We are among the largest networks of doctors in India, and have approximately 3,130
nurses, 1,104 paramedical personnel and 513 executives.

Weakness
We have added 297 Stand-alone pharmacies during the year, since most of the pharmacies are in the incubation
stage which can depress the margins. High attrition rates among the nursing workforce to Western countries and
competitors due to higher salaries and perks being offered necessitates higher investment in training to ensure
that the clinical staff is equipped with the right skills, competencies and expertise needed to deliver quality
healthcare. The rising costs of healthcare delivery makes majority of the private hospitals expensive for a
normal middle-class family. Internal control systems and their adequacy The company deploys a robust system
of internal controls to allow optimal use and protection of assets, facilitate accurate and timely compilation of
financial statements and management reports, and ensure compliance with statutory laws,

Business strategy
Apollos business model has been a successful as it is able to generate profit even in the face of being capital
intensive in nature. Our mission is to continuously keep improving the quality of healthcare services provided to
the communities we serve and strive to bring healthcare services of international standards within the reach of
every individual. At the same time, we seek to generate strong financial performance and appropriate returns to
our investors through disciplined and balanced execution of a comprehensive business strategy that reinforces
both quality of care and financial strength. We seek to further strengthen our position as a leading healthcare
service company by successfully differentiating our service offerings and increasing the scale of operations. We
would be looking to dominate the healthcare space by increasing bed strength in the cities where we are already
present in addition to commissioning of new hospitals in Tier 2 and Tier 3 cities through the Reach initiative.
The Reach model is expected to be a no-frills model, providing cost-effective quality healthcare. The
facilities shall be of the level of higher secondary and acute care, capable of developing into a tertiary care
centre. Each facility will be conceptualized to cater to the shortage in nursing infrastructure in the country, by
providing for nursing colleges. Leverage our intellectual property and domain knowledge to create Centres of
Excellence of high-end medical care services at the new and existing facilities. Share best practices across all
the locations to enable increase occupancies at newly launched hospitals. Improve asset utilization across all the
hospitals. We have also made significant investment in our human capital to meet both our in-house needs and
our consultancy services business through the establishment of nursing schools and colleges and hospital
administration colleges. Growth in Standalone Pharmacies revenues would be driven by new store rollouts as
well as maturity of existing stores. We also believe that growth can also be achieved as we add new service
lines in our existing markets, invest in new technologies desired by physicians and patients, and demonstrate the
quality of the care provided in our facilities. Given the non-availability of adequate health care facilities in most
parts of India, we believe that high-growth opportunities remain in our existing markets as well as new
geographies that we are seeking to enter.

Competitive and Regulatory Environment

In the healthcare services segment, we face competition from other acute care hospitals, including tertiary
hospitals located in larger markets; specialty hospitals that focus on one or a small number of lucrative service
lines; standalone centres at which surgeries or diagnostic tests can be performed; and physicians on the medical

staffs of our hospitals. The shortage of bed supply in India continues to be high, although several healthcare
service providers have aggressive organic growth plans. In addition, our competitors are also expanding
presence by acquiring/ partnering with existing smaller hospitals. Going forward, pricing could come under
pressure in our key markets and competition for medical staff could intensify both of which may have an
adverse effect on our operations. It is widely recognized that India has a shortage of physicians in certain
practice areas, including specialists such as cardiologists and orthopedists, in various areas of the country.
Healthcare insurance penetration is Increasing rapidly, which may lead to a scenario where the costs of
providing care rise faster than reimbursement rates. We are putting in place systems and procedures to increase
cost efficiency and transfer best practices across our hospital network. Our standalone pharmacies (SAPs)
compete primarily with the unorganised sector. Organised sector penetration in the pharmacy sector is currently
only 2%, and unorganised players are able to offer similar services as the organized players. We differentiate
ourselves by ensuring high quality of the drugs supplied through SAPs, ensuring convenience for and building
deeper relationships with the end-customer and creating linkages between our hospitals and SAPs. The
pharmacy supply chain in India has multiple layers of suppliers, middlemen and retailers. Apart from
distribution, costs are another important element in this price-sensitive market.

Some Suggestions for improving the position of the Apollo hospitals

1.

The general perception that large hospitals, with high bed-occupancy rate, are profitable, is misleading.

Global experience shows that hospital with more than 250 beds dont do well. Many Indian hospitals are
following the US healthcare industry, by decreasing the average length of stay of patients and increasing patient
turnover. US research shows that 80% of the revenues form a patient comes in the first 72 hours postadmission. Hospitals generate a lot of revenues from General Inspection, because the patient turnover is very
high.
A large percent of revenues come from specialized services like operations and surgeries. It is because of these
reasons that many corporates are planning for a small 100 beds specialized hospitals, which caters to specific
diseases like cardiac, cosmetic surgery, neurology etc. Research shows that there exist a lot of space for superspecialized hospitals with 100-150 beds, which generate revenues equivalent to large 500 bed general hospital.
Typically large hospitals with approximately 500 bed capacity takes about 9-10 years to break even whereas
super-specialty hospitals with about 100 beds take about 6-7 years to break even. Therefore, going in for superspeciality hospitals seems to be a more viable option today.

2.

Hospitals could also generate revenues from medicines if they are supplying them in-house. Some

hospitals make it mandatory for the patients to buy medicines from the hospitals chemist shop. A margin of 1520 % can be charged for such medicinal supplies. Though many hospitals run by Trusts do not earn this way,
but new entrants or corporates for whom private healthcare sector is a direct extension of their line of business (
eg. Pharma companies), can generate good returns from medicine supply.
3.

Health Plan packages can be provided by hospitals to family and corporate. For example Family Health

Plan Services (FHP), a subsidiary of Apollo Hospitals does health management of employees of its clients.With
a wide net work of Hospitals and Healthcare providers countrywide, and a tie -up with General Insurance
Corporation of India, FHP offers a range of services to employees and dependants, such as Preventive
Healthcare, Corporate Counseling, welfare Programmes, Claims Administration, Patient-care Coordination and
so on. So FHP's healthcare packages, optimize the benefits while keeping the cost under control.
4.

Apart from preventive healthcare, stress management programs could be provided. For example

Effective Stress Management Programme offered by Wockhardt Hospital. This programme provides a
medical perspective of stress and is conducted by a medical professional. The programme includes a series of
one-to-one sessions, with a clinical Psychologist highlighting the factors responsible for inducing stress, and the
methodologies, which can be adopted to cope with this phenomenon practically.
5.

Hospitals can become integrated healthcare systems i.e. when medicines, food services, laundry and

linen etc will become "purchased" services. These third-party operations will increase the profit margins.
6.

Mergers could be used for synergy of skills - i.e. to help the merged organisations benefit from one

another's individual strengths by applying them across the board. It also helps them to make joint investments in
branding or information technology and also to react effectively to the changed market forces.
Alternatively hospitals can go in for Group Purchases, as in USA. The buying power of large GPOs in USA like
Premier, VHA / UHC and AmeriNet gives them the clout to exert price pressure on suppliers, particularly for
products in lower demand. And as GPOs have consolidated, manufacturers have offered bigger discounts to
hang on to their contracts. So there exists a lot of supply management opportunity, which will affect spending
productivity.

SWOT analysis based upon industry analysis