Indonesia update – Growth recovering gradually

Aditya Birla Sun Life Asset Management Company Limited (ABSLAMC) is the largest non-bank affiliated AMC in India by Quarterly Average Assets Under Management (QAAUM) since March 31, 2018,

ABSL (Aditya Birla Sun Life) is the largest non-bank affiliated AMC in India since FY18, and among the four largest AMCs in India since FY12.

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We interacted with the Senior Management of Narayana Hrudayalaya represented by Mr. Viren Shetty, COO along with Mr. Debangshu Sarkar, Head of IR and his colleague, Mr. Ashish Sukhija to get more insights on Narayana’s business. Narayana sounded very optimistic on the near term growth prospects. India revenue has recovered to pre-Covid levels and the situation can only improve from here onwards unless of course there is a severe impact of a possible third wave. Cayman should also continue its growth trajectory although some softness can happen during Q3FY22 as insurance benefits are generally extinguished during Q3, Q4FY22 should be devoid of this and thus better than Q3FY22. From a long term perspective, the Management is confident about the growth in India and Cayman given the demographic situation in India as well as in Cayman, where a recent trend of locals getting treated at Narayana’s facilities rather than in the US has been observed. The proposed investment in Cayman’s new facility at Camana Bay should further bolster the confidence of locals getting treated in this facility as the facility would be equipped with state of the art equipment with a focus on oncology, while all other speciality departments would also be present. Besides, inflow of patients from the US should also increase going forward with the commissioning of the new facility. Refurbishment of hospitals in India Narayana has elaborate plans of refurbishing its hospitals in India with a reduction in number of beds in general wards, the freed up capacity being used for ICU, Critical Care and Day Care beds. More number of private and semi private beds would also be added. Narayana feels that the situation is not as dire as it was 15 years earlier with respect to affordable healthcare as during that time Narayana was probably the only player in the private space catering to low income patients. Many new hospitals have come up across the country since then, which provide affordable healthcare. Besides, the paying capacity of patients has also improved over the years with further inroads being made in terms of insurance penetration. Thus, the refurbishment of the hospital network in India would take care of the changing dynamics effectively without hampering the basic ethos of Narayana as an affordable healthcare provider. The total cost of refurbishment would be around Rs 10,000 mln over 5 years. Preparation for a possible third wave Narayana is adequately prepared to face a possible third wave. All the beds across all facilities would be ICU convertible if necessary with high flow oxygen and ventilators. Narayana expects the third wave to be much milder compared to the second wave, however, if children get affected out of proportion then the available beds in the country across all hospitals will not be able to cope up as it totals to just 2000. Case mix and payor mix Narayana is continually focusing on improving the case mix across its hospitals, particularly in the ones located in Tier 1 cities. For example, it brings on board highly specialised surgeons who have trained in the US and UK to treat complicated diseases. While the number of complicated cases may not be high in number in a Tier 1 facility, the realisations are far superior leading to higher margins. Having said that, the cost of treatment of a highly complicated case would still be lower than other multispeciality hospitals. In terms of payor mix, Narayana expects the proportion of cash patients to fall to 40% from the current level of 50% in the long run. The decrease would be balanced by an equivalent increase in insurance patients while scheme patients would continue to be 20%. Over supply situation in Cayman Cayman’s current population is around 60,000 plus there are around 10-15,000 migrant workers. Even before Narayana entered Cayman there was an oversupply situation as the number of beds available per 1000 patients was above the WHO recommended guidelin

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