HDFC Bank Ltd

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HDFC Bank Ltd

• Presentation
• on
• Healthcare Business/Opportunities

2
Objectives

• Overview on Healthcare Industry
• To estimate healthcare growth and funding
  requirements

3
India Demographics

• Total Population 1.15 Billion
• National Gross Domestic Product 1.2 (Trillion
  )
• Health care per capita spend at USD 94
• 1.04 beds per 1000 population

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Update on Healthcare Industry in India

• Estimates Fuelling Growth-
• Projected size by 2012 USD 75 -85 Bn
• 15,000 Hospitals addition by 2012
• 3,31,082 hospital beds by 2012
• 6,60,801 doctors by 2012
• 170 New Medical colleges
• 24,000 retail chemist outlets

• Current Scenario-
• Estd Current mkt size USD 40 Bn
• 30,000 hospitals approx
• 11,78,576 beds
• 50,00,000 doctors
• 229 Medical colleges
• 3,50,000 retail chemist outlets

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Healthcare market Concentration
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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.

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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.

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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.

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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.
• Apparently, the age group of 15-44 years are
  prone to fall to these ailments which is the
  major chunk of our age demographic
  classification, avg to 48 of the total
  population.

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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.

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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

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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 NBFCs - Rs. 1750 cr. To Rs. 2000 cr.
• Scope for scaling up Medical Equipment Funding -
  an Issue

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Funding Pattern and Potential lending Opportunity
for Banks / FIs

• 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

Pvt Spending 82.7 Rs.99600 Crs
Govt Spending -17.3 Rs.20400 Crs
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Distribution of funds - Segmentwise
Total Debt of Rs.20033 crs Per Annum
Manufacturers Traders Rs.8500 Crs
Hospitals /Diagnostic Centres Rs.11533Crs
Infrastructure
Importers Distributors
Wholesaler of Medicines
Equipment Manufacturers
Eqpmt. Finanace
Software Solution Providers
Formulation bulk Drug Manufacturer
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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

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Hospital Infra - Funding

• About 56 of the Hospital capex in multi
  speciality is on imports. Typical capex in such
  hospital is as underDepartmental Building
  / civil infra 40Specific equipments 18Imagin
  g equipments 16Furniture / IT 13Elecl /
  Mechanical 6Pathology lab 5Clinical
  instruments 2

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Hospital Bed counts / Proj. Investment
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Pharmacy Funding

• No of Pharmacies 3,25,000 units
• Industry Size/sales Rs. 1,19,000 cr
• No of Captive units _at_ 30 97,500
• Margin 15 to 20
• Store size 200 sq ft
• No of Community units _at_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

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Medical equipment overview / concentration

• Total Market Size Rs. 12000 crs

Medical equipments Rs. 5000 crs
Lab equipments Rs. 2500 crs
Medical Devices Rs. 2500 crs
Consumables 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.

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Medical Devices - Funding
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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.

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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.

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HDFC Bank - Synopsis

• Largest product offering Whole sales, retail,
  treasury and advisory
• Most diverse client base including Pvt sector,
  PSUs, 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

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Over view of HDFC banks Health care business

• HDFC bank offers 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

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THANK YOU