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Message from The Executive Chairman & The Executive Vice Chairman
It gives us great pleasure to once again communicate with you through our annual report for the year 2012–13. We set out over a decade ago on our mission to make quality healthcare accessible to all and would like to thank you for your unstinting support in our journey so far.
We are also happy to share with you that in the year gone by, your Company has witnessed a further maturing of processes and systems aligned towards delivering better healthcare to our patients across the Fortis Network.
Nature of the Healthcare Business
Healthcare is a ubiquitous need and a business that is directed at serving humanity. The demand for medical care and the consequent demand for better hospitals and healthcare facilities grow incessantly, unaffected by economic gyrations.
The setting up of medical infrastructure is capital intensive. This makes the gestation period for payback longer. Whilst a strong portfolio of businesses, such as ours, lends stability, it also brings complexity with various units at different stages of their life cycle and maturity curve. Challenges of predictability in the way economic circumstances pan out during this period require astute and swift judgment for course corrections. The ability to continuously match funding needs with the capital mix becomes vital in navigating difficult economic cycles for long term success.
Reassessing Priorities– An India Focus
In the last few years, we expanded rapidly beyond India, in Asia, to develop an integrated healthcare–delivery platform in response to the opportunities in the region. Debt for expansion in a growing market is the norm and we incorporated it to our advantage.
In the way the global economic environment has panned out since, and with continuing turbulence, predictability, certainty and consistency are virtues, whilst leveraged funding is perceived as an added risk. This has led us to reassess our own priorities and make necessary adjustments to make India our top priority.
With the prevailing economic circumstances, we also need to factor in and balance the current phase of evolution for Fortis, with imperatives that optimise our growth in the short versus the medium and the long term.
Given these growth realities we have divested our business in Australia and Vietnam, to focus on the Indian healthcare market. We continue to evaluate our portfolio of overseas businesses to ensure the right strategic fit.
There are many reasons that favour this decision. In–spite of a recalibrated growth in Indias GDP of 5%, the demand supply gap for healthcare delivery services in the country remains considerable. The Indian healthcare market is expected to reach US$ 119.6 Bn by 2015, reflecting a CAGR of 15.0%. Currently, India accounts for nearly 6% of the world hospital beds and shares 20% of the worlds disease burden. This will grow, as India surpasses China by 2030 to become the most populous country in the world. The ageing profile of its citizens, higher purchasing power, growing affluence and a higher incidence of chronic life style and non communicable diseases, will continue to fuel demand for healthcare services. (Source: Frost & Sullivan report Independent Report on the Healthcare Industry in the Asia Pacific regions, 17 September 2012)
In India, we have the advantage of scale and size and a leadership position and we need to build on that. Therefore, we believe that an India focus works to our advantage as we can ramp up our businesses faster at far lesser incremental expense by leveraging our existing infrastructure in the country.
To strengthen the sustainability of our model, we have also taken several strategic measures to reduce our debt burden and strengthen our balance sheet.
We successfully listed the Religare Health Trust (RHT) on the Singapore stock exchange,as its main sponsor, and raised gross proceeds of approximately Rs. 2,200 Crore. With this vehicle, we have created a perpetual source of funding for the business and made the move to an asset light model. In addition, we are seeking operate & manage projects and leasing options for growth. This will put us in a stronger position to capitalise on future opportunities in an asset light manner.
Our diagnostics business in India, SRL, witnessed strategic investments from high quality global investors such as the International Finance Corporation (IFC) and the NYLIM Jacob Ballas India Fund.
Fortis has also received further investments at the beginning of FY14, via the subscription of equity and equity linked instruments, from institutional investors, to part fund growth and to further strengthen the balance sheet. IFC, which has a longterm horizon and commitment to healthcare, has cumulatively invested more than US$ 100 Mn in the Company.
These measures will together bring down overall debt, enhance profitability and create room for further growth.
The priority for the business going forward is to work towards achieving a significantly higher level of operating leverage that will have a substantial positive impact on our performance and results. This also means that this rationale will drive our future resource allocation programme and help to stagger our investment and capital expenditure over a period of time. Today, we are well on our path to achieving this desired objective.
This year, 2013–14, will witness the launch of three new greenfield hospitals in India: The Fortis Memorial Research Institute, Gurgaon (launched May 2013) and hospitals in Chennai and Ludhiana, to be launched later this year. We will also see further consolidation and strengthening of our business and balance–sheet.
Thrust Areas and Improvements
Fortis, with its large network of 62 healthcare facilities spread across India, has created a highly respected brand, well recognised for comprehensive services and quality. It enjoys a leadership position with a very strong platform of operational capability, deep experience and knowledge of the Indian market–place.
Our greatest strength lies in our people our pool of doctors, paramedics, nurses and managerial talent and our processes. This talent pool and knowledge of processes can be easily scaled up and replicated giving us the unique ability to ensure quality growth whilst keeping costs low. Additionally, capacity enhancements at our existing hospitals can be achieved with marginal investment only, enabling us to grow faster. This is good reason why we see bed capacity ramp up from 4,000 operational beds to about 10,000 operational beds before the end of this decade.
Continuous improvement in the way we work to deliver value to our patients is central to how we think and act. The organisation has invested considerable time in the improvement and standardisation of processes ensuring a consistently high level of service across our hospitals. Other high impact organisation building programmes included the creation of shared services for the Group to drive both efficiencies and economies of scale in the supply–chain and important back office operations.
Launch of Our Flagship:
The Fortis Memorial Research Institute (FMRI)
In the last year, of the five hospitals we set up, our most significant contribution has been the Fortis Memorial Research Institute (FMRI) which was dedicated to the nation in May 2013. We believe this will become the landmark facility for international research and medical talent. Drawing patients from India and abroad for its competence in the treatment of disease complexity, it will be recognised among the top few hospitals in the world.
FMRI represents the culmination of several years of conceptualisation of what a futuristic institute of medical excellence ought to be. It builds on a strong platform of medical programmes that encompass all super–specialities and multi–specialities, providing comprehensive medical services, under one roof. Clinical delivery led actively by the human values of empathy, care, service and a philosophy of healing are at its core.
Building a Strong Base for Indian Healthcare
As frontrunners in healthcare, we have also been instrumental in kickstarting a pan–India industry forum, Nathealth, that actively supports sectoral players in coming together on a common platform so that issues of common interest and other important matters can be jointly discussed and addressed. It will go towards building congruence amongst its constituents in creating greater value for patients and ensure that ethical principles of practice are institutionalised not only in our company but in the fabric of every healthcare delivery organisation in the country.
Corporate Social Responsibility
Fortis Healthcares spirit of service to humanity is not confined to its facilities. We have actively pitched in with our expertise whenever and wherever a need has arisen. Fortis, through its philanthropic arm, the Fortis Foundation, endeavours to take quality healthcare to the grassroots. Many of these programmes have been institutionalised and revolve around the girl child, healthcare education and the delivery of healthcare through outreach programmes that touch the lives of the less fortunate through community service rendered by Fortis hospitals all over the country.
In association with Being Human–The Salman Khan Foundation, we have launched The Little Hearts Programme that aims to treat underprivileged children suffering from congenital heart diseases. We have also supported victims of acid attacks and most recently, we were at the forefront of offering medical aid to the victims of natures fury in Uttarakhand. It is through such ongoing efforts that we try and assist the less fortunate members of our society to cope with their medical challenges.
Our Special Thanks to all Fortisians
We would like to place on record the enormous contribution being made every day by our Doctors, Paramedics, Nursing, Administrative Staff and all other Fortisians, across the Network by putting in dedicated effort to make a difference to every patient. This sense of dedication and personal involvement has helped the organisation to continually improve upon its own benchmarks of patient satisfaction, service quality, clinical outcomes, efficiency and move ahead on the path to prosperity.
Our objective is to create a growth–focused culture that delivers high quality healthcare with warmth and empathy, generating sustainable value for patients and all our stakeholders.
In conclusion, we would like to say that this has been an immensely satisfying year. We have accomplished much as an organisation and have set the stage for the next phase of growth.
We started Fortis with the intent to serve the people of India and have been successful in our efforts to bring world–class capability, technology and local medical talent in alleviating the burden of disease. We are also happy to see that the Industry is maturing and that India is well poised to leverage its vast Indian medical talent, technology, infrastructure, systems and processes, to provide world–class medical treatment, with care and compassion, at price points that are affordable.
It is therefore not surprising that more and more international patients are beginning to seek medical attention here and India is beginning to make its mark on the world map as a value market for medical travel, on account of its high quality of medical care, superior service and affordability. We are confident that India will actualise its true potential as the preferred global healthcare destination in the foreseeable future.
We would once again like to extend our very special thanks to all of you and look forward to your continued commitment to Fortis and to the future of healthcare.
With warm regards,
Malvinder Mohan Singh
Shivinder Mohan Singh
Executive Vice Chairman