Date:11.11.

21

Krishna Institute of Medical Science Ltd

Market Cap (Cr) 9401 EV/EBITDA 24.4

Promotor Holding 38.8% Div Yld 0%

About the Company:

Founded by Dr. Bhaskar Rao Bollineni, a renowned cardiothoracic surgeon, KIMS operates a chain of
multispecialty hospitals in Andhra Pradesh and Telangana, with a focus on tertiary and quaternary
healthcare. It began its journey in 2004 a hospital in Secunderabad. Today, KIMS is one of the India's
leading multi-disciplinary integrated private healthcare service providers offering comprehensive
healthcare services across specialties and super specialties.

KIMS operates 9 multi-specialty hospitals under the “KIMS Hospitals” brand, with an aggregate bed
capacity of 3666, which is 2.2 times more beds than the second largest provider in AP and Telangana,
according to the CRISIL report.
KIMS offers a comprehensive range of healthcare services across over 25 specialties and super
specialties, including cardiac sciences, oncology, neurosciences, gastric sciences, orthopedics, organ
transplantation, renal sciences and mother & child care.

Segment wise Revenue:

1. Is the market opportunity huge enough to provide long runway to growth?

➢ The Indian healthcare delivery market is valued at ₹ 4.3 trillion and accommodated ₹ 1.7
billion treatments (both in-patient and outpatient) in Fiscal 2021. With renewed impetus
from the PMJAY, the healthcare delivery market is expected to log a CAGR of 17- 18% and
reach ₹7.07 trillion in fiscal 2024. The share of IPD (in value terms) is expected to grow
from 69% in the current fiscal to nearly 74% in Fiscal 2024, with OPD contributing the
remaining. In terms of volumes, OPD is estimated to outweigh IPD volumes, with the latter
contributing the bulk of the revenues to healthcare facilities.
➢ By 2030, India’s population is projected to touch 1.5 billion.
➢ Urbanization likely to reach 40% of Indian Population by 2030
➢ India’s per-capita income, a broad indicator of living standards, clocked a healthy ~5%
CAGR, from ₹ 63,462 in fiscal 2012 to ₹ 94,954 in fiscal 2020. Growth in per-capita income
has been led by better job opportunities, propping up overall GDP growth. Moreover,
population growth has remained fairly stable at a ~1% CAGR.
➢ India is the most prominent destination as per the Medical Tourism Market due to highest
quality treatment at the lowest cost.
➢ Comparison of health care expenditure with other Nations:

➢ Bed Density Comparison with other Nations:

➢ Key budget proposals : Budgetary allocation towards health and well-being increased to
₹ 2.23 lakh crore in fiscal 2022

➢ Key Growth Drivers :

➢ KIMS is one of the largest corporate healthcare groups in AP and Telangana in terms of
number of patients treated and treatments offered, they have 3,064 beds across nine
multi-specialty hospitals in AP and Telangana as of December 31, 2020, which is 2.2 times
more beds than the second largest provider in AP and Telangana, they have over 20 years
of expertise in AP and Telangana since opening of their first hospital in Nellore in 2000.
They strategically focus on the southern India healthcare market where they have a strong
understanding of regional nuances, customer culture and the mind-set of medical
professionals and where there is significant and growing need for quality and affordable
healthcare services. KIMS Ltd is one of the three hospitals in India rated ‘AA’ by CRISIL
➢ In Fiscal Year 2020, their nine hospitals recorded ARPOB of ₹ 18,307, a bed occupancy rate
of 80.49%, and an ALOS of 4.34 days, on an aggregate basis. In Fiscal Year 2020, ARPOB
for their hospitals situated in Tier 1 cities was ₹ 27,410 and ARPOB for our hospitals
situated in Tier 2-3 cities was ₹ 11,758.
➢ Due to policy of providing equity partnership to its key doctors, they have retained 80%
of their doctors since inception.
➢ Some of the key advantages of having regional presence which add value to KIMS are as
follows:
▪ Understanding the mentality of people (patients) in a particular region forms a
crucial part of connecting and establishing long-term relationships for any
hospital. Players with regional presence often have a strong grasp of the regional
languages, food preferences, culture, and affordability, which helps them connect
and bond with their patients from a long-term perspective.
▪ Understanding the mentality of doctors is also an important aspect for a hospital.
Having regional presence not only gives players’ access to the key doctors in the
region, but it also helps doctors tie up with a brand to enhance their portfolios.
▪ Integrating talent from well-established allied workforce such as lab technicians
and nurses also augers well for established players. There are additional benefits
for employees associated with a regional chain, such as easy location transfers for
any personal reasons. Hence, workforce in such hospitals sticks longer.
➢ Telangana, Andhra Pradesh and Karnataka the top three states in terms of average per-
capita income growth between fiscals 2014 and 2020.
➢ Andhra Pradesh and Telangana among the states with higher (>50%) NCD burden in India
According to reports, the proportion of NCDs in the country’s disease burden has
increased.
➢ Andhra Pradesh has highest percentage of population aged 15-59 years. So after clubbing
all the data we can conclude that a growing middle-class, coupled with rising burden of
new diseases, are boosting the demand for affordable and quality healthcare. Which can
help KIMS to grow in coming years.
➢ They also intend to expand in these regions via different models, which include asset-light
models or models involving no ownership of assets.

➢ Keeping future expansion in view KIMS Kondapur has entered into a lease agreement for
a land and building. KIMS is already experiencing shortage of beds at KIMS Kondapur and
 there is a lot of scope for serving the medical needs of people in that area. It is a good
opportunity to strengthen KIMS Kondapur.
▪ The new Kondapur hospital will have total of 700 to 800 beds and this will be
deployed over a period of time. In phase I, KIMS is looking to operationalize an
incremental 150 beds so that is the current 200 to 250 beds will scale up and
additional 200-250 beds and take it to 500 beds and this could be commissioned
in the next like 30 to 36 months and based on ramp up and occupancy of these
beds we will then commission the incremental 200 to 250 beds.
▪ KIMS was fortunate to having found this land very close to the current hospital in
Kondapur. KIMS will then slowly transition from the current facility into the new
campus once the new campus is ready within the six month to nine month period.
▪ In three years KIMS will have 500 beds built up. KIMS will then let go of the existing
facility and move to the completely new facility where we will have 500 beds
operational, so that will be an incremental of only 250 beds because we currently
anyways occupying 250.
➢ In central India Maharashtra KIMS have been able to zero down one to two assets, but
KIMS is yet to get final clearances and then will present to the board and send an official
note.
➢ KIMS is looking to add an incremental 1500 beds and this will happen over a period of 12
months to 36 months and the incremental cost to deliver these 1500 beds will be to the
tune of around 0.90 – 1.1 Crores for bed
➢ Recently (OCT-2021), KIMS Hospitals has entered into definitive agreements to acquire
51.07% stake (as a combination of fully and partly paid-up equity shares) in Sunshine
Hospitals (M/s Sarvejana Healthcare private Limited).
▪ Acquisition will help KIMS Hospitals to consolidate its position as a leading
provider of tertiary care services in its key markets and adds a world renowned
orthopedic surgical team led by Dr. A. V. Gurava Reddy.
▪ Augments and complements KIMS Cardio, Neuro, Transplant and Renal sciences
team
▪ Combined entity will have 12 hospitals across 9 cities with 3666 beds and over
1200 doctors and 12,000 + employees
▪ Particulars after acquisition of Sunshine in Hyderabad Market :

➢ Over the next 3-4 years, KIMS may undertake moderately aggressive capex of over
Rs.1000 crores to expand into adjacent geographies in South India, and other states.
 Capex requirement will be largely be managed by internal accruals and expects revenue
contribution from 2025.

➢ EXPANSION PLAN:

3. Is shareholder major beneficiary of the growth in business

➢ KIMS is well positioned to consolidate in India’s large, unorganized yet rapidly growing
and underserved affordable healthcare market.
● The revenue CAGR since last 5 years is 21%.
● ROE 27.6%.
● ROCE 29.6%.
● Net Profit Margin CAGR since last 5 year is 49%
● Debt to Equity Ratio is 0.37
KEY Growth Ratios:

KEY Financials:
Operating Performance:

Comparison between AP Matured Hospitals & Acquired Hospitals:

Cash Flow Statements:

Consolidated operating revenue saw an increase of 15% against Q4 of FY 21, standing at Rs. 4,117.40
million. Increased Patient flow, new doctor additions in existing specialties, consistent growth in Heart
and Lung transplant programme & increasing normalization of business to pre-covid levels contributed
to this growth. Against Q1 FY 22, it saw a decrease of 13%.
• Consolidated EBITDA for Q2 FY 22 stood at Rs. 1,341.85 million, a growth of 27.7% against Q4 FY 21.
EBITDA margins expansion was driven by speciality mix change over Q4 FY 21 last year and operation
leverage.
• EBIDTA Margin grew to 32.2% in Q2 FY22 from 31.0% in Q1 FY 22 primarily led by tighter control on
medical consumption cost.
• Consolidated PAT of Rs. 842.54 million in Q2 FY 22 at 20.2% PAT margin compare to Q4 of FY 21 was
16.2% and in Q1 of FY 22 was at 19.3%.
• EPS on diluted basis has increased to Rs. 10.34 in Q2 FY 22 from Rs. 7.59 in Q4 FY 21 and it has
decreased against Q1 FY 22 of Rs. 11.48
• As on 30th Sept, 2021, on consolidated basis we are net debt free, out of IPO proceeds, group has
repaid the term loans to the tune of Rs. 1,500 million

Operational Highlights:
• Q2 FY 22 occupancy stood at 59.8% against 60.1% in Q4 FY 21 and in Q1 FY 22 was 62.2% (based on
beds capacity).
• IP discharged volume has increased to 36k+ in Q2 FY 22 against 32k+ in Q4 FY 21 translating to a
growth of 11% and it has increased from 31K+ in Q1 FY 22 as volume of major speciality has increased
on account of normalization.
• OP Consultation volume has increased to 2.80 Lakhs in Q2 FY 22 from 2.62 Lakhs in Q4 FY 21, and
also increased from Q1 FY 22 from 1.82 Lakhs.
• ALOS has improved from 5.06 days in Q4 FY 21 and 5.47 days in Q1 FY 22 to 4.61 days in Q2 FY 22.
• ARPP has increased from Rs. 1.09 Lakhs in Q4 FY 21 to Rs. 1.15 Lakhs in Q2 FY 22, which is a growth
of 5%, and decrease from Q1 FY 22 from Rs. 1.49 Lakhs.
• ARPOB for Q2 FY 22 has improved at Rs. 24,877 against Rs. 21,591 in Q4 FY 21, this is driven by better
payor mix and increase in complex surgeries and procedures also ARPOB has decreased from Q1 FY
22 from Rs. 27,289.

Management Pedigree:

▪ Dr. Bhaskara Rao Bollineni is the Managing Director of the Company. He holds a bachelor’s
degree in medicine and surgery from Andhra University and a master’s degree in general
surgery from Madras Medical College, Chennai. He has also been admitted as a Diplomat of
the National Board of Examinations, New Delhi for the practice of cardio-thoracic surgery. He
has over 27 years of experience in cardiothoracic surgery and has in the past held various
positions with Apollo Hospitals, Austin Hospital, University of Melbourne and Mahavir
Hospital and Research Centre.
▪ Anitha Dandamudi is a Whole-time Director of the Company. She holds a diploma in business
management from the ICFAI University and a certification for the six-sigma green belt. She
also holds certifications for the auditing of quality systems as per ISO 9001-2000 and ISO 9004-
2000, and has completed a training program on internal quality audit for the NABH. She has
over 16 years of experience in the hospital industry, having held various positions with our
Company, and has also served as vice president of administration at e-Talent Software
Limited.
▪ Dr. Abhinay Bollineni is an Executive Director of the Company. He holds a bachelor’s degree
in medicine from the Deccan Medical College. He participated in the ‘International Visitor
Leadership Program on Oncology: Research, Prevention and Treatment’ held by the U.S.
Department of State where he undertook training in diagnosis, treatment methods,
alternative therapies, support groups and follow-up care for cancer patients and their families.
Additionally, he played a key role in establishing KIMS Kondapur in 2014.
▪ Sandeep Naik is a Non-executive Director of the Company. He holds a bachelor’s degree in
engineering from the University of Bombay, and has completed his master’s degree in science
from the Virginia Commonwealth University and a master’s in business administration from
Wharton School of Business at University of Pennsylvania. He is a Managing Director and head
of General Atlantic’s business in India and Asia-Pacific and a member of the management
committee at General Atlantic. He was previously associated with Apax Partners LP, Apax
Partners India Advisers Private Limited, Medtronic Inc. and McKinsey and Company. He was
also selected as a Young Global Leader by the World Economic Forum in 2010.
▪ Shantanu Rastogi is a Non-executive Director of the Company. He holds a bachelor’s degree
in technology and a master’s degree in technology from Indian Institute of Technology,
Bombay and has completed his master’s in business administration from Wharton School of
Business at University of Pennsylvania. He is a Managing Director at General Atlantic. He was
previously associated with Apax Partners India Advisers Private Limited and McKinsey and
Company.
▪ Pankaj Vaish is an Independent Director of the Company. He holds a bachelor’s degree in
mechanical engineering from the Indian Institute of Technology - Banaras Hindu University
and a master’s in business administration from the Carlson School of Management, University
of Minnesota, Minneapolis. He has over 35 years of experience in various fields, including 28
years of experience with Accenture Services Private Limited (Accenture) where has was a
senior founding member of Accenture’s consulting practice in India. He was also a member of
the global leadership team of the ‘Communications, Media and Technology’ (CMT) business
of Accenture, where he held various roles, including the ‘Asia-Pacific Operating Unit lead’ for
CMT and the ‘Global Management Consulting Lead’ for CMT. He also served as the managing
director for Accenture’s Delivery Centre Network for Business Process Outsourcing, helped
formulate Accenture’s Horizon 2012 strategy and served as co-sponsor of the culture work
stream of the Accenture Human Capital Strategy initiative. He also holds advisory positions at
Insorce Operational Optimizers Private Limited and Unlax Consumer Solutions Private Limited
and is a Professor of Practice of Management at the Amrut Mody School of Management,
Ahmedabad University.
▪ Rajeswara Rao Gandu, is an Independent Director of the Company. He holds a bachelor’s
degree in science from Andhra University and a bachelor’s degree in law from Osmania
University. He has over 37 years of experience as a civil servant and has worked in the
Department of Supply, GoI in the past. He joined the Indian Revenue Service thereafter, where
he held various positions including that of the Under Secretary and Deputy Secretary, Central
Board of Direct Taxes (New Delhi), Joint/Additional Director of Income-tax (Investigation),
Commissioner of Income-tax, Director General of Income-tax (Investigation) and Chief
Commissioner of Income-tax. He also held the position of Insurance Ombudsman for the
states of Andhra Pradesh and Karnataka and the Union Territory of Yanam. He has also won
the Finance Minister’s Gold Medal for academic excellence and served on the editorial board
of ‘Let us Share’ which is an annual publication of the Income-tax department of India.
▪ Ratna Kishore Kaza is an Independent Director of the Company. He holds a bachelor’s degree
in science and a master’s degree in science in nuclear physics from Andhra University. He has
 held the position of Principal Secretary (health, medical and family welfare) to the
Government of Andhra Pradesh and has served as an Administrative Member on the Andhra
Pradesh Administrative Tribunal. He has also in the past served on the board of Godavari
Fertilizers and Chemicals Limited, as managing director.
▪ Saumen Chakraborty is an Independent Director of the Company. He holds a bachelor’s
degree in science from Visva Bharati University, Santiniketan and completed his post-graduate
diploma in management from the Indian Institute of Management, Ahmedabad. He is
currently the managing director of Samarjita Management Consultancy Private Limited and is
pursuing a PhD. equivalent executive fellow program in management from the Indian School
of Business, Hyderabad. He has more than 36 years of experience across various strategic and
operational aspects of management. He was previously employed with Dr. Reddy’s
Laboratories Limited for over 19 years, where he held, inter alia, the positions of ‘Global Chief
of Human Resources’, ‘Chief Financial Officer’, ‘Global Head of Information Technology and
Business Process Excellence’, ‘President – Corporate and Global Generics Operations’,
‘President and Global Head of Quality, Human Resources and IT’ and was also responsible for
Dr. Reddy’s Laboratories Limited’s global legal and compliance and facility management
functions. He currently continues to serve as an advisor to Dr. Reddy’s Laboratories Limited.
He was awarded CFO of the Year at the 10th India CFO Awards held by IMA, overall best CFO
at the Yes Bank – Business Today Best CFO Awards, 2014, the best CFO at the Yes Bank - BW
Business World Best CFO 199 Awards, 2016 for healthy balance sheet management (large
enterprise) and the Best Performing CFO in Healthcare Sector by CNBC TV-18 at the CFO
Awards, 2007. He was also previously associated with CMC Limited, Centre for Development
of Telematics, Eicher Goodearth Limited and Tecumseh Products India Private Limited.
▪ Venkata Ramudu Jasthi is an Independent Director of the Company. He holds a bachelor’s
degree in arts and a master’s degree in arts (economics) from Sri Venkateswara University and
a master’s degree in law from Osmania University. He also holds a postgraduate certificate in
criminal justice and police management from the University of Leicester. He worked in the
Indian Revenue Service (Income Tax) from 1979 to 1981 (1979 batch). He is a member of batch
of 1981 of the Indian Police Service cadre of Andhra Pradesh and has held the position of the
Director General of Police of Andhra Pradesh. After retirement, he has enrolled as an advocate
with the Bar Council of India

4. KEY RISKS:

▪ KIMS is highly dependent on the healthcare professionals, and the business and financial
results could be impacted if they are not able to attract and retain such healthcare
professionals.
▪ Revenues are highly dependent on the hospitals in Hyderabad. KIMS is also significantly
dependent on certain specialties for a majority of the revenues. Any impact on the revenues
from these hospitals or earnings from our top specialties could materially affect the business,
financial condition, results of operations and cash flows.
▪ KIMS may not be successful in expanding the operations to other parts of India which could
have an adverse effect on the business, financial condition, results of operations and cash
flows.
▪ Business depends on the strength of the brand and reputation. Failure to maintain and
enhance the brand and reputation, and any negative publicity and allegations in the media
against company, may materially and adversely affect the level of market recognition of, and
 trust in services, which could result in a material adverse impact on the business, financial
condition, results of operations and prospects.
▪ KIMS face intense competition from other healthcare service providers. If Company is unable
to compete effectively, the business, results of operations and cash flows may be materially
and adversely affected.
▪ KIMS operate in a highly regulated industry, and compliance with applicable safety, health,
environmental and other governmental regulations and any violations of existing regulations
may adversely affect the business, results of operations and cash flows.
▪ A majority of the doctors are not Company employees. The arrangements with such doctors
are on a consultancy basis. If such doctors discontinue their association with company or are
unable to provide their services at the hospitals for any reason or if KIMS is unable to attract
or retain such consultants, and other healthcare professionals, the business, results of
operations and cash flows may be materially and adversely affected.
▪ Reforms in the healthcare industry and the uncertainty associated with pharmaceutical
pricing and other matters could adversely affect the business, results of operations and cash
flows.
▪ KIMS is exposed to legal claims and regulatory actions arising from the provision of healthcare
services and may be subject to liabilities arising from claims of malpractice and medical
negligence which could materially and adversely affect the reputation and prospects.

CONCLUSION:

● KIMS operates with comparatively good financials in Healthcare Industry with experienced
Management team.
● KIMS has done acquisition of Sunshine Hospitals at an Enterprise Value of approx. INR 7,300
mn, subject to working capital adjustments on the closing date. For Financial Year ended
March'21 Sunshine Hospitals reported INR 4,118 mn in revenue and INR 752 mn in operating
EBITDA. The acquisition deal is expected to be EPS accretive and provides an enhanced
platform for KIMS to further strengthen its presence in the key home market of Hyderabad
and Secunderabad.
● Going ahead if they can expand as per Plan to the other territory in India with cost
effectiveness then it can be good value creation in coming years.

Disclaimer: This report has been shared only for education purpose, it’s not a buy or sell
recommendation. Pls consult your financial advisor before any action.

I would like to sincerely thank Bhavin Patel and Sachin Pandya, who helped me in organizing my
thought in writing the report and guiding in the process.
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