Equity Research | narayana Hrudayalaya

Growth drivers shaping the landscape of healthcare delivery in India:

• 𝐒𝐡𝐢𝐟𝐭 𝐟𝐫𝐨𝐦 𝐜𝐨𝐦𝐦𝐮𝐧𝐢𝐜𝐚𝐛𝐥𝐞 𝐭𝐨 𝐥𝐢𝐟𝐞𝐬𝐭𝐲𝐥𝐞 𝐝𝐢𝐬𝐞𝐚𝐬𝐞𝐬, with over 50% of in-patient bed spending directed towards lifestyle diseases, driving demand for specialized care.
• 𝐈𝐧𝐜𝐫𝐞𝐚𝐬𝐢𝐧𝐠 𝐩𝐞𝐧𝐞𝐭𝐫𝐚𝐭𝐢𝐨𝐧 𝐨𝐟 𝐡𝐞𝐚𝐥𝐭𝐡 𝐢𝐧𝐬𝐮𝐫𝐚𝐧𝐜𝐞 beyond government coverage is notable, with only 25% of lives covered by group and retail health insurance, a figure that continues to rise.
• 𝐈𝐧𝐝𝐢𝐚’𝐬 𝐠𝐫𝐨𝐰𝐢𝐧𝐠 𝐦𝐞𝐝𝐢𝐜𝐚𝐥 𝐭𝐨𝐮𝐫𝐢𝐬𝐦 𝐬𝐞𝐜𝐭𝐨𝐫 is thriving, with surgeries costing just 20% of what they do in developed countries. The industry has seen a 20% CAGR in medical tourists over the past decade, reaching 7 lakh tourists, and is on the rise again post-covid.
• 𝐑𝐢𝐬𝐢𝐧𝐠 𝐢𝐧𝐜𝐨𝐦𝐞𝐬 𝐚𝐧𝐝 𝐚𝐧 𝐚𝐠𝐞𝐢𝐧𝐠 𝐩𝐨𝐩𝐮𝐥𝐚𝐭𝐢𝐨𝐧 are significant contributors as well, with the elderly population (aged 60+) expected to grow from 12 crores in 2016 to 18 crores by 2026.
• While # 𝐨𝐟 𝐛𝐞𝐝𝐬 may not be an ideal metric to gauge the opportunity size, but it is notable that India has 1.5 beds / 1000 people, lower than the global average of 3 beds / 1000. Comparatively, China has 4 beds / 1000, other growing economies such as Brazil stands at 2 / 1000, and Vietnam at 2.5 / 1000.

𝘗𝘳𝘪𝘷𝘢𝘵𝘦 𝘩𝘰𝘴𝘱𝘪𝘵𝘢𝘭𝘴 𝘤𝘰𝘯𝘴𝘵𝘪𝘵𝘶𝘵𝘦 ~70% 𝘰𝘧 𝘵𝘩𝘦 𝘩𝘦𝘢𝘭𝘵𝘩 𝘤𝘢𝘳𝘦 𝘥𝘦𝘭𝘪𝘷𝘦𝘳𝘺 𝘮𝘢𝘳𝘬𝘦𝘵 𝘣𝘺 𝘷𝘢𝘭𝘶𝘦 (𝘶𝘱 𝘧𝘳𝘰𝘮 60% 𝘪𝘯 2016). 𝘞𝘪𝘵𝘩𝘪𝘯 𝘱𝘳𝘪𝘷𝘢𝘵𝘦, 90% 𝘰𝘧 𝘣𝘦𝘥 𝘤𝘢𝘱𝘢𝘤𝘪𝘵𝘺 𝘪𝘴 𝘶𝘯𝘰𝘳𝘨𝘢𝘯𝘪𝘻𝘦𝘥. 𝘞𝘪𝘵𝘩 𝘳𝘪𝘴𝘪𝘯𝘨 𝘪𝘯𝘤𝘰𝘮𝘦𝘴, 𝘵𝘩𝘦𝘳𝘦 𝘪𝘴 𝘢 𝘴𝘩𝘪𝘧𝘵 𝘪𝘯 𝘵𝘩𝘦 𝘱𝘳𝘦𝘧𝘦𝘳𝘦𝘯𝘤𝘦 𝘰𝘧 𝘱𝘢𝘵𝘪𝘦𝘯𝘵𝘴 𝘵𝘰 𝘮𝘰𝘷𝘦 𝘧𝘳𝘰𝘮 𝘶𝘯𝘰𝘳𝘨𝘢𝘯𝘪𝘻𝘦𝘥 𝘵𝘰 𝘭𝘢𝘳𝘨𝘦𝘳/𝘢𝘤𝘤𝘳𝘦𝘥𝘪𝘵𝘦𝘥 𝘩𝘰𝘴𝘱𝘪𝘵𝘢𝘭𝘴.

While private hospitals will continue to do well, but most of them are trading at uber valuations. Of the private hospital chains KIMS, Jupiter, Yatharth and Narayana Hrudayalaya seem to be optically reasonably valued (on a relative basis).

I analyzed and valued one of these hospitals — which is the first hospital chain to start its own health insurance, have an international presence and is also commercializing its in-house healthcare software applications. Link to my business analysis and valuation is present in section 1 and 3 of this linked video:

P.S: This is purely for educating people on how to model and value a business.