IHH Annual Report 2018

HOME MARKET – INDIA Performance Highlights Our India Operations saw revenue grow 20% to RM851.3 million with the consolidation of Fortis’s financials to the Group’s income statement. EBITDA decreased 54% to RM6.3 million. Inpatient admission grew 23.3% to 88,793 with the inclusion of Fortis’ inpatient admission since acquisition. However, revenue per inpatient admission decreased 1.7% to RM7,463 as Fortis’ revenue intensity is generally lower than existing operations in India. The transformational acquisition of Fortis presents a significant expansion of IHH’s exposure to India, one of the most attractive countries globally for healthcare, through a controlling interest in the second largest hospital chain in the country. Fortis’ hospitals have a stronger presence in North India, complementary to IHH’s existing South-India focused portfolio, and provide access to a leading platform with pan-India presence. This offers the Group a significant synergy potential in management, administration and operations, leveraging IHH’s global private healthcare execution track record and expertise. In January 2019, Fortis completed the acquisition of RHT Health Trust’s (“RHT”) India assets for a total cash consideration of INR46.7 billion (approximately RM2.7 billion) as planned. This consolidates Fortis’s control over the RHT assets for a more focused and streamlined business operation and will generate substantial cost savings as Fortis will no longer need to bear significant rental fees paid to the trust. Fortis has two core business components: the hospital business and a diagnostic business called SRL Diagnostics. With its What we do COMPLEMENTARY ANCILLARY SERVICES SECONDARY & TERTIARY CARE PRIMARY CARE QUATERNARY CARE strong focus on diagnostics, tertiary and quaternary care segments, there is significant opportunity for Fortis in the growing healthcare market in India. Outlook India is a market of tremendous potential, and the Group believes that the potential for growth continues to be supported by expanding demographics, an increase in the incidence of lifestyle related diseases and rising affluence. At the same time, the low cost of treatment, advanced facilities and availability of highly skilled doctors, makes India a popular location for medical tourism. It is estimated that India’s medical tourism industry could be worth INR63 billion (USD9 billion) and account for 20% of the global market share by 2020. IHH is anticipating substantial growth opportunities with the burgeoning healthcare demand in India. On our existing India operations, we are focused on improving operations, introducing new service lines and undertaking strict measures to control costs. We expect that over time, volume will ramp up and case mix will improve. With the acquisition of a 31.1% interest in Fortis in November 2018, Fortis will continue to contribute to the Group’s revenue and EBITDA. We will focus on integrating and executing the turnaround plans for Fortis to restore its operational performance back in line with “best in class” industry standards in the medium to long term. 2. FICCI, FICCI Knowledge Paper, Medical Value Travel in India: Enhancing Value in MVT. KEY FACTS RM851.3 million Revenue RM6.3 million EBITDA See page 26 on Fortis Healthcare for more information With 36 hospitals, India is IHH’s fourth home market. In 2015, the Group had pivoted from a greenfield strategy to a brownfield strategy with the acquisition of Continental Hospitals and Global Hospitals. To date, the Group has a 62.23% stake in Continental Hospitals and a 73.87% stake in Gleneagles Global Hospitals. On 13 November 2018, IHH became the single largest controlling shareholder in Fortis after completing an INR40 billion (approximately RM2.4 billion) subscription to a preferential allotment of shares for 31.1% interest in Fortis Healthcare (“Fortis”). Fortis is a leading integrated healthcare services provider in India with operations spanning across both hospitals and diagnostics businesses. Currently, it is the second largest player in India by number of hospitals, operating a network of 32 hospitals across the country and internationally with a capacity of over 4,600 beds and employs more than 2,600 doctors and 13,200 support staff who catered to approximately 2.6 million patients in 2018. In addition, the Group has a 50-50 joint venture with Apollo Hospitals, Apollo Gleneagles Hospitals in Kolkata. IHH Healthcare Berhad | Annual Report 2018 50 Performance Review OPERATING REVIEW