MANAGEMENT DISCUSSION

AND ANALYSIS

Mr. Mohit Talwar

Managing Director

Mr. Dharmender Kumar

Associate Director - External Affairs

Mr. Dilbagh Singh Narang

Director - Taxation

Mr. Himanshu Tiwari

Executive Assistant to Managing Director

Mr. Jatin Khanna

Chief Financial Officer

Mr. Nitin Thakur

Director - Brand & Communications

Mr. P. Dwarakanath

Head-Group Human Capital

Mr. Prashant Hoskote

Senior Director - Quality & Service Excellence

Mr. Rishi Raj

Director - Strategy & Corporate Development

Ms. Shahana Basu

Director - Legal & Regulatory Affairs

Mr. V. Krishnan

Company Secretary

Max India Limited (‘Max India’ or ‘the Company’), a part of the US$ 3 billion Max Group, operates in the Health & Allied Services space through Max Healthcare Institute Limited, Max Bupa Health Insurance Company Limited and its wholly-owned subsidiary Antara Senior Living Limited.

The Company was incorporated on 1st January, 2015 and as a result of the demerger of the erstwhile Max India Limited (now renamed as ‘Max Financial Services Limited’ or ‘MFSL’), the investments held by MFSL in Max Healthcare Institute Limited, Max Bupa Health Insurance Company Limited, Antara Senior Living Limited, Max Skill First Limited, Pharmax Corporation Limited, Max Ateev Limited and Max UK Limited stood transferred to the Company w.e.f. appointed date, i.e. 1st April, 2015.

The Company’s shares commenced trading on the BSE and NSE from 14th July, 2016. The Company is committed to becoming the most admired Company for the health and life care needs of its customers, patients, and their families.

Its key operating businesses include:
Max Healthcare Institute Limited (MHC) is an equal joint venture with Life Healthcare, South Africa’s second-largest healthcare chain, and provides standardised, seamless and world-class healthcare services, especially focussed on tertiary and quaternary care.

Max Bupa Health Insurance Company Limited (MBHI) is a joint venture between Max India and Bupa Finance Plc., UK and offers individual and family-oriented health insurance policies across all age groups.

Antara Senior Living Limited is a wholly-owned subsidiary and offers highly differentiated, world-class senior living communities fulfilling lifestyle, wellness and health-related requirements of senior citizens.

Max SkillFirst Limited (Max SkillFirst) is a wholly-owned subsidiary of the Company. Max SkillFirst is a shared service centre for providing learning and development solutions and training services to companies in the Max Group. It is also engaged in the business of distribution of life and health insurance products through its wholly-owned subsidiary, Max One Distribution Services Limited.

The Company’s shares commenced trading on the BSE and NSE from 14th July, 2016. The Company is committed to becoming the most admired Company for the health and life care needs of its customers, patients, and their families.



All businesses operate in highly under-penetrated sectors with the potential for rapid growth and are driven by demographic and other socio-economic factors, which have a more enduring impact than short-term economic factors. The Company owns and actively manages a 45.95% stake in Max Healthcare, a 51% stake in Max Bupa Health Insurance and a 100% stake in Antara Senior Living.

Industry Overview

Max India’s key businesses operate in the Health & Allied Services space, spanning healthcare, health insurance, and senior living. Indian healthcare is one of the fastest-growing sectors and is expected to reach ~US $280 billion (nearly ₹ 18 lakh crore) by FY 2020. The share of healthcare FDI has almost doubled since FY 2011 – from 0.7% in FY 2011 to 1.21% in FY 2015 – highlighting the growing interest of foreign players in the sector. Rising income levels and increasing insurance penetration are major contributing factors for the rise in patients accessing private healthcare services. This fact is reflected more strongly in the rural and urban middle-class clusters. Growth in India’s urban population, the rise in elderly population and increase of lifestyle diseases are expected to further propel the industry to new heights.

Much like healthcare, the Indian health insurance sector continues to remain a fundamentally attractive industry. Though small in size (1% of India’s GDP), it is the most rapidly growing segment in the BFSI sector with gross written premiums increasing by 26% to ₹ 34,374 crore in FY 2017. The health insurance market is expected to grow ~15% to ~ ₹ 50,000 crore by FY 2020 and is likely to continue at a similar rate post-FY 2020 for 3-5 years.

Finally, senior living as an industry category is now witnessing a growth phase with existing players developing higher value products as well as new entrants trying to launch their first senior living ventures. However, most of these projects continue to be ‘real estate’ offerings by traditional real estate players and lack the sharp focus and world-class service standards of Antara’s product offering.

Financial Highlights

Max India’s flagship entity Max Healthcare reported Gross Revenues of ₹ 2,567 crore in FY 2017 for its network of owned and managed hospitals, growing 18%. MHC also reported a robust 31% growth in EBITDA for its network of hospitals to ₹ 281 crore and a growth of 141% in Profit Before Tax (PBT) to ₹ 24 crore.

This marked improvement in profitability was driven, in part, by a significant performance turnaround at MHC’s newer hospitals including Dehradun and Bathinda, as well as Max Smart Super Speciality Hospital (formerly Saket City Hospital) in Saket, New Delhi. Key specialities such as Renal Sciences, Neuro Sciences, and Oncology, among others, continue to be the biggest drivers of growth for MHC.

25%
growth in Max Bupa’s Gross Written Premium in FY 2017.

Max Healthcare also launched three alternate business lines in FY 2017, namely Max Labs, a pathology vertical focussed on B2B and in-hospital labs, Max@Home, a vertical providing high-quality medical care at home and Oncology Day Care, under which the first unit has been set up in a prime South Delhi locality. These verticals are expected to add to revenues and profitability in the years to come, but more importantly, will increase the depth and width of MHC’s coverage and offerings.

Max Bupa, which has emerged as one of India’s leading standalone private health insurers, also reported strong growth in its topline with Gross Written Premium (GWP) of  ₹  594 crore in FY 2017, growing 25% over FY 2017.

The growth in revenues was primarily driven by robust growth in new sales as well as renewals, over the previous year, and multiple products and portfolio improvement initiatives as well as the launch of new group products. Additionally, savings in operating expenses and implementation of technology-enabled solutions helped the Company improve its profitability margins. The Company also moved up 2 ranks to become the 8th largest private health insurer overall in FY 2017.

In the second quarter of FY 2017, Max Bupa commenced offering its comprehensive health insurance policy suite to the diverse and large customer base of Bank of Baroda, one of India’s largest public sector banks, through a bancassurance corporate agency agreement. Max Bupa already has bancassurance arrangements and strategic alliances with other leading retail finance institutions such as Standard Chartered Bank, Federal Bank, Ratnakar Bank, Deutsche Bank, Muthoot Finance and Bajaj Finserv.

In April 2017, Antara Senior Living opened the gates to its maiden community of 200 apartments near Dehradun, Uttarakhand, with unanimous appreciation from customers, public, and media. In FY 2017 , Antara generated collections of   ₹ 78 crore, a growth of almost 100% over the previous year.

In FY 2017 , Max SkillFirst reported revenues of  ₹  44.6 crore, growing 27%, with profits of  ₹  4.7 crore. During the year, the business imparted over 4.3 lakh hours of training to more than 55,000 trainees through more than 1,25,000 sessions.

Max India maintains a healthy Treasury Corpus of  ₹  301 crore (as at 31st March, 2017).

Corporate Developments

Recently in May 2017, Max India announced its plan to increase its stake in its flagship healthcare business to 49.7% from the earlier 45.95% by acquiring 3.75% of International Finance Corporation’s (IFC) stake in MHC. Max India raised requisite funds for this transaction from Max Group’s Founder and Chairman Emeritus Mr. Analjit Singh, by issuing convertible warrants at   ₹  154.76 per warrant aggregating to  ₹  300 crore, in accordance with SEBI guidelines. The total numbers of warrants issued were 1,93,84,854 which will translate into ~4% stake in the Company for the Sponsors. The Sponsors’ shareholding in the Company after conversion of warrants wouldbe 45.12%.

IFC’s balance 3.75% stake in MHC will be acquired by Max India’s joint venture partner in MHC – the Life Healthcare Group. The transactions will be completed in another few days.

Human Resources

There are 53 permanent employees in Max India Ltd. as on 31st March, 2017.

Max India has made concerted efforts in establishing a robust talent management framework and a strong performance management mechanism to ensure that the Company consistently develops credible, strong and inspiring leadership. During this year, the focus of our Company has also been to ensure effective corporate governance, availability of critical talent for key positions, engagement of key talent and leveraging progressive methods of employee learning and development. The Company has established an organisational structure which is agile, focussed on delivering results and performing effectively in the dynamic business environment. The Company strongly believes in fostering a culture of mutual respect and trust and we have strived to ensure effective communication channels so that all employees are aligned to common business objectives.

Opportunities and Threats

Max India’s businesses have identified efficiencies across cost, revenue and process dimensions led by changes in technology. Over the past few years, both Max Healthcare and Max Bupa have made significant progress in building digital capabilities and enabling an end-to-end digital journey for our customers across the spectrum. These efforts will continue to be a priority for these businesses over the coming years.

Recently in May 2017, Max India announced its plan to increase its stake in its flagship healthcare business to 49.7% from the earlier 45.95% by acquiring 3.75% of International Finance Corporation’s (IFC) stake in MHC.

One of the primary concerns for the Company is the growing regulatory headwinds in the healthcare sector. Continuous regulatory changes and interventions necessitate frequent adjustments to business plans & projections, thereby impacting timelines and margins. Another key concern is the identification, hiring, and retention of quality talent. Finally, there is a risk of margin compression which can potentially accrue in most of our businesses due to the cluttered and often irrational competitive landscape.

Outlook

The strong financial performance of our businesses is a testimony to the success of several initiatives they have undertaken over the past year and a half. In the coming months, all of Max India’s key operating businesses will continue to invest in value accretive initiatives such as new clinical programmes, product launches and improvements, new partnerships and alliances, improved operating efficiencies, delivery of superior service standards, and tangible return on investments in people and technology.

With a further capital infusion now from the Promoters, Max India will have adequate liquidity to explore additional growth opportunities, mainly in healthcare.

It is a significant achievement that within a year of the Max Group’s restructuring, its benefits became apparent for our operating businesses in the form of sharper focus and improved capabilities to leverage their underlying strengths. We are confident that Max India will continue along the path of growth and profits and deliver to the same standards of excellence that Max Group’s investors have come to expect from us over the years.