Shalby Limited: Information Analysis
Headquartered in Ahmedabad, Shalby Hospitals operates through a network of hospitals in India, as well as outpatient clinics (no overnight stay facility) and Shalby Arthroplasty Centre of Excellence or SACE (third-party shared surgery hospitals) located in India, Africa and the Middle East. The multi-specialty chain has 11 operational hospitals across five states, 47 outpatient clinics and 10 SACE. Hospitals usually provide four types of services: Primary, Secondary, Tertiary and Quaternary. Primary and secondary services are basic healthcare services, whereas Tertiary and Quaternary are advanced services, with the latter being a premium service. Shalby provides Tertiary and Quaternary services, with special focus on orthopaedics. It also provides services related to cardiology, neurology, oncology and renal transplantation.
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As of June 30, 2017, Shalby had a total operational capacity of 841 beds. The company generated revenues of Rs 333 crore in FY17, which does not include the additional revenue contribution from new beds. Two new properties, Shalby Naroda and Shalby Surat, started providing inpatient services July 1 onwards, with combined bed capacity of 510. This will take the total operational capacity to 1,351 beds (an increase of about 60 per cent in the current bed capacity, assuming all the beds become operational). However, Shalby has a total capacity of 2,012 beds, which provides it with an opportunity to further scale its business. It also plans to open new hospitals in Nashik and Vadodara.
Industry outlook
The size of the Indian healthcare delivery market (hospitals) was estimated to be Rs 6.2 lakh crore in 2016. It grew at a 14-15 per cent CAGR during 2011-15, and is further expected to grow at 15-16 per cent during 2015-20 to Rs 11.7 lakh crore by 2020. In 2014, 12 per cent of the total population was above 54 years of age. The figure is expected to go up to 14 per cent by 2020, which will lead to an increase in demand for healthcare services. In 2015, nearly 23 per cent of the population was in the 45 and above age group, which accounted for nearly 95 per cent of joint replacement surgeries.
Industry-wide ethical issues
In recent weeks, we have had intense internal discussions on the ethical standards of the Indian private healthcare sector. None of our readers would be unaware--either through news or through personal experience--of the widespread incidence of malpractices in healthcare whereby hospitals are focussed solely on increasing revenue and profit without any regard for medical ethics. The recent Fortis case is only one of the very, very few that has come to widespread notice.
Here''s a brief excerpt from the red herring prospectus (RHP) of this IPO. Please read it carefully. ''As a significant portion of inpatient income is derived from medical services provided in the initial two to three days of an inpatient visit, we seek to increase our ARPOB (Average Revenue per Occupied Bed) by optimising the length of patient stay, increasing capacity turnover, focusing on complex procedures and achieving higher operating efficiency through the adoption of advanced technology and through the provision of improved medical services.''
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