HCG Chairmans Speech

Dear shareholders,


The year has indeed been an exciting one for our Company. It has been over a year since we got listed with the stock exchanges; and this phase of our journey has been an enriching experience.


The Company’s growth has kept us extremely focused on building infrastructure, commencing new centres and augmenting the talent bandwidth required for each of these centres. We continue to evolve and evaluate new opportunities for growth, and we pursue our goal with a passion in winning over cancer through our onco philosophy of treating cancer ''''the right way, the first time’.


In our voyage in winning over cancer, I am happy to report that we have received profound appreciation for our hub-and-spoke model. To understand the success of our model, we have had leadership teams from clinical and management from the US, Latin America, South East Asia, Africa as well as China, who visited us to gather insights into our hub-and-spoke model. This demonstrates that we have truly made cancer care accessible and affordable, and this is in harmony with our vision to take our recognized model to emerging markets.


Looking back at the way cancer care has evolved in the country, it is encouraging to note that the quality of life after cancer has immensely changed for the better. This is due to increased awareness, early diagnosis, easy accessibility to cancer care centres, expertise, cutting-edge technology and affordable cancer care. Our Company has played a crucial role in changing the ecosystem of the cancer burden, and these outcomes synchronize with our mission of adding life to years, where we ensure to improve the quality of life by managing the disease the right way.


Today, we stand at the cusp of a paradigm shift in cancer care itself. There is a move towards ''''precision medicine’, which is highly an individualized therapy, designed to obtain better success rates and less side-effects. Precision medicine also describes how genetic information about a person’s disease can be used to diagnose their medical condition, leading to more effective treatment strategies tailored to the genetic profile of each patient’s condition.


To individualization of therapy may involve genetic mapping of the individual, as well as analysis of complete data, known as predictive analysis. When we combine the two, the treatment is highly specific to the person for that particular disease. In the future, instead of an organ-specific disease like breast or colon cancer, therapy for cancer would be genomics-based. This can revolutionize the understanding of cancer, therapy and could result in better outcomes, increasing the longevity.


While this could be the future, we are happy to inform shareholders that the future is now for HCG. We have been at the forefront of genomics and have moved ahead by commissioning a Next-Generation Sequencing (NGS) lab, bioinformatics and biorepository. We are developing various models for our patients as we take leadership role in preventive oncology and genetic counselling.


In terms of oncology care, we continue to maintain leadership position not only recognized in India, but also globally. We are proud to be the only cancer care group that has taken its model successfully to Tier 2 and Tier 3 cities in India. By 2020, we expect nearly 8 million people living with different kinds of cancer in India alone. This is an obvious challenge, which can be met only by proper analysis and planning, for which your Company is well positioned with the existing cancer care centres and the expansion programme being charted out for India and abroad.


With regard to the financial performance for the year ended March 31, 2017, the consolidated income from operations for FY17 was INR 7,001.1 million as compared to INR 5,841.7 million in the previous fiscal year, reflecting a growth of 19.8%. Operating EBITDA in FY17 was INR 1,050.0 million as compared to INR 847.6 Million in FY16, reflecting a year-on-year increase of 23.9%. EBITDA margin for the year was 15.0% as compared to 14.5% in FY16, reflecting an increase of 50 basis points. PAT in the fiscal year was INR 221.7 million as compared to a loss of INR 14.6 Million in FY16.


The revenue growth was driven by a 19.2% growth from HCG Centres (which includes cancer care centres and multispecialty hospitals) while the Milann centres grew at 27.8%. HCG Centres constituted 92% of the consolidated revenues for the Company and the remaining 8% was contributed by Milann centres.


The key takeaway from these financial results is that your Company has demonstrated strong growth in revenues, EBIDTA, PAT and margin improvements during the year.


Looking at the operations across centres in India, Karnataka continues to report a steady increase in revenues from international patients. We added new units in Baroda, Visakhapatnam and Kanpur during the fiscal year. Gulbarga and Bhavnagar are exhibiting the fastest growth within the Company. Baroda, a comprehensive cancer care hospital, that started in May 2016 is performing well. Additionally, we have many new centres in the pipeline. Under Milann, we added new centres in Delhi, Chandigarh and Mumbai in the current fiscal.


HCG, by expanding and deepening its footprint of network hospitals has helped us touch an increasing number of lives during the year across the globe; the Company continues to strive towards improving the value proposition for the patients and society at large.


While our growth has been exciting, HCG continues to actively participate in awareness programmes with a focus on the early detection of cancer as well as a long-term control of the disease. We are proud to say that we have published articles in leading publications as well as work on research in molecular genomics and clinical trials.


We have put together a talented and formidable leadership team across markets, adding significant experience, depth and bandwidth to our system. Our line-up of professionally respected doctors and clinical staff include some of the best available medical talent globally, an asset few organizations in the medical delivery space can claim. We also have dedicated teams to constantly monitor technological innovations and medical advances to keep abreast of the latest developments in cancer care globally. The Company has used technology to create tumour boards, virtual tumour boards and multi-disciplinary clinics.


Our other area of expertise lies in managing infertility through ''''Milann'''' -our network of fertility clinics. Nearly 28 million couples seeking children in India are affected by infertility. However, only 1% of them are seeking treatment. In 2015, the total demand for IVF cycles, primarily used for treatment of infertility, was 100,000, and is expected to touch 260,000 by 2020 at a compound annual growth rate (CAGR) of over 20 per cent.


We recognized this need ahead of time and ventured into the fertility services under the brand name of Milann. I am happy to report that during the reporting year, the number of centres under Milann increased significantly.


We are working diligently to maintain and strengthen our leadership position in oncology and fertility. We are confident of doing so due to the clinical expertise we house in terms of our talent.


Our focus is clear: execute all our projects in a timely manner, significantly upgrade our information technology infrastructure in order to enhance the quality of care delivered to patients, enhance our clinical best practices and strengthen our research capabilities.


The future of oncology care will be high precision medicine and we are well positioned to be leaders in this.


Achieving all of this has been a dream come true. For HCG, however, the journey has only begun. We remain steadfast in our vision of making HCG a best-in-class cancer care provider - an institution of excellence that operates on the principles of quality and ethics; a network that leverages learning across geographies, builds synergies to optimize cost and provides the finest medical service to the ultimate benefit of the patient. This vision positions us as thought leaders in an industry, where the gap between demand for quality cancer care and the facilities to meet that demand remains enormous. We recognize this opportunity and are working towards becoming the global institution of choice for cancer care.


I am excited about the journey and what is in store for HCG. I believe that HCG''''s best days are yet to come.


I wish to place on record our appreciation and acknowledge with gratitude the support extended by our Board of Directors, management team, employees, advisors, bankers, investors and other stakeholders at large, medical fraternity and patients for their continued trust reposed in our institution.


On behalf of the entire Board of Directors of the Company, I would like to thank you - our valued stakeholders - for the continuing confidence you have placed in the organization.


Best regards,


Dr. B.S. Ajaikumar


Chairman & CEO

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