MANAGEMENT DISCUSSION AND ANALYSIS

(a) Industry Structure and Developments

Global economic growth continued to remain uneven in FY 2014-15 and showed disparate rates of advancement for developing and emerging economies. Against the back drop of a not so encouraging global economic performance India stands out in the crowd. There are credible reasons for this optimism. First the GDP growth rate bounced back to 7.3 % in FY 2014-15 on the back of strong growth- oriented policies adopted by the new government. Second the menace of high inflation moderated (prompting the RBI to cut repo rates) and both fiscal and current account deficits narrowed during the year. Third the consumer sentiments also improved significantly. However, more structural reforms are needed to deal with the legacy challenges and removal of road blocks for economic development. India's world ranking in health care is quite low.

While the public sector is vast, it is sorely underfunded and not large enough to meet the growing needs of the country. Private healthcare service providers are acknowledged to be geographically pervasive and therefore easy to access, possessing technical and managerial skills that are often not found in public hospitals, innovative and flexible in the deployment of resources and perceived to provide services of better quality with greater efficiency. The private sector is also dominant in the field of medical education as well as manufacturing of medical equipment, pharmaceuticals and provision of diagnostic services. The growth of the private sector is expected to continue. This is due to the introduction of macro-economic policies that recognized the healthcare sector as an industry, willingness of the people to pay for health services as well as spending on Government sponsored Healthcare Schemes and demand arising from a rapid increase in non-communicable diseases (NCDs)

(b) Opportunities And Threats

(i) Opportunities:

Growing Populations and Changing demographics is expected to continue growth of health care in India.

Disparities between urban and non-urban areas: There is a world of difference between the healthcare in urban and non-urban areas. Patients in non-urban areas have the ability to spend and health care service providers who have ability to service in non-urban areas benefit from the ready market.

Increase in demand for elective surgeries: Patients are now willing to undergo discretionary surgeries in order to improve health and enhance quality of life.

(ii) Threats:

Intense competition from new ventures results in undercutting of prices.

Discontinuation of Leases: Lands on which our hospitals are located are set up on leased properties. In the event of non-renewal or renewal not in terms favourable to us, our business may face disruptions.

(c) Segment-Wise or Product-Wise Performance

The segment wise performance of the company is given separately in Notes forming part of accounts.

(d) Industry Outlook:

Looking ahead, the health care sector is expected to be the core of economy with a meaningful contribution to growth. The health care growth remains intact with increased income levels, ageing population, growing health awareness and changing attitude towards brventive health care.

(e) Risks and concerns and mitigations thereof:

(1) Competition intensity and new entrants to the market:

Many competitors attempt capturing market by offering similar treatment through use of primitive technology. This can significantly impact Company's bottom line.

Risk Mitigation: The Company believes that in the long run, quality is the sole consideration and has never compromised on its ability in inducting high end, state-of-the-art technology.

(2) Pace of obsolescence of technology and treatment methods

Eye care segment uses a number of equipments in its business, which needs to be constantly tested and monitored for technology obsolescence.

Risk Mitigation: Company utilises a dedicated Research & Development function, which develops near term and incremental improvements, as well as step change improvements to existing procedures and processes, resulting in minimal obsolescence.

(3) Materials risk:

Non availability of good quality materials could impact on time delivery of service to clients.

Risk Mitigation: The Company procures its materials directly from manufacturers on a sustained basis on account of large volumes and timely payments.

(4) Labour shortage and attrition of key staff including medical professionals

Non availability / attrition of key staff including skilled Medical Professionals: Non availability of key / skilled Medical Professionals could negate the quality and quantitative performance of the business

Risk Mitigation: The Company has been continuously recruiting / training Medical Professionals and building its capabilities

(5) Increased compliance and regulatory challenges

The evolution of the global regulatory environment has resulted in increased regulatory scrutiny that has raised the minimum standards to be maintained. This signifies the alignment of corporate performance objectives, while ensuring compliance with regulatory requirements

Risk mitigation: Company recognises that regulatory requirements can at times be challenging, and therefore will strive to understand the changing regulatory standards, so as to strengthen its decision making processes and integrate these in the business strategy.

(f) Internal Control Systems:

Given the nature of business and size of operations, your company's internal control system has been designed to provide

(i) Accurate recording of transactions with internal checks and prompt internal reporting

(ii) Adherence to applicable accounting standards and policies

(iii) Compliance with applicable statutes, policies and procedures

(iv) Effective use of resources and safeguarding of assets

(v) The audit committee of the board of directors also meets regularly to review the reports of internal auditors and providing guidance.

(g) Discussion on financial performance with respect to operational performance

The financial performance of the Company is given separately in Directors report.

(h) Material developments in human resources / industrial relations front including number of people employed:

The total employees as at the year end were 920. The details regarding developments in Human resources is dealt under the heading " Particular of Employees" forming part of the of the Directors' Report.

CAUTIONARY STATEMENT

The above statements are as perceived by the directors based on the current scenario and the input available. Any extraneous developments and force majeure conditions may have an impact on the above perceptions.