Krsnaa Diagnostics Ltd

Dear Shareholders,

Successful Public Listing

The Rs 1,213 crore Initial Public Offering (IPO) of Krsnaa Diagnostics was subscribed over 64 times and received an overwhelming response. The proceeds from the issue are intended to be utilized for establishing new diagnostic centers, repayment of loans, and for general corporate purposes.

Our Company has an exceptional vision and strong moat with a wide network and dominant position in the PPP space. We sharply focus on the partnerships with trust hospitals, corporate hospitals, and public hospitals through public-private partnership (PPP) and have the largest presence in the diagnostics PPP segment. Our unique business model, size and scale of operations, and strong brand equity make us well- positioned to benefit from favorable trends in the healthcare delivery ecosystem.

The Opportunity Matrix

The Indian healthcare infrastructure is expected to reach a size of US$ 349.1 billion by FY 2021-22. The share of public expenditure on healthcare stood at 2.1% of GDP in FY 2021-22 as against 1.8% in FY 202021 and 1.3% in FY 2019-20. The healthcare sector is one of India's largest employers and employs a total of 4.7 million people. The sector generated 2.7 million additional jobs in India between 2017-22 i.e., over 5,00,000 new jobs per year.

The Indian diagnostics industry has grown consistently over the past three fiscals and is projected to reach Rs 920-980 billion by fiscal 2023, echoing the growth in healthcare delivery services. The emergence of the pandemic has further highlighted the importance of investing in effective healthcare infrastructure and diagnostics services.

Post the pandemic, there has been a shift towards specialized testing, increased home collection, and business-to-customers (B2C) segments. With rising literacy rates and disposable incomes, individuals increasingly demand better healthcare facilities leading to higher growth of in-patients and outpatient treatments.

The PPP segment of healthcare services is a large addressable market and is expected to grow at a CAGR of 14%-17% between fiscal 2021 and 2023 to reach Rs 135 billion on the back of higher government spending in the PPP segment.

The National Health Infrastructure Mission with an outlay of Rs 64,180 crore till 2025-26 envisages increased investments in public health reforms to provide better access to health in rural areas. Key focus areas include strengthening health and wellness centers in villages and cities; adding critical care-related beds at district-level hospitals; creating public healthcare units in 11 high- focus states; and developing integrated public health laboratories in all districts.

The Health Systems Strengthening Program is of special focus of the National Health Mission (NHM). It involves the Free Diagnostic Service initiative which is vital in boosting the PPP model in diagnostics sector. The scheme is implemented through the in-house mode wherein the government set-ups and manages the diagnostic centers.

This initiative was announced in fiscal 2015 to tackle the issue of high out-of-pocket expenses on diagnostic services. The major objective of this initiative is to ensure availability and access to essential diagnostic tests at public health facilities for economically weak patients.

One of the biggest advantages of a PPP-led diagnostic facility is the services offered at the existing healthcare service delivery points such as government hospitals, private health centers, and community health centers across Tier I and Tier II and rural cities. This not only helps reduce the need to travel but also helps reduce their out-of-pocket expenditures.

This will bring a paradigm shift in India's healthcare infrastructure and make it more resilient. Further, Government's emphasis on healthcare infrastructure will create substantial opportunities for private investment to create affordable healthcare facilities.

Strong Performance, Stronger Prospects

At Krsnaa, we intend to serve the nation by providing affordable diagnostics throughout the country serving the low-income segments and create employment opportunities across the locations where we serve and generate value for our stakeholders.

Our revenues stood at Rs 4,555 million in FY 2021-22 compared to Rs 3,965 million in FY 2020-21, marking a growth of 15%. Profit after Tax for the year increased by a whopping 117% to Rs 684 million from Rs 315 million in the previous year. EBITDA was impacted due to investment in operationalizing new centers and increase in employee costs.

During the year, we incurred a capex of Rs 1,311 million, of which Rs 721 million was funded from internal accruals and Rs 590 million was generated from IPO proceeds.

This was primarily utilized towards setting up new diagnostic centers.

Further, we have built a strong cash flow generating model backed by healthy cash flow conversion cycle and efficient working capital management. This enables us to fund our growth plans through internal accruals.

The fact that we conducted 17.28 million tests in FY 2021-22 compared to 9.38 million tests in FY 202021 demonstrates the faith in our services and higher awareness and visibility of Krsnaa Diagnostics centers.

We differentiate ourselves on account of our pan-India presence and affordable pricing which act as an entry barrier for newer entrants in the industry. The value we add to the services provided at public hospitals on account of the quality of our services, competitive rates, and advanced technology, makes us a preferred partner for the expansion of affordable healthcare facilities across the country.

We have a three-pronged approach focusing on strengthening our PPP, B2B, and B2C diagnostic segments with a revenue share of 60%, 20%, and 20%, respectively.

Our aim is to reduce the out-of-pocket expenditure on healthcare which is aligned with the Government's policy of providing high-quality, affordable healthcare to all.

We plan to expand our network of diagnostics centers in the underpenetrated markets by participating in new PPP tenders and establishing newer diagnostic centers. Expanding the pathology service offerings, having increased penetration in home visits, and opening more collection centers will also enable us to penetrate deeper into key markets. Our ability to deploy and operate diagnostic centers in tier II and III cities and towns makes us a preferred partner for private players in the healthcare industry to establish diagnostic centers within their facilities in the rural areas.

Going forward, we intend to leverage our vast presence and extensive infrastructure to offer additional diagnostic services in molecular diagnostics and genomics. Plans on the anvil also include strengthening our digital footprint and customer engagement and improving profitability and efficiency.

Conclusion

My sincere appreciation to all our stakeholders and employees for their unwavering belief and support in us. Krsnaa aims to serve the nation by providing affordable diagnostics throughout the country serving the middle and lower income group with special focus on the needy patients, and at the same time creating employment opportunities across the locations where we serve and generate value to our stakeholders. I am quite confident that our robust track record coupled with promising prospects will enable us to accelerate growth momentum and unleash higher value creation.