RHT HEALTH TRUST Taps into Pulse of Indian Boom

1. Search Write Sign in Sign up RHT HEALTH TRUST: Taps into Pulse of Indian Boom Chakrinnovation Follow 9 min read · 5 days ago RHT Health Trust has a portfolio valued at S$1.1 billion, with 12 clinical establishments, 4 greenfield clinical establishments and 2 operating hospitals in 13 Indian states. Gurpreet Dhillon’s salt-and-pepper look lends him clout beyond his years. The 32-year-old was appointed Chief Executive Officer of Religare Health Trust Trustee Manager, which manages Singapore-listed Religare Health Trust (RHT), three years ago. “I think I have too much white hair for my age,” Dhillon said, his tongue firmly in cheek. If we can continue to demonstrate that we are this island of calm in a sea of volatility that is India, yet able to capture the strong growth inherent in the country, it would be very interesting to anyone looking to deploy capital in the emerging markets. - Gurpreet Singh Dhillon CEO

2. RHT Health Trust “I became CEO at 29, and now, I can’t imagine myself doing anything else with my life. Running RHT — that’s my passion,” he added. In fact, Dhillon has little time to spare for anything other than managing the operations of the trust. “Every three to four months, I start guitar lessons again, but that always gets sidelined. I’m either at work, travelling, or spending time with my kids,” said the father of two boys, aged four and one. Dhillon served as the Chief Operating Officer of the Trustee Manager for five months in 2013 before taking the helm. Prior to that, the Bachelor of Law graduate from University of Essex gained investment and asset management experience during his stint in Religare Capital Markets Plc, the investment banking arm of Religare Enterprises Ltd, where he played key advisory roles in real estate acquisitions across India and the UK. RHT’s unique offering — providing stability as well as growth — is Dhillion’s constant source of inspiration. “We have been able to put in place a product that gives investors access to growth, without the volatility that accompanies investments in emerging markets,” he said. “If we can continue to demonstrate that we are this island of calm in a sea of volatility that is India, yet able to capture the strong growth inherent in the country, it would be very interesting to anyone looking to deploy capital in the emerging markets.” Rosy Outlook RHT, which listed on Singapore Exchange in October 2012, has a market capitalisation of S$790 million. It is the first business trust on SGX that owns India-based healthcare assets. Religare, a Latin word that means “to bind together”, is paired with the symbol of a four-leaf clover. Each leaf of the clover carries a special meaning — hope, trust, care and good fortune. RHT’s portfolio comprises 12 RHT Clinical Establishments (CEs), four greenfield CEs, and two operating hospitals located across India, valued at S$1.1 billion. CEs are medical institutions with in-patient beds that provide diagnosis and treatment of diseases. RHT’s sponsor, Fortis Healthcare Ltd, which is listed on the Bombay Stock Exchange, owns approximately 28% of the trust. RHT has a Right of First Refusal over CEs owned by Fortis.

3. Fortis Healthcare is a chain of super specialty hospitals in India. Between 2013 and 2016, the trust averaged total annual revenues of S$114.6 million and an annual distribution per unit (DPU) of 7.8 Singapore cents. The healthcare sector in India — the world’s second-most populous country with about 1.3 billion people — has seen rosy growth, and the prognosis remains good. Valued at about US$100 billion today, the market is seen expanding to US$280 billion by 2020, reflecting a compound annual growth rate (CAGR) of 22.9%, according to a January 2016 report by the India Brand Equity Foundation (IBEF). India’s healthcare spending was estimated at 5% of gross domestic product (GDP) in 2013, and this is expected to remain steady through 2016, according to a 2015 industry report by Deloitte that cites data from the Economist Intelligence Unit (EIU). Total healthcare spending in local currency terms is projected to rise at an annual rate of over 12%, from an estimated US$96.3 billion in 2013 to US$195.7 billion in 2018, the Deloitte report said, citing EIU data. ♦ Underserved Market Key growth drivers include a burgeoning middle class and an evolving disease profile, Dhillon noted. Age- and lifestyle-related illnesses — including cancer, diabetes and cardiac disease — are on the rise, due to urbanisation, changing diets, widespread tobacco use, and increasing obesity levels. India has one the world’s highest number of diabetes sufferers, at more than 65 million individuals, data from Deloitte showed. Rural India, which accounts for over 70% of the population, is also set to emerge as a potential demand source. The doctor-to-patient ratio for rural areas, according to Health Ministry statistics, stands at 1:30,000, well below the World Health Organization’s recommended 1:1,000 ratio, the IBEF report stated.

4. RHT Health Trust’s clinical establishment at Gurgaon. “The demand-supply gap is quite substantial — in most Indian cities, there is a huge shortage of hospital beds. We continue to see growth opportunities in this underserved market,” he added. According to policies put in place by Prime Minister Narendra Modi’s government, the healthcare industry is one of the few sectors in the country with no foreign direct investment limits. “Over the last couple of years, we’ve seen quite a few investors from the private sector pumping money into the healthcare sector, including TPG, Carlyle, Temasek and GIC,” Dhillon said. RHT Health Trust Stock Price S$1.025 Market Cap S$815.6 million 52-week High Low 89.5c to S$1.05 Dividend Yield 7.49% PE Ratio 19.4 Source: Bloomberg (data as of 7 Sep 2016) The Indian government is also rolling out a universal health plan that aims to provide free drugs, diagnostic services and insurance for serious ailments. In its latest 2016–2017 Budget, the government said it would provide health insurance of up to 1 lakh (or one hundred thousand) rupees per family, and an additional top-up package of 30,000 rupees for senior citizens aged 60 and above, as part of its health protection scheme. It is also giving higher income tax deductions for private healthcare insurance, which would in turn drive increased health insurance penetration and patient volumes. Underlying Strength Meanwhile, the medical tourism industry in India is forecast to expand at a CAGR of 20% — from US$3 billion in 2015 to US$8 billion by 2020. The number of people arriving for medical treatment is also set to double over the next four years, as cost of major surgeries in India is approximately 20% of that in developed markets, IBEF data showed. What India needs to do is build better supporting infrastructure for critical care patients arriving in the country and travelling to their respective hospitals for medical treatment. - Gurpreet Dhillon

5. CEO RHT Health Trust “What India needs to do is build better supporting infrastructure for critical care patients arriving in the country and travelling to their respective hospitals for medical treatment,” Dhillon said. “The extension of e-visas or visas on arrival to medical tourists is also a step in the right direction.” Apart from riding on the industry’s robust outlook, RHT has an edge over the competition in many respects, Dhillon noted. Although the trust’s mandate includes Asia-Pacific emerging markets as a whole, the team focuses purely on India, where its expertise lies. “What we do differently from other healthcare trusts listed in Singapore is our focus on high-end medical care — there are no nursing homes or ancillary healthcare structures in our portfolio.” RHT also targets the sector purely from an infrastructure perspective. “Most investors focus on the operators, but we look at owning infrastructure supporting the operating entity, such as land and buildings, after which, we give the operator multi-year contracts to run the hospitals,” he noted. These long-term contracts provide stability for unitholders. “There are no short-term leases and thus, no economic uncertainty that will impact our financial performance. Over the last four to five years, we’ve recorded stable growth annually,” he added. For the financial year ended 31 March 2016, RHT grew its distributable income by 6% in Singapore dollar terms, and maintained operating margins above the 60% mark, without adding capacity or deploying capital for acquisitions. “That gives you an idea of the strength of the underlying growth in our portfolio, as well as the healthcare sector in the country.” ♦ Tuned In Now that RHT has established a stable growth base, it is looking at expanding more aggressively through organic and inorganic means. Even without venturing outside its portfolio, the trust has grown its pipeline to 2,600 beds currently, from 1,700 beds four years ago. It has a total capacity of 5,800 beds, and is actively focusing on projects that will add 900 beds over the next two to three years, Dhillon said. It is also working with operators to add medical programs that can raise revenue per bed levels, such as oncology services.

6. Amritsar Clinical Establishment is a multi-specialty hospital, located in the north eastern part of Amritsar. Its key specialties are cardiac sciences, neurosciences, urology and nephrology, medical and surgical gastroenterology, medical and surgical oncology, orthopaedics and joint replacement. “Our day-to-day focus is organic, on our brownfield projects, where we add capacity to our existing CEs,” Dhillon added. At the same time, RHT is on the lookout for suitable acquisitions. “We want to take advantage of our low gearing of 19%, and we have a long way to go before we reach our targeted 30% to 35% level,” he added. RHT’s first acquisition since its listing was the purchase of Mohali CE, located in the well-connected and growing state of Punjab, in May 2014. Key criteria for evaluating an M&A deal include quality of the operator, location of the CE, and whether it is yield-accretive for unitholders. “Most of our due diligence is done on the operator rather than the asset — because the asset has natural downside protection, and we examine factors like historical financials, reputational risk and type of medical services offered,” Dhillon said. RHT’s focus on one single operator — Fortis Healthcare — does carry some risk, despite the fact that Fortis is India’s largest operator. We have created a product that is inherently stable, one that is not impacted by macroeconomic volatility, and yet is tuned into the robust Indian growth story. - Gurpreet Dhillon CEO RHT Health Trust “We are excited to work with Fortis, but at some point, we want to work with another operator, to diversify away from the single-operator risk,” he added. After Fortis, India’s second-largest operator is the Apollo Hospitals Group. Dhillon’s two-pronged strategy of ensuring stability and growth for unitholders exemplifies management’s emphasis on transparency and performance. “We are one of the few business trusts trading above our listing price, and that is a function of the sector we are in, as well as the way we have been

7. able to approach Indian healthcare,” he said. “We have created a product that is inherently stable, one that is not impacted by macroeconomic volatility, and yet is tuned into the robust Indian growth story.” Year ended 31 March (S$000)FY2016FY2015FY2014FY2013#Total Revenue (ex straight-lining)138,447130,590⁹³,508¹¹⁰,450Distributable Income61,58358,16646,69444,834Distribution per unit (DPU)7.727.328.19*7.90~Quarter ended 30 June (S$000)1QFY20171QFY2016YoY ChangeTotal Revenue35,39135,3690.1%Distributable Income15,13415,443– 2.0%Distribution per Unit (DPU)1.7981.940–7.3% Outlook Slowing growth in major economies, coupled with volatility in interest rates and foreign exchange, signal challenging times ahead. Despite the uncertain outlook, healthcare is one of the few sectors where demand is fairly consistent, regardless of the economic situation. To further augment the stability in demand, RHT’s Clinical Establishments (CEs) provide specialty medical treatments that are generally non- elective, and operate in geographical locations where demand for hospital beds exceeds supply. To-date, management has been consistent in its strategy of expanding capacity in its existing CEs, and undertaking refurbishment works to cater for increasingly more sophisticated medical treatments. New CEs will be opened in the next financial year, and more advanced medical programmes will be introduced at various existing CEs when development works are completed. RHT Health Trust RHT Health Trust is the first business trust listed on Singapore Exchange with a portfolio of India-based healthcare assets. Its investment mandate is principally to invest in medical and healthcare assets and services in Asia, Australasia and other emerging markets. RHT’s portfolio as of 31 March 2016 comprises 12 Clinical Establishments, four Greenfield Clinical Establishments and two Operating Hospitals located across India. Gurpreet Dhillon Written by Chakrinnovation Follow 0 followers · 1 following This journey led to the creation of Chakr Shield 1.0 in 2017 and the establishment of a manufacturing plant in Pune's Hinjewadi in 2019. No responses yet

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