Aakash Healthcare's expansion strategy involves both greenfield and brownfield projects, says MD

Aakash Healthcare has been steadily expanding since its establishment in 2017, focusing on clinical excellence and patient-centric care. Their recent initiatives include establishing a multi-specialty hospital in Uzbekistan and expanding into Tier II cities with specialized care. The company plans to add over 1,000 beds in the next five years and aims for a total valuation of 3,500 crores. Dr Aashish Chaudhry, Managing Director, Aakash Healthcare discussed the company’s expansion plans, growth strategies, financial sustainability, regulatory challenges, and international partnerships.

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What are recent investments, partnerships, and future funding plans for Aakash Healthcare's expansion?

Since its establishment in 2017, Aakash Healthcare has maintained a commitment to clinical excellence, delivering quality healthcare with a patient-centric approach. The goal has been to grow by expanding bed capacities across various specialties, including super speciality and tertiary care hospitals. Over the past seven years, the flagship hospital in Dwarka has served a population of nearly 1.5 million.

In 2022, Aakash Healthcare became the first Indian hospital brand to establish its own 50-bed multi-speciality hospital in Uzbekistan by acquiring Asia Med Facility in Tashkent. Additionally, Aakash Healthcare began expanding into Tier II cities with the launch of Aakash Orthocity, focusing on single-speciality care.

The expansion strategy involves both greenfield and brownfield projects, with diverse business models tailored to factors such as size, geographical location, and the financial status of existing hospitals. Aakash Healthcare is adaptable, considering ownership of assets, lease and rent models, revenue-sharing models, and Operating and Managing (O&M) arrangements. This flexibility ensures a swift expansion with minimal initial fixed costs.

Looking ahead, Aakash Healthcare plans to add over 1,000 beds in the next five years, aiming for a total valuation of around 3,500 crores. The initial focus will be on self-funding through internal resources, with the goal of achieving a total capacity of 800 beds across the entire group. Subsequently, the company will explore fundraising options to support its expansion plans.

What are the key growth strategies and long-term plans for Aakash Healthcare, including diversification and technology integration?

AC: Aakash Healthcare's growth strategies for the coming years focus on expanding its core private healthcare business. The initial emphasis is on multi-specialty healthcare, particularly in northern India, due to the region's similarities in population, mindset, and business strategies.

A pilot project, Aakash Orthocity in Agra, has been launched, focusing on single-specialty orthopaedics, covering joint replacement, sports medicine, spine, and trauma. Single-specialty infrastructure requirements are significantly less than those for multi-specialty facilities, making it a viable growth avenue despite its challenges.

In the long term, Aakash Healthcare is committed to clinical excellence, delivering high-quality medical care, achieving positive patient outcomes, and adopting a patient-centric approach integrated with technology. The company aims to enhance accessibility and awareness, striving to establish itself as a responsible healthcare brand. This commitment includes a broader focus on societal wellness through preventive healthcare measures.

Additionally, Aakash Healthcare is diversifying through a new venture under M/s ANVKA Healthcare, focusing on ancillary healthcare businesses. The company is expanding its presence in the medical uniform sector with the brand name LINTEX and making strides in 3D printing technology with Cure with 3D, which is gaining traction among patients and surgeons. This technology addresses complex clinical problems, demonstrating the company's commitment to innovation and meeting the evolving needs of the healthcare industry.

How does Aakash Healthcare balance rapid expansion with financial stability and operational efficiency?

As an organisation, we have strong financial stability. However, maintaining a balance between rapid expansion and financial stability and profitability is imperative. Despite our sixth year of operation, we are undergoing rapid expansion while ensuring sound financial health and robust performance figures.

To achieve this balance, we are implementing a phased expansion approach, closely monitoring each phase's impact on overall operations. Operational costs are continuously optimised through efficient measures, including stringent revenue cycle management with a focus on timely and accurate billing and coding.

Fostering a culture of cost transparency is integral to our strategy, promoting a thorough analysis and review of costs. Having consistently achieved positive double-digit EBITDA in the last 2-3 years, we are now exploring expansion opportunities with a cautious approach.

Over the next five years, expansion plans will be methodically executed, with a critical eye on the financial health of the Dwarka flagship hospital. The processes implemented have been tested and proven successful at our main hospital in Dwarka, New Delhi. This approach enables us to control costs by leveraging tested resources—whether human, financial, or technical—ensuring consistent profitability. The intent is to fund expansion as much as possible from our own earnings, minimising reliance on external investors at the initial stages.

What are the main regulatory challenges in expanding healthcare services in India?

Expanding healthcare services across India involves managing various regulatory hurdles. One significant challenge is obtaining licenses and accreditation, including compliance with National Accreditation Board for Hospitals & Healthcare Providers (NABH), state licensing, and Medical Council of India (MCI) regulations. The complexities arise from the need to adhere to diverse norms set by different government bodies, which may vary from state to state. Another challenge is that most patients visiting hospitals either have health insurance, are on government panels, or come under the Ayushman Bharat scheme or other local state-regulated schemes.

Healthcare insurance poses a significant hurdle, especially with private players reluctant to empanel new hospitals. This limits access to patients covered by insurance plans or government schemes. Launching a new hospital requires managing cash flow from patients, leading to financial challenges in the initial year.

Empanelment with private or public insurance schemes, vital for patient occupancy, is time-consuming and depends on NABH accreditation.

These challenges are interconnected, with one licence leading to another, putting healthcare institutions under financial strain. Despite having the necessary infrastructure, delays in insurance empanelment impact patient occupancy.

Are there plans for international collaborations to introduce advanced medical technologies to India?

International partnerships and collaborations are integral to Aakash Healthcare's strategy, focusing on bringing advanced medical technologies and expertise to India. Since its inception, the international market has been a primary focus, aiming to leverage Indian doctors' expertise globally.

Aakash Healthcare has made significant progress in international collaborations, operating in nearly 44 countries through OPDs and local partnerships. Over 4,000 international patients have received treatment in the last six years, with outreach efforts spanning continents. Notable initiatives include healthcare camps in CIS countries like Uzbekistan, Kazakhstan, Kyrgyzstan, and various African nations.

Aakash Healthcare holds exclusive contracts with the Ministries of Nigeria and Bangladesh. New partnerships in 2024 include collaborations with Fiji and Mongolia, targeting significant Indian populations. Future plans involve expanding partnerships to Saudi Arabia, Cameroon, and other international locations, using dual strategies of organising medical camps and establishing tertiary care facilities.

Aakash Healthcare is evaluating UK startups focused on digital healthcare technology to enhance patient outcomes through its work with the Indo-UK Healthcare Mission. Additionally, the adoption of advanced medical technology, such as 3D printing from Stratasys, USA, positions Aakash Healthcare at the forefront of innovation in healthcare design.

Does Aakash Healthcare prefer organic growth or strategic acquisitions, and what factors guide these decisions?

It's a blend of strategies that defines our approach. Opting for organic growth means a longer timeline but allows us to meticulously plan our processes. On the flip side, acquisition strategy promises rapid expansion, leveraging existing infrastructure, personnel, and processes. However, integrating our own processes within an established environment poses challenges. Hence, we adopt a mixed strategy, steering clear of a single method that incurs high organic costs, intensive capex, or an asset-heavy acquisition model. This combination yields optimal outcomes, ensuring expansion while maintaining financial stability.

In our acquisition decisions, several key factors come into play for our multispecialty approach. We prioritize facilities with over 100 beds, regulatory compliance including fire safety, and the strategic location of the hospital. The property's title and its suitability for our purposes are also crucial considerations. We are exploring options like Operations & Management (O&M) or long-term leases for asset-light expansion.

Currently, we are actively exploring potential partnerships, leveraging outsourcing agencies to expedite our expansion. These partnerships span diagnostic services, support functions, and non-medical operations, relieving us of non-core burdens and allowing us to focus solely on clinical healthcare. These synergistic alliances address key challenges, particularly in non-medical areas.

How is Aakash Healthcare funding its expansion plans, and what are the expected ROI and strategies for financial sustainability?

Regarding funding for our ambitious expansion plans, Aakash Healthcare prefers initial funding from internal equity and EBITDA generated from existing facilities. Our aim over the next five years is to establish ourselves as a brand valued at over 3000 crores, with a bed capacity of 1000-1200 for patient care.

To ensure long-term financial sustainability, we emphasize operational efficiency, technological advancements, and telehealth services. Our focus is on enhancing patient experience, cost control, quality improvement, and staff training for enhanced productivity.

Financial stability and profitability are paramount, and we achieve these goals by selecting the right partners and personnel for our expansion endeavors. AHPL's facilities, irrespective of tier, are expected to take ownership of operations, akin to our flagship hospital. We adopt a cautious approach with contingency plans, ensuring a successful and enduring presence in the healthcare sector.