Chairperson's strategic overview
Through our symbiotic approach across our IT and health care businesses we are optimistic of accelerating growth and emerging as one of the fastest growingcompanies within our respective spaces over the foreseeable future."
The principal message that I intend to communicate on behalf of the founder is thatVirinchi Limited represents the coming together of two areas of expertise with enduringrelevance IT products & services coupled with health care delivery through thebrick and click mode. The founder believes that these spaces are not only synergic butrepresent a compelling model of scalable and profitable sustainability. The subtleVirinchi differentiation from most competing business models is that our IT products andservices business largely operating in US is front-ended by the business solutionsexpertise in India. The result is that our technology competence finds a visible anddynamic manifestation in business solutions (hospital) an integrated solution.
The question that a number of people have asked is whether this integration is at alladvisable. My answer is that the integration is not only advisable but necessary. Thisintegration has been necessitated by global technology developments that promise totransform the face of virtually every business across the foreseeable future. This isbecause information technology is no longer a corporate support function; it is completelyintegral to the existence of companies to the point that every company is virtually aninformation technology company in addition to its core personality. The result is thatstronger the technology component of industrial and service companies the stronger theircompetitiveness and profitability. Over the last decade a concurrent increase incomputing power coupled with a decline in computing costs has created the foundation ofthe data mining sector. The result is that companies that collected information but couldnot mine them competently enough to derive specialised insights are now doing so morecompetently. The result is that data has emerged as the new oil' indicating thatcompetitive companies are more likely ones that mine information effectively andsuccessively. This evolution has transformed the IT services sector as well. An increasingnumber of companies do not merely need vendors to address technology challenges; they needpartners to provide business solutions. As an extension companies do not need partnerswho merely promise a high uptime; they need partners who can assure an increase inbusiness profitability. I am pleased to communicate on behalf of the board that Virinchihas been positioned around this dynamic environment through its focus on the extensivepotential in two verticals financial technologies and healthcare delivery.
The fintech opportunity
We are aware that the financial sector has been in existence for decades and the roleof technology with fintech has been established for long. Interestingly the scope of ITwithin the sector continues to widen largely the result of evolving regulations andcompetitive action in developed markets. Companies need to perform better; in turn theyneed IT products and services that can raise their bar. Besides with Big Data making itpossible to address specific challenges (as opposed to the generic) the role of IT hasonly increased; IT products and services are making it possible for companies to reachwider deeper and weave solutions around the last customer.
As a future-facing company Virinchi has done precisely this. The company works closelywith marquee US clients provides business solutions strengthens their competitivenessand makes it possible for them to win in challenging market spaces. The result is that ourIT products and services segments have been marked by enduring customer engagementgrowing revenues from existing products and a growing share of their wallet
The hospital scope
The hospital space we see a similar reality. Over the last decade-and-a-half therehas been a ten-fold increase in the number of bio-markers; a reasonably-sized hospital cannow provide more than 25000 medical services; of the 5000-odd parameters that can bepotentially checked per patient even the interplay of 500 variables can place a premiumon the need for data interpretation that can only be addressed by advanced equipment. AtVirinchi we are bringing to this space the next generation in concept infrastructureequipment and service. For one we have commissioned a technology-driven hospital the onearea where we perceive extensive operating leverage. We believe that in a space where thediagnostic landscape is widening and deepening the need of the hour is to be able toservice the entire range without ever having to turn any patient away on account of adearth of service capability. At Virinchi we believe that with India's insurance sectormaturing the consumer will become increasingly demanding when it comes to the quality ofhealth care services being offered. The service requirement will not only comprise careand empathy; it will extend to convenience and anytime-information availability. At ourcompany we have addressed this growing need with a singular focus: provide a consistentlyworld-class service in a market where even national standards are erratic. Besides analternative to the age of professional-promoted hospitals is emerging ; professionals withspecific competencies (say cardiac or oncology) engaged in promoting hospitals areyielding ground to multi-speciality hospitals: in the former case the professional needsto address the entire health care eco-system comprising real estate ownershipequipment negotiation housekeeping capital mobilisation etc. at the expense of afocus on his or her core competence. The result is that the country needs multi-competenceentrepreneurs to commission multi-speciality hospitals at a lower cost and quicker speed.
As a business professional -promoted hospital Virinchi's modern hospital showpiece isin the right country at the right time with the right business model. We are optimistic ofour prospects due to the sheer vastness of the opportunity on the one hand and theprevailing extensive under-penetration on the other.
The Virinchi disruption
At Virinchi we believe that the vast opportunity can either be addressed incrementallyor radically. We have selected the latter approach through a decision to identify theright location to commission hospitals identify existing infrastructure that needs to bebenchmarked round hospital standards commission the hospital with speed engage inmodestly-priced long-term lease agreements build a scalable business around a lowbreak-even point provide multi-speciality services enhance patient transparency throughtechnology-enabled smartphone services create the foundation of a scalable businessaround a low capital cost per bed and robust Balance Sheet. The result of this disruptiveapproach may not be completely visible in our financials as yet. However we areoptimistic that our showpiece 350-bed hospital in Banjara Hills that was commissioned inJuly 2016 should break-even at the operating level within 18 months of commissioning oneof the shortest tenures within the modern niche of India's hospital sector. Besides thehospital possesses a revenue potential that is four times our prevailing monthly revenuesbased on the prevailing services mix excluding oncology) which should progressivelytranslate into enhanced value.
The Indian opportunity
I on behalf of the board am pleased to indicate that each of our businesses in Indiaaddresses an upbeat future for good reasons. The IT products and services business isattractively poised with India at an inflection point in its digital journey. Theelectronic reconciliation of Aadhar and KYC is a development with seminal implications ina country where  mn people have bank accounts including Jan Dhan accounts on the onehand while the number of credit cards issued in the country is only [28 mn] i.e. 3.59%of the population with access to banking facilities or 2.33% of the country's population.
The demonetisation the creation of a national payments backbone and various incentivesto accelerate the growth of digital currency indicates that as far as large currencytransactions are concerned the decline of physical money has perhaps transpired and morecash transfers will only transpire in the digital domain from this point onwards.
Virinchi is attractively placed in this regard; the company has worked in precisely theproducts and services niche of the digital domain in advanced geographies like US andEurope enhancing its exposure to cutting-edge technologies and companies. With Indialikely to turn increasingly digital Virinchi is attractively placed to provide businesssolutions to relevant digital players its first-mover advantage likely to translate intoattractive market presence.
From a hospital sector perspective the picture continues to be as optimistic. TheIndian hospitals market is considerably under-penetrated; Private spending on health carespending is a high 84% which indicates a low role for insurance companies a scenario thatwill soon correct as healthcare serviced are priced higher on account of growing servicesophistication and the danger of private spenders tripping into debt following medicalemergencies. India has only 3 beds per 1000 of the population which is estimated at amere quarter of its actual requirement. This indicates that even as India needs to catchup with a retrospective average the sustained market growth could possibly make the gapwider. Besides Indian healthcare infrastructure companies are marked by standalonehospitals needing continuous improvement an extensive reliance on legacy practices andthe sheer inadequacy of beds to address a growing incidence of disease and population. Inview of these realities we believe that there is a large scope to keep growing one'span-India presence without remotely satiating the sector's deep potential (quantitativelyand qualitatively).
At Virinchi we intend to graduate to Tier 2 and 3 urban clusters in India that provideattractive long-term lease options; we will seek to grow through partnerships and aprudent exercise of the REIT option; we will continue to exercise asset-light options withthe objective to build assets that break-even faster than the sectoral standardstrengthening our overall sustainability. Through this synergic approach we areoptimistic of accelerating growth and emerging as one of the fastest growing companieswithin our respective spaces across the foreseeable future.
M. Santhi Priya
Chairperson & Whole Time Director