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* We visited the Lucknow facility of Medanta, Lucknow Health City hospital and Apollo Medics (AM) to understand healthcare dynamics of the city and nearby regions.

* Despite recording an 8% CAGR in net state domestic product (NSDP) per capita over FY12-22, Uttar Pradesh (UP) lacks high-quality healthcare infrastructure, leading to underserved healthcare demand. Currently, western UP has better healthcare infrastructure and connectivity to metro cities like Delhi and Noida, while significant healthcare demand is unfulfilled in central and eastern UP. However, public and private sectors are showing increased impetus to improve healthcare infrastructure in the state over the next 4-5 years.

* Lucknow boasts notable government hospitals like SGPGI (Sanjay Gandhi Postgraduate Institute of Medical Sciences) and KGMC (King George’s Medical College).

* Given the limited availability of services, people from Lucknow and nearby areas travel to far places like Delhi (~550kms) for superior tertiary treatment in therapies such as cardiac, neurology and transplants. However, for the past few years, a few private hospitals in Lucknow, like MEDANTA and AM, have started providing high-end tertiary care.

* For people travelling to other metro cities like Delhi, the cost of treatment in Lucknow is almost similar to that in those metro cities, but they have to incur additional costs related to travel and accommodation, which are not covered under insurance.

* MEDANTA Lucknow has a good payor mix with nearly 80% cash-paying patients and ARPOB of ~INR55k. The facility broke even in its first full-year of operations, which highlights the significant traction for healthcare services in the city.

* AM, a 51% subsidiary of APHS, is also attracting patients for high-end treatments (use of technology like AI-enabled robotic knee replacement surgery). AM has occupancy of ~70% and ARPOB of INR52k-55k. AM is also looking for land to expand its bed capacity.

* The key feedback from this visit: 1) there is an ample scope to add at least 1k-2k beds in Lucknow to cater to rising demand for tertiary care treatment; and 2) other cities, like Varanasi, have potential to cater to eastern UP and some parts of Bihar.

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