Jeena sikho lifecare

Jeena Sikho Lifecare Limited (JSLL) is a player in India’s rising Ayurvedic healthcare sector, which is uniquely positioning itself to offer holistic healthcare solutions. Founded by Acharya Manish Ji, a well-regarded Ayurvedic practitioner, JSLL provides an accessible alternative to traditional allopathic treatments using the science and knowledge of Ayurveda at a cost effective rate. Operating under the ‘Shuddhi’ brand, the company has built a reputation for delivering Ayurvedic healthcare through its hospitals, clinics, and comprehensive range of proprietary herbal products. This blog will aim to explain the business model and the key thesis, anti-thesis, etc of the business.

Business Overview

Revenue Structure and Growth

JSLL’s business model is divided into two core revenue streams: Ayurveda healthcare services and Ayurveda healthcare products. The healthcare services segment accounted for 43% of FY24 revenue, with INR 139 crore coming from services provided at its hospitals, clinics, and day-care centers. Meanwhile, the product segment generated 57% of total revenue, amounting to INR 186 crore.

JSLL has maintained a strong trajectory of growth and much of this growth comes from an increased presence and investment in both its service facilities and product reach, with its Ayurveda healthcare products now being sold through tele-calling centers, e-commerce channels, and its own network of clinics and hospitals.

Operational Metrics and Scale

JSLL’s operations consists of 35 hospitals and 79 clinics nationwide, with a total of 1,277 beds. The company employs a hub-and-spoke model where smaller clinics funnel patients into larger hospitals for advanced treatment. This structure enhances patient engagement and allows for efficient use of its facilities. The bed occupancy rate, while growing, was at around 38% at FY24-end due to the addition of 400 new beds in the previous fiscal year. JSLL aims to increase occupancy to 55% by mid-FY25, a target supported by marketing and increasing awareness of Ayurvedic treatments.

The company has aggressive expansion plans to increase their bed count of 1270 in FY24 end to 2000 by the end of FY24 and 2150 by FY24 end andtargeting a capacity of 3,000 beds by December 2025. In addition, JSLL plans to open 21 new hospitals and clinics in strategic locations, reinforcing its commitment to scaling across India’s growing alternative healthcare market.

Strong Product Portfolio High-Margin Sales

Under the ‘Shuddhi’ brand, JSLL offers a range of Ayurvedic products covering various ailments, from chronic conditions like liver and kidney diseases to preventive healthcare. The high-margin nature of these products significantly enhances the company’s profitability. With a gross margin of around 90% on these products, JSLL’s product line acts as a cash cow, enabling the company to reinvest profits into expanding its service facilities and improving overall patient care. The reason JSLL can command such margins is because of the fact that these products are patented and are only sold by them. By creating a regulatory supply side dominance, JSLL can earn such high margins.

Industry dynamics

The AYUSH sector, which encompasses Ayurveda, Yoga, Unani, Siddha, and Homeopathy, is experiencing a period of high growth driven by government support, rising consumer interest and an expanding infrastructure. With both public and private investment, AYUSH is evolving into a highly organized, accessible healthcare system that combines traditional practices with modern healthcare standards. These industry dynamics will act as strong tailwinds for the business. Lets take a look at the industry drivers:

1. Robust Government Support and Financial Backing

The Indian government has shown strong support for AYUSH, as evidenced by increased budget allocations and specific initiatives to promote traditional healthcare practices. Budget allocation for AYUSH has grown significantly over recent years, from INR 1,214 crore in FY16 to INR 3,648 crore in FY24. This growth rate shows the intent of the government to integrate AYUSH practices into mainstream healthcare, with a YoY growth rate spiking to over 40% in certain years.

Furthermore, the National AYUSH Mission (NAM) serves as a cornerstone for promoting AYUSH infrastructure. NAM’s initiatives include the transformation of 12,500 primary health centers into AYUSH Health and Wellness Centres under Ayushman Bharat. Public health initiatives under NAM encompass specialized programs like the National Program for AYUSH for Morbidity Management, AYUSH Maternal & Neonatal Intervention, and AYUSH Geriatric Healthcare Services. These efforts expand AYUSH’s reach, making alternative healthcare accessible to underserved populations in rural and semi-urban regions.

2. Expanding Infrastructure Under AYUSH

As of FY24, India’s AYUSH infrastructure consists of 3,844 hospitals and 36,848 dispensaries. A significant portion of these facilities is managed by the government, with 3,403 hospitals and 27,118 dispensaries operated publicly. However, the private sector also plays a vital role, operating 11% of AYUSH hospitals and 26% of dispensaries, demonstrating a growing private interest in AYUSH.

3. Accelerating Market Demand and Projected Growth

The demand for Ayurvedic products and services is surging, driven by heightened consumer interest in natural and preventive healthcare. According to recent projections by NirogStreet, India's Ayurvedic product market is expected to expand from INR 57,450 crore in FY23 to INR 1.2 lakh crore by FY28, marking a CAGR of approximately 16%. The broader Ayurvedic product and service market is expected to grow at around 15% CAGR over the same period, with the services sector specifically projected to expand by 12% CAGR​.

The Ayurvedic hospital market, valued at USD 1.3 billion in 2023, is anticipated to reach USD 3.2 billion by 2030, growing at a CAGR of 11.8%.

Why I Like the Business

1. Sectoral Tailwinds

As discussed above, the industry strcuture strongly favours the existing conctnetrated players, with JSLL being one of them. The growth pushed by the government and consumer preferences will act as a strong long term tailwind.

2. Strong growth ahead

The company expects to generate a revenue of 400 crores and a PAT of 25% for FY25. Moreover, they have an ambitious expansion planned with the aim to reach 3000 beds by December 2025 from the current 1250 something. That is a strong growth in terms of revenue. However, another thing to note is that the occupancy can rise as well which will lead to a very high operating leverage. The current occupancy of 38% is expected to be 55% by FY25 and that basically means a 50% jump in PAT for their services division. The shift in revenue mix form product to services will als help in margin expansion, as it is a superior business model.

3.Promoter image

Since the business is in the healthcare industry and is an emerging theme, it is a bit obvious that people will be skeptical. It is upto the company to ensure that they can be trusted. Having a promoter like Manish Ji is a big edge as he has been a popular spokesperson of Ayurveda and has a credible reputation. Having his presence associated with JSLL can be a big boost in establishing trust and superior allocation of capital.

4. Low-Capital, High-Return Model

JSLL’s low-capital expenditure per bed, ranging between INR 2.5-3.5 lakh, is a significant advantage. Compared to conventional healthcare, where per-bed costs can soar to INR 50 lakh, JSLL’s cost structure allows it to scale quickly without significant financial strain. This capital-light model results in a faster payback period, estimated at less than five months for new hospitals. Additionally, with a return on capital employed (ROCE) of over 70%, JSLL has positioned itself as an efficient player in a capital-intensive sector.

5. Strong Unit Economics, High Profitability and balance sheet.

JSLL’s financial performance is bolstered by strong unit economics, with average revenue per bed at INR 7,900 per day. This figure is expected to grow as occupancy rates increase. The company’s Ayurveda products, with a gross margin of 90%, add another layer of profitability, providing a steady cash flow that supports service expansion and reinforces JSLL’s financial stability. This unique combination of high-margin product sales and revenue from services creates a stable foundation for future growth. Moreover, having a solid balance sheet not only atrengthens the business but allows them scope of expansion and survive turbulent times whenever ahead.

5. Strategic Expansion and integrated services

The company’s hub-and-spoke model, where smaller clinics drive patient volumes to larger hospitals, maximizes its reach and optimizes resource utilization. This approach not only enhances patient access but also strengthens JSLL’s market position by creating a seamless, scalable infrastructure. The planned addition of hospitals in Tier 2 and 3 cities will further JSLL’s penetration in underserved regions, tapping into a growing demand for affordable healthcare. JSLL has evolved into a full-fledged service provider from a product-based company by expanding its operations through Shuddhi Ayurveda Panchakarma Hospital (HIIMS) and Shuddhi Panchakarma Day Care Clinic (OPD). It provides treatments such as Ayurveda, allopathy, homoeopathy, and naturopathy. It offers a cure for various diseases such as cancer, diabetes, liver problems, arthritis, cholesterol, thyroid, leukoderma, and joint pains. Although there are a number of unorganised players offering panchakarma services, JSLL has a competitive advantage, it being an integrated service provider that combines Ayurvedic, panchakarma, homoeopathy, and naturopathy treatment to reduce the fundamental causes of disease through its network of Hospital & Institution of Integrated Medical Sciences (HIIMS). (extract taken from Nuvama)

Anti-Thesis

1. Challenges in Increasing Occupancy Rates

Despite rapid expansion and the goal to increase occupancy mentioned in the thesis, I remain a skeptic. JSLL faces a challenge in achieving higher occupancy rates across its facilities. The current occupancy rate is around 38%, which may limit the company’s revenue potential if not addressed promptly. Improving these rates to the targeted 80-90% in the future will require consistent marketing, education, and awareness efforts to attract new patients. While the government’s support for Ayurveda is a positive factor, awareness-building in rural areas will be a slow process. Moreover, as the economics of the market are extremely favourable, we can expect new entrants to compete for the profit pool which can always lead to overuspply and hence, lower occupancy.

2. Regulatory Risks in a Developing Sector

The Ayurveda healthcare sector, while promising, is subject to regulatory uncertainties. With evolving government guidelines on Ayurveda, any changes in policy could impact JSLL’s expansion plans. For instance, delays in NABH accreditations or changes in Ayushman Bharat scheme coverage may affect service accessibility. Furthermore, as Ayurveda gains popularity, regulatory scrutiny is likely to increase, potentially impacting operational flexibility.

3. Marketing Reliance

JSLL’s business model relies heavily on marketing and patient education, particularly given the lifestyle-based nature of its treatments. The company invests significantly in social media, television, and print campaigns, which may impact profitability if patient acquisition costs rise. Balancing marketing expenditures with sustainable patient acquisition is essential for long-term growth, especially in a sector where consumer awareness is still developing.

4. Strong competition present

Since the profit pool is growing but limited, larger players like Patanjali can easily capture the market. It will be difficult for JSLL to maintain a leadership as big players spend more money. At the end, it will come down to branding and patented products, both of which can be replicated or beaten. However, we should not worry about this for the next few years as the industry is beung created, but it is a concern we must be aware of in the future. There can be multiple winners here, but it wont be easy for sure and will require a lot of spending in infrastructure and branding.

5.Industry creation

In my opinion, this should be one of the bigest challenges. Despite the fact that Ayurveda and such treatments have been present for the longest time, people have always preferred western medicine and treatment. Moreover, the industry in order to grow, has to create trust and increase its viability. How can that be done? two ways. First, continious marketing to showcase the benefits and second and most important, researching and producing research papers that prove the benefits of Ayurveda. That is extremely important as that will determine if this industry is here to stay. There has to be strong emperical evidence.

Valuations and technicals

The stock price has been doing immensely well. From its lows of 630 in Mar-24, it has almost tripled at the moment and is at an all time high. It is trending in stage 2 and also held itself strong during the broader market correction.

On the valuations front, I would urge you all to look at it yourself, However, I want to help you guys a bit and suggest how can we approach this. I would prefer a SOTP or some of the parts type valuations where we separately value the service business and the medicine business. Both are of great quality, but we can expect a higher growth rate, return ratio and margin expansion from the service side and hence would give it a premium. Using this idea, I am sure it will become very easy for you guys.

That marks the end of the blog, I hope you found it informational and worth your time.

Citations

• Jeena Sikho Lifecare Limited. Annual Report FY 2023-2024. National Stock Exchange of India, 3 Aug. 2024, archives.nseindia.com/annual_reports/SME_AR_24802_JSLL_2023_2024_03082024175221.pdf. Accessed 31 Oct. 2024.

• Jeena Sikho Lifecare Limited. Investor Update Presentation FY24. National Stock Exchange of India, 16 May 2024, nsearchives.nseindia.com/corporate/JSLL_16052024161201_Investorupdatepresentation.pdf. Accessed 31 Oct. 2024.

• Jeena Sikho Lifecare Limited. Transcript of Analysts/Investors Earnings Conference Call FY24. National Stock Exchange of India, 21 May 2024, nsearchives.nseindia.com/corporate/JSLL_21052024191457_transcript_con_call_final.pdf. Accessed 31 Oct. 2024.

• Nuvama Wealth. Market Research Report on AYUSH Sector Growth. Nuvama Wealth, 2024, www.nuvamawealth.com/ewwebimages/WebFiles/Research/ced6f95c-6e6a-4f0d-93cb-e2d393ea148a.pdf. Accessed 31 Oct. 2024.

• Jeena Sikho. “Jeena Sikho Lifecare Limited – Company Overview and AYUSH Initiatives.” YouTube, 2024, www.youtube.com/watch?v=i76t3Aegh6E. Accessed 31 Oct. 2024.

• Jeena Sikho. “AYUSH Healthcare Expansion and Jeena Sikho Lifecare's Role.” YouTube, 2024, www.youtube.com/watch?v=cInkld2jZR8. Accessed 31 Oct. 2024.