Pancham Project Report

Super Specialty Hospital Pancham Hospitals Private Limited

CONTENTS

SR.

NO.

CHAPTER

1. EXECUTIVE SUMMARY

2. INTRODUCTION

3. PROMOTERS

4. MANAGEMENT AND ORGANIZATION

5. INDUSTRY SCENARIO

6. PROPOSED PROJECT

7. PROJECT COST & FINANCIAL ANALYSIS

8. IMPLEMENTATION SCHEDULE

9. STATUTORY APPROVALS FOR THE PROJECT

10. SWOT ANALYSIS OF THE PROJECT

11. CONCLUSION

ANNEXURES

1. COST OF PROJECT AND MEANS OF FINANCE

2. DETAIL OF LAND

3. DETAIL OF SITE DEVELOPMENT

4. DETAIL OF BUILDING

5. DETAIL OF PLANT & MACHINERY

6. DETAIL OF FURNITURE & FIXTURES

7. DETAIL OF PRE-OPERATIVE EXPENSES

8. INTEREST CALCULATION & REPAYMENT SCHEDULE

9. DEPRECIATION CHART

10. PROJECTED PROFITABILITY STATEMENTS

11. PROJECTED CASH FLOW STATEMENTS

12. PROJECTED BALANCE SHEET

13. PROJECT DEBT SERVICE COVERAGE RATIO

14. SENSITIVITY ANA-DSCR-DEC. IN SALES

15. BREAK-EVEN ANALYSIS


1. EXECUTIVE SUMMARY

Company : Pancham Hospital Pvt LtdProject : Super Specialty HospitalPromoters : Dr. R P Singh

Dr. A C GaurProposed Location : Pakhowal RoadProposed Capacity of Hospital : 100 BedsIndustry : InfrastructureProject Cost : Rs.3185.07 LacPromoters Contribution : Rs.885.07 LacTerm Loan from Bank/FIs : Rs.2300.00 LacCapacity Utilisation : 2011-12 2012-13 2013-14

50% 50% 50%Receipts in the optimum years (Rs. In Lac) : No. of working days : 175 350 350Average Gross DSCR without TUFS benefit : 1.88Average Gross DSCR with TUFS benefit : 2.04Break even Point (3rd year) : 53.78%Cash Break even Point (3rd year) : 22.09%


2. INTRODUCTION

Pancham Hospital Private Limited is a Private Public Limited Company incorporated on 13.10.2009 vide CIN U85110PB2009PTC033284 with the Registrar of Companies, Chandigarh. The company has its Registered Office at 743, Hargobind Nagar, Phagwara and works at Pakhowal Road, Ludhiana. The company has been promoted by Dr. Rajinder Pal Singh and Dr. Anup Chand Gaur. The company was newly incorporated with the main object as under: -

To acquire, establish and maintain one or more Hospital/Hospitals, nursing home(s) for medical aid, relief and treatment of all parts of the body of the general public in all the branches of medical sciences by all available means; to provided all types of facilities to General Public for the physical growth and nourishment, to establish dispensaries, operation laboratory, medical tests, clinics laboratories, medical tests, clinics laboratories for general welfare of the Public; to open branches/centres in different parts of the country and to open their allied institutions, promote medical science, medical education or development of new methods of diagnosis and treatment.

Both the promoters of the company are well experienced in the line of activity.

The project is estimated to cost of Rs.31.85 crore. The proposed schedule for the project to be operational is July 2012.


3. PROMOTERS

The main promoters of the company are Dr. Rajinder Pal Singh and Dr. Anup Chand Gaur.

Dr. Rajinder Pal Singh, S/o S. Dalip Singh, aged 52 years is the Promoter Director of the company and is associated with the company since incorporation. He is a MBBS, MD, DNB (Cardiology). He has experience of 30 years as a doctor. His detailed Bio- Data is enclosed as an annexure to this report.

Dr. Anup Chand Gaur, S/o Sh. Jaswant Singh, aged 51 years is the Promoter Director of the company and is associated with the company since inception. He is a MBBS, MD (Medicine). He has experience of 30 years as a doctor. He has his own hospital at Phagwara.


4. Management and Organization

Board of Directors

PHPL is managed by a board, comprising of two directors with wide experience in the line of activity and industry. The composition of the Board of Directors is as per table below: -

Sr. No.

Name Age (Years)

Qualification Designation

Experience (Years)

1 Dr. Rajinder Pal Singh

52 MBBS, MD, DNB(Cardiology)

Director 30

2 Dr. Anup Chand Gaur

51 MBBS, MD (Medicine)

Director 30

All directors are qualified professionals and experienced in their respective fields. Dr. Rajinder Pal Singh under the guidance of Board of directors, and assisted by senior Executives in charge of various departments would look after the overall operation of PHPL.

5. INDUSTRY SCENARIO

The health system in India is a mix of public and private sectors, with non-government

organisations (NGOs)/civil society sector also playing a small but important role. The

private sector dominates in India’s health care spending with share of 75%. The growth of

the private sector has been phenomenal due largely to dysfunctional nature of public

health system. India’s private final consumption expenditure (PFCE) on medical care and

health services was around Rs. 1,174 billion in FY2005, accounting for 6.2% of total

PFCE. Demand for healthcare is not cyclical.

In fact, India’s private spending on medical and healthcare spending has increased at a

faster rate than total private spending. As a result, share of medical and health care

services in total PFCE has increased from 4.7% in FY2000 to 6.3% in FY2005. With rising

demand for health services, inadequacies of present health system (public and private)

are increasingly becoming evident. Realizing importance of healthcare sector, the

government’s approach towards sector has been supportive, especially in recent past.


There is a realization in government that public sector cannot meet demand for healthcare

delivery alone and therefore private and voluntary sector needs to be encouraged.

THE National Health Policy, 2002 has envisaged the development of an integrated network of evenly spread speciality and super-speciality services through private investments for patients who can pay, so that the draw on the Government’s facilities is limited to those entitled to free use. Simultaneously, trend of decreasing government spending, and the liberalization process since the 1990s has enabled the entry of the corporate sector in health.

`With this background, the government’s recent policy initiatives towards the healthcare sector reflect its stance of removing the hurdles towards private and voluntary sector playing a larger role. This has taken form of reduction of customs duty on equipment, push to health insurance and other similar initiatives. India’s private final consumption expenditure (PFCE) on medical & healthcare spending has increased at a faster rate than total PFCE. While PFCE at current prices has increased at a 5-year compound average growth rate (CAGR) of 16.5% to Rs. 1,174 billion in FY2005, PFCE at current prices has increased at a 5-year CAGR of 13.1%. As a result, share of medical and health care services in total PFCE has increased from 4.7% in FY2000 to 6.3% in FY2005. However, almost half the spending was on outpatient care.

The trends in India’s expenditure on health also indicate a growing share of the private sector. For example, while annual per expenditure on health increased from Rs. 911 in 1998 to Rs. 1,283 in 2004, the share of private sector increased from 75.1% to 75.7%. Annual per capita expenditure on health in the private sector increased from Rs. 684 in 1998 to Rs. 970 in 2004. Of the total private healthcare spending of around Rs. 1,050 billion in 2004, around Rs. 710 billion was on healthcare delivery, and Rs. 325-350 billion on pharmaceuticals.

Total healthcare spending in India is likely to increase to around Rs. 2 trillion (Rs. 1.5 trillion excluding drugs and pharmaceuticals) by 2011-12. Even as the segment witnesses strong growth, structural changes and change in healthcare demand pattern are likely to occur which may require incumbents to make operational changes and focus on costs & efficiency. Structural changes would include emergence of health insurance, which would enhance bargaining power in hands of insurance companies.

At present, health insurance is a very small and insignificant part of health financing with a total premium collection estimated at Rs. 12 billion, growing at around 20% per annum. Private insurance is concentrated in about 8 cities. International experience has shown that insurance companies tend to leverage their bargaining power towards extracting discounts from hospitals, which in turn forces hospital to rationalize costs and focus on efficiency.

The change in demand for healthcare would come in the form of changing demographics: the percent of rich households would increase as would number of people aged 65 and above. The change in demand would also happen in terms of change in disease mix as


the share of lifestyle diseases such as cancer and cardiac related ailment increases. Thus, even as the sector grows it will throw up challenges for hospitals. Over years, private sector in India has gained a dominant presence in all health care sub markets—medical education and training, medical technology and diagnostics, pharmaceutical manufacture and sale, hospital construction and ancillary services and, finally, provisioning of medical care. Over 75% of human resources & advanced medical technology, 68% of estimated 18,500 hospitals, and 37% of 683,000 hospital beds in country are in private sector. The private healthcare sector in India consists predominantly largely of sole practitioners or small nursing homes having 1-20 beds, serving an urban and semi urban clientele & focused on curative care.

Government surveys have indicated a highly skewed distribution, with 85-90% of towns having private practitioners, as compared with 24% in rural areas. Private sector account for 49% beds & an occupancy ratio of 44% whereas occupancy rate is 62% in public sector. Moderate over-supply situation in segment has resulted in mild to strong competition in segment. The intensity varies with area and the service-mix. Competition in the segment takes the form of (1) competing for resources such as specialist doctors and the latest equipment. And also (2) price competition in terms of bed rates, charges for diagnostics and also for surgical procedures. In 1995, a Supreme Court brought the medical profession within the ambit of a 'service' as defined in the Consumer Protection Act, 1986 (CPA). This defined the relationship between patients and medical professionals as contractual. Patients who had sustained injuries in the course of treatment could now sue doctors in 'procedure-free' consumer protection courts for compensation. The CPA is not applicable for free services, or if patients have paid only a nominal registration fee. However, if patients' charges are waived because of their incapacity to pay, they are considered to be consumers and can sue under the CPA. Under civil laws, the law of torts protects the interests of patients. Overall, India faces a serious shortfall in the number of human resources required for health as compared to global norms. There are wide inter-state variations in the number of doctors per 100,000 populations, with higher numbers in Delhi (177), Punjab (132), and Goa (132); but exceedingly low numbers in Haryana (6), UP (24), North-East (32), and Bihar/Jharkhand (33). Generally, availability & quality of healthcare varies across cities and even various locations across cities. The overall trend is that in absence of regulations governing location, standards, pricing, etc; private facilities run in marketplaces, residential colonies, pharmacy shops, with freedom to provide any kind of service, of whatever quality and at exorbitant cost, which varies from facility to facility. In the rural areas, the trend is of abysmally poor quality of services being provided by a large number of unqualified persons. At present, over 90% of the private sector in rural areas consists of sole practitioners who can at best provide some outpatient (OP) services and refer. There is also geographical inequity in the location of diagnostic sites and hospitals. Data for 70 magnetic resource imaging (MRI) sites suggests that 63% of the sample MRIs were located in 5 major cities (Bangalore, Chennai, Delhi, Hyderabad and Mumbai) with a combined population of no more than 45 million (or 4% of India’s population). The past decade has seen growing inequalities in access to health care.


On the one hand, corporate hospitals with state-of-the art facilities cater to the elite, the majority is left to market forces, and medical expenditure is the second highest cause of rural indebtedness. ICRA estimates that in spite of ongoing capacity additions, the shortages in Indian healthcare system will continue, thus making for a cautiously positive outlook on this front.

The sample comprises many hospitals, which have incurred significant capital expenditures in the recent past. As a result, interest and depreciation costs have increased, thereby resulting in net losses. Net sales, as a percent of average assets, were around 40% during FY2005. During 9MFY2006 (April-December 2005), the industry has shown small decline in operating margins, which is on account of increase in employee costs. However, on account of rise in other income of some companies, there has been an improvement in financial performance at the net level.

Medical equipment constitutes a major part of investments in the healthcare sector, accounting for around 60% of capital costs. The sale of medical equipment in India is worth approximately Rs. 15 billion. Most high-end medical equipment is installed in cities with tertiary care hospitals. Most of equipment costing above Rs. 1 million are installed in the metropolitan and large cities. Medium-level equipment is present at district level for secondary care in both public & private sector. The percentage utilization required in the private sector in relation to break-even numbers (number of investigations required to recover fixed costs at the current patient price) are ultrasound (90-120%); CT scan (90% in private hospitals, 190% in private diagnostic centres).

Both quantitatively and qualitatively, medical equipment is better utilized in private sector diagnostic centres as compared to the public sector and private hospitals. Utilization per machine is high in the private sector compared with public sector hospitals; this is in spite of the fact that the latter have more manpower and a higher patient load. Qualitatively, in terms of early investigation, early reports and minimum patient visits, the private sector shows better utilization.

Also, private sector doctors and technicians do more number of investigations per machine in a year than in the public sector. Owing to relatively stable nature of demand and supply more or less matching the demand, earnings can be relatively stable for successful projects. RISK SCORING: 3.80 as per ICRA Rating (Neutral) Industry rating 92-07 Favourable)


4. PROPOSED PROJECT

The proposed project envisages setting up a Multi- speciality hospital consisting of following specialties:-

General MedicineTuberculosis & Respiratory DiseasesDermatology Venerelogy & LeprosyPsychiatryPediatricsGeneral SurgeryOrthopedicsOto-Rhino-Laryngology (ENT)OphthalmologyObstetrics and GynecologyRadio DiagnosisRadio Therapy (Optional) AnesthesiologyDentistryGastroenterologyNeurologyCardiologyCardiac SurgeryNeuro- SurgeryUrologyNephrology

PROJECT INFRASTRUCTURE


Location of Land

The total land acquired for the project is about 2.5 acres about 7 kms from Sidhwan Canal on Pakhowal Road, Ludhiana. The land is suitably situated and well connected by road and Railway. The land is sufficient for expansion, water disposal management, men & material movements and for greenery.

Building

The building will have RCC structure. The details of the building are attached in the annexure.

Power

The unit would require total installed power of about 1000 KW for the unit.

Power Supply will be obtained from Punjab State Electricity Board. Power is available with normal cuts during peak season. Sanction for installed load will be sought in due course of time. The project also proposes to install Generating Sets of adequate capacity to meet the requirement of the project during interruptions. However, the endeavor of the company will be to seek uninterrupted power supply from Electricity Board.

Water

The requirement of water for Human Consumption & for general use would be met from its own tubewell, provision for which has been made in the Project cost.

Manpower

Machinery

RTL proposes to acquire a mix of imported and indigenous plant & machinery fir spinning and for the manufacturing of terry towels. The company has negotiated prices with the suppliers and orders will be placed after financial tie-ups.

Technical Arrangements

In order to implement the project, the company will hire technical professionals experienced in-line. However, the company has inducted Mr. Joshi, possessing postgraduate degrees in textile technology, a


technocrat of long-standing experiences in implementing textile projects and is exposed to latest technologies.

It may be mentioned here that main promoters are well versed in the manufacturing technologies Terry Towels as have been in this field for last 18 years (longest by far in the industry) and have adequate in-house technical expertise to start up another unit without any problems whatsoever.

The promoters also propose to make arrangement with the machine suppliers, in their respective fields, who will provide the shop floor training to the technical staff and shop floor workmen. This would be mainly for the new air jet machines being added where we have a small technical lurning curve.

Marketing Arrangement

. PROJECT COST & FINANCIAL ANALYSIS

Project cost

The cost of the project is estimated to be Rs.50.84 Crore, and is as under:

Sr. No. Project Cost Amount

1 Land 1.20 2 Site Development 0.70 3 Building 8.06 4 Plant & Machinery

- Imported 24.9

6 - Indigenous 4.21 29.16 5 Misc. Fixed Assets 3.23 6 Pre-operative Expenses(Including IDC) 4.17

7

Contingencies (5% on Site Development, Building, Pant & Machinery, Misc. Fixed Assets & Pre-operatives) 2.27


8 Margin for Working Capital 2.05 TOTAL 50.84

Respective details of each item of the cost under the stream are given in the annexure - Means of Finance

The company proposes to meet this cost as under:

Sr. No. Means of Finance Amount

1 Promoters Contribution 16.34 2 Term Loan 34.50 TOTAL 50.84

The Promoters are also providing collateral security worth Rs. ---- Crore, details given below:

The promoters also undertake that if there would occur any shortfall in means of finance for costs overrun due to any reason, that shortfall shall be met by promoter from his own sources. The promoters will give also give their personal guarantees. The combined net worth of the promoter directors, as on 31st March 2009 was Rs. 3157 Lakhs.

The security for the term loan is proposed to be first pari-passu charge on all fixed assets and second pari-passu chare on current assets of the company on reciprocal basis with the working capital lenders.

Financial Indicators

The financial indicators far the projects as working out are as under:

Particulars31.03.

1231.03.

1331.03.

1431.03.

1531.03.

1631.03.

1731.03.

1831.03.

1931.03.

20Gross Sales 37.88 81.59 87.42 87.42 87.42 87.42 87.42 87.42 87.42Domestic 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Export 35.01 75.41 80.80 80.80 80.80 80.80 80.80 80.80 80.80Sale Related Income 2.87 6.18 6.63 6.63 6.63 6.63 6.63 6.63 6.63% Growth -- 115.38 7.14 0.00 0.00 0.00 0.00 0.00 0.00Other Income 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Operating Profit/Loss 0.52 4.23 8.63 10.72 12.32 13.59 14.59 15.41 16.04Profit 0.52 4.23 8.63 10.72 12.32 13.59 14.59 15.41 16.04


Before TaxProfit After Tax -0.41 2.83 5.78 7.18 8.26 9.11 9.78 10.32 10.75Depreciation 5.52 9.63 7.18 5.39 4.07 3.09 2.37 1.84 1.43Cash Profit/ (loss) 5.12 12.47 12.97 12.57 12.33 12.20 12.15 12.16 12.18Paid up Capital 16.34 16.34 16.34 16.34 16.34 16.34 16.34 16.34 16.34Reserve & Surplus Exclu. Rev, Res. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Misc Expenditure not written off 0.75 4.76 11.17 18.64 26.96 35.98 45.59 55.69 66.21Accumulated Losses 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Deferred Tax Liability -1.17 -2.34 -2.97 -3.26 -3.32 -3.24 -3.07 -2.85 -2.61Tangible Net Worth 15.92 18.76 24.54 31.72 39.98 49.09 58.86 69.18 79.93Investment in allied concern amt of Cross Holding 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Net Owned Funds 15.92 18.76 24.54 31.72 39.98 49.09 58.86 69.18 79.93Unsecured Loans 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Total Borrowings 48.59 45.35 40.75 36.15 31.55 26.95 22.35 17.75 15.45Secured 48.59 45.35 40.75 36.15 31.55 26.95 22.35 17.75 15.45Unsecured 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Investments 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Total Assets 66.70 68.21 70.84 74.11 78.30 83.22 88.73 94.72 103.37Out of which Net Fixed Assets 43.26 33.62 26.44 21.05 16.98 13.89 11.52 9.68 8.25Net Working Capital 7.16 15.04 23.40 31.37 39.09 46.69 54.25 61.81 71.69Current Ratio 1.44 1.77 2.11 2.45 2.76 3.06 3.36 3.66 4.06Debt Equity Ratio 2.17 1.59 1.03 0.65 0.40 0.23 0.12 0.03 0.00Operating Profit/Sales 0.01 0.05 0.10 0.12 0.14 0.16 0.17 0.18 0.18TOL/ TNW 3.19 2.64 1.89 1.34 0.96 0.70 0.51 0.37 0.29Long Term Sources 50.42 48.66 49.84 52.42 56.08 60.59 65.76 71.48 79.93Long Term Uses 43.26 33.62 26.44 21.05 16.98 13.89 11.52 9.68 8.25Surplus/ Deficit 7.16 15.04 23.40 31.37 39.10 46.70 54.24 61.80 71.69Short Term Sources 16.28 19.54 21.00 21.69 22.22 22.64 22.96 23.23 23.44Short Term Uses 23.44 34.58 44.40 53.06 61.31 69.33 77.21 85.04 95.13


Surplus/ Deficit -7.16 -15.04 -23.40 -31.37 -39.09 -46.69 -54.25 -61.81 -71.69

The average Gross DSCR of the project works out to be 2.51(With TUFS), 2.28 (without TUFS) and Break Even (Capacity) 54.54% optimum year, which consider satisfactory.

Important Assumptions

1 Working days in a year 365

2 Unit will work 3 shift a day

3 Capacity Utilisation

First Year65%

Second Year70%

Third Year & Onward75%

4

5

6 Interest on Term Loan .00%

7

8 Interest on Working Capital 9.00%

9 Income Tax Rate 33%


10

Office Salaries are assumed to increase by 5% every year

11

Wages & salaries are assumed to increase by 5% every year.

12

Depreciation on Fixed Assets has been provided as per Companies Act on W.D.V. basis

13

Repair & Maintenance cost has been taken at of cost of Plant & machinery and MFA. 3%


8. Implementation Schedule

The implementation schedule of the project is as under:The project is proposed to be completed in September, 2011 and go in stream in October, 2011.

Particulars Commencement Completion

Acquisition of Land

Site Development

Building and Civil works

Placement of Orders of Plant & Machinery

Installation of equipment

Commercial production


9. Statutory Approvals for the Project

Approval/Consent Agency Granting Approval

Status

Building Plan ApprovalPollution Control Board ClearancePower SupplyWater SupplyFire and SafetyRegistration under Factory ActIndustrial Entrepreneurs MemorandumLabour Law Registration under Contract Labour LawEnvironment ClearanceStack Height Clearance


10. SWOT Analysis of the project

Strengths

Weaknesses

Opportunities

Threats

11. Conclusion

The promoters of RTL are already in the Terry Towel line and the company had already running a Terry Towel unit with a capacity of 3230 MTs per annum. They are fully aware of future of textile industry in India. The promoters have inducted a blend of technocrats, financial experts, retired banking and administrative personnel as director of the company.

The technology selected for the project is recognized worldwide and is the state-of-the-art. The set up conceived is capable to produce terry towels of International quality standards and will help the company to explore branded markets. Raw material and power required for the project is available in abundance in the State of Haryana and Punjab.

The proposed project is technically feasible and economically viable.

Pancham Project Report

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