a93d_Aarohan_2011_Case_Study

8/7/2019 a93d_Aarohan_2011_Case_Study

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Symbiosis Institute of International Business, Pune Page 1

CASE STUDY : Bitter pills in Diversity Land

Socialism in intellectual property laws is meant for idealists having no clue of how businessworks, and not for pharmaceutical companies running expensive R&D operations , Hitesh

Guptas morning jog partnertold him while they took a break. The comment came after Hitesh

had pointed out that the days Economic Times had a story on how a cancer drug generics

manufacturer was going to arm-twist a global pharmaceutical companys Indian subsidiary to

give them the license to produce a generic version of their drug using a provision in Indian laws.

The case was a test case for licensing by a foreign drugmaker whose patented drug could be

produced as a cheaper generic version by another firm using compulsory licensing. The

pharmaceutical world was watching keenly the developments in the Indian case. Hitesh sighed

and wondered if the remaining part of the day would have better news for him.

Three days later, the Chairman and CEO of Surya Healthcare , Dr. Hitesh Gupta took a long look

at the quarterly numbers of his chain of hospitals and grimaced. It had been a bad quarter and

there were signs that in this quarter too the numbers would not meet expectations. He called his

secretary and asked her to cancel the days appointments. Then he called his younger brother, Dr.

Rupen Gupta who headed the companys pharmaceuticals foray, Surya Pharma; to set up a

meeting later in the day.

Surya Pharma was set up in 1993 after the Board of Directors approved a plan for the company

to diversify into the Pharmaceuticals sector which had shown much promise. Aft er their fathers

death in 1996 , Dr. Hitesh Gupta took over as Chairman of the flagship Surya Hospitals wherehe had previously been the Managing Director while younger brother became the COO of the

Group. Lately the two brothers had developed some friction over the direction which the Surya

Healthcare Group should take. Hitesh wanted the chain of hospitals to expand further into Tier 2

cities while increasing the number of beds in the Tier 1 cities. Rupen had differed and said that

the company should tap the capital markets for further expanding the capacity of their

blockbuster drug which had shown great potential. The brothers generally adopted an approach

where they would discuss the differences in opinion in private and present an united picture to

the Board of Directors. Lately however their stances had become so different that people who

were not in the know could also detect something amiss. Yet the elder brother Hitesh had the

foresight to hire a consultancy firm, Synapse, to help them create a roadmap for their Groupsfuture forays.

The team at Synapses Healthcare Practice which was assigned this project had in the past dealt

with expansion plans of hospital chains and medical tourism, this was however the first time they

were dealing with a client which had both a chain of hospitals and a pharmaceuticals company

under its umbrella. Sanjeev Aggarwal was leading this team, a veteran of fifteen years in the


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consultancy industry with the last eight years specializing in the Healthcare Practice. He had a

meeting with Hitesh and Rupen later that afternoon and he was going through the document

which he had emailed to both Hitesh and Rupen three days back listing the Grou ps strengths

vis--vis its rivals and challenges in adopting either strategy as advocated by both the brothers.

Sanjeev leafed through the document which Surya Healthcare had prepared for its strategic

institutional investors three months back. (See Appendix 1)

Dr. Rupen had a stormy meeting with his elder brother where Hitesh once again argued that the

quarter numbers not meeting expectations could be linked to the hospitals chain not expanding

commensurate to the opportunities available. Rupen once put forth the same arguments which he

had presented so many times to his brother about why Maunomycin held great promise, and the

pressing need for a capacity expansion.

Maunomycin(the company's blockbuster drug) and its derivatives( chemotherapy drugs) were

used to treat specific types of Leukaemia. In terms of volumes, Moxomycin ( Maunomycin

derivative, also manufactured by Surya Pharma) were among the most widely used cancer drugsand were part of the standard chemotherapy drug cocktail, used in combination with Cytarabine.

The emergence of liposomal formulations of Maunomycin and Moxomycin (Moxomycin

provides greater penetration) were increasing the volumes for this drug. Maunomycin had a high

global consumption as the essential precursor for the widely used derivative anti-cancer drugs

viz. Dauxorubicin and Epirubicin.

Maunomycin, however was an old molecule and faced extensive generic competition and was a

low margin commodity product. Maunomycin being a high value low volume biopharmaceutical

made small scale manufacturing of the product viable. Surya Pharma's five yearly strategy

document projected the demand for the product to grow considerably over the next 5-10 years,with new variants of this chemical being discovered for use in various healthcare areas. The

industry showed a modest up-trend in demand in the last fiscal, though the prices continued to

decline.

Realizing this demand, Surya Pharma planned a huge capital expenditure for capacity expansion.

Another alternative being presented to the Board was buying up two production centres (one in

Paonta Sahib in Himachal Pradesh, the other in Dehradun) of a small-scale pharmaceutical firm:

Rutanis Pharmaceuticals which had existing production capacities for Maunomycin's generics.

However, Rutanis had lately run into a large lawsuit filed by the United States Food and Drug

Administration (USFDA) and was trying to do a distress sale of two of its plants to pay thelawsuit penalty. The $55 million punitive damages asked for in the lawsuit was related to

deficiencies in the company's drug manufacturing process were due to the breach of the current

Good Manufacturing Practice (cGMP) requirements of the US FDA. The Rutanis production

facilities could be used for production of Maunomycin after an upgradation of the Rutanis two

plants to Surya Healthcares requirements. The Legal Department at Surya Healthcare was

examining whether the business was worth acquiring given the lawsuit.


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The manufacturing unit at Dehradun was a particularly attractive asset as it was set up in June

2009, and enjoyed tax benefits as described in the following table:

Nature of benefit Quantum of benefit

Excise exemption100% Central Excise Exemption for a period of 10 years from the year ofcommencement of production

Income tax exemption

For the first 5 years from first assessment year - 100 %For subsequent 5 years - 30%MAT is payable by the company but is eligible for set off

Table 1: Tax benefits available to the Rutanis Dehradun plant

Initial valuations of the two plants gave a figure of`433 crores, an all cash-deal was being

asked for by Rutanis in view of the liquidity crunch placed on them by the lawsuit. The Rutanis

two plants had a combined annual output of about 145 Kg of Maunomycinbased generics and110 Kg of Moxomycin-based generics, this estimate was based on the initial data provided by

Rutanis to interested investors. Surya Pharma estimated that they would need atleast`112 crores

to bring the plant upto their quality standards and to modify it to their requirements.

What was worrying the Group CFO, Mr. Ramachandran Rao, a 14-year veteran in the Group;

who had also been called into the meeting was a lack of a clear direction on how the groups

strategy should pan out, there was little chance they could win the aggressive bid for Rutanis

assets. Weakened financials and the total number of beds which Surya Hospitals had in

comparison to its competitors made it a possible target for acquisition too. There were already

feelers being sent to the Surya Healthcare Group from investment bankers representing theircompetitors on possibilities of a merger or acquisition of Surya Hospitals, with Surya Pharma

being then spun off as a separate company.

Surya Hospitals had two different types of hospitals under it: greenfield and brownfield. As theowner and operator of greenfield hospitals, Surya Hospitals was responsible for the operatingcosts of these hospitals, including equipment, staff, liability insurance, maintenance supplies andcapital expenditure. As operators of brownfield hospitals, Surya Hospitals had to refurbish, equipand operate hospitals located on the premises of others pursuant to revenue sharing or leasearrangements. The pharmacies in the hospitals were owned and operated by Surya Hospitals.

With the brothers arguing over what the right strategy was, the CFO pulled up on his laptop theword document which contained Surya Hospitals short-term Strategy Roadmap:


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Strategy A: Expand into Tier 2 cities for providing healthcare in secondary and tertiary care

segments.

Strategy B: Consolidate their operations within cities having more than one of their Group

Hospitals. They could use the services of one doctor among multiple hospitals within the city; it

all boils down to how they planned the schedules of their doctors and other medical personnel

for meeting the needs of individual hospitals.

The CFO sighed, he had more worries on his hand, and did not want to become embroiled in the

battle for the potential strategy the Group needed to employ which was unfolding in front of his

eyes. He wished the Synapse Consulting report would come soon, so that the two brothers could

have the benefit of an outsider opinion on the problems the group was facing. He coughed and

that made the two brothers look up from the intense discussion they were having, ignoring that

the CFO too was in the room. The CFO smiled weakly and said If I may , from what we have

been discussing over the last few months, the problem reduced to these two questions.

The first question is should the Group acquire Rutanis assets to produce the two blockbuster

drugs or should it expend money from its reserves in expanding its capacity in existing plants.

We can tap the capital markets. We need to see this in the backdrop of the licensing of cancer

drugs manufactured by a rival in India possibly coming under compulsory licensing , and atleast

for India our market-share may come down due to this. The CFO paused and gave the brothers

a look to see if they agreed with the summary and then continued.

The second question relates to Surya Hospitals .We are currently facing an overload in some ofthe departments in some hospitals while some hospitals are not realizing the potential inflow of

patients which we had initially forecasted. Seeing so, should we expand into Tier 2 cities with

more hospitals and hope for more patients or consolidate within a city where we have different

super-speciality hospitals so as to save operational costs ? In view of the recent feelers from the

investment banker community about other hospitals expressing a desire for a joint venture or

acqusition of our hospitals, possibly we should we take a hard look at our strategy of moving

into Tier 2 cities as well.

Do you gentlemen agree this is the synopsis of our current meeting, the CFO asked hopefully.

Hitesh and Rupen haltingly agreed. The CFO then proceeded to advise that Synapse Consultingshould be asked to specifically tackle these two questions, rather than wandering about creating a

blue skies approach to the Groups growth plans.

As Sanjeev Aggarwal of Synapse Consulting, what options and strategies would you

suggest to the two brothers, Hitesh and Rupen.


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APPENDIX 1

Selected excerpts from the documents prepared for its strategic investors by Surya

Healthcare

Surya Hospitals (hereby referred to as we and our) currently focuses on tertiary care superspeciality areas such as cardiology and cardiac surgery orthopaedics, neurology and neuro-

surgery and critical care, and specializes in minimally invasive surgery. While continually

developing our expertise in these areas, we also seek to expand we may also seek into other high-

value super-speciality areas such as oncology. The development of expertise in new and super

speciality areas will require significant investments in technology, equipment and infrastructure,

and we may not realize the returns that we expect from these areas. Our investments into super

speciality areas are partially based on demographic predictions of increasing demand for

sophisticated medical use procedures in the future which may not materialize. Conversely, we

may be slow to develop or fail to develop further expertise in these super speciality areas, and we

may not be able to supply the market with the level of care it demands.

We compete with other private hospitals, government owned hospitals, smaller clinics, hospitals

owned or operated by non-profit and charitable institutions and hospitals affiliated with medical

colleges. We will also have to compete with any future facilities located in the regions which we

operate. Moreover, some of these competitors may be established and may have greater

financial, personnel and other resources than our hospitals. In particulars our competitors include

hospitals owned by government agencies or trusts, which may be able to obtain financing or

make expenditure on more favourable terms than private hospitals owned or managed by

government agencies and trusts which may be able to obtain financing or make expenditures on

more friendly terms than private hospitals owned and managed by for-profit interests, such asourselves. New or existing competitors may price their services at a significant discount to ours

or offer greater conveniences or better services or amenities than we provide. Smaller hospitals,

stand-alone clinics and other hospitals may exert further pricing pressure on some or all of our

services and also compete with us for doctors and other medical professionals. Some of our

competitors also have plans to expand their hospital networks, which may exert further pricing

and recruiting pressures on us. If we are forced to reduce the price of our services or are unable

to attract patients and doctors and other medical professionals, our business and financial results

may be affected. The expansion of our competitors hospital network may also limit or hamper

our ability to identify and expand into new markets. Some of the competitors have also planned

Medicities with facilities offering various levels of healthcare services, as well as medical

teaching institutions.

Furthermore, there may, in the future, be regulatory changes which increase competition. The

owners of land or buildings may also establish their own hospitals in the future.


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The following table indicates the location and nature of planned facilities of Surya Hospitals:-

Planned hospitals Beds

Ludhiana 100 to 200 beds

Delhi 100 to 200 beds

Bhopal > 200 bedsKolkata > 200 beds

Goa > 200 beds

Mumbai >200 beds

Develop network of regional speciality ICU hospitals: Our regional speciality ICU hospitals

act as referral centres for our super-speciality hospitals for advanced and tertiary procedures, but

are also life sustaining and strategically located to fulfil market demand for basic tertiary care in

case of regional ICU hospitals and higher secondary care in the case of secondary care hospitals.

We intend to further develop our network of regional super ICU hospitals which deepen andcomplement penetration of our super-speciality hospitals with their referrals of patients in need

of advanced tertiary care. In India there is a shortage of supply in adequate equipped and staffed

ICU services, which satisfy internationally accepted standards. We believe we can expand our

reach in the high-end intensive care segment by setting up stand-alone regional ICU hospitals,

with 30 to 80 beds(approximately 25% of which are ICU beds), which will complement our

tertiary care model by providing intensive care and secondary care services. We currently have

two regional ICU hospitals in Bandra, Mumbai and Indira Nagar, Bangalore. These regional ICU

hospitals are typically staffed with approximately 120 doctors and trained intensive care

specialists who provide 24-hour emergency service every day of the week. We intend to increase

our market share in intensive care and also increase our local reach by setting up additional

regional ICU hospitals. In the long term, we also expect our regional ICU strategy to contribute

to the reduction of average length of stay at our super-speciality hospitals, because patients are

able to receive critical care at regional ICU hospitals prior to referral to our super speciality

hospitals.

We intend to leverage growth model with flexible expansion plans. Since a humble start, we

have now grown into a network of five super-speciality hospitals and two regional speciality ICU

hospitals, with a total of 1582 inpatient beds. We employ a flexible approach in our expansion

plans, opportunistically engaging in either greenfield or brownfield projects depending on the

best available alternatives. We believe our ability to successfully complete new projects (on

average to date, greenfield projects within 18 to 24 months and brownfield projects within six to

twelve months) coupled with our focus on super speciality tertiary care enable us to achieve cash

break-even within relatively short periods of time, capital investment and cash outflows (on

average, within one or two years). In particular, in brownfield projects, we can minimize ramp

up time, capital investments and cash flows, and instead focus on our core competencies of

operating hospitals and providing advanced tertiary care and higher secondary care to our


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patients. Improve profitability at mature hospitals and increase occupancy rates at newer

hospitals. We intend to improve profitability at our mature hospitals (which have operated more

than three years by increasing average income per bed and decreasing average length of stay. We

plan to focus on case mix and increase ratio of surgical to medical procedures, and also improve

our utilization rates in order to increase average income per bed. In addition we intend to expand

our practice with minimally invasive surgical procedures, which eliminate the need to make large

incisions in the human body, thereby reducing physical trauma, pain and blood loss. We have

been using minimally invasive procedures in most of our specialities (approximately 7% to 10 %

of our surgical operations, for the fiscal year ended March 31, 2010) and we intend to expand its

range to a wider use of procedures. Patient recovery time is shorter in minimally invasive

surgeries, freeing up beds for other patients and reducing the average length of stay at our

hospitals. For the fiscal year ended March 31, 2010 the average length of stay at our hospitals

was 4.6 days. At our new hospital which we have operated for less than three years, we plan to

increase occupancy rates through extensive marketing (especially during the first year of the

hospital), expansion of our referral network and increase in community outreach programmes togain market share in the regions which we operate.

Improve profitability at mature hospitals and increase occupancy rates at newer hospitals:

We intend to improve profitability at our mature hospitals (which have operated more than three

years by increasing average income per bed and decreasing average length of stay. We plan to

focus on case mix and increase ratio of surgical to medical procedures, and also improve our

utilization rates in order to increase average income per bed. In addition we intend to expand our

practice with minimally invasive surgical procedures, which eliminate the need to make large

incisions in the human body, thereby reducing physical trauma, pain and blood loss. We have

been using minimally invasive procedures in most of our specialities (approximately 7% to 10 %of our surgical operations, for the fiscal year ended March 31, 2010) and we intend to expand its

range to a wider use of procedures. Patient recovery time is shorter in minimally invasive

surgeries, freeing up beds for other patients and reducing the average length of stay at our

hospitals. At our new hospitals which we have operated for less than three years, we plan to

increase occupancy rates through extensive marketing (especially during the first year of the

hospital), expansion of our referral network and increase in community outreach programmes to

gain market share in the regions which we operate.

Profitability of Health Care Industry

According to E&Y, the Indian healthcare industry suffers from low average EBDITA margins

(17.7%) compared to U.S. healthcare industry or other sectors in India such as hospitality

industry. With domestic healthcare insurance premiums growing, hospitals are likely to face a

greater margin squeeze with increasing pressure from insurance companies from insurance

companies for price rationalization for longer credit periods. E & Y also states that hospitals of

medium size (141-220 beds) have the highest profitability, measured by revenue per bed,

compared to small size (80-140 beds) and large size (221-600 beds) hospitality, although the


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location of the hospital, city specific, target market and price sensitivity also determine

profitability. According to E & Y, cardiac specialty hospitals generate the highest revenue per

occupied per bed per day (`13,413), followed by single-speciality hospitals (`11,141) and multi-

speciality hospitals (`10,620). As for profitability, multi-speciality hospitals generate the highest

EBITDA margins per occupied bed per day. According the same report, the average length stay

of Indian tertiary care hospitals is approximately 5 days, which is higher than the international

standard of 4 days.


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APPENDIX 2

Global demand for Maunomycin

Maunomycin in Kgs

Year USA Europe Asia Middle East Total Growth

2005 2,013 3,696 562 47 6,318

2006 1,955 3,844 538 44 6,381 1.00%

2007 1,940 3,981 519 42 6,482 1.60%

2008 1,988 4,123 497 40 6,648 2.60%

2009 2,042 4,286 486 39 6,853 3.10%

2010 2,098 4,405 485 37 7,025 2.50%

Global demand for Moxomycin

Moxomycin in Kgs

Year USA Europe Asia Middle East Total Growth

1999 316.6 600.4 10,479 4 11,400

2000 355.4 615.5 10,769 5 11,745 3.00%

2001 422 629.8 11,158 8 12,218 4.00%

2002 537.7 649.5 11,668 10 12,865 5.30%

2003 611.9 672.5 12,109 13 13,406 4.20%

2004 676.2 703.1 12,543 14 13,936 4.00%

Cost of production of 1 kg of Maunomycin =`1,43,890/-

Selling price (to distributor) of 1 kg of Maunomycin =`2,42,65,680 /-

Cost of production of 1 kg of Moxomycin =`1,97,580 /-

Selling price (to distributor) of 1 kg of Moxomycin =`2,38,43,450 /-


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APPENDIX 3

The installed capacity, proposed production and capacity utilization percentage at Surya

Pharmaceuticals existing plants

ParticularsFor the year ended on

Unit 31-Mar-08 31-Mar-09 31-Mar-10

Installed Capacity

MaunomycinKg 225.00 225.00 225.00

Moxomycin Kg 125.00 125.00 125.00

Proposed ProductionMaunomycin

Kg 135.00 157.50 180.00

Moxomycin Kg 75.00 87.50 100.00

Capacity Utilization %Maunomycin

60.00% 70.00% 80.00%

Moxomycin 60.00% 70.00% 80.00%

The proposed project to increase the production of Maunomycin and Moxomycin at Surya

Pharma.

The total cost of the project of`280.8 crores consists of

Particulars Amount

Land and site development 8.0

Buildings & Civil Works 31.7

Plant and machinery 122.0

Technical know-how fee 50.0

Misc. fixed assets 5.0

Preliminary and Pre-operative expenses 40.4

Contingencies 13.8

Margin money for working capital 1

Total 280.8


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APPENDIX 4

Tables : Metrics of the various hospitals

Greenfield hospitalThree months

ended June

Fiscal year

ended March

Fiscal year

ended March

Fiscal year

ended March

Surya Hospital, Bandra, Mumbai 30.2010 31.2010 31.2009 31.2008

Number of Beds 92 92 92 80

Inpatient Admissions 1,494 5,715 5,210 4,899

Outpatient Registrations 19,021 67,285 41,988 40,159

Average Occupancy Rate 74% 75% 72% 77%

Average Length of Stay 4.2 4.4 4.6 4.6

Inpatient Income (Rs. crores) 95.4 398.7 402.2 336.3

Outpatient Income (Rs crores) 9.1 14.5 23.7 21.4

Pharmacy Income (Rs crores) 16.5 37.9 33.1 38.7

Average Income Per Bed in Use(Rs. crores)

1.0 4.3 4.4 4.2

Number of Major Procedures:

- Cardiac Care 1,102 4,284 4,410 4,064

Greenfield hospital, Surya Hospital, Cunningham Road,Bangalore

Three months

ended

June 30, 2010

Fiscal year ended

March 31, 2010

Number of Beds 600 600

Inpatient Admissions 2,233 2,856

Outpatient Registrations 11,095 15,791

Average Occupancy Rate 50% 46%

Average Length of Stay 4.1 4.4

Inpatient Income (Rs. crores) 121.9 181.3

Outpatient Income (Rs. crores ) 19.5 21.7

Pharmacy Income (Rs. crores) 15.2 22.1

Average Income Per Bed in Use (Rs. crores) 0.6 0.9Number of Major Procedures:

- Cardiac Care 407 1,113

- Orthopaedic 279 625

- Neuro-surgeries 97 198

- Minimally Invasive Surgeries 120 300


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Greenfield hospital, SuryaHospital ,Kolkata

Three months

ended

June 30, 2010

Fiscal year

ended

March 31, 2010

Fiscal year

ended

March 31,2009

Fiscal year

ended

March 31,2008



Outpatient Income (Rs.millions)

13.5 53.9 43.0 36.1


- Ophthalmology 267 1138 992 758

Greenfield Hospital, Surya Hospital,Indira Nagar, Bangalore

Three months

ended

June 30, 2010

Fiscal year

ended

March 31, 2010

Fiscal year

ended

March 31, 2009

Fiscal year

ended

March 31, 2008


Inpatient Admissions 1,203 4,467 4,111 3,968Outpatient Registrations 36,552 65,237 60,587 60,464



Inpatient Income (Rs. crores ) 26.7 113.2 103.8 93.8

Outpatient Income (Rs. crores ) 14.5 50.7 45.3 43.9

Pharmacy Income (Rs. crores ) 7.9 25.4 24.9 20.9

Average Income per Bed(Rs. crores )

0.4 1.7 1.5 1.4


- Urosurgery 198 820 728 833

- Transplant 6 22 16 20

- Minimally Invasive Surgery 150 439 345 252


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Brownfield hospital, Surya HeartHospital, Nagpur

Three months

ended

June 30,2010

Fiscal year

ended

March 31,2010

Fiscal year

ended

March 31.2009

Fiscal year

ended

March 31.2008


Inpatient Admissions 841 2,982 2,511 696




Inpatient Income (Rs. crores) 36.8 127.2 99.8 48.7

Outpatient Income (Rs. crores) 2.2 5.5 4.4 1.9

Pharmacy Income (Rs. crores) 0.5 0.4 - -

Average Income Per Bed(Rs. crores)

0.9 3.2 2.5 2.9


- Cardiac Care 713 2,119 2,040 1,216

Brownfield hospital, Surya HospitalBanjara Hills Hyderabad

Three months

ended

June 30,2010

Fiscal year

ended

March 31, 2010

Fiscal year

ended

March 31, 2009

Number of Beds 130 130 130

Inpatient Admissions 1,300 4,048 1,504

Outpatient Registrations 5,946 14,702 6,125

Occupancy Rate 42% 39% 20%

Average Length of Stay 3.8 4.5 4.4

Inpatient Income (Rs. crores) 52.6 171.1 65.4

Outpatient Income (Rs crores) 3.7 0.7 0.5

Pharmacy Income (Rs. crores) 6.6 18.0 6.2

Average Income per Bed in Use (Rs.crores)

0.4 1.3 0.7


- Cardiac Care 709 1,920 1,379


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Brownfield hospital,Surya Hospital, L B Nagar,

Hyderabad

Three months

ended

June 30,2010

Fiscal year

ended

March 31, 2010

Fiscal year

ended

March 31, 2009

Number of Beds 50 50 50

Inpatient Admissions 397 1,243 155

Outpatient Registrations 2,914 10,897 1,288

Average Occupancy Rate 34% 31% 23%

Average Length of Stay 3.9 4.6 4.4

Inpatient Income (Rs. crores) 16.6 44.7 5.4

Outpatient Income (Rs crores) 1.3 5.4 0.7

Pharmacy Income (Rs. crores ) 1.6 4.9 0.4

Average Income per Bed (Rs. crores) 0.3 0.9 0.6


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APPENDIX 5 : Number of personnel in different hospitals

Name and Location Doctors Nurses Other

Medical

Personnel

Total

Medical

Personnel

Other

Personnel

Total

Personnel

Date of Commencement

of

Operations/Affiliation

Greenfield Hospitals

Surya Hospital, Bandra , Mumbai 145 371 92 608 150 758 July 2002

Surya Hospital, Cunningham Road,Bangalore

30 120 32 182 80 262 March 1991

Surya Hospital, Indira Nagar ,Bangalore

98 244 71 413 136 549 November 2006

Surya Hospital ,Kolkata 19 63 50 132 88 220 July 1993

Brownfield Hospitals

Surya Heart Hospital , Nagpur 18 54 13 85 33 118

July 2008

Surya HospitalBanjara Hills Hyderabad,

24 116 29 169 52 221July 2005

Surya Hospital, L B Nagar,Hyderabad

6 52 12 70 19 89

February 2009


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APPENDIX 6

SURYA HEALTHCARE Profit and Loss (All figures incrores)

Particulars

Three Months Year Ended Year Ended Year Ended

Ended June 30, March 31, 2010 March 31, 2010 March 31, 2010

2010

Income

Sales and Services773.50 2,364.84 1,586.78 1,290.97

Other Income 1.49 2.20 4.85 1.33

Total Income 774.99 2,367.04 1,591.63 1,292.30

Expenditure

Purchases 258.45 782.01 515.82 479.93

(Increase) / Decrease in (40.31) (43.77) (10.08) (8.17)

Inventories

Personnel Expenses 101.75 295.69 192.95 148.21Operating Expenses 284.81 789.34 517.17 350.27

General and 24.20 79.68 50.81 48.05

Administration ExpensesSelling Expenses 22.16 69.06 37.62 55.95

Interest Expenses (net) 58.12 113.07 56.99 93.51

Preoperative & - - -

Preliminary ExpenditureWritten OffDepreciation Amortisation

43.97

120.12 88.45 90.72

Total Expenditure 753.15 2,205.20 1,449.73 1,258.47

Profits / (Losses) before 21.84 161.84 141.90 33.83

Tax

Income Tax

(2.45)

(18.32) (11.85) (2.43)

Fringe Benefit Tax

(1.27)

(4.03) (3.16) -

Wealth Tax

(0.06)

(0.06) (0.04) (0.04)

Deferred Tax

(6.59)

16.48 16.86 (17.94)

Net Profits /(Losses) as 11.47 155.91 143.71 13.42

Restated


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APPENDIX 7

SURYA HEALTHCARE Balance Sheet (All Figures in Crores)

Particulars

As at June 30, As at March As at March As at March

2010 31.2009 31.2008 31.2007

Fixed Assets

Goodwill on consolidation 138.39 138.39 138.39 138.39

Gross Block 2,865.54 2,841.37 1,315.91 1,204.20

Less : Accumulated 617.13 573.32 453.53 366.56

Depreciation /AmortisationNet Block 2,248.41 2,268.05 862.38 837.64

Capital Work in Progress 1,274.88 806.43 993.55 377.04

including capital advances

TOTAL 3,661.68 3,212.87 1,994.32 1,353.07

Investments 100.00 - 0.70 25.00

Current Assets, Loans &

Advances

Inventories 122.49 82.18 38.41 28.33

Sundry Debtors 274.46 218.23 107.39 65.68

Cash and Bank Balances 434.45 409.18 84.50 125.71

Other Current Assets 7.66 2.14 - 0.02

Loans & Advances 292.90 267.65 137.25 100.91

TOTAL ASSETS 4,893.64 4,192.25 2,362.57 1,698.72

Liabilities and Provisions

Secured Loans 1,593.39 1,505.68 1,132.61 794.53

Unsecured Loans 1,797.47 1,356.77 249.23 200.00


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APPENDIX 8

Brownfield and Greenfield expansion of Surya Hospitals

Surya Hospitals used the proceeds of going public in 2008, and deployed the net proceeds of the

Issue in the aforesaid projects in the next three Fiscals. The total amount to be deployed in Fiscal2009, 2010 and 2011 are`408.80 crores,`333.02 crores and`70.35 crores, respectively. The

following are the details of the estimated schedule of deployment of funds and the schedule of

implementation of the projects:

(in Crores)S.No. Object Expenditure

occurred as

on July 31,

2008

Schedule of deployment of funds Estimated time of

completion or repayment

Fiscal 2009 Fiscal 2010 Fiscal 2011

1

Construction, expansionand development of the

greenfield andbrownfield hospitals of

the Company

59.17 213.88 333.02 70.35 Fiscal 2011

2

Repayment andprepayment of short term

loans of the Company 195.00 Within 3 months of the Issue


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APPENDIX 9

Hospital Charge in `


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APPENDIX 10

Private Healthcare Service Providers

Number ofBeds

Location(s) in India Type ofFacility

Hope Chain 6,952 Pan India P,T

Gentle Touch 1,020 South India and Nagpur P,S,T

Singhania Healthcare 1,600 North India and Jaipur S,T

Mellow Healthcare 765 NCR P,S,T

Surya Hospitals 1,582 South, West and East T

Earnest Group 7629 South P,S,T

P= Primary Care, S= Secondary Care, T= Tertiary Care

Besides competing with each other, the major private healthcareservices providers also compete with healthcare delivery facilitiesthat are owned by individuals or non-profit entities supported byendowments, government agencies and charitable contributions incertain locations.


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Rules:

1. The solutions would be judged on the depth of the thought process & logical approach. Specify

assumptions (if any) as an annexure at the end.

2. The event is open to all B-school participants. A team can have a maximum of 2 members, from

the same Institute. One student cannot be part of more than one team. There is no restrictionon the number of teams from an Institute.

3. Solution Format: Font Size Times New Roman, 12 point, 1.5 line spacing and the file should be

a Microsoft Word Document/PDF.

4. The solution for the case study should not exceed 3000 words excluding exhibits and

appendices.

5. The cover page should carry only (i) Name of the Institute, (ii) Name of the Team, (iii) Details of

the Team Members (Name, Email Ids and Contact Nos.).

6. The details of the participants should appear nowhere else in the entire document. Failure to

adhere to this clause will result in automatic disqualification.

7. The solutions shall be sent to email Id : [email protected], the subject of the mail and also the

document name should be in the format _

8. Five teams will be shortlisted to present their solution to the judges at the Symbiosis InfotechCampus, Hinjewadi, Pune on the 24th Feb 2011.

9. Shortlisted teams need to send their confirmation regarding participation within 24 hours,

failing which, the team in the waiting list would be invited. Teams coming for the final round

need to carry their ID cards compulsorily.

10.The selected teams will be reimbursed sleeper class, two way train(Non AC) travel expense. The

reimbursement will be for the shortest route between the participants institute and Pune.

11.The decisions of the organizers of the contest and the panel of judges shall be final and will be

binding on all the participants.

Important Dates:

Launch of Case Study: 25th

January, 2011 Submission of case solutions: 4th February, 2011

Announcement of Shortlist of top 5: 10th February, 2011

Contacts:

For any queries, please send a mail [email protected]

Case Team:

Aby Johnson: 9730045434 ([email protected])

Neeharika Raina: 09730400951 ([email protected])

Tejas Godbole: 09503053744 ([email protected])
mailto:[email protected]:[email protected]:[email protected]:[email protected]

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