SMEDA Private Hospital

Pre-Feasibility Study

PPRRIIVVAATTEE HHOOSSPPIITTAALL

Small and Medium Enterprise Development AuthorityGovernment of Pakistan

www.smeda.org.pk

HEAD OFFICE

6th Floor LDA Plaza Egerton Road, LahoreTel 111 111 456, Fax: 6304926-7 Website www.smeda.org.pk

[email protected] OFFICE

PUNJABREGIONAL OFFICE

SINDHREGIONAL OFFICE

NWFPREGIONAL OFFICE

BALOCHISTAN

8th Floor LDA Plaza Egerton Road, Lahore

Tel 111 111 456, Fax: 6304926-7 Website www.smeda.org.pk

[email protected]

5TH Floor, BahriaComplex II, M.T. Khan Road,

Karachi.Tel: (021) 111-111-456

Fax: (021) [email protected]

Ground FloorState Life Building

The Mall, Peshawar.Tel: (091) 9213046-47


Bungalow No. 15-AChaman Housing Scheme

Airport Road, Quetta.Tel: (081) 831623, 831702


Feburary, 2007

Pre-Feasibility Study Private Hospital

PREF-53/ February, 2007/Rev 2

2

DISCLAIMER

The purpose and scope of this information memorandum is to introduce the subject

matter and provide a general idea and information on the said area. All the material

included in this document is based on data/information gathered from various sources and

is based on certain assumptions. Although, due care and diligence has been taken to

compile this document, the contained information may vary due to any change in any of

the concerned factors, and the actual results may differ substantially from the presented

information. SMEDA does not assume any liability for any financial or other loss

resulting from this memorandum in consequence of undertaking this activity. Therefore,

the content of this memorandum should not be relied upon for making any decision,

investment or otherwise. The prospective user of this memorandum is encouraged to

carry out his/her own due diligence and gather any information he/she considers

necessary for making an informed decision.

The content of the information memorandum does not bind SMEDA in any legal or other

form.

DOCUMENT CONTROL

Document No. PREF-53

Revision 2

Prepared by SMEDA-Punjab

Issued by Library Officer

Issue Date March, 2004

Revision Date February, 2007


PREF-53/ February, 2007/Rev 2

3

1 PURPOSE OF THE DOCUMENT............................................................................................... 4

2 CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT..................... 4

3 PROJECT PROFILE.................................................................................................................... 4

3.1 OPPORTUNITY RATIONALE ...................................................................................................... 43.2 PROJECT BRIEF ....................................................................................................................... 53.3 PROJECT CAPACITY AND RATIONALE....................................................................................... 53.4 PROJECT INVESTMENT............................................................................................................. 53.5 RECOMMENDED PROJECT PARAMETERS................................................................................... 53.6 PROPOSED LOCATION.............................................................................................................. 53.7 KEY SUCCESS FACTORS/PRACTICAL TIPS FOR SUCCESS............................................................ 53.8 THREATS FOR THE BUSINESS ................................................................................................... 6

4 SECTOR & INDUSTRY ANALYSIS........................................................................................... 6

4.1 HEALTH CARE DELIVERY........................................................................................................ 64.2 PHYSICAL TARGETS AND ACHIEVEMENTS DURING 2005-06 ...................................................... 74.3 HEALTH AND NUTRITION EXPENDITURES................................................................................. 84.4 REGULATIONS......................................................................................................................... 8

5 MARKET INFORMATION ......................................................................................................... 8

5.1 MARKET POTENTIAL ............................................................................................................... 85.2 TARGET CUSTOMERS .............................................................................................................. 9

6 DEPARTMENTS ........................................................................................................................ 10

7 MACHINERY DETAILS............................................................................................................ 10

7.1 MACHINERY AND EQUIPMENT REQUIREMENT ........................................................................ 107.2 OTHER OPTIONS AVAILABLE FOR MACHINERY ...................................................................... 13

8 LAND & BUILDING REQUIREMENT .................................................................................... 13

8.1 TOTAL LAND REQUIREMENT ................................................................................................. 138.2 SUITABLE LOCATIONS........................................................................................................... 138.3 COVERED AREA REQUIREMENT ............................................................................................. 148.4 UTILITIES REQUIREMENT ...................................................................................................... 16

9 HUMAN RESOURCE REQUIREMENT................................................................................... 16

9.1 HUMAN RESOURCE REQUIREMENTS....................................................................................... 169.1.1 Consultants...................................................................................................................... 16

10 FINANCIAL ANALYSIS............................................................................................................ 17

10.1 INITIAL PROJECT COSTS ........................................................................................................ 1710.2 ESTIMATED TIME FOR PROJECT COMPLETION ........................................................................ 1710.3 PROJECT RETURNS ................................................................................................................ 18

11 FINANCIAL ANALYSIS............................................................................................................ 19

11.1 PROJECTED INCOME STATEMENT........................................................................................... 1911.2 PROJECTED CASH FLOW STATEMENT..................................................................................... 2011.3 PROJECTED BALANCE SHEET ................................................................................................. 21

12 KEY ASSUMPTIONS................................................................................................................. 22


PREF-53/February, 2007/Rev 24

11 PPUURRPPOOSSEE OOFF TTHHEE DDOOCCUUMMEENNTT

The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs in project identification for investment. The project pre-feasibility may form the basis of an important investment decision and in order to serve this objective, the document/study covers various aspects of project concept development, start-up, and production, marketing, finance and business management. The document also provides sectoral information, brief on government policies, which have some bearing on the project itself.

Before studying the whole document one must consider following critical aspects, which forms the basis of any investment decision.

22 CCRRUUCCIIAALL FFAACCTTOORRSS && SSTTEEPPSS IINN DDEECCIISSIIOONN MMAAKKIINNGG FFOORR IINNVVEESSTTMMEENNTT

Before making any investment decision, it is advisable to evaluate the associated risk factors by taking into consideration certain key elements. These may include availability of resources, academic knowledge, past experience and specific managerial and medical health care skill. At times evaluation and analysis of strengths, weaknesses, opportunities and threats (SWOT) for a particular project serves the purpose of a basic tool in investment decision making. Pre-feasibility study should capture all the important factors that can play an instrumental role in the success of a project.An idea of the competing hospitals and general practitioners in geographical zone/ City where the hospital will be set up is very critical.

33 PPRROOJJEECCTT PPRROOFFIILLEE

33..11 OOppppoorrttuunniittyy RRaattiioonnaallee

Growing number of patients and lack of maintained infrastructure has put tremendous pressure on public sector hospitals. This has resulted in a rising demand for health services in the private sector. Moreover, introduction of latest technology, hygienic environment and professional staff attitude at private sector hospitals has also contributed to the popularity of the hospitals in private sector. In addition to this, increasing trend of medical diagnosis through sophisticated scientific medical tests has increased the need of high capital investment in the hospital sector. Investors in the private sector can therefore exploit this opportunity and provide latest and dependable diagnostic services on round the clock basis, which not available in the public sector hospitals.

The hospital is a capital-intensive project. Once the required infrastructure is developed, the management focus should shift to maintain its repute, provide quality services and engage reputed consultants to attract patients. Considering the current market structure, the key success factor for a successful hospital is the provision of modernized consultancy and diagnostics services in multidisciplinary areas.

Constrained public sector health system, growing population, introduction of new and modern medical technologies and increased healthcare awareness in the country provides a better business opportunity for the private sector to invest in the health care services.


PREF-53February, 2007/Rev 25

33..22 PPrroojjeecctt BBrriieeff

The proposed project is for setting up a private hospital. This hospital would be a general hospital catering both to indoor as well as outdoor patients. The hospital indoor facilities would include a 25-bed in-patient department with a fully functional operation theatre capable of conducting major types of surgeries. The outdoor facilities would include a diagnostic clinic consisting of a complete medical laboratory and a radiology department.

33..33 PPrroojjeecctt CCaappaacciittyy aanndd RRaattiioonnaallee

The proposed capacity of this hospital is 25 beds, 10 consultants providing services to patients and one emergency unit.

33..44 PPrroojjeecctt IInnvveessttmmeenntt

Total project cost is Rs 41.9 million.

33..55 RReeccoommmmeennddeedd PPrroojjeecctt PPaarraammeetteerrss

Capacity Human Resource Medical Equipment25 Beds 53 Local/Foreign

Financial SummaryProject Cost IRR NPV Payback Period Cost of

Capital(Wacc)Rs. 41.9 million 35.64% 22,617,992 4.44 20%

33..66 PPrrooppoosseedd LLooccaattiioonn

Large public sector hospitals are concentrated in major cities of the country. Therefore, it is suggested that new hospital should be opened up either in smaller cities, peripheral areas or in those areas of the larger cities where there is little presence of existing medical facilities.

33..77 KKeeyy SSuucccceessss FFaaccttoorrss//PPrraaccttiiccaall TTiippss ffoorr SSuucccceessss

Availability of reputed consultants plays a major role in the success and popularity of private hospitals. It is suggested that consultants from a wide range of specialties should be attracted for the hospital. The key success factor in this business is the availability of renowned consultants in the hospital. The consultants are the main reason for good patient base of the hospital. If the hospital has renowned consultants, it would bring many patients, who will not only be the source for consultation fee but will also be using both the outdoor and the indoor facilities of the hospital thereby increasing the revenues for the hospital. This will also create an image and reputation of the hospital in the eyes of general public.

Availability of trained and professional Paramedical Staff. High standard patient care and hygienic environment for the patients, trained nurses

and courteous para-medical staff. Modern and reliable diagnostic services which would include a fully equipped

Radiology Department consisting of X-Ray, ECG and Ultra Sound Equipment and a dependable Medical Laboratory for routine medical examinations.

A well equipped Operation Theatre capable of conducting major surgeries. Reasonable and competitive fees, positioned against competitors fees.



Each city and each area within a city has different demographic characteristics. Thismeans that every area has its own set of medical problems. For example, in those areas where there is a large concentration of industries, environmental pollution related diseases and industrial emergencies would be more prevalent. It is therefore suggested that a careful market analysis of the surrounding population should be carried out before determining the services to be provided in the hospital.

33..88 TThhrreeaattss ffoorr tthhee BBuussiinneessss

One of the major threats to the business is a high turnover rate of medical, paramedical staff and the consultants. To retain the consultants and other medical staff, salary package should be competitive.

44 SSEECCTTOORR && IINNDDUUSSTTRRYY AANNAALLYYSSIISS

44..11 HHeeaalltthh CCaarree DDeelliivveerryy

Pakistan enjoys a vast network of health care facilities. These health care facilities include 946 hospitals, 4554 dispensaries, 5290 Basic Health Units and sub health centers, 907 Mother and Child Health Centers, 552 Rural Health Centers and 289 TB Centers primarily run by provincial governments. The human resource available for health care have gradually increased over the years and according to Pakistan Medical and Dental Council (PMDC) there are 100131 doctors registered until 28th February 2006. There are also 18029 doctors registered as specialists making the total number of available doctors as 118160.The dental surgeons registered in the country include 6374 as general practitioners and 387 as specialists making a total of 6761. Though there is annual output of around 5000 medical graduates from both private and public medical colleges the current ratio of one doctor per 1310 persons is below the recommended ratio of one doctor per 1000 persons. The readers are warned that they should use the number of doctors, dentists and nurses with great caution as there are many bonafide doctors, dentists and nurses who are not registered with PMDC and practicing in hospitals, clinics as well as practicing privately. The details of available human resource are given in Table below

TTaabbllee 44--11 AAvvaaiillaabbllee HHuummaann RReessoouurrccee

Up to 2002-03 Up to 2003-04 Up to 2004-05 Up to 2005-06

Registered Doctors 101635 108062 113206 118160Registered Dentists

5068 5530 6127 6761

Registered Nurses 44520 46331 48446 334271Population Per Doctor

1466 1404 1359 1310

1 Number of registered nurses as of February 2006 . The actual number of nurses working is 27677(Economic survey 2005-06)



Population Per Dentist2

29405 27414 25107 25297

Population Per Nurse3

3347 3296 3175 4636

44..22 PPhhyyssiiccaall TTaarrggeettss aanndd AAcchhiieevveemmeennttss dduurriinngg 22000055--0066

The targets of the health sector during 2005-06 included the establishment of 20 Rural health Centers (RHCs), 50 Basic Health Units (BHUs), Up gradation of 21 RHCs and 53 BHCs . The manpower targets covers the addition of 4000 new doctors, 270 dentists, 2500 Nurses, 5000 paramedics and 500 Traditional Birth Attendants (TBAs). Under the preventive Program about 8.0 million children are targeted to be immunized and 22 million packets of Oral Dehydration Salt (ORS) are to be distributed during 2005-06.

The health program during the current fiscal year has realized on average 80% of its physical targets. The highest achievement of 100% has been obtained in the trained Lady Health Worker (LHWs) category followed by the Immunization Coverage (94%). The sub sector wise achievement of program has been recorded as 70% for RHCs and 84 % for BHUs .The encouraging picture is that the achievements obtained so far are in close vicinity of the targets.

TTaabbllee 44--22 PPuubblliicc SSeeccttoorr EExxppeennddiittuurree

Public Sector Expenditure(Federal Plus Provincial)

Sub Sector Targets (No)

Estimated Achievements(No)

Achievements (%)

A. Rural Health Programi. New Basic Health Units (BHUs)

50 42 84

ii. New Rural Health Centres (RHCs)

20 14 70

iii. Up gradation of existing RHCs

21 18 86

iv. Up gradation of existing BHUs

53 41 77

B. Beds in Hospitals/RHCs/BHUs

2,00 2,000 80

C. Health Manpower Development. Doctors 4,000 3,500 87

2 Source: Nursing Council of Pakistan

3 Based on total population of 155 million



ii. Dentists 270 210 76iii. Nurses 2,500 1,900 76iv. Paramedics 5,000 4,000 80v. Training of TBAs 500 400 80vi. Training of LHWs 15,000 15,000 100D. Preventive Programi. Immunization (Million Nos) 8 7.5 94ii. Oral Re hydration Salt (ORS) (Million Packets)

22 86

44..33 HHeeaalltthh aanndd NNuuttrriittiioonn EExxppeennddiittuurreess

During the year 2005-06, the total expenditure on health is estimated at Rs.40 billion, of which Rs.16 billion allocated for development expenditure and Rs. 24 billion for current expenditure. These figures show an increase of 5.3% over the last year and work out to be 0.51% of GDP. It may be pointed out that as a result of improvement in fiscal front, the government has been allocating relatively more resources to health sector. During the last three years, public sector expenditure on health has increased on average by 11.7 percent per annum as against 10.6 percent per annum during the previous five years.

TTaabbllee 44--33 EExxppeennddiittuurree ddeettaaiill

FiscalYear

DevelopmentExpenditure

CurrentExpenditure

TotalExpenditure

Change(%)

As %ofGDP

2001-02 6688 18717 25405 4.7 0.52002-03 6609 22205 28814 13.4 0.592003-04 8500 24305 32805 13.8 0.582004-05 11,000 27,000 38,000 15.8 0.572005-06 16,000 24,000 40,000 5.3 0.51

44..44 RReegguullaattiioonnss

The doctors working in the hospital should be registered with the Pakistan Medical and Dental Council (PMDC). Prior sanction/approval from the government through Pakistan Atomic Energy Commission (PAEC) is required in case of the equipment being installed in the hospital such as X Ray machines, as they emit radiation and it has to be .

55 MMAARRKKEETT IINNFFOORRMMAATTIIOONN

55..11 MMaarrkkeett PPootteennttiiaall

From 1981 to 2005, the estimated population of Pakistan has grown from 85 million to 149 million making Pakistan the seventh most populous country in the world. This



growth rate of population has posed tremendous challenge to the existing infrastructure for basic facilities in the country. Growing population, increasing industrialization, resultant high level of environmental pollution, and increased healthcare awareness has specially stretched the existing public health care system in the country. This has given rise to high demand of private sector health care facilities to compliment its public sector counterpart.

55..22 TTaarrggeett CCuussttoommeerrss

The major target market for the facility consists of residential areas in the vicinity of the hospital. The basic services that will be provided will also be determined by the need of the locality and its adjacent areas.



66 DDEEPPAARRTTMMEENNTTSS

The proposed hospital would have the following departments:

Emergency Diagnostic Centre Radiology Department Surgical Consultancy Medical Consultancy Gynecology and Obstetrics

77 MMAACCHHIINNEERRYY DDEETTAAIILLSS

77..11 MMaacchhiinneerryy aanndd EEqquuiippmmeenntt RReeqquuiirreemmeenntt

The major cost involved in establishing a well-equipped hospital is the cost involved in machinery, equipment and furnishing. The proposed hospital is a twenty five-bed hospital, providing basic in-house diagnostic and radiology services to its patients. It is also proposed that the hospital is equipped with a fully functional operation theatre.

The following requirement is estimated for running this twenty five-bed hospital.

TTaabbllee 77--11:: MMaacchhiinneerryy aanndd EEqquuiippmmeenntt RReeqquuiirreemmeenntt44

Description No Cost Per Unit (Rs) TotalRadiology DepartmentX-Ray Apparatus with motorized tilting table 1 4,125,000 4,125,000 Dark Room X-Ray Accessories 1 32,000 32,000 ECG Machine 2 95,000 190,000 Ultrasound Machine 1 490,000 490,000 Printer for Ultrasound 1 60,000 60,000 Total 4,897,000 Diagnostic CenterBlood Analyzer 1 100,000 100,000 ELISA for hormone Analysis 1 60,000 60,000 Binocular Microscope 1 85,000 85,000 Centrifuge Machine 1 14,500 14,500 Clinical water bath 1 6,500 6,500 Photoclorimeter 1 14,500 14,500 Lab Incubator 1 55,000 55,000 Miscellaneous Lab Equipment 1 5,000 5,000 Oxygen Supply Plant with Supply in all Rooms

1 150,000 150,000

Total 490,500

4 Machinery cost has been taken from Mediequip and Nurani surgical ,Lahore



Operation TheatreOperation Theatre Shadow less Light 1 36,000 36,000 Electric suction apparatus 1 14,500 14,500 Surgical Diathermy 1 55,000 55,000 Anesthesia Apparatus 1 180,000 180,000 Trolly for Anesthesia 1 5,500 5,500 Cardiac Resuscitation Trolley 1 85,000 85,000 Cardic Monitor 1 310,000 310,000 Hydraulic Operation Table 1 38,000 38,000 Horizontal and Vertical Autoclave 1 50,000 50,000 Operation Table 1 38,000 38,000 Emergency Oxygen Kit 3 5,000 15,000 Total 827,000Gynecology, Obstetrics & PediatricsDelivery Table 2 5,000 10,000 Computerized Baby Incubator 3 595,000 1,785,000 Phototherapy Apparatus 2 160,000 320,000 Baby Cot with side protection 5 3,500 17,500 Total 2,132,500 Grand Total 8,347,000

In addition to this machinery, small auxiliary tools are also required for the smooth operations of the hospital.

TTaabbllee 77--22:: OOtthheerr EEqquuiippmmeenntt RReeqquuiirreemmeenntt

Description No Cost Per Unit (Rs)

Total

Electricity Generator 1 1,500,000 1,500,000 Elevator 1 1,000,000 1,000,000 Light and Electricity Appliances 1 1,500 1,500 Instrument sterilizers 2 5,000 10,000 Baby Weighing Machine 1 3,500 3,500 Instrument cabinets 2 8,500 17,000 Stethoscope 12 2,000 24,000 LV Stands 40 850 34,000 Blood Pressure apparatus 6 1,950 11,700 Miscellaneous 200,000 Total 2,801,700

Moreover, there is other office equipment that is required for the daily operations of the hospital.



TTaabbllee 77--33:: OOffffiiccee EEqquuiippmmeenntt RReeqquuiirreemmeenntt

Description No Cost Per Unit (Rs)

Total

Split Units 13 25,000 325,000 Refrigerators 30 9,000 270,000 Computers 8 25,000 200,000 Printers 5 15,000 75,000 Telephone Exchange 1 100,000 100,000 Telephone Sets 40 1,000 40,000 Fire Extinguishers 16 4,000 64,000 File Cabinets 10 9,000 90,000 Total 2,114,000

To furnish the hospital rooms, laboratories, and visiting area the following furniture is required.

TTaabbllee 77--44 RReeqquuiirreedd SSpplliitt UUnniittss

Split unitConsultants rooms 8 25,000 200,000 Bed rooms 25 25,000 625,000 Doctors' Room 3 25,000 75,000 Surgeons room 1 25,000 25,000 Nurses' room 1 25,000 25,000

38 950,000

TTaabbllee 77--55:: FFuurrnniittuurree aanndd FFiixxttuurree RReeqquuiirreemmeenntt

Description No. Cost Per Unit (Rs)

Total

Single side lift able beds 30 3,500 105,000 Examination Couch 13 2,000 26,000 Sofa set 3 seat 57 4,500 256,500 Chairs 76 750 57,000 Office Table 23 4,000 92,000 Bed Side Cabinets 30 2,000 60,000 Mobile stretcher trolleys 8 3,500 28,000 Wheel Chairs 8 5,000 40,000Instrument trolley 10 6,500 65,000 Total 729,500

Total cost of the infrastructure is summarized below.



TTaabbllee 77--66:: TToottaall CCoosstt ooff IInnffrraassttrruuccttuurree

Description Cost (Rs)Machinery cost 8,347,000 Other Equipment 2,801,700 Office Equipment 2,114,000Furniture & Fixtures 729,500 Split units for rooms ,etc 950,000Total 13,992,200

77..22 OOtthheerr OOppttiioonnss AAvvaaiillaabbllee FFoorr MMaacchhiinneerryy

Alternative Chinese machines are available for Radiology and Diagnostic Departments and for the operation Theatre. However, their prices are 2 to 3 times lower than Japaneseequipment. However we use the mix of Japanese and Korean machinery for the proposed project

88 LLAANNDD && BBUUIILLDDIINNGG RREEQQUUIIRREEMMEENNTT

88..11 TToottaall LLaanndd RReeqquuiirreemmeenntt

For above recommended size of hospital, approximately 6,750square feet (1.5 kanal) areais required with 4 floors including the basement.

TTaabbllee 88--11:: LLaanndd CCoosstt

Description No. of Kanal Rate per Kanal (Rs.) Total CostTotal Land 1.5 3,000,0005 4,500,000

88..22 SSuuiittaabbllee LLooccaattiioonnss

A hospital is supposed to be in a location that is easily accessible and has considerable population concentration. Considering the spread of new residential areas some of the suitable locations in some of the cities of Pakistan are:

TTaabbllee 88--22:: SSuuiittaabbllee LLooccaattiioonnss

City Location

Lahore Main Road Johar Town LCCHS New Phases Jail Road, Gulberg Ferozepur Road

Rawalpindi West Ridge Peshawar Road

Karachi North Nazimabad Gulshan-e-Iqbal

5 Rate of per kanal in Valencia society, Lahore



Defence Phase I to IIIQuetta Satellite Town

Madrussa Road, Cantt Hazara Town Jinnah Road

Faisalabad Susan Road Railway Road Madina Town

Peshawar Dabgari garden Hayatabad

Multan Cantonment Area New Multan

88..33 CCoovveerreedd AArreeaa RReeqquuiirreemmeenntt

Following is the covered area requirement split into various departments and sections:

TTaabbllee 88--33:: CCoovveerreedd AArreeaa RReeqquuiirreemmeenntt

Building No Dimensions Required area

Covered. Area

Total Cost

Ground floor

Reception and waiting room

1 50 x 50 2500 2500 3000000

Emergency 1 20 x 20 400 400 480000

Wash rooms 5 6 x 6 180 180 216000

Consultants rooms 4 15 x 12 720 720 864000

Nursing centers 1 12 x 10 120 120 144000

Doctors' Room 3 12 x 10 360 360 432000

Lounge 1 20 x 20 400 400 480000

Nurses' room 1 15 x 12 180 180 216000

Space for stairs and elevator 1 20 x 15 300 625 750000

Total 5160 6582000

1st floor No. Dimensions CoveredArea

Total cost

Bed rooms 12 14 x 14 2352 2822400Wash rooms 5 6 x 6 180 216000Consultants rooms 4 15 x 12 720 864000Nursing centers 1 12 x 10 120 144000Lounge 1 25 x 20 500 600000



Child nursery and labor room 1 25 x 25 625 750000space for stairs and elevator 1 20 x 15 300 360000Store room 1 20 x 15 300 360000Total 5097 22140002nd floor

Bed rooms 13 14 x 14 2548 3057600

Wash rooms 5 6 x 6 180 216000

Operation theatre 1 30 x 25 750 900000

Sterlization room 1 15 x 15 225 270000

Surgeons room 1 12 x 10 120 144000

Recovery room 1 15 x 12 180 216000

Nursing centres 1 12 x 10 120 144000

Lounge 1 25 x 20 500 600000

Admin block 1 25 x 20 500 600000

space for stairs and elevator 1 20 x 15 300 360000

Total 5123 6147600

Basement

Canteen 1 20 x 20 400 480000

Wash rooms 5 6 x 6 180 216000

Laboratory 1 30 x 40 1200 1440000

Store room 1 20 x 15 300 360000

Pharmacy 1 20 x 15 300 360000

Diagnostic 1 30 x 40 1200 1440000

space for stairs and elevator 1 20 x 15 300 360000

open space 1280 1536000

Total 5160 6192000



88..44 UUttiilliittiieess RReeqquuiirreemmeenntt

Electricity Telephone Gas Water Waste disposal

99 HHUUMMAANN RREESSOOUURRCCEE RREEQQUUIIRREEMMEENNTT

99..11 HHuummaann RReessoouurrccee RReeqquuiirreemmeennttss

99..11..11 CCoonnssuullttaannttss

Consultant services for the following fields would be available in the hospital:

1. Gastroenterology Specialist2. Pediatric Physician3. General Surgeon4. General Physician (Chest & TB)5. Diabetes & Endocrinologist6. Cardiologist7. Orthopedic Surgeon8. Gynecologist9. Pathologist10. Dentist

The consultants generally get 60-70% of the professional fee charged to the patient. In surgical cases, 1/3rd of the fee charged is shared by the hospital, while the surgeon and his team share the rest 2/3rd.

For the proposed size of hospital, apart from consultants following manpower is required:

TTaabbllee 99--11:: HHuummaann RReessoouurrccee RReeqquuiirreemmeenntt

Positions Required Salary per month Salary per annum

Chief Executive 1 75,000 900,000Medical Superintendent 1 50,000 600,000Medical Officers 9 15,000 1,620,000Nursing Staff 9 6,500 702,000Laboratory Technicians 5 7,500 450,000Radiology Technicians 2 7,500 180,000Receptionist 2 5,000 120,000Accountant 1 15,000 180,000Accounts clerk 1 8,000 96,000Security Guard 2 5,000 120,000Electrician/technician 2 4,000 96,000



Sweepers 8 3,500 336,000Total 43 202,000 5,400,000

1100 FFIINNAANNCCIIAALL AANNAALLYYSSIISS

1100..11 IInniittiiaall PPrroojjeecctt CCoossttss

Following is the breakdown of the initial project cost for the proposed hospital. It is suggested that the land for the hospital is purchased and a custom designed building is constructed.

TTaabbllee 1100--11:: TToottaall PPrroojjeecctt CCoosstt

Project Costs Costs (Rs)Capital Costs

Land 4,500,000 Building 21,187,000 Medical Equipment and Furniture 13,992,200 Pre-operating costs6 1,726,000

Total Capital CostsWorking Capital

Raw Material Cost7 53,852 Cash 500,000 Total Working Capital 553,852

Total Project Costs 41,959,052

TTaabbllee 1100--22:: FFiinnaanncciinngg PPllaann

FinancingDebt (60%) 16,783,621 Equity (40%) 25,175,431

Total 41,959,052

1100..22 EEssttiimmaatteedd TTiimmee FFoorr PPrroojjeecctt CCoommpplleettiioonn

Three months for completion of initial formalities i.e. formation, registration of the company etc.

One year for purchase of land and construction of building. Six months for sanction of loan (In case, if financing has to be arranged through

bank) 5-6 months for purchase of machinery, its installation and testing. Thirty days for premises furnishing and staff/labor appointments.

6 These include salaries of administration staff during the period of construction; incorporation charges and interest accrued during first year.7 This represents chemicals, radiology films and other disposable items used in diagnostic department and Operation Theatre.



1100..33 PPrroojjeecctt RReettuurrnnss

Project economics is intended to assess the financial sustainability of the project. This financial analysis however, depends on the assumption used for the analysis. Since this document concern a generic hospital business unit, the financials will vary considerably for individual projects.

According to the information analyzed the hospital business is a viable business opportunity. According to assumptions used for this study, the business has equity IRR of 60.04% and equity payback period of 3.71 years.

TTaabbllee 1100--33:: PPrroojjeecctt RReettuurrnnss

Project EquityIRR 35.64% 60.04%NPV 22,617,992 38,480,131 Payback Period (Years) 4.44 3.71


PREF-53/Feburary, 2007/Rev 2

19

1111 FFIINNAANNCCIIAALL AANNAALLYYSSIISS

1111..11 PPrroojjeecctteedd IInnccoommee SSttaatteemmeennttYear 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees

REVENUE

Indoors - Surgery 9,600,000 11,214,000 12,965,544 14,864,148 17,284,860 19,910,388 23,076,648 26,932,032 31,115,376 35,650,044 - Room rent 4,050,000 4,677,750 5,402,801 6,240,235 7,207,472 8,324,630 9,614,948 11,105,265 12,826,581 14,814,701

13,650,000 15,891,750 18,368,345 21,104,383 24,492,332 28,235,018 32,691,596 38,037,297 43,941,957 50,464,745 Outdoors - Consultation fee 36,000,000 42,840,000 50,274,000 58,338,000 67,068,000 76,575,000 90,048,000 104,718,000 120,564,000 137,751,000 - Diagnostic Center 4,368,000 5,045,040 5,831,508 6,741,288 7,788,384 8,988,840 10,374,816 11,991,096 13,837,548 15,985,644

40,368,000 47,885,040 56,105,508 65,079,288 74,856,384 85,563,840 100,422,816 116,709,096 134,401,548 153,736,644 pahrmacy rent 30,000 33,000 36,300 39,930 43,923 48,315 53,147 58,462 64,308 70,738 canteen rent 6500 7150 7865 8651.5 9516.65 10468.315 11515.1465 12666.66115 13933.32727 15326.65999

54,054,500 63,816,940 74,518,018 86,232,253 99,402,156 113,857,642 133,179,074 154,817,521 178,421,746 204,287,454 DIRECT COSTS

Surgeon's & Anaesthesist's Share 6,400,000 7,476,000 8,643,696 9,909,432 11,523,240 13,273,592 15,384,432 17,954,688 20,743,584 23,766,696 Consultants' Share 25,200,000 29,988,000 35,191,800 40,836,600 46,947,600 53,602,500 63,033,600 73,302,600 84,394,800 96,425,700 Direct diagnostic costs 655,200 756,756 874,726 1,011,193 1,168,258 1,348,326 1,556,222 1,798,664 2,075,632 2,397,847 Rooms Electricity 756,000 935,550 1,143,450 1,383,575 1,660,289 1,978,512 2,343,775 2,762,306 3,443,675 4,233,695 Total Variable Cost of Services 33,011,200 39,156,306 45,853,672 53,140,800 61,299,387 70,202,930 82,318,030 95,818,259 110,657,692 126,823,938

Fixed OverheadsPayroll 2,952,000 3,247,200 3,571,920 3,929,112 4,322,023 4,754,226 5,229,648 5,752,613 6,327,874 6,960,662 Depreciation 2,640,845 2,640,845 2,640,845 2,640,845 2,640,845 2,640,845 2,640,845 2,640,845 2,640,845 2,640,845 Maintenance 329,712 362,683 398,952 438,847 482,731 531,004 584,105 642,515 706,767 - Total Services Cost (Fixed + Variable) 38,933,757 45,407,034 52,465,389 60,149,603 68,744,987 78,129,005 90,772,628 104,854,232 120,333,178 136,425,444

Contribution Margin 21,043,300 24,660,634 28,664,346 33,091,453 38,102,769 43,654,712 50,861,044 58,999,262 67,764,054 77,463,516

Gross Profit 15,120,743 18,409,906 22,052,630 26,082,650 30,657,169 35,728,637 42,406,446 49,963,289 58,088,568 67,862,010 OPERATING OVERHEADSPayroll 2,448,000 2,692,800 2,962,080 3,258,288 3,584,117 3,942,528 4,336,781 4,770,459 5,247,505 5,772,256 Depreciation 656,275 656,275 656,275 656,275 656,275 656,275 656,275 656,275 656,275 656,275 Electricity 1,320,000 1,452,000 1,597,200 1,756,920 1,932,612 2,125,873 2,338,460 2,572,306 2,829,537 3,112,491 Other operating costs 120,000 132,000 145,200 159,720 175,692 193,261 212,587 233,846 257,231 282,954 Legal & professional charges 75,000 82,500 90,750 99,825 109,808 120,788 132,867 146,154 160,769 176,846 Telephone 350,000 385,000 423,500 465,850 512,435 563,679 620,047 682,052 750,257 825,283 Amortization of pre-opertaing ezpenses 172,600 172,600 172,600 172,600 172,600 172,600 172,600 172,600 172,600 172,600 Total 5,141,875 5,573,175 6,047,605 6,569,478 7,143,538 7,775,005 8,469,618 9,233,692 10,074,174 10,998,705

Rental Income 420,000 462,000 508,200 559,020 614,922 676,414 744,056 818,461 900,307 990,338 Financial chargesLong term loan @ 14% 2,349,707 1,879,766 1,409,824 939,883 469,941 - - - - -

Net profit before tax 8,049,161 11,418,965 15,103,400 19,132,309 23,658,611 28,630,046 34,680,884 41,548,058 48,914,701 57,853,643

Tax @ 35% 2,817,206 3,996,638 5,286,190 6,696,308 8,280,514 10,020,516 12,138,309 14,541,820 17,120,145 20,248,775

Net Profit after tax 5,231,955 7,422,327 9,817,210 12,436,001 15,378,097 18,609,530 22,542,575 27,006,237 31,794,556 37,604,868

Retained earnings at the beginning - 5,231,955 12,654,282 22,471,492 34,907,493 50,285,590 68,895,121 91,437,695 118,443,933 150,238,488 Available for distribution 5,231,955 12,654,282 22,471,492 34,907,493 50,285,590 68,895,121 91,437,695 118,443,933 150,238,488 187,843,356 Dividend - - - - - - - - - - Retained earnings at the end 5,231,955 12,654,282 22,471,492 34,907,493 50,285,590 68,895,121 91,437,695 118,443,933 150,238,488 187,843,356



20

1111..22 PPrroojjeecctteedd CCaasshh FFllooww SSttaatteemmeenntt

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees

Profit after tax - 5,231,955 7,422,327 9,817,210 12,436,001 15,378,097 18,609,530 22,542,575 27,006,237 31,794,556 37,604,868

Adjustment of non-cash changes and other items: Depreciation - 3,297,120 3,297,120 3,297,120 3,297,120 3,297,120 3,297,120 3,297,120 3,297,120 3,297,120 3,297,120 Amortization of preoperating expenses - 172,600 172,600 172,600 172,600 172,600 172,600 172,600 172,600 172,600 172,600 Working Capital Changes (Increase) in stocks (53,852) (8,347) (9,696) (11,216) (12,909) (14,800) (17,087) (19,927) (22,764) (26,483) 197,083 Increase/(Decrease) in financial charges payable - 2,349,707 (469,941) (469,941) (469,941) (469,941) (469,941) - - - - Increase/(Decrease) in payables - 2,777,753 2,405,338 879,541 962,814 1,082,458 1,188,122 1,588,063 1,778,503 1,940,073 2,125,949

(53,852) 5,119,113 1,925,700 398,383 479,963 597,716 701,093 1,568,136 1,755,738 1,913,590 2,323,032

Net Cash Flow from operating activities (53,852) 13,820,788 12,817,747 13,685,313 16,385,684 19,445,534 22,780,344 27,580,431 32,231,695 37,177,866 43,397,620

Pre-operating expenses (1,726,000) - - - - - - - - - - Fixed Capital expenditure (37,471,200) - - - - - - - - - - Net Cash Flow from investing activities (39,197,200) - - - - - - - - - -

Capital issued 16,783,621 - - - - - - - - - - Long term Loan 16,783,621 (3,356,724) (3,356,724) (3,356,724) (3,356,724) (3,356,724) - - - - - Dividends paid - - - - - - - - - - - Net Cash Flow from financing activities 33,567,242 (3,356,724) (3,356,724) (3,356,724) (3,356,724) (3,356,724) - - - - -

Cash generated (injected) during the year (5,683,810) 10,464,064 9,461,023 10,328,589 13,028,960 16,088,809 22,780,344 27,580,431 32,231,695 37,177,866 43,397,620

Opening balance of cash and cash equivalent - (5,683,810) 4,780,253 14,241,277 24,569,866 37,598,825 53,687,635 76,467,978 104,048,409 136,280,104 173,457,970

Closing balance of cash and cash equivalent (5,683,810) 4,780,253 14,241,277 24,569,866 37,598,825 53,687,635 76,467,978 104,048,409 136,280,104 173,457,970 216,855,590



21

1111..33 PPrroojjeecctteedd BBaallaannccee SShheeeettYear 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees

CAPITAL AND RESERVESIssued, subscribed and paid up capital 16,783,621 16,783,621 16,783,621 16,783,621 16,783,621 16,783,621 16,783,621 16,783,621 16,783,621 16,783,621 16,783,621 Retained Earnings - 5,231,955 12,654,282 22,471,492 34,907,493 50,285,590 68,895,121 91,437,695 118,443,933 150,238,488 187,843,356

16,783,621 22,015,576 29,437,903 39,255,113 51,691,114 67,069,211 85,678,741 108,221,316 135,227,554 167,022,109 204,626,977

LONG TERM LOAN

Long term loans - unsecuredLONG TERM LOAN @14% 16,783,621 13,426,897 10,070,172 6,713,448 3,356,724 - - - - - -

CURRENT LIABILITIES

Creditors accrued and other liabilities - 2,777,753 5,183,091 6,062,632 7,025,445 8,107,903 9,296,025 10,884,088 12,662,591 14,602,664 16,728,613 Financial Charges payable - 2,349,707 1,879,766 1,409,824 939,883 469,941 - - - - -

- 5,127,460 7,062,856 7,472,456 7,965,328 8,577,845 9,296,025 10,884,088 12,662,591 14,602,664 16,728,613 33,567,242 40,569,933 46,570,932 53,441,017 63,013,166 75,647,056 94,974,767 119,105,404 147,890,144 181,624,773 221,355,590

FIXED CAPITAL EXPENDITURE

Freehold Land 4,500,000 4,500,000 4,500,000 4,500,000 4,500,000 4,500,000 4,500,000 4,500,000 4,500,000 4,500,000 4,500,000

Building 18,979,000 18,979,000 18,979,000 18,979,000 18,979,000 18,979,000 18,979,000 18,979,000 18,979,000 18,979,000 18,979,000 Medical Equipment and furniture 13,992,200 13,992,200 13,992,200 13,992,200 13,992,200 13,992,200 13,992,200 13,992,200 13,992,200 13,992,200 13,992,200 Accumulated depreciation - (3,297,120) (6,594,240) (9,891,360) (13,188,480) (16,485,600) (19,782,720) (23,079,840) (26,376,960) (29,674,080) (32,971,200)

32,971,200 29,674,080 26,376,960 23,079,840 19,782,720 16,485,600 13,188,480 9,891,360 6,594,240 3,297,120 -

Preoperating expenses 1,726,000 1,553,400 1,380,800 1,208,200 1,035,600 863,000 690,400 517,800 345,200 172,600 -

CURRENT ASSETS

Raw Material Inventory 53,852 62,199 71,895 83,112 96,021 110,821 127,909 147,835 170,600 197,083 Cash and Banks balances (5,683,810) 4,780,253 14,241,277 24,569,866 37,598,825 53,687,635 76,467,978 104,048,409 136,280,104 173,457,970 216,855,590

(5,629,958) 4,842,453 14,313,172 24,652,977 37,694,846 53,798,456 76,595,887 104,196,244 136,450,704 173,655,053 216,855,590 33,567,242 40,569,933 46,570,932 53,441,017 63,013,166 75,647,056 94,974,767 119,105,404 147,890,144 181,624,773 221,355,590


PREF-53/February, 2007/Rev 222

1122 KKEEYY AASSSSUUMMPPTTIIOONNSS

TTaabbllee 1122--11:: RReevveennuuee AAssssuummppttiioonnss

Description Annual Growth Rate

Assumptions

Surgery - General Surgery - No of operations per month 10% 20 - Average fee per operation 5% 25,000 - Gynaecology & Obstetris - No of deliveries per month 10% 15 - Average fee per delivery 5% 20,000 Room Rent - No of Rooms 25 - Working Days 360 - Total Working Days (Weighted) 9,000 - Occupancy Rate 10% 25% - Occupancy 2,250 - Room Rent per Day 5% 1,800 Consultation fee - No of Consultants 10 - Patients per day / Consultant 10% 15 - No working days 300 - Consultants' Fee 5% 800 Diagnostic center - Radiology - Ultra-Sound No of patients per month 10% 150 Ultrasound Fee per patient 5% 500 - X-Ray No of patients per month 10% 180 X Ray Fee per patient 5% 300 - ECG No of patients per month 10% 120 ECG Fee per patient 5% 500 - Complete Blood Test/Urine Test No of patients per month 10% 350 Test Fee per patient 5% 500



TTaabbllee 1122--22:: EElleeccttrriicciittyy AAssssuummppttiioonnss

Room Electricity ConsumptionOne Ton AC Operating For 10 Hours/Day 36 (Kwh)Other Electric Appliances 6 (Kwh)Rate Per Unit (Rupees/Kwh) 8Electricity Price Growth Rate 10%

TTaabbllee 1122--33:: OOppeerraattiinngg EExxppeennssee AAssssuummppttiioonnss

Costs BasisSurgeon's & Anesthetist’s Share 2/3 of Total Surgery FeeConsultants' Share 70 % of Total Consultation FeeDirect Diagnostic Costs 15% of Total Diagnostic Center Fee

TTaabbllee 1122--44:: OOtthheerr OOppeerraattiinngg EExxppeennssee AAssssuummppttiioonnss

Maintenance Cost (% of Total Machinery & Building Cost) 10%Maintenance Cost growth rate 10%Other operating costs growth rate 10%Legal & professional charges growth rate 10%Telephone & Communication cost growth rate 10%Accounts Payable Cycle 30 DaysRaw Material Inventory 15 DaysAmortization Of Pre-Operating Expenses 10 Years

TTaabbllee 1122--55:: FFiinnaanncciiaall AAssssuummppttiioonnss

Interest On Long Term Loan 14%Long Term Debt Tenure 5 yearsTax Rate 35%Weighted Average Cost Of Capital 20%

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