DETAILED PROJECT REPORT - GCSRA
DETAILEDPROJECTREPORTFOROPERATION alayaPrivate LimitedPrivate & ConfidentialDecember 18, 2012
Narayana Hrudayalaya: Bharuch Hospital Project ReportDecember 18, 2012TABLE OF CONTENTSSr. #DESCRIPTIONPAGE NUMBERS1.Executive Summary5 – 152.An Overview of the Indian Healthcare Sector18 – 313.Narayana Hrudayalaya Group of Hospitals34 – 564.Project Outline59 – 685.Project Development Plan71 – 766.Operational Plan79 – 817.Proposed Operational Models84 – 858.Projected Financials88 – 89Page 2
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Narayana Hrudayalaya: Bharuch Hospital Project ReportDecember 18, 2012ExecutiveSummaryPage 4
Narayana Hrudayalaya: Bharuch Hospital Project ReportDecember 18, 2012Project IntroductionBorosil Glassworks Limited and GNFC are desirous of setting up a multi-specialtytertiary care hospital in Bharuch. The hospital would bridge the gap in accessibility totertiary healthcare services in Bharuch and the nearby areas of Ankleshwar, Jhagdia,Dahej etc. The hospital would be equipped with state-of-the-art diagnostic andclinical facilities to provide best in class treatment to the local community.The hospital would be would be located on a 6 acre land allotted for the purpose byGNFC.Gujarat Borosil Limited (GBL), a USD 14.5 Million1 company, is one of the premiermanufacturers of glass ware in India. The Borosil brand is synonymous with qualityand extensively used in laboratories, kitchenware, microwave-ware etc. The companycommissioned first of its kind Low Iron Solar Glass Furnace on 16th March, 2010giving it a major first mover advantage in the fast growing solar glass marketsegment in the country. GBL has an employee and worker strength of 4262, notincluding contract labour.Gujarat Narmada Valley Fertilizers & Chemicals Limited (GNFC), a joint sectorenterprise promoted by the Government of Gujarat and the Gujarat State FertilizerCompany Limited (GSFC) set up in Bharuch, Gujarat in 1976. Initially, starting off asmanufacturer of ammonia-urea fertilizers, GNFC has since diversified into areassuch as chemicals, petro-chemicals and energy.12Gujarat Borosil Limited, Annual Report FY 2011 - 12Gujarat Borosil Limited, Annual Report FY 2011 - 12Page 5
Narayana Hrudayalaya: Bharuch Hospital Project ReportDecember 18, 2012Overview of the NH GroupProviding high quality affordable healthcare to the massesNarayana Hrudayalaya (NH) was established with a “dream of making qualityhealthcare available to the masses yana Hrudayalaya iscredited with the(headquartered in Bengaluru) was established in‘Walmartization’ of2000 by the visionary Dr. Devi Shetty with theobjectivetoprovidequalityhealthcare. Narayana Hrudayalaya was launchedwithoneflagshiphealthcare. The Groupaffordablemulti-specialtyhospitalcurrently performs over30 cardiac surgeries daily(Bengaluru) catering to a variety of illnesses anddiseases.at its flagship facility inBangalore.Dr. Shetty, an eminent cardiac surgeon trained in the UK, before returning to Indiain 1989. Prior to founding NH, Dr. Shetty played a pivotal role in setting up thecardiac surgery departments at BM Birla Heart Research Center and the ManipalHospital. The NH Group provides high quality medical care at affordable prices to asignificant section of the society whichPassion makes all thecannot otherwise bear the excruciatinglyhigh cost of modern healthcare. Thedifference.Group has perfected the art of providingOne of India’s largest and one oftertiary care to large volumes of patientsworld’s most economical healthat its hospitals. All of this is done whilecare service al quality standards.Narayana Hrudayalaya’srevenues have grown a whopping464 per cent in the five yearsleading to 2011-12.Narayana Hrudayalaya Group startedoff with a 200 bedded hospital inBangalore in 2000. The Group has sincegrown rapidly to expand to 6400 bedsacross 21 facilities located in 13 cities across India. The Group will soon commencePage 6
Narayana Hrudayalaya: Bharuch Hospital Project ReportDecember 18, 2012constructing its first facility outside India, at the Cayman Islands. Further, the Groupis also setting up the first of its four cardiology centers in Malaysia. The internationalforay into Malaysia and Cayman Islands is the first step in achieving the Group’sAmbition of becoming a global healthcare provider.The NH Group today includes a chain of dental and cosmetology clinics ‘Reviva’apart from multi-specialty hospitals located across the country. The expertise of thegroup lies in treating large volumes of patients and leveraging the volumes to bendthe cost curve downwards through operational excellence and unwavering focus onclinical outcomes.Page 7
Narayana Hrudayalaya: Bharuch Hospital Project ReportDecember 18, 2012Project at a glanceThe proposed hospital would be multi-specialty tertiary care unit. The hospital wouldhave 150 beds in the first phase spread over a total built up area of approximately1,00,000 sq. ft.Land area requirement6 acresTotal built-up area of the hospital100,000 sq. ft.Foot plate area60,000 sq. ft.Facility spreadGround 1 floor, total building height – 10m (max.)Total number of census beds150 beds (in phase 1)Facility MixThe proposed hospital would accommodate about 20 outpatient consultation rooms,5 nos. operating rooms and 40 intensive care beds. The women and child ward wouldconsist of 2 delivery bays, labor ward with 6 – 7 beds and 8 nos. NICU / PICU beds.Total number of census beds150 bedsTotal number of OPD rooms20 roomsBed split ICU beds40 beds Casualty10 beds General ward beds40 beds Semi-private beds30 beds Private beds25 beds Deluxe beds05 bedsOperating Theatres4 nos. major 1 no. emergency gynecology OTEmergency / triage1 no. minor OTDelivery bays2 nos.Page 8
Narayana Hrudayalaya: Bharuch Hospital Project ReportDecember 18, 2012Typical area statementAREA DESCRIPTIONAREA (SQ. FT.)Consultation rooms110 sq. ft.Operating Theatres450 - 550 sq. ft.CATH Lab450 sq. ft.MRI500 sq. ft.CT Scan450 sq. ft.Endoscopy suite400 sq. ft.X-Ray /mammography250 sq. ft.Critical care areas (per bed)120 – 130 sq. ft. per bedSpecialty MixThe Bharuch market is deficient in tertiary care and super-specialty services. Hence,the proposed hospitals would be equipped with super-specialties and the requisitehigh end diagnostic and radiology facilities to ensure holistic and complete care tothe patient under one roof.Super-specialty servicesprovidedbythehospital Prominentdiagnosticfacilities planned Cardiology & cardiacsurgeryNeurology & eral surgeryVascular & Endo-vascularsurgery OrthopedicsUrologyNephrologyWomen & child Other ancillaryspecialtiesCATH Lab16 slice CT scan0.5 Tesla MRIDigital x-rayMammographyEndoscopy suite ECHO, TMT &ECGUltrasoundEEG, ENMG &Sleep labLithotripsyAudiometryPage 9 Plastic surgeryPediatricsurgery
Narayana Hrudayalaya: Bharuch Hospital Project ReportDecember 18, 2012Project CAPEX EstimatesThe proposed hospital shall be developed in phases, with 100,000 sq. ft. total builtup area in Phase 1 accommodating a total of 150 beds. The cost of land has beenconsidered at a nominal price of INR 200,00,000 at the rate of INR 200 per sq. ft. ofbuilt up area.The detailed break up of costs shall be as follows –Total built up areasq. ft.100,000CAPEX ESTIMATESRate per sq. ft.(in INR)Land200Building1000Mechanical, Electrical & Plumbing1200Interior finishing & External development500Medical equipmentTotal cost(INR in 90.00Non-medical equipment & furnitureGrand Total4,599.00Further, it is proposed that the hospital in Phase 1, shall be equipped in stages in linewith the growth in occupancy levels to prevent lock in of capital in the initial stagesitself.CAPEX BreakupThe capital requirement for the project neglecting nominal cost of land works out toINR 43.99 Crores, out of whichContribution from Narayana Hrudayalaya- INR 7.00 Crores Promoter- INR 36.99 CroresPage 10
Narayana Hrudayalaya: Bharuch Hospital Project ReportDecember 18, 2012Project TimelinesThe project timelines shall be as below. It is envisaged that the statutory clearancesand licenses required prior to commencement of construction shall be worked uponand put in place before commencement of the construction at site.MonthActivityArchitectural & MEP designAward of tendersCivil workMechanical, Electrical & PlumbingArchitectural finishingHospital set up and operational readiness123456789101112131415Staffing Plan (Phase 1)The proposed hospital shall be staffed in line with industry standards. Each specialtywould have a super-specialist at the level of a senior consultant. Further, the staffingstrategy would envisage having visiting consultants at a minimum of one perspecialty to drive volumes and utilization initially.The broad numbers for the man power grid (administrative and para-medical staff)is as follows iciansFinance, HR, Purchase & Inventory, Maintenance ManagerFacilty DirectorJunior ExecutiveSenior ExecutiveHead NursingHead Medical servicesTotalPage 11Year 1 Year 2 Year 3 Year 11116263032610111211111111183286329347
Narayana Hrudayalaya: Bharuch Hospital Project ReportDecember 18, 2012Proposed Operational ModelsFee for the design consultancy and project managementservicesIt is proposed that NH is paid a lump sum amount of 1.5% of the total project cost forits support towards on design planning, project management and pre-operativecommissioning of the hospital. In addition to this NH would be reimbursed actualcosts incurred on travel and stay for its personnel providing support during theproject phases. NH will do its best to minimize costs in this regard.Proposed Operational Model – Model 1Management Fee modelThe promoter would be assisted by the NH group in running the operations of thehospital in return for a management fee. NH would provide management expertise to the promoter in operating asuper-specialty hospital. Day to day operations of the hospital would be takencare of by NH The scope of services and benefits of associating with the NH group such assourcing and supply chain advantages, talent acquisition, standard operatingprocedures etc. would be made available to the promoter by NH. The promoter would own the responsibility of the profit and loss account ofthe hospital. The payment to Narayana Hrudayalaya would be as follows –Annuity: 2% of revenues towards costs incurred by NH on corporate overheads.Year 1 – Year 2Fixed payment of INR 4 lacs per monthYear 3 – Year 41% of gross revenue plus 15% of the EBITDA.Year 5 – Year 102% of gross revenue plus 15% of the EBITDA.Year 11 – Year 203% of gross revenue plus 15% of the EBITDA.Page 12
Narayana Hrudayalaya: Bharuch Hospital Project ReportDecember 18, 2012 The term of the management agreement would be for a minimum period of 20years with an option to extend further subject to mutual agreement.Proposed Operational Model – Model 2Profit & Loss owned by NHIn this model, the P&L responsibility would be owned by the Narayana Hrudayalayagroup. NH would operate the hospital and own the responsibility for the profit andloss account of the operations. The promoter would invest on the capital expenditure incurred on thebuilding, associated utilities and services, architectural finishes and themedical equipments. Any expansion of the infrastructure would also beinvested by the promoter. All expenditure incurred on the day to day operations and the maintenancewould be taken care by NH. All future expenditure for replacement/repair of medical equipment for theexisting facility would be the responsibility of NH. The term of the agreement would be for a minimum of 20 years with aprovision to extend further based on the mutual agreement of both parties. In return for the promoter’s investment in the project, NH proposes a revenueshare to the promoter such that there is a return of approximately 8% IRR onthe total investment in the first 20 years of contract. The revenue share would be paid from the 2nd year onwards with the 1st yearbeing a moratorium towards stabilizing the operations of the new unit. In addition, NH would also provide charitable and affordable care to thecommon man in line with its mission similar to that in its other grouphospitals.Page 13
Narayana Hrudayalaya: Bharuch Hospital Project ReportDecember 18, 2012Projected FinancialsGeneral Assumptions1. 300 working days has been considered for revenue calculations.2. The capacity utilization matrix has been benchmarked based on NH’sexperience at its hospitals elsewhere and the market dynamics. The same hasbeen considered as per the matrix below –YearCapacity UtilizationYear 130%Year 250%Year 365%Year 475%Year 578%Year 6 onwards80%3. Price increment year on year has been considered at 5%4. For the purpose of calculating revenue share to the promoter, revenue fromimplants has been considered at 10% of the gross revenues for calculating netrevenues.P&L SnapshotParticularsConstruction PeriodOccupancyYear 130%REVENUE :Surgical Revenue50%Year 365%Year 475%Year 578%Year ,1871,303TOTAL %(48)-2%1665%3699%68515%75215%Non Surgical RevenueOPD Diagnostic, Pharmacy & Lab RevenueTOTAL REVENUE-Year 2Avg. revenue Per Occupied bedCOST :Variable CostFees To DoctorMedicines & ConsumablesOther Variable CostFixed CostSalaries & Administrative ExpensesEBITDA Margin (%)Page 14
Narayana Hrudayalaya: Bharuch Hospital Project ReportDecember 18, 2012Some key points to be noted are as below – EBITDA break even period– Year 2 Cumulative cash break even period– Year 4Cash flows to Narayana Hrudayalaya & promoterYearModel 1: Management feepayment to NHNHYear 1Year 2Year 3Year 4Year 5Year 6Year 7Year 8Year 9Year 10TOTAL484858951922112292402522651,638Model 2: Revenue sharepayout to promoter by NHPromoterNHAll figures are INR in 533583763954152,758Note: Promoter cash flows in Model 2 are estimated assuming net revenue sharepayout as below –Year 1 – Year 35% net revenue shareYear 4 – Year 108% net revenue shareYear 11 – Year 2010% net revenue share In Model 2, where in Profit & Loss is owned by Narayana Hrudayalaya, allreplacement CAPEX shall be borne by NH. In Model 1, all cash flows to NH exclude the annuity payment of 2% towardsits corporate overheads including branding, Information Technology licensecharges, central marketing support and SCM / procurement support.Page 15
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Narayana Hrudayalaya: Bharuch Hospital Project ReportDecember 18, 2012An Overviewof theIndian healthcareSectorPage 17
Narayana Hrudayalaya: Bharuch Hospital Project ReportDecember 18, 2012Indian Healthcare scenarioAs per statistics publishedby the WHO, in 2008, thedeath-rateduetonon-communicable diseases wasapprox. 55% in the agegroup of 15 – 60 ntributed a major portiontotaling to almost 85% of allFigure 1: India Disease burden in age group 15 - 60 yearsdeaths in this category.Source – WHO StatisticsA large part of this observation can be attributed to either the lack ofaccess to tertiary healthcare or to the unaffordable nature of tertiarycare.The life-expectancy of Indianshas been steadily increasingovertheyearsandthiscombined with a slow andsteady migration of youngworkforce to the cities andurbanagglomerationsresultedshareFigure 2: Projected life expectancy values at birth, IndiaSource: National Health Profile, 2009Page 18ofinthehasincreasinglifestyledisease
Narayana Hrudayalaya: Bharuch Hospital Project ReportDecember 18, 2012incidence. The projected life expectancy will be 70 years by the years 2025. On theother hand, the infant mortality rate is on a steady downward trend thanks to theimprovements in medical technology and accessibility to primary care. However, itneeds to be noted that the secondary and tertiary healthcare accessibility is stilllargely restricted to the metro and the larger Indian cities.In short, Indians are living longer, steadily migrating to urban areas and arebecoming more and more prone to lifestyle related diseases at a much earlier agethan before.On the other hand, the cost of healthcare has risen steeply over the years. The publicspending on health by the Indian Government is one of the lowest in comparison toother nations, amounting to only 20%. 80% of the healthcare expenditure is borne bythe public.Figure 3: India Health Profile, WHO StatisticsThe per-capita expenditure on health has seen a CAGR of 15% in theperiod 2005 – 2010. The cost of healthcare has grown at a pacegreater than the inflation, thereby making access unaffordable to thecommon man.Page 19
Narayana Hrudayalaya: Bharuch Hospital Project ReportDecember 18, 2012Indian Healthcare vs. Global StandardsIndian healthcare has grown rapidly in the last three decades. Corporate groups haverevolutionized the delivery of healthcare, by continuously benchmarking with globalstandards and striving to achieve international and national accreditation such asJoint Commission International, NABH etc.Figure 4: Indian Healthcare Delivery Market Size and Growth Projections, CRISIL ResearchHowever, a lack of Government will to promote the growth of healthcare coupledwith the presence of high entry barriers such as steep set up costs, shortage ofmedical professionals etc. have ensured that the reach of the corporate healthcaregroups have remained largely confined to the metros and Tier I cities. India currentlyhas approximately 0.9 beds per 1000 population compared to the global standards of3.5 beds per 1000 population. This translates to an additional 0.81 million beds at anestimated investment of INR 2.1 Trillion by 2018.The Indian middle class is expected to grow the most with the workforce in the agegroup of 15 – 59 years of age set to reach 325 million by the year 2050. The demandPage 20
Narayana Hrudayalaya: Bharuch Hospital Project ReportDecember 18, 2012for health servicesaidedbyhigherdisposable nesslevelsare factors whichare set to be themain drivers of thehealthcare boom.Figure 5: Growing share of Indian urban middle classSource: IBEF EstimatesOne other factor aiding the growth of healthcare is that India currently boasts of cilitiesoutsideofFigure 6: FDA approved drug manufacturing facilities statisticstheUS. Whilethese facilities currently focus on serving the lucrative US and European markets,eventually it can be expected that the strong domestic demand would be met by theproduction from these facilities. The prevalence of generics supported by massmarket production strategies would aid to lower the cost of medicines andconsumables for the Indian patient.Page 21
Narayana Hrudayalaya: Bharuch Hospital Project ReportDecember 18, 2012Industry ChallengesIn 2011, India had about 313 medical colleges across the country offering about34,000 under-graduate seats and approximately 16,000 post-graduate seats. Theacute shortage of medical professionals has resulted in a skewed distribution withconcentration of healthcare workers and doctors in the main cities. For e.g. Bihar hada patient to doctor ratio of 3400:1 as compared w
Narayana Hrudayalaya: Bharuch Hospital Project Report December 18, 2012 Page 8 Project at a glance The proposed hospital would be multi-specialty tertiary care unit. The hospital would have 150 beds in the first phase spread over a total built up area of approximately 1,00,000 sq. ft. Land area requirement 6 acres
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The Detailed Proposal contains the detailed information of a particular project to be implemented by the Research Institution/Agency. Detailed proposal must be prepared using the format given and in accordance with the following guidelines: A. BASIC INFORMATION 1. Project Title Brief but clear official and distinctive name of the
A detailed Project Schedule is available in [4]. The Project Schedule is monthly updated by the Project Manager. 4.3 Budget Help: Calculate the required project budget based on cost estimates for project activities, sub-contracts, COTS (Commercial Off The Shelf), training, etc. Present the distribution of the budget over the whole project life.
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