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CASE STUDY : Bitter pills in Diversity Land

“Socialism in intellectual property laws is meant for idealists having no clue of how business
works, and not for pharmaceutical companies running expensive R&D operations,” Hitesh
Gupta’s morning jog partner told him while they took a break. The comment came after Hitesh
had pointed out that the day’s Economic Times had a story on how a cancer drug generics
manufacturer was going to “arm-twist” a global pharmaceutical company’s 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 day’s appointments. Then he called his younger brother, Dr.
Rupen Gupta who headed the company’s 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. After their father’s
death in 1996 , Dr. Hitesh Gupta took over as Chairman of the flagship Surya Hospitals where
he 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 Group’s
future forays.

The team at Synapse’s 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 Group’s strengths
vis-à-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 drugs
and 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 the
lawsuit 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 Healthcare’s 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 exemption
Income tax exemption
100% Central Excise Exemption for a period of 10 years from the year of
commencement of production
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 Maunomycin–based generics and
110 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 group’s
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 their
competitors 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 the
owner and operator of greenfield hospitals, Surya Hospitals was responsible for the operating
costs of these hospitals, including equipment, staff, liability insurance, maintenance supplies and
capital expenditure. As operators of brownfield hospitals, Surya Hospitals had to refurbish, equip
and operate hospitals located on the premises of others pursuant to revenue sharing or lease
arrangements. 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 the
word 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 of
the 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 Consulting
should be asked to specifically tackle these two questions, rather than wandering about creating a
blue skies approach to the Group’s 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 super
speciality 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 as
ourselves. 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 beds
Kolkata > 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 and
complement 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 to
gain 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

For the year ended on

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

Installed Capacity
Maunomycin
Kg 225.00 225.00 225.00
Moxomycin Kg 125.00 125.00 125.00

Proposed Production
Maunomycin
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

Three months Fiscal year Fiscal year Fiscal year

Greenfield hospital
ended June ended March ended March 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 1.0 4.3 4.4 4.2

(Rs. crores)

Number of Major Procedures:

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

Three months
Greenfield hospital, Surya Hospital, Cunningham Road, Fiscal year ended
ended
Bangalore March 31, 2010
June 30, 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 0.9
Number of Major Procedures:
- Cardiac Care 407 1,113
- Orthopaedic 279 625
- Neuro-surgeries 97 198
- Minimally Invasive Surgeries 120 300

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Three months Fiscal year Fiscal year Fiscal year

Greenfield Hospital, Surya Hospital,
ended ended ended ended
Indira Nagar, Bangalore
June 30, 2010 March 31, 2010 March 31, 2009 March 31, 2008

Number of Beds 567 567 567 567

Inpatient Admissions 1,203 4,467 4,111 3,968

Outpatient Registrations 36,552 65,237 60,587 60,464

Average Occupancy Rate 89% 89% 85% 83%

Average Length of Stay 4.5 4.9 5.1 5.1
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 0.4 1.7 1.5 1.4
(Rs. crores )
Number of Major Procedures:
- Urosurgery 198 820 728 833
- Transplant 6 22 16 20

- Minimally Invasive Surgery 150 439 345 252

Three months Fiscal year Fiscal year Fiscal year

Greenfield hospital, Surya ended ended ended ended
Hospital ,Kolkata
June 30, 2010 March 31, 2010 March 31,2009 March 31,2008

Number of Beds 3 3 3 3

Outpatient Registrations 5,688 22,357 20,340 20,818

Outpatient Income (Rs. 13.5 53.9 43.0 36.1

millions)
Number of Major Procedures:

- Ophthalmology 267 1138 992 758

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Brownfield hospital, Surya Heart Three months Fiscal year Fiscal year Fiscal year
Hospital, Nagpur ended ended ended ended
June 30,2010 March 31,2010 March 31.2009 March 31.2008

Number of Beds 140 140 140 140

Inpatient Admissions 841 2,982 2,511 696

Outpatient Registrations 2,081 7,099 6,959 2,636

Average Occupancy Rate 88% 96% 83% 53%

Average Length of Stay 3.8 4.7 4.8 4.6
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 0.9 3.2 2.5 2.9
(Rs. crores)
Number of Major Procedures:
- Cardiac Care 713 2,119 2,040 1,216

Three months Fiscal year Fiscal year

ended ended ended
Brownfield hospital, Surya Hospital
June 30,2010 March 31, 2010 March 31, 2009
Banjara Hills Hyderabad

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. 0.4 1.3 0.7
crores)
Number of Major Procedures:
- Cardiac Care 709 1,920 1,379

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Three months Fiscal year Fiscal year

Brownfield hospital, ended ended ended
Surya Hospital, L B Nagar, June 30,2010 March 31, 2010 March 31, 2009
Hyderabad

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 Total Other Total Date of Commencement
Medical Medical Personnel Personnel of
Personnel Personnel Operations/Affiliation

Greenfield Hospitals

Surya Hospital, Bandra , Mumbai 145 371 92 608 150 758 July 2002
Surya Hospital, Cunningham Road, 30 120 32 182 80 262 March 1991
Bangalore

Surya Hospital, Indira Nagar , 98 244 71 413 136 549 November 2006
Bangalore

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 Hospital 24 116 29 169 52 221

Banjara Hills Hyderabad, July 2005
Surya Hospital, L B Nagar, 6 52 12 70 19 89
Hyderabad February 2009

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APPENDIX 6

SURYA HEALTHCARE Profit and Loss (All figures in crores)

Three Months Year Ended Year Ended Year Ended

Particulars Ended June 30, March 31, 2010 March 31, 2010 March 31, 2010
2010
Income
Sales and Services
773.50 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 101.75 295.69 192.95 148.21
Operating Expenses 284.81 789.34 517.17 350.27
General and 24.20 79.68 50.81 48.05
Administration Expenses
Selling Expenses 22.16 69.06 37.62 55.95
Interest Expenses (net) 58.12 113.07 56.99 93.51
Preoperative & - - - 

Preliminary Expenditure
Written Off 120.12 88.45 90.72
Depreciation Amortisation
43.97
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
(18.32) (11.85) (2.43)
(2.45)
Fringe Benefit Tax
(4.03) (3.16) -
(1.27)

Wealth Tax (0.06) (0.04) (0.04)

(0.06)
Deferred Tax
16.48 16.86 (17.94)
(6.59)
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)

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

Particulars 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 /
Amortisation
Net 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 Fiscal
2009, 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 Schedule of deployment of funds Estimated time of
occurred as completion or repayment
on July 31,
2008

Fiscal 2009 Fiscal 2010 Fiscal 2011

Construction, expansion
and development of the
greenfield and
1 brownfield hospitals of 59.17 213.88 333.02 70.35 Fiscal 2011
the Company

Repayment and
prepayment of short term
2 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 of Location(s) in India Type of

Beds Facility

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 healthcare

services providers also compete with healthcare delivery facilities
that are owned by individuals or non-profit entities supported by
endowments, government agencies and charitable contributions in
certain locations.

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Aarohan 2011

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 restriction
on 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 : aarohan@siib.ac.in, the subject of the mail and also the
document name should be in the format <Institute_name>_<Team Name>
8. Five teams will be shortlisted to present their solution to the judges at the Symbiosis Infotech
Campus, 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 to aarohan.siib@gmail.com

Case Team:

Aby Johnson: 9730045434 (aby.johnson@gmail.com)

Neeharika Raina: 09730400951 (neeharika.raina@gmail.com)

Tejas Godbole: 09503053744 (tejas2903@gmail.com)

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