Private & Confidential Draft Appraisal Report

1.0 INTRODUCTION

KPC Medical College and Hospital Society is a society registered under the West
Bengal Society Registration Act, 1961 and is based in Kolkata. Dr. K.P.
Chaudhuri, who is an Orthopaedic Surgeon and is the founder member of KPC
Charitable Foundation, USA and KPC Foundation, India is the President of the
Society. The project is proposed to be funded and managed by KPC Charitable
Foundation, USA, the KPC Foundation, India, Dr. Kali Pradip Chaudhuri as an
individual and his family.

Dr. Chaudhuri proposes to develop an integrated medical education complex

known as the KPC Medical College and Hospital. This includes state-of-the-art
medical college and hospital together with a dedicated tuberculosis hospital and
infectious disease hospital, a super specialty interactive medical center for
special diseases, a medical mall similar to the models currently in practice in
Japan, America and Western Europe, a center of congregate care, old age home,
senior life care center, Alzheimer care unit, long term care unit and other living
facilities for incapacitated adults and children, associated dormitory and
hospital facilities and medical IT center for present and futuristic interactive
medical educational systems.

The total project cost is currently estimated at approximately Rs 148.20 crore.

Work commenced on the project in October 2003 and significant progress is
already under way. Dr. Chaudhuri alongwith his family has contributed
necessary funds for starting the proposed project for which additional finance
through term loan has been envisaged.

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2.0 COMPANY DETAILS

Particulars Details

Name : KPC Medical College & Hospital Society (KMCHS)

Constitution : Society registered under the West Bengal Society
Registration Act, 1961
Registered Office : 758, Marshall House,
25, Strand Road,
Kolkata – 700 001
Hospital Address : K.S. Roy Road,
Jadavpur,
Kolkata – 700 032
Authorized Capital :
(31/03/2003)
Proposed Business : Hospital and Medical College
Industry : Healthcare Industry.

2.1 Brief Profile of Members

The Society is founded by KPC Charitable Foundation, USA and KPC

Foundation, India of which [Link] is a founder member. The
members of the Society include a retired Director of Medical Education, a
retired Principal of a Medical College, a Special secretary of Dept. of Health and
Family Welfare, as representative of the West Bengal Government.

Dr. K.P. Chaudhuri, who is an Orthopedic Surgeon and founder member of

KPC Charitable Foundation, USA and KPC Foundation, India is the President of
the Society. Dr. Chaudhuri is a practicing orthopedic surgeon since 1982 and
has been certified by the American Board of Orthopedic Surgeons. In addition
to his immaculate track record as a highly respected orthopedic surgeon, Dr.
Chaudhuri holds the following prestigious honours and credentials:

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 Fellowship of the International College of Surgeons

 Fellowship of the American College of Surgeons
 Fellowship of the American Academy of Orthopedic Surgeons
 Faculty membership of the prestigious Loma Linda University Medical
School, California, USA
 Chairman, [Link] Surgery, Menifee Valley Medical Center
 Chairman, Orthopedic Dept., HCMG
 Chairman, Orthopedic Dept., APEX Healthcare Medical Group.

Dr. Mohan C. Seal has done MBBS, MS in Kolkata and has obtained two
Fellowships from the Royal College of Surgeons from Edinburgh and England.
He received special training in Urology at London Hospital and Dialysis and
Kidney Transplant at Hammersmith Hospital. Dr Seal has vast teaching
experience, both for undergraduate and post graduate studies as the Registrar
at the Calcutta National Medical College, Undergraduate teacher at National
Medical College and Hospital for 7 years, post graduate thesis examiner of
Calcutta University and as a post graduate teacher at Calcutta National Medical
College and Hospital for 1 year. He has also been an Undergraduate and
Postgraduate teacher at London Hospital, Bethnal Green Hospital, London, UK
for more than two years.

Dr Seal was one of the pioneers of Kidney Transplant Surgery in India. Till date
he has performed 450 Kidney Transplants. He was the co-founder of the
Saviour Clinic in Calcutta, which is a well known clinic of Central Calcutta. Dr.
Seal runs a very successful Nursing Home equipped with all modern facilities.

Mrs. Krishna Das is the Founder Member of their family trust named as
“Shakti Pada Das Memorial Foundation” which is doing extensive work for the
prevention and early detection of Breast Cancer & Cervical Cancer. This
Foundation has got International recognition from American Cancer Society.

Mr. Sarad Jha is a Chartered Accountant and is one of the founders and now
the Senior Partner in a firm called Vidya & Company, which is engaged in

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providing value added financial services to its corporate and non corporate
clients spread all over the globe. Mr. Jha has been on the Board of various
companies for several years and has gained considerable experience in the field
of designing economic policies and other management techniques.

Mr. Rajat Kumar Ray is a Science Graduate with Chemistry (Hons.) and AMIE
in Chemical Engineering from Institute of Engineers India. He was awarded as a
“Chartered Engineer” from Institute of Engineers India. He has over 35 years of
experience in the Project Implementation and Industrial Management and is
keenly associated with Bio-chemical Unit of KPC Medical College and Hospital,
Jadavpur.

Ms. Jini Seal had got 9th rank in MSc. She was associated with the setting up
of a very large state-of-the-art nursing home, operating theatre and medical
clinic in Kolkata. She is currently working as an Administrative Coordinator for
the current project, working as a liaison between the Writers Building, Kolkata
Municipality Corporation, Architects, Engineers and Contractors.

Ms. Sunanda Chaudhuri is [Link]., [Link]., and M.A. She is currently the
administrator of Apex Health Care Medical Group and CEO of Hemet Global
Medical Cell & Orthopedic Unlimited Medical Practices.

Mr. Kali Priyo Chaudhuri is a Certified Professional Accountant. He is working

as a Manager in the European Film Marketing Division besides being co-
founder & CEO of a company called Tea Evaluation.

Ms. Sumanta Chaudhuri is currently enrolled as a medical student in

Northwestern university, Chicago, USA and is pursuing joint degree in medicine
and business. She is actively involved in Strategic Global Medical Management
Services.

Mr. Kalidas Dutta Chowdhury is the Chairman and Director of Global Care
Hospital Pvt. Ltd. which was initially funded by KPC Charitable Foundation,

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USA. He is actively associated with the KPC Medical College and Hospital
Project.

Prof. C.R. Maity, MD, PhD is a Director of Medical Education and Ex-Officio
Secretary. He is also the ex-officio founder member and a member of the
governing body of the KPC Medical College and Hospital Society. He is a
member of the Medical Council of India and the Post Graduate Committee of
the MCI and a highly respected personality in the Medical fraternity.

Prof. Soumendra Nath Banerjee, MD, FCCP, Special Secretary (Medical

Education), Dept. of Health and Family Welfare is one of the government
nominees and ex-officio members of the Society. He was the Principal of
Calcutta National Medical College and is a member of the Joint Entrance Board,
West Bengal Medical Council and West Bengal University of Health Sciences.

Prof. Vakil Ahmed, ex-officio founder member of the Society has been the
principal of the Bankura Medical College and is currently the Registrar of the
West Bengal University of Health Sciences.

Ms. Indrani Ghosh is a renowed painter, stage actor and interior designer. She
is active in charity, public service and helping the poor section of the society.
She is actively involved in the setting up of the Project.

Ms. Swapna Roy is an Arts Graduate from Dacca University and has also
learnt Computer Applications from Aptech, Hyderabad. She is closely
associated with and is putting her best effort for the overall growth of KPC
Medical College and Hospital, in West Bengal.

2.2 Constitution of the Society

KPC Medical College and Hospital is a society registered under the West Bengal
Society Registration Act, 1961 and is based in Kolkata. Dr. K.P. Chaudhuri is
the President of the Society who is an Orthopaedic Surgeon and is a founder
member of KPC Charitable Foundation, USA and KPC Foundation, India.

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The objects of the Society are:

 To impart medical education by running, establishing, constructing
Medical colleges and Institutions either directly or indirectly.
 To construct, establish, equip, maintain and operate a hospital for the
treatment, care and relief of the sick, infirm and injured, for the care and
treatment of all kinds of patients, for the study of the cause, mature
preventions and cure of the various diseases and the dissemination of
the knowledge relating thereto and the erection, equipment and
maintenance of all buildings and laboratories necessary or incidental
thereto and to establish in connection therewith a school for instruction
in nursing.
 To establish, cooperate, take over and/or run directly or indirectly
hospitals, clinics, dispensaries, old age homes for the public welfare and
other allied activities in the field of medicine and medical professions.

As per the Memorandum of Association, “the Income and property of the Society
directly related to operation of the Medical School whensoever and howsoever
derived or obtained shall be applied solely towards the maintenance,
management, procurement and for promotion of the objects of the Society as set
forth in this Memorandum of Association and no portion thereof shall be paid
or transferred directly or indirectly by way of dividend or bonus or otherwise
howsoever, by way of profit to the persons who at any time are to have been
members of the society or to any person or persons claiming through any of
them”.

The detailed objects of the society are provided in the Memorandum of

Association (Annexure ---).

2.3 Management and Organization

There shall be a Governing Body consisting of not less than seven and more
than nine members. The Governing Body shall have general power of
supervision, and conduct over all the affairs of the Society and in particular
shall discharge the following acts:

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 To appoint Committee or sub-committee with such powers and duties as

may be considered necessary or expedient.
 To accept donations, gifts, subscriptions, to make gifts, donations of
moveable and immovable properties for the objects of the Society.
 To sell, lease mortgage or otherwise dispose of and deal with all or any
part of the property of the Society as deemed necessary or expedient for
the purpose of the society to the approval of the Board of the Founding
members.
 To keep proper accounts of the Society and to open bank account in the
name of the Society.
 To co-opt not more than two members of the Governing Body
 To appoint person or persons on payment to assist any office bearer of
the Society and to dismiss them.
 With the approval of the Founding Members and subject to such terms
and conditions as may be prescribed by Founding members to borrow or
raise money which may be required for the purpose of the Society.
 Subject to the approval of the Founding Members to build, construct,
maintain, pull down, alter, extend, improve and repair any house,
buildings and structures.
 Conduct any other business not specified hereinbefore for the attainment
of the objects of the Society provided such business is not repugnant to
such objects.

Board of Founding Members:

There shall be a Board of Founding Members of the Society. The Members of

the Board shall not be less than three and not more than seven persons. The
Founder Members, alongwith the position they hold in the Society is as under:
[Link]. Name of Member Position in KMCHS
1. Dr. Kali Pradip Chaudhuri President
2. Dr. Mohan [Link] Vice-President
3. Mrs. Krishna Das Secretary
4. Mr. Sarad Jha Treasurer

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5. Mr. Rajat Ray Member

6. Mrs. Indrani Ghosh Member
7. Ms. Jini Seal Member
8. Dr. C.R. Maiti Member
9. Dr. Soumendranath Bannerjee Member
10. Prof.(Dr.) Vakil Ahmed Member

2.4 Details of other ventures / activities of KPC Foundation in India and USA
i) The KPC Foundation is running the integrated delivery systems (IDS)
which manages the largest district Hospital System in the State of
California, U.S.A. known as Valley Health System with three Hospitals
with annual revenue of U.S. $ 700,000,000. Dr. Chaudhuri personally
owns 50% of the Hospital management company.

ii) Dr. Chaudhuri owns & controls Physician practice management, an

independent Physician Organisation, which direct the activities of over
1300 primary care and specialty physicians in Southern California. The
net revenues of the physician organizations are approximately $80
million per year.

iii) Dr. Chaudhuri augments his ownership and control of the Integrated
Delivery System with ancillary providers such as healthcare surgery
centers, radiology medical groups and nursing homes. The total annual
revenue of the network is approximately $ 70 million.

iv) Dr. Chaudhuri is also a developer of real property owning and developing
approximately 4000 acres of real estate in U.S.A. and Canada.

v) In addition the KPC group owns and operates numerous businesses and
ventures in the U.S.A. and other countries.

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3.0 GUIDELINES OF MEDICAL COUNCIL OF INDIA (MCI) FOR SETTING

UP A NEW MEDICAL COLLEGE

The Medical Council of India (MCI) has laid down the procedure to be followed
for setting up a new medical college, under the Establishment of Medical
College Regulations, 1999. The main points with regard to the same are given
below.

3.1 Eligibility Criteria

The following organisations are eligible to apply for permission to set up a

medical college:
• A State Government/Union territory;
• A University;
• An autonomous body promoted by Central and State Government by or
under a Statute for the purpose of medical education;
• A society registered under the Societies Registration Act, 1860 (21 of
1860) or corresponding Acts in States; or
• A public religious or charitable trust registered under the Trust Act, 1882
(2 of 1882) or the WAKFS Act, 1954 (29 of 1954).

3.2 Qualifying Criteria

The eligible persons (as stated above) shall qualify to apply for permission to
establish a medical college if the following conditions are fulfilled:

• That medical education is one of the objectives of the applicant in case

the applicant is an autonomous body, registered society or charitable
trust.
• That a suitable single plot of land measuring not less than 25 acres is
owned and possessed by the person or is possessed by the applicant by
way of 99 years lease for the construction of the college.
• That Essentiality Certificate in regarding no objection of the State
Government/Union Territory Administration for the establishment of the
proposed medical college at the proposed site and availability of adequate

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clinical material as per the council regulations, have been obtained by

the person from the concerned State Government/ Union Territory
Administration.
• That Consent of affiliation for the proposed medical college has been
obtained by the applicant from a University.
• That the person owns and manages a hospital of not less than 300 beds
with necessary infrastructural facilities capable of being developed into a
teaching institution in the campus of the proposed medical college.
• That the person has not admitted students to the proposed medical
college.
• That the person provides two performance bank guarantees from a
Scheduled Commercial Bank valid for a period of five years, in favour of
the Medical Council of India, New Delhi, one for a sum of rupees one
hundred lakhs (for 50 admissions), rupees one hundred and fifty lakhs
(for 100 admissions) and rupees two hundred lakhs (for 150 annual
admissions) for the establishment of the medical college and its
infrastructural facilities and the second bank guarantee for a sum of
rupees 350 lakhs (for 400 beds), rupees 550 lakhs (for 500 beds) and
rupees 750 lakhs (for 750 beds) respectively for the establishment of the
teaching hospital and its infrastructural facilities:

Provided that the above conditions shall not apply to the persons who are
State Governments/Union Territories if they give an undertaking to
provide funds in their plan budget regularly till the requisite facilities are
fully provided as per the time bound programme.

• Opening of a medical college in hired or rented building shall not be

permitted. The Medical College shall be set up only on the plot of land
earmarked for that purpose as indicated.

MCI has prescribed certain formats for various preliminary and statutory
applications for setting up of the Medical College and all the documentation is
required to be in these formats only.

4.0 PROJECT DETAILS

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4.1 Proposed Project

Dr. Chaudhuri proposes to develop an integrated medical education complex
known as the KPC Medical College and Hospital in an area of 25 acres of land
out of 48.03 acres of the land site leased out to the Society. This includes state-
of-the-art medical college and hospital together with a dedicated tuberculosis
hospital and infectious disease hospital, a super specialty interactive medical
center for special diseases, a medical mall similar to the models currently in
practice in Japan, America and Western Europe, a center of congregate care,
old age home, senior life care center, Alzheimer care unit, long term care unit
and other assisted living facilities for incapacitated adults and children and
associated dormitory and hospital facilities, medical IT center for present and
futuristic interactive medical educational systems.

The entire project is proposed to be implemented in three Phases as under:

• Phase I – Immediate establishment of 300 bedded Hospital alongwith a State

of the Art Emergency and Casualty Medical Services, Blood Bank, ICU &
ICCU and Radio-diagnosis department. Establishment of administrative
block, Medical college for pre-clinical, Dental College and allied health
sciences & Hostels for Boys and Girls, staff quarters and other amenities
with overall construction area of four lakhs [Link].

• Phase II – Construction of additional 200 bedded hospital, autopsy block,

para clinical departments of medical college and dental college and allied
health sciences & Hostels for Boys and Girls, staff quarters and other
amenities with overall construction of three lakhs [Link].

• Phase III – Construction of additional 250 bedded hospital, auditorium for

medical college and dental college and allied health sciences & Hostels for
Boys and Girls, Interns quarters, staff quarters and other amenities with
overall construction of two lakhs [Link].

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KPC Medical College & Hospital Society also proposes to establish KPC Dental
College, KPC Institute of Allied Health Sciences & Research Centre and Shova
Rani Nursing College in the remaining area of 23.034 acres of land alongwith
students’ hostel, staff quarters and playground with built up area of nine lakhs
square feet, including medical college and hospital. The entire project is
proposed to be implemented over a period of three years.

4.2 Terms of Lease Deed

The Deed of Lease was signed by the Govt. of West Bengal (lessor) and KPC
Medical College & Hospital, Jadavpur (lessee) in November 2003, to enable the
lessee to set up a Medical College and Modern Hospital with state-of-the art
facilities. The lease is for a period of 99 years, with the option of renewing it for
another 99 years. The yearly rent payable to the Govt. of West Bengal is Rs 45
per decimal. KPC has full rights to utilize the leased premises for the proposed
Medical College & Hospital.

4.3 Justification for the Project

Kolkata is a fast growing city with a population of more than 45 lacs. The
availability of Super-specialty large hospitals is insufficient, looking at the
demand for such services. A necessity is felt for Modern Super-speciality
Hospitals in Kolkata, which will cater to patients from whole of West Bengal and
adjacent states. The new college and hospital will be well equipped and modern,
and will cater to medical care both in preventive and curative aspects at
reasonable costs, not only to the people of West Bengal but also neighbouring
countries like Bangladesh.

There are at present 7 Government Medical Colleges in the State with an

admission capacity of 905 students in MBBS Course. The Doctor-Population
ratio in the State is abysmally low at 1:2600 (approx). In West Bengal, a
substantial proportion of the Rural Population are still being treated by
unregistered medical practitioners despite best efforts of the Government. The
Government is unable to provide any additional resources for establishing new
Medical Colleges. The rising demand for good medicare, coupled with the
resources crunch on the part of the Government, has necessitated the

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involvement of the private sector in health care, especially in the development of

specialty services and diagnostic facilities in the State. It is also hoped that the
private Medical Colleges will bridge the demand-supply gap in medical
education in West Bengal. In view of this, the Govt. of West Bengal has
permitted the KPC Medical College Society to set up a new Medical College with
750 bedded Hospital (which will be increased to 1000 bedded hospital), a
Dental College and a few more Para Medical teaching institutions. The proposed
Medical College is the first private Medical College to be set up in the State and
it is expected to produce at least 100 qualified doctors who can fulfill the need
of a great part of the so far under-privileged population.

4.4 Location & Land

The Hospital is being set up in Jadavpur, Kolkata. The Govt. of West Bengal has
leased out 48.034 acres of land to the KPC Medical College and Hospital
Society. The Society proposes to establish KPC Medical College and Hospital in
an area of 25 acres out of the land site leased to the society and the remaining
area of 23.034 acres of land will be utilized for subsequent expansion and
development purpose.

4.5 Building

4.6 Utilities and Services

• Power

• Water

• Manpower requirement

4.7 Consulting Doctors

The company proposes to adopt the following strategy to attract the services of
eminent doctors over and above the resident doctors who will be on the rolls of
the Company.

Consulting staff from other Hospitals in Kolkata

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Consulting doctors from outside

4.8 Effluent & Garbage Disposal

The effluents arising from hospital operations and kitchen waste are proposed
to be collected by Municipality Corporation on payment of the specified charges
by the hospital. No problem is envisaged on this count as this system is
operating in the city over the years.

4.9 Schedule of implementation

The project is proposed to be implemented in three phases, as explained earlier.
The proposed implementation schedule is as under:

4.10 Statutory Clearances

• NOC / Essentiality Certificate
The Govt. of West Bengal has given the Essentiality Certificate for the Medical
College, a copy enclosed of which has been enclosed at Annexure ---.

• Medical Council Approval

The Medical Council of India / Govt. of India approval is being obtained
separately.

• Affiliation with University

The West Bengal University of Health Sciences has provided necessary consent
of affiliation (copy enclosed at Annexure ---).

• Reclassification of Land for institutional zone

The land measuring 48.034 acres leased out by the Govt. of West Bengal to the
Society is an institutional area.

• Local authority Approval for construction

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The building drawings, sections, elevations and structural drawings are already
submitted by the Society to Kolkata Municipal Corporation for approval.

• Power Connection
The Kolkata Power Transmission Corporation will be providing electricity
through 11 KVA feeder to the institutions. In addition D.G. sets and UPS
systems for selected critical areas will ensure continuous power supply for
uninterrupted patient care and education.

• Water Supply and Sewerage Connection

The institution will have necessary number of bore wells. In addition, water
supply will be available through the Kolkata Municipal Corporation. A well-
planned and networked sewage system within the campus for discharging to
the effluent treatment plant is under way.

• Pollution Control Board License

This is not required to carry educational activities. However, the hospital waste
disposal management tie up will be ready once the hospital becomes functional.

4.11 Intake Procedures

The procedure for intake of students is ----

5.0 PROJECT COST

Particulars Phase I Phase II Phase III Total

Cost of Project
Cost of Land & Site 450.00 450.00
Development
Buildings/Structures 3400.00 2805.00 2057.00 8262.00

Equipment & Instruments 2041.00 994.00 744.00 3779.00

Furniture & Fixture 619.00 371.00 247.00 1237.00
Library Books 50.00 30.00 30.00 110.00

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Vehicle 20.00 10.00 10.00 40.00

Contingencies 343.00 236.00 173.00 752.00
Margin Money for Bank 110.00 110.00
Guarantee
Preliminary Expenses 80.00 80.00
Total 7113.00 4446.00 3261.00 14820.00

4.1 Land Development

Area Cost per sq. ft. Total
25 Acres
=1089000 [Link] Rs 41/50 Rs 45193500/-

4.2 Building & Civil Works

Particulars Area in [Link] Cost per sq. ft. Total
College building 367500 Rs 850/- 312375000/-
(Medical College,
Dental College,
Nursing College,
Institute of Allied
Health Sciences &
Research)
Hostel building 268500 Rs 775/- 208087500/-
Hospital building 360000 Rs 850/- 306000000/-

4.3 Equipment & Instruments

4.4 Furniture & Fixture

4.5 Library Books

4.6 Preliminary Expenses

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4.7 Provision for contingencies

4.8 Margin Money and Bank Guarantee Charges

6.0 MEANS OF FINANCE

The project is proposed to be funded out of promoter’s contribution, equity and
term loans from banks. The proposed means of the finance for the project are
as under:

Means of Finance (Rs in lacs)

Capital & Corpus Fund 2363.00 1446.00 1082.00 4891.00
Term Loan 4750.00 3000.00 2179.00 9929.00
Total 7113.00 4446.00 3261.00 14820.00

The Society will contribute Rs 4891 lacs as equity and debt will be Rs 9929
lacs. In the first phase Society will contribute Rs 2363 lacs.

5.1 Equity Contribution

5.2 Unsecured Loans

5.2 Term Loans

5.2 Proposed Repayment Schedule

7.0 HEALTHCARE INDUSTRY IN INDIA

6.1 Introduction
Healthcare is one of the most important services in a growing society. The
healthcare industry in India has undergone a revolution in the past two
decades. With increase in living standards, the health awareness among the
people has increased. The transition in healthcare services has been fast paced,
riding on the crest of technological innovation. The changing scenario of
increased demand, a variety of means to support the rendering of quality health

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care, and the entrepreneurial spirit have given a boom to the health care
industry in India. Supporting industries such as equipment, instruments,
software indigenisation have multiplied and strengthened. There has been an
increased focus on sourcing of investment, resource optimization, and
increasing productivity, maintaining high quality and service orientation to the
customer-patient.

A recent study by KSA Technopak has brought out some interesting findings,
which throw light on the present health care expenditure of the Indian masses
and also throw light on the potential of healthcare services. A few of the findings
are:
• 11% of the average household income is spent on healthcare.
• Upto 30% of total health expenditure for income class with monthly
household income of Rs. 30,000 and above is in preventive care.
• Of the expenditure on healthcare of family members it was observed that
after an expenditure of approx. 46% on self, 24% is spent on dependent
parents and 19% on children.
• 32% of the expenditure on healthcare is for hospitalization, the rest being
for domiciliary treatment.

According to The Economic Times Healthcare 2001-02 Report, India's

healthcare industry grew at 13% per annum over the last decade and is
currently growing at 17% annually. The report expects healthcare delivery to
reach a size of Rs 1862 billion (£ 26.6 billion) by 2005-06. The growth is being
propelled by an increasingly affluent and more consumer-oriented middle class
population of 100 million who are seeking and willing to pay for a higher
standard of healthcare. Propelled by an affluent and health conscious growing
middle class, the healthcare industry in India grew by more than 13 percent per
annum. India’s healthcare industry is estimated at Rs 1,500 billion and
accounts for 6 percent of the GDP. The potential of health services sector is
immense in India as there are more than 140 million upper and middle class,
growing at over four percent per annum with combined annual income of over
Rs 820,000 crore. The private sector is playing an increasingly important role

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in the provision of healthcare services. According to a theme paper on

healthcare produced by the Confederation of Indian Industry (CII), the private
sector attends to over 75% of medical complaints and accounts for 88% of total
health expenditure.

With Indian Economy growing at the rate of 7-8% for FY05, the healthcare
industry is expected to be one of India’s largest industries in the near term with
present growth rates of around 13 percent annually. It is expected that the
Government spending will be increased to 2-3% by FY05. The Rs 40 billion
diagnostics and pathology laboratory testing business is growing at a CAGR of
20 percent. Outsourcing of laboratory testing and diagnostic services is set to
become big business. IHCF has estimated that India requires fresh investments
to the tune of $25 billion in the next 10 years. Of this, the investments from
domestic sources could be $12-15 bn. Reduction in Customs duty on medical
devices and equipment to 8% is also expected to fuel the growth of the sector.

6.2 Healthcare Industry at Crossroads

Due to change in Demographics globally there is tremendous increase in aged
population group and thus higher demand for Preventive care and Home care.
India is undergoing a health transition, a term used to describe shifts in
demographics, altered health behaviors, and changes in disease patterns.
Communicable diseases of childhood are becoming less prevalent, while there
are more degenerative and man-made diseases, diseases with higher costs per
episode. There is also more polarization of health conditions. The bulk of the
disease burden is placed on the poor, on women, and on scheduled castes and
tribes. Characteristic of this large and deeply complex country, the disparities
across states and between different groups are quite striking. Overall, the
poorest 20 percent of Indians have more than twice the rates of mortality,
malnutrition, and fertility of the richest 20 percent.

These vivid differences suggest of course that there is no simple, central

solution for India’s health challenge, no unique “Indian” health status. Some
Indian states like Kerala compare favorably with upper-middle income countries
like Argentina and Mauritius. Most states are comparable with lower-middle

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income countries like Brazil and Egypt and then states like Bihar and Uttar
Pradesh compare to low-income countries like Sudan and Tanzania.

6.3 Problems of Healthcare Industry

India’s government spending is less than 2% of the GDP on health care
services, among the lowest in the World. Even more disturbing is the gradual
decrease in the proportion of government spending. Historically, health care
services in the country were with the various State Governments. The State
Governments with budgetary support ran all large hospitals in the country.
However, with the financial position of the state governments deteriorating, the
budgetary allocations have not proportionately grown and at present 85% of the
funds allocated are going towards the salaries of the concerned department. No
fresh investments from the Government have been forthcoming.

Healthcare costs are a major concern and a burden. This is reflected when
spending as a percentage of the GDP is compared with other countries. Lack of
health insurance is the main cause for this problem. Around 35% of the
hospitalized Indians fall below the poverty line, and more than 40% of those
hospitalized borrow money or sell assets to cover the expenses. In India there
are five forms of healthcare coverage, namely the private insurance, social
insurance, employer-provided cover, community insurance schemes and
government healthcare expenditure, but they have limited reach. Private health
insurance covers only around four million lives; wage based insurance such as
ESIS covers around 30 million lives, and employers (e.g. railways) and
community based insurance schemes (e.g. schemes run by NGO’s such as
SEWA) cover around 50 million each. Put together, these four forms of
prepayment cover less than 15 percent of the population.

Another problem of the sector is the poor delivery of healthcare both at the
public as well as private level. While the government takes as meager as 20
percent of the total spend on health, it is unable to completely reach the poorest
segment. While it spends 62 percent on secondary and tertiary care, only 26
percent goes for public health programmes and 12 percent for primary care.

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The large healthcare market is unorganized and is highly fragmented. Most of

the healthcare delivery is by individual doctors. There is no standardization of
the treatment processes and the qualifications required for rendering medical
services are not strictly enforced. This has given rise to lot of unqualified
personnel practicing medicine across the country. According to some estimates
there is a demand for 80,000 multi or super-specialty beds in India, but
construction in the next year will provide only 3,000. This shortfall has resulted
in the proliferation of small private “nursing homes” in profitable niches such
as cardiology, developed by such doctors as an alternative source of income.

There exists huge demand-supply gap in terms of the hospital beds. The
country lags behind international standards on basic healthcare infrastructure
and facilities. India has 94 beds per 100,000 population as compared to the
WHO norm of 333 beds per 100,000. To reach a ratio of even 2 beds per 1000
by 2010, India needs to build 10 lakh more hospital beds.

Bigger than the infrastructure shortage is the acute shortage of skilled medical
manpower. India has only 0.54 doctors per 1000 of population and 0.75 nurses
per 1000 of people. This is a very poor ratio when compared with other
countries and with the minimum standards set by World Health Organization
(WHO). To reach a ratio of even 1:1000, an additional 5,20,000 physicians will
be required over and above the numbers that will be added through existing
medical colleges.

6.4 Future Scenario

According to the CII-McKinsey report, the combination of limited coverage,

inefficient purchasing and poor delivery has led to the poor performance of the
healthcare sector. However, the growth potential in the sector is tremendous.
The study estimates that healthcare spending will increase from Rs. 86,000 cr
in 2000-2001 to over Rs. 200,000 cr in 2012. This translates to a supporting

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investment of Rs. 100,000 cr, 80% of which will have to come from the private
sector. With increased penetration of health insurers, a plethora of
opportunities exist for private players in India.

Private healthcare will continue to be the largest component of healthcare

spending in 2012 and is likely to more than double from today’s Rs. 69,000
crore to Rs. 1,56,000 crore. It could rise by an additional Rs. 39,000 crore if
health insurance cover becomes available at least to the rich and the middle
class.

The spending pattern is expected to change dramatically by 2012. Of the

expected Rs. 1,56,000 crore private healthcare spending in 2012, inpatient
spending will account for 47 percent, up from 39 percent in 2001. This growth
will be driven by the rise in life style diseases, especially cancer and
cardiovascular disease. These two diseases alone will constitute more than 35
percent of the inpatient spend. WHO has projected a very grim picture of the
heart diseases scenario in India. There are an estimated 45 million patients
suffering in Coronary Artery Disease (CAD) alone in India and an increasing
number of young Indians are falling prey to this disease. The share of
outpatient spend is expected to decrease from the existing 61 percent to 53
percent. Outpatient spend is expected to decrease in terms of share but will
increase in absolute terms to Rs. 74,000 crore.

One of the major changes expected is the streamlining of health insurance. It is

estimated that India currently has an insurable population of 200–300 million.
Health insurance is expected to trigger spending and lead to a demand for
better quality healthcare delivery and a stiff control on costs. Private Health
insurance companies have been active in this field. The concept of Third Party
Administrators is fast catching up, and the sorting out of the few issues
concerning direct payment of claims to the hospital will augur well for the
health industry.

The Union Budget for 2003-04 (announced on 28 February 2003 by the Union
Finance Ministry) provided a positive thrust to the sector through a slew of

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measures including customs duty rate cuts, higher depreciation rates on

equipment and fiscal incentives for setting up of new hospitals. These are
highlighted below:
• Extension of tax benefits to financial institutions providing long-term capital
to private hospitals with 100 beds or more - this is likely to enhance access
to funds by private sector for setting up hospitals.
• Increase in tax depreciation rate to 40% on life saving medical equipment.
• Reduction/exemption of customs and excise duties on life saving equipment
and drugs, hearing aids, crutches, wheel chairs, walking frames, tricycles,
braillers and artificial limbs.
• Proposed launch of a community based universal health insurance scheme
by general insurance companies during 2003-04 with premium ranging from
Re.1 per day for an individual to Rs 2 per day for a family of seven.
• Setting up a college of rehabilitation sciences at Gwalior, and a national
institute for empowerment of persons with multiple disabilities at Chennai.

6.5 Implications for Private Sector Players

Healthcare sector has certainly evolved as an attractive investment option for
the private sector. In India 83 percent of the health sector is dominated by
private sector and public sector accounts for a mere 17 percent. So there is
enormous pressure on the government to play a more active role in the health
sector. Government’s inability to provide healthcare to the Indian population
and the relaxation of the funding norms by financial institutions are making
this sector an attractive investment destination.

A joint study "Healthcare in India: The Road Ahead" done by the Confederation
of Indian Industry and McKinsey & Company in 2002 mentions that India has
1.5 beds per 1000 people while China, Brazil & Thailand have an average of 4.3
beds. The study projects that changing demographic and disease profiles and
rising treatment costs will result in healthcare spending more than doubling
over the next 10 years. Many sops were offered to the healthcare sector in the
union budget 2003-04 viz., lesser interest rates for term loans, higher
depreciation rates and lower customs tariff for vital medical equipment.

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In order to cope with the new, varied and growing requirement, the health care
industry is growing with an annual average growth rate of 15-20% in the last
decade. It is also becoming more competitive day by day and several specialist
doctors are establishing their own hospitals. The main aim of this industry is
to cater to the need of the masses and cover the masses with reasonable &
affordable tariffs and quality services.

6.6 Marketing Strategy

There is strong demand for the Hospital facilities and Medical Institution in and
around Kolkata. Hence it is felt by the company that they would be able to
achieve the revenue targets. Also, appropriate marketing steps including
advertisements would be done by the Society.

8.0 PROFITABILITY PROJECTIONS

7.1 Assumptions Underlying Profitability Estimates

7.2 Projected Financials

7.3 Sensitivity Analysis

9.0 RISK ANALYSIS

10.0 SWOT ANALYSIS

8.1 Strengths
 The Proposed Hospital and Medical College is to be set up in Kolkata,
which has inadequate medical facilities that favours the project.

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 The project draws on the expertise of Dr. Chaudhuri who the experience
of managing and running hospitals abroad.
 The project includes state-of-the-art medical college and hospital
together with a super specialty medical center with all modern and latest
facilities. This will help the patients to have treatment for all types of
illness under one roof.
 The project being an educational and medical institution is exempt from
tax (to be checked)

8.2 Weaknesses
 The society depends heavily on Dr. Chaudhuri and Dr. Seal for
development of the project. However, other members have experience in
general administration and the society is also recruiting experienced and
trained staff to look after the affairs of the hospital and medical college.

8.3 Opportunities
 Kolkata and neighbouring areas do not have adequate medical facilities
to cope up with the growing demand due to its increasing population.
There exists considerable demand for hospitals providing quality medical
services at reasonable rates.
 The state has only 7 medical colleges and there is huge demand for
getting admission to the medical college in the state.

8.4 Threats
 The society has to recruit a large number of staff for various positions at
the Hospital and Medical College.
 In case the college is forced to stop accepting deposits from the students
due to regulatory or other reasons, the debt servicing ability of the
project would be adversely affected.
 The paying capacity of the people could impact the capacity utilization of
the premium services in the hospital. However, the charges in the
proposed hospital are considered to be competitive as compared to other

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hospitals in Kolkata. Further, with all medical facilities available under

one roof, the hospital will get more patronage from the people.

11.0 CONCLUSION

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