EXECUTIVE SUMMARY

The Business Idea

High-end medical treatment facilities in India are scarce and concentrated

only in selective cities. Figures confirm the fact that outstation
patients account for 65 to 70 percent of the occupancy. Affordable lodging
and dinning near the hospitals is the prima concern for these patients and
their relatives/visitors.

Providing a solution to this need forms the basis of our business plan. Hence
we will like to venture into the ‘hospital-ity’ industry. We plan to provide
accommodation facilities near hospitals for the relatives of outstation
patients who come for treatment, at a low cost. We name these
accommodation centers as ‘Aashray’.

Our Mission statement:

“We envision to provide clean, convinent quality accommodation with

friendly service at affordable price to exceed customer’s expectation and
thereby ensuring financial success and growth opportunities for the company
and its shareholders”

The suggested business plan is feasible, profitable, risk-free and affordable.

How do we start???

We have identified a few parameters on the basis of which we will shortlist

various hospitals and locations for ‘Aashray’.These are:

• Capacity of the hospitals (should be high)

• Ability of the hospital to attract non-local patients(very important)

• Cost of land near the hospital. (Preferably low).

 • Customers (patients) insights.

Considering the above mentioned criteria’s we find that cities like

Ahmadabad, Patna, Bhopal ,Indore, Jodhpur ,Pune , Bhubaneswar,Vijaywada
etc,(which act as ‘medical centers’) are perfect locations to start with
because they attract high number of patients from all the corners of their
states. Also, land availing is relatively easier and cheaper.

Apart from these medical centers, we will also target a number of speciality
and super-speciality hospitals (like heart centers, kidney and cancer center)
depending on the above mentioned short listing criteria.

Aashrays can also be built, strategically located between two hospitals,

ensuring higher occupancy and profits, as they will derive its customer’s base
from both the hospitals. The possibility of tie ups with hospitals should also
be explored.

Having selected the hospitals and location, we plan to provide lodging and
dinning facilities to outstation patients and their relatives as near the hospital
as possible.

Concept of ‘AASHRAY’

• These lodging places – we will call them ‘AASHRAY’- will be a cross

between a traditional Indian dharmashala and a hotel.

• It will ensure the cleanliness and hygiene of a hotel but will work on a
very small number of employees.

• As it is a low cost service it shall cut down on the frills and ensure
minimum overhead costs.

• These lodges will be strategically located as near to the hospitals as

possible and will be more hygienic and ergonomically built.
 • Aashrays will derive their demand from the hospitals and therefore will
be non cyclical, rescission proof business.

• The number of rooms/beds in these Aashrays will be linked to (lets

say, around 20%) total number of beds in the hospitals- thus ensuring
near hundred percent occupancy rates.

• Aggressive cost cutting practices shall ensure profitability.

• Also, tie ups with the hospitals will ensure higher occupancy.

• Though relatives of patients are ‘the only priority’, in case of low

occupancy, rooms may be let out to others for short durations, the
extensions of which shall be daily reviewed.

• The most important challenge for the project is availability of land. The
options available are as follows:

o Outright purchase of land.

o Purchase of land on lease-transfer basis.

Porter’s five forces analysis:

High initial investment and first mover advantage ensures high entry barriers.

Threat of substitutes is low.

Bargaining power of supplier and customers is low.

Exit barriers are very low as fixed investments (land and building) are easy to
recover.
Revenue Model:

Cost=cost of land (fixed and high) +construction cost (fixed and high) +employee
salary (variable and moderate)+electricity and other maintenance
costs(moderate).Revenue=rental charged from customers+income from canteen.

The payback period comes to around 5-6 years in case of outright purchase of land.

Profits depend on selection of city, medical centre and rent charged, apart from
occupancy rate. Lease- transfer seems to be good alternate in case we want to start
showing profits from the very beginning.

The uniqueness and scale of the plan coupled with affordability to the needy lodgers
will ensure “Aashray” attaining an iconic brand status in 8 to 12 years. Once the
efficency and expertise as gained we will gradually move on to the bigger cities.

THE BUSINESS IDEA

High- end medical treatment facilities in India are scarce and concentrated
only in selective cities. Figures confirm the fact that outstation patients
account for 65 to 70 percent of the occupancy. Affordable lodging and
dinning near the hospitals is the prima concern for these patients and their
relatives/visitors.

HOW DO WE START?
Location of Aashray, type of rooms, number of rooms and rentals charged will
depend on the following factors-

QUANTITATIVE INFORMATION:

• No. beds in the hospital

• Occupancy rate of the hospital The higher the

better

• Percentage of outstation patients

• F.S.I in the area

• Cost of land near hospital The lower the

better

• Cost of construction in the city

QUALITATIVE INFORMATION:

• Relative cost of services charged in the hospital.

• Relative income group of patients.

Considering the above mentioned criteria, we find that cities like Ahmadabad,
Patna, Bhopal, Indore, Ranch, Pune, Bhubaneswar, Cochin etc, (which act as
‘medical centers’ for their respective states) are perfect locations to start
because they attract high number of patients from all the corners of their
respective states. Also, land availing is relatively easier and cheaper.

Apart from theses medical centers, Multi-speciality and super-speciality

hospitals (like heart centers, kidney and cancer hospitals) also satisfy the
above mentioned requirements. They are equally good locations to start
hospitals.

Having selected the hospitals and locations, we plan to provide lodging

facility to outstation patients and their relatives as near the hospital as
possible.

TYPES OF ROOMS-The rooms can be classified into three types.

 Type A – rooms with beds only.

 Type B – rooms with toilets attached.

 Type C – rooms with toilet and kitchens attached

Apart from the above mentioned 3types of rooms, we plan to provide a single
bed accommodation in a big hall at minimum price for an overnight stay. This
shall depend on the type of the hospital. For example, if ‘aashray’ is built
near a low cost government hospital, we expect more people from lower
strata of the society with lower per capital income to come to such hospitals.
For these kind of customers, the hall facility will be best suited.

Number of rooms of each type and rentals charged will be determined on a

case to case basis and shall not be standardized.
 MARKET DYNAMICS & COMPETITIOR
ANALYSIS
Currently the industry is in introductory phase: hence the completion is most
likely to be from unorganized, local accommodation providers. The market is
largely unattended & differentiation is low.

• Some competition exists from unorganized players like those who rent
out flats in areas nearby these hospitals. But these are unable to carter
to a major part of the demand and hence people have to go to various
dharamshalas and hotels which may not be in the nearby area.

• Also, though food id available nearby the hospitals at a cheaper cost,

the level of hygiene and cleanliness is very low.

SWOT ANALYSIS

Strengths Weakness

 First mover advantage.  Differentiation is low, easy to

imitate.
 Stable returns.
 Availability of required land.
 Exit barriers are low.
 Few growth avenues.

 Entry barriers are low.

Opportunities Threats

 Market size.  Unorganized players.

 Tie ups with hospitals in  Hospitals may venture into

metros. this field.

 Franchise  Demand is derived from

hospitals.
 MARKETING & SALES
The main thrust of the marketing plan is to create awareness about Aashray.

Tie-up with NGOs /social workers

There area several NGOs and social work groups who help people get
medicines, blood and other necessary requirements in the hospitals. Tie-ups
with such NGOs can help create awareness among the target audience.

BRANDING AND AWARNESS

Aashray should leverage on the first mover advantage by selecting the prime
hospitals. Growth can be attained in the form of tie ups with hospitals (in
metros), and franchises if possible.

Spending on awareness is important because of the following reasons-

• Occupancy in Aashrays cannot be expected to be very high in

the initial phase of the launch. As the service is new and in its
introductory phase, awareness will definitely add to the
customer’s base.

• Aashray as brand is likely to deter the prospective competitors

to enter the fray.
• It helps to keeps the option of franchise open.

• Owners may expect more returns in case of exit.

 FINACIAL PLANNING & FINANCING NEEDS
INTIAL CAPITALOUTLAY/FINACING NEEDS

The real estate cost & legalities shall have a bearing on the organizational
performance. The capital expenditure and financing structure (debt, equity) will
have an impact on the accounting statements. There are three ways of going ahead
with the property acquisition:

1. Outright Purchase of Land

• In case of sufficient initial capital.

• Insulates from fluctuations in interest rates and rise in property

prices.

2. Bank Financing

• Low equity does not hinder ownership.

• Monthly cash outflows.

• Ownership retained.

3. Leasing Property

• Minimum cash outflow.

• Fluctuation in interest rates & property prices may jeopardize the

budget.

• Deal can be structured for right to purchase at the end of lease period
or for purchase at determined price.

Apart from the above three options , other option with various mixtures of debt and
equity could be considered.
REVENUE

Revenue will be mainly contributed by the rentals of the rooms.

Rentals=f (cost of land, cost of construction, expected payback period, percent of

outstation patients)

Revenue is also expected from canteen if outsourced. The suggestion is to

outsource canteen only if reduction of overhead costs is of utmost importance.
OUTSOURCING THE CANTEEN WILL RESULT IN RISKING Hygiene and quality- the
core competencies of Aashray.

COSTS

The expenditure incurred by Aashray can be divided into two broad categories-fixed
and semi-fixed. The variable component is linked to the occupancy and the facility
usage.

Fixed costs included-

• Administrative and general expenses (a small portion is variable)

• Property taxes

• Insurance

• Payroll

Semi-fixed expenses include-

• Energy costs

• Operation and maintenance expenses

 SALES FORCAST AND REVENUE GROWTH

Number of rooms in Aashray=f(number of beds in the hospital, percentage of

outstation patients, occupancy rate in the hospital).

The revenue is expected to be fairly stable as the industry is recession free and non
cyclic in nature.

Revenue growth can be expected from any of the following-

• Increase in rentals.

• Expansion.

• Increase in occupancy.
BUSINESS RISKS
Competition: The idea is simple and easy to initiate. Competition can be from the
following-

• Big players may enter the fray.

• Competition from unorganized and domestic players (Dharmashalas,

paying Guest services and rented flats) may intensify.

• Few hospitals may find it profitable to start their own accommodation

facilities.

Demand:

• Competitions may results in price reduction and fall in occupancy.

Construction:

• Rise in cost of raw materials (overshooting of budgeted cost).

• Delay in construction due to various factors like labor strike force, major
change in government policies, and irregularly in supply of Raw material.

MEASURE TO COUNTER RISKS:

• Judiciously identify lucrative locations and try to leverage on first mover

advantage. Thus discouraging the big players to enter competition.

• Create awareness about the brand and advertise on few attributes like low
cost with hygiene environment, tie ups with hospitals will help in countering
the competition from unorganized players.
• Valve added services like-emergency bus service, air coolers and early
booking discount etc. will help in negating competition and ensure
occupancy.

• One way to counter the risks in construction (monerty and time delay)is to
insure the complete process.
 ACTUALS
The following is the preliminary research finding of five different kinds of hospitals-

S.NO Hospital Type Relative Treatment

Cost

1 Apollo Hospital, Multi-specialty High

Hyderabad

2 Narayan Hrudyalaya, Super- Moderate

Bangalore Specialty

3 IGIMS,Patna Medical High

Center

4 RIMS,Ranchi Medical Moderate

Center

5 Govt.Med.Hosp,Nagpur Medical Low

Center

Now the distribution of each type of room A, B & C is dependent on the type of
people who come for treatment is such hospitals. This is determined by the
Qualitative factors:

• Relative cost of services charged in the hospital

• Relative income group of patients

We have divided the distribution of rooms for the above mentioned hospitals in the
following way depending on the qualitative factors:

Apollo Naryana IGIMS RIMS GMH

A(Beds 20% 20% 30% 50% 65%

only)

B(toilets 35% 40% 45% 30% 25%

attached)

C(Toilet and 45% 40% 25% 20% 10%

kitchen)
The total no. of rooms to be built is taken as 50% of target customers.

Target Customer = Total no. of beds in hosp. X Avg. Occupancy of Hosp. X Avg. no.
of outstation patients

The final figures come out to be

Apollo Naryana IGIMS RIMS GMH

A 17 21 64 105 207

B 30 43 96 63 80

C 38 43 53 42 32

Total 85 107 213 210 319

Now the total floor space required to build A,B & C types of rooms are:

Room Floor space in sq

Type feet

A 125

B 150

C 175

The total capital required to build these five Aashrays depends on:

• Cost of land near the hospital

• Floor Space Index (F.S.I)- FSI means Floor Space Index, which is the ratio between
the built up area allowed and plot area available. Like if FSI is 1 then on a plot of 100
sqmts, one can build 100 sqmts of built up area and with the setbacks and open
spaces, the building can be higher than one floor. Simply it means that higher the
FSI, higher built up area is possible
 • Cost of Construction in the city

• Total Floor Space Required

Actual figures of the above (as confirmed from real estate agents in respective
cities)

Come out as:

Hospital No. of Cost of F.S.I Total Cost of Total cost

Beds land Floor constructi (in lacs)
on in
(sq.feet) Space
city(sq.
required
feet)

Apollo 550 1000 2.25 18992 500 155

Naryana 500 1550 2 15671 500 190

IGIMS 1000 750 2.5 31343 450 235

RIMS 990 700 2.5 28400.6 450 207

25

GMH 1500 900 2.5 39046.8 450 316

75
 FINANCIALS

Roomsin Hospital 1500 Hospital name GMH

Outstation patients 50.00%
Average Occupancyin Hospitals 85.00% Type of Hospital 3 Type of Financing Outright of Purchase
Cost in hospitals L Of Land
No of rooms in Aashray 319 Outstation patients 1
(Functions of the above 3factors)
Combined Factor 5
Average OcupancyRate of Aashray 80% Type of Rooms
No.of rooms Occupied 255 A 207
B 80
C 32
Cost Of land 156
construction cost per square feet 450
Total Construction Cost 19543359
Typeof Rooms Reqiured per month DailyRentals
Total Intial Investment 35178047 A 404263.2 81
Initial Investment in case of lease 19543359 B 272100 142
C 1339937 183
OperatingCosts per month:
FixedCost Basepayback Newpayback
Payback period 5
Employee cost 100000
Propertytaxes 10000
Administrative and general expenses 10000

Semi-fixedcost

Energycost 100000
Operatingand Maintanence expenses 10000

Total OperatingCostpermonth 230000

Incaseof Outrightpurchaseof land Incaseof BankFinacing Incaseof leaseof Land

Annual Cashflow requiredto achieve 7035609 Actual revenues per Actual revenues per
the base payback month 816300.8 month 816300.8
Monthly Cashflow reqiured 586300.8 OperatingCost 586300.8 OperatingProfit 586300.8
Monthly revenues required Invest payment per Lease Rentals per
tomeet the cashflow 816300.8 month 234520.3 month 15634.88
Operatingcashflow 351780.5 OperatingProfit
cashflow 429953.9
TOTAL NUMBER OF ROOMS:

The total number of rooms to built will be dependent

 The total number of beds in the hospital

 Number of Outstation patients

 Average occupancy rates of the hospitals.

The calculation for total number of rooms for a location near Government Medical
Hospital , Nagpur as seen from the above diagram comes out to be

1500(total number of beds in hospital) X 80% (Average occupancy rates of hospital)

X, 50% (Number of outstation patients) X 0.5 (Factor for scaling to estimate
demand)

RENTALS

As you can see from the above diagram the rentals charged for room type B is a
function of-

 Total rentals required for a pay back period of 5 years

 Total number of rooms of type B

 Total number of rooms in ‘Aashray’ and

 Type of hospital i.e. whether it is s super/multi specality or medical center

and whether it is a high cost, low cost or medium cost hospital.

For example considering pay back of 5 years(out right purchase of land). The
rentals of Type B (rooms with toilet attached) comes out to be 142 Rs. Per day.

However, the payback period will change once the way of financing is changed
to bank Finance or lease of land.
PAYBACK PERIOD

The base payback period is assumed to be 5 years in case of outright

purchase of land and accordingly rentals have been decided. The ‘New
Payback period’ heading will give the payback period as we change our
financing options.

For example, In case of ‘Lease of Land’ option, the pay back period will be
Initial cost of construction/ (Operating cash flow- Lease rentals). Here we will
not consider the cost of land our calculation for initial investment.
 PROFIT & LOSS STATEMENT
Location Bilaspur Banglore Patna Ranchi Nagpur
Apollo Narayan IGIMS RIMS GHM

Category(Type) 1 2 3 3 3
cost wise(H,L,M) H M H M L
Total No of Beds 400 500 1000 990 1500
Average %of Outstation
patients 50% 50% 50% 50% 50%
Average occupancyrate 85% 85% 85% 85% 85%
Cost of Land(per square feet) 1400 2500 750 700 900
F.S.I. 2.5 2 2.5 2.5 2.5
Cost of construc
nstruc
ton
tion
per
per
sq.feet 450 450 450 450 450

Total cost of land 7437500 19755859 9482812.5 8393962 15634688

Total construction cost 5976562 7112109 144224218 13490296 19543359
Total Intail Investment 13414062 26867968 2370731 21884259 35178046

Revenues (per month) 453567.7 677799 625117 594737 816300

Total operatingcost
(per month) 230000 230000 230000 230000 230000
Interest payment/lease rentals
(per month) 89427 179119.8 158046.88 145895.1 234520.3
Depreciation(per month) 49804.69 59267.58 118535.16 112419.1 162861.3
PBT 84335.94 209412.1 118535.16 106432.5 188919.1
Taxes 25300.78 62823.63 35560.55 31927.04 56675.74
PAT/Net rofit 59035 146588.5 82974.61 74496.42 132243.4

Net cash flow before taxes 134140.6 268679.7 237070.31 218842.6 351780.5
Payback period(in years) 8.333333 8.333333 8.3333333 8.333333 8.333333
The above figure shows our sample Profit/Loss statement cum hospital related
data.The figures for revenue and profit as well as costs and depreciation are on
monthlybasis. Total operating costs includes:

• Employee costs(wages and salaries):

The number of employees would be proportional to the number of rooms in

Aashray and as possible. For convenience, we used 1,00,000 per month as
employee salary.

• Property taxes:

Property taxes will be charged as per the municipality regulation. Each city
has its own property tax structure.

• Administrative & General expenses:

Administrative and general expenses would include expenditure on

maintaining cleanliness in premises, rooms cleaning, telephone charges etc.
The average administrative and general expenses are assumed to be
Rs.10,000 per month for each’ Aashray’.

• Operation & Maintenance expenses:

Operation and maintenance expenses would include electricity cost and costs
on annual repairs, maintaining drainage system, repainting the building if
required etc. Some of these expenses will occur on an annual basis but for
the purpose of monthly Profit and loss, they are taken proportionately as
monthly expenses.
 ORGANIZATIONAL ROADMAP
Phase 1:

• Shortlist locations for Aashray.

• Identify 15-25 hospitals for launch of Aashray over a period over three to four
years.(Identify hospitals on the basis of quantitative and qualitative
information as described above).

• Depending upon the capital available choose the best property acquisition
mode and build Aashraya.

• Spread awareness (through NGOs, social workers and local television

advertising)and try to establish brand name.

Phase 2:

• This is the expansion phase. Using flows from existing Aashrays get into
newer locations.

• Having achieved learning curve;explore the possibility of venturing into

metros.

• Possiblity of building Aashrays in areas located centrally between big

hospitalsin the metros to carter to all of them simultaneously.

• Explore the possibility of catering to ‘medical tourists’.

• Keep the options for franchising open.

Phase 3:

• The industry is in maturity phase.

• Choose between milking the cash cows and venturing into new avenues.
• Learning curve may help in venturing into following-

 Identifying educational centers without hostels and providing

dormitory for students.

 Working women hostel.

 Residential facility for BPO employees.

BIBLOGRAPHY
THANK YOU