FINANCIAL

MANAGEMENT
II

Financial Analysis of Hospital

Industry:

By:
Who must not be
named…

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Apollo Hospital Enterprise Ltd.
AHEL, is the leading private sector healthcare provider in Asia and owns and manages a network of
specialty hospitals and clinics, a chain of Pharmacy retail outlets across the country, and provides
Consultancy Services for commissioning and managing the Specialty Hospitals.

Liquidity Position Analysis

The percentage of current assets to total assets and current liabilities to total liabilities:
Title FY17-18 FY16-17
Current Assets/Total Assets 25.78% 26.22%
Current Liability/Total Liability 29.97% 20.58%

The percentage of each component of current assets to total current assets:

Components of current assets
and their % with total current FY17-18 FY16-17
assets
(A) Inventories 25.49% 21.93%
(B) Financial assets
Trade receivables 39.85% 35.25%
Cash and cash equivalents 13.80% 13.28%
Bank balances other than above 5.00% 11.35%
Investments 2.61% 4.97%
Other financial assets 7.23% 6.55%
(C) Other current assets 6.04% 6.66%

The current assets and current liabilities form almost one-fourth of the total asset and liabilities. Of
the total current assets, the highest chunk is that of trade receivables forming ~40% in FY17-18. The
inventories follow that with a share of ~25% in the same year.
----Liquidity Analysis--------

Approaches of working capital financing

Particulars (in mn.) FY17-18 FY16-17

Current Assets 22,201.25 21,292.16
Permanent Current Asset
Working Capital 6,528.56 11,658.60

Temporary Current Asset 15672.69 9633.56

Matching
Short term Liabilities 15672.69 9633.56

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As it can be observed that the temporary current assets are financed by short term liabilities
completely hence the permanent current asset would be financed by the long-term liabilities.
Therefore, there is the exact match between the life of asset and life of source of finance thereby
implying the Hedging Approach of working capital financing.

Gross operating cycle and net operating cycle/cash conversion cycle

Particulars (in days) FY17-18 FY16-17

Gross Operating cycle 80.92314 76.83318
Cash Conversion cycle 34.3171 30.82172

The cash conversion cycle varies significantly in Hospital Industry among the peers for the chosen two
companies however the cash conversion cycle for AHEL projects good health with regard to the
industry.
Source: Bloomberg

Investments through short term surplus funds

The short-term investments of Apollo Hospitals Enterprise Ltd. amounts to Rs. 578.73 million which
have been invested in total of 29 Mutual Funds, the prominent ones with the respective investment
for FY 17-18 are as follows:
Investments in Rs. Mn. FY 17-18 FY 16-17
Reliance Short Term Fund 72.74 -
ICICI Prudential 54.39 59.92
Birla Sun Life 53.64 59.68
ICICI Equity Arbitrage Fund 51.34 -
Aditya Birla Sun life Short term fund 51.13 -
SBI STD Fund - Reg plan Growth 50.96 21.67

For FY 16-17 the short-term investments were almost double that of the following year amounting to
Rs. 1058.45 million, prominent investments are as follows:
Investments in Rs. Mn. FY 17-18 FY 16-17
DHFL Pramerica Short Maturity Fund- - 142.59
Growth
Reliance Short Term Fund-Growth - 367.80
ICICI Prudential STP - Growth - 119.97
DHFL Pramerica Insta Cash Plus Fund 34.43 104.36

-------working capital management policies--------------

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Long term sources of finance
Various sources of finances and their composition in terms of amount sourced is as follows:
Particulars (Amount in Rs. Mn.) FY 17-18 FY 16-17
(A) Secured
Redeemable Non-Convertible Debentures 7,000 8000
Term loans from Banks 20,259.60 16,407.42
Finance Lease Obligations 24.73 40.59
Letter of Credit 123.58 323.38
(B) Unsecured
Term loans from banks 1,759.12 4,623.26
Term loans from other parties 70.98 -
Deposits from Public - 134.10
(C) Other Financial Liabilities
Security deposit 52.75 629.37
Derivative Financial Instrument 43.68 59.03
Capital subsidy 4.21 -
Gross Obligation under written Put Option 4,620.47 4,500.07
Total 33,959.12 34,722.24

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Narayana Hrudayalaya Ltd.
NH is a india based holding company. The company operates a network of hospitals, diagnostic
centers, clinical centers or test laboratories. The company operates through Medical and Healthcare
Services business segment. The Company offers medical, surgery and diagnostic and support services.
The company operates a network of over 20 hospitals, approximately seven heart centers and over
20 primary care facilities across India and a hospital at Cayman Islands with approximately 5,347
operational beds.

Liquidity Position Analysis

The percentage of current assets to total assets and current liabilities to total liabilities:
Title FY17-18 FY16-17
Current Assets/Total Assets 18.90% 18.31%
Current Liability/Total Liability 33.99% 47.19%

The percentage of each component of current assets to total current assets:

Components of current assets
and their % with total current FY17-18 FY16-17
assets
(A) Inventories 17.45% 17.36%
(B) Financial assets
Trade receivables 58.21% 52.03%
Cash and cash equivalents 6.95% 8.70%
Bank balances other than above 0.40% 2.61%
Investments 1.72% 1.00%
Other financial assets 2.90% 11.70%
(C) Other current assets 12.38% 6.60%

The current assets and current liabilities form almost one-fourth of the total asset and liabilities. Of
the total current assets, the highest chunk is that of trade receivables forming ~40% in FY17-18. The
inventories follow that with a share of ~25% in the same year.
----Liquidity Analysis--------
Current Assets constitute almost 19% of the Total assets which indicates company has optimum
liquidity position implying less cost of liquidity and higher profitability as there will be less blockage of
funds in idle current assets. There is no change in the current asset position from FY16-17 to FY17-18
which indicates there is no change in liquidity position of the company.
There is reduction of almost 13% in current liability of the company from FY16-17 to FY17-18 which
implies company has reduced its short-term debts to finance its current assets thereby increasing the
liquidity of the firm.

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Approaches of working capital financing

Particulars (in mn.) FY17-18 FY16-17

Current Assets 4792.93 3015.80
Permanent Current Asset
Working Capital (304.73) (209.76)

Temporary Current Asset

Aggressive
Short term Liabilities 5097.66 3225.56

As it can be observed that the temporary current assets are financed by short term liabilities
completely hence the permanent current asset would be financed by the long-term liabilities.
Therefore, there is the exact match between the life of asset and life of source of finance thereby
implying the Hedging Approach of working capital financing.

Gross operating cycle and net operating cycle/cash conversion cycle

Particulars (in days) FY17-18 FY16-17

Gross Operating cycle 80.92314 76.83318
Cash Conversion cycle 34.3171 30.82172

The cash conversion cycle varies significantly in Hospital Industry among the peers for the chosen two
companies however the cash conversion cycle for AHEL projects good health with regard to the
industry.
Source: Bloomberg

Investments through short term surplus funds

The short-term investments of Apollo Hospitals Enterprise Ltd. amounts to Rs. 578.73 million which
have been invested in total of 29 Mutual Funds, the prominent ones with the respective investment
for FY 17-18 are as follows:
Investments in Rs. Mn. FY 17-18 FY 16-17
Reliance Short Term Fund 72.74 -
ICICI Prudential 54.39 59.92
Birla Sun Life 53.64 59.68
ICICI Equity Arbitrage Fund 51.34 -
Aditya Birla Sun life Short term fund 51.13 -
SBI STD Fund - Reg plan Growth 50.96 21.67

For FY 16-17 the short-term investments were almost double that of the following year amounting to
Rs. 1058.45 million, prominent investments are as follows:

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 Investments in Rs. Mn. FY 17-18 FY 16-17
DHFL Pramerica Short Maturity Fund- - 142.59
Growth
Reliance Short Term Fund-Growth - 367.80
ICICI Prudential STP - Growth - 119.97
DHFL Pramerica Insta Cash Plus Fund 34.43 104.36

-------working capital management policies--------------

Long term sources of finance

Various sources of finances and their composition in terms of amount sourced is as follows:
Particulars (Amount in Rs. Mn.) FY 17-18 FY 16-17
(A) Secured
Redeemable Non-Convertible Debentures 7,000 8000
Term loans from Banks 20,259.60 16,407.42
Finance Lease Obligations 24.73 40.59
Letter of Credit 123.58 323.38
(B) Unsecured
Term loans from banks 1,759.12 4,623.26
Term loans from other parties 70.98 -
Deposits from Public - 134.10
(C) Other Financial Liabilities
Security deposit 52.75 629.37
Derivative Financial Instrument 43.68 59.03
Capital subsidy 4.21 -
Gross Obligation under written Put Option 4,620.47 4,500.07
Total 33,959.12 34,722.24