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Dhan Jeevan


Dhan Jeevan operates a hospital offering various diagnostic and therapeutic services.

The hospital operates in various areas of medicine including Urology, Gastroenterology, Cardiology, Neurology, Internal Medicine, and Radiology (including MRI). 

It generally enjoys a high occupancy rate of its beds.  Further, the trend of greater numbers of people taking health insurance coverage bodes well for the hospital industry’s revenues.

As a result of the above and other related factors, management intends on increasing the hospital’s bed capacity and expanding some of the hospital’s other facilities. 

The company reported stable operating profits on similarly stable revenues (with minor growth) – reporting almost 1cr in operating profits on revenues of over 4.5cr.  It did not operate with any net debt as at 31st March, 2012 although this is likely to change in the near future (see below).

The business is not immune to reduced demand as a result of economic slowdowns as patients put off non-emergency visits.  Even rises in interest rates reduces demand for those patients who finance treatment with loans.  Other macro-economic factors such as general cost inflation, slow rate of infrastructure development (roads, etc.), high taxes, etc. play their part in reducing demand.

Moreover, there is an inherent conflict of interest in this business where higher profits may not be consistent with quality patient care.

The business earns low returns on invested capital and hence, significant expansion plans are likely to destroy shareholder value.  Moreover, management have explicitly stated their intention to raise funds for this purpose – either enhancing financial risk via external borrowings or diluting existing shareholders.  Further, management have not paid dividends to shareholders in the past despite low returns.  All this raises serious questions about management’s fidelity towards their employers – the equity shareholders.

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