Primecare (India) is a healthcare corporate providing innovative integrated healthcare to communities in and around Bangalore. After a seemingly successful pilot with two running centres, Primecare has embarked on an ambitious plan of establishing three hospitals and twenty medical centres over the following two years all over Bangalore. The group is in the process of setting up the first of these three hospitals which will be a 28 bed hospital and requires Rs. 1.8 crore to purchase medical equipment. The investors’ funds will be used to purchase the equipment which will in turn be leased to the hospital in return for monthly lease payments. The business is backed by very professional and creditworthy promoters who are also supporting the deal with their personal guarantees.
There will be 2 types of cash flows to the investors. One is from the monthly rental, the other is from the partial asset repurchase, which the company will be doing at the end of each year of the 3 year tenure.
Brief details of the deal
Deal Category (Investment/Emerging/Social) – Investment deal
Deal Structure – Structured as a loan where the payments replicate an ijarah (lease) contract
Total investment amount – Rs. 1.8 crore
Minimum investment ticket size – Rs. 5 lakh
Investment tenure – 3 years
Method of payment of profits & principal – Monthly lease payments will be made along with 3 bullet payments at the end of each year towards asset repurchase
Expected profits/losses for the investment – Gross expected internal rate of return of 18%
Risk profile (High/Medium/Low) – Low to Medium Risk since the monthly cash flows do not depend on the business performance and since the credit risk is low in the deal owing to high creditworthiness of the promoters and their personal guarantees. The only major source of risk seems to be any damage/devaluation of the leased equipment. The risk of loss is there only in the unlikely event that the hospital closes down in the first 2 years of the lease period itself and we are forced to sell the equipment in the market at a significant discount to the fair asset value.
Brief details of the business
Name of the business – Primecare Medical Services and Multispecialty Clinics (India) Private Limited
Nature of the business – Healthcare services
Location – Bangalore, India
Expected annual turnover – Rs. 6 crore
Year when the business started – Oct 2012
Name of the business CMD – Dr Syed Sayeed Ahmed
Website – www.primecare.in