birla pacific medspa ltd Management discussions

MANAGEMENT DISCUSSIONS AND ANALYSIS REPORT

a) Economy and Market Trends:

According to a FICCI-Ernst and Young study titled ‘Wellness-Exploring the Untapped Potential, the wellness services market, presently estimated at Rs11, 000 crore, would sustain an annual growth rate of about 30-35% for the next five years. Further, the FICCI-EY report, titled Wellness Exploring the untapped potential, highlights that the growth is expected on the back of favorable market demographics, consumerism, globalization, changing lifestyles, increasing availability across categories and regions and rising awareness among people. The Report has classified the wellness industry into seven core segments within different products & services, such as Allopathy, Alternative therapies, Beauty, Counseling, Fitness/slimming, Nutrition and Rejuvenation. Of these, rejuvenation services such as spas, alternative therapies, ayurveda treatments and beauty services are expected to show growth rates as high as 30%. The FICCI-E&Y report said increasing level of activity created by the entry of national and international players in the organised market, expansion by existing companies to new product categories and regions, strategic alliances across the value chain and interest by private equity investors led to the growth in the wellness sector.

India is currently going through a socio economic change; the country is witnessing an expansion of existing markets and the creation of many new ones.

The report also points to a trend of players moving towards offering a ‘one-stop-solution’ for all Wellness based needs by adding more products and services across various segments in wellness.

With rising disposable incomes and growing health and fitness consciousness, demand for health, wellness and grooming services in the country has gone up. The country’s wellness industry is growing at 35% and estimated to touch 14,500 crore by 2014.

This high growth is fuelling the ambitions of niche healthcare and wellness companies.

b) About the Company

Our company, was incorporated on 15th July 2008 to carry on in India and abroad the business of beauty and healthcare treatments, health and fitness resorts, dieticians, yoga ashrams, saloons, hair and skin treatments, Sanatorium centers, and to manufacture soaps consumables, oils, medicines, body sprays and scents, creams, powders, natural and artificial skin and hair conditioners. However our company presently does not carry on the business of manufacturing of soaps, consumables, etc. It offers treatments and special products; diet skin care tips; anti-tanning solutions, skin whitening solutions, age control solutions, and tone skin solutions for men; hair loss prevention solutions; revitalizing face wash services; skin relief after shave gel services; and anti ageing services

We presently operate our healthcare centres under the brand name BIRLA WELNESS CENTER.

Our Centers act as a single stop set up for beauty related medical procedures in India which gives our company an edge over local unorganized players.

c) Competitive Strength:

The Competitive Strength of the Company are:

1. In-house panel of qualified and specialist doctors to facilitate our doctor-led approach for treatment.

2. Wide range of specialized treatments in cosmetic surgery, dermatology and dentistry as compared with competition and ayurveda.

3. Competitive pricing with cost leadership.

4. Association of PacificHealthcare, Singapore, one of the Asia’s leading healthcare providers, ourerstwhile JV partner.

d) Segment-wise Performance:

The segment wise performance in detail is given in Note 32 to the audited accounts of the Company as available in this Annual Report.

e) Threats/Risks & Concerns:

Our business, results of operations and financial condition are affected by a number of factors, including:

1 General Economic conditions

2 Changes in Laws and regulations applicable to the industry, fiscal, economic or political conditions in the country

3 Increasing competition in the industry

4 Realisability of the dues

5 Depends on the specialized doctors

6 Obsolescence of equipments

f) Internal Control Systems and their adequacy:

Pacific has a well established and comprehensive internal control structure across the value chain, to ensure that all assets are safeguarded and protected against loss from unauthorized use of disposition, that transactions are authorized, recorded and reported correctly and that operation are conducted in an efficient and cost effective manner. The key constituents of the internal control system are:

1) Establishment and reviews business plans

2) Identification of keys risks and opportunities

3) Policies on operational and strategic risk management

4) Systems of monitoring compliance with statutory regulations.

5) A robust management information system

6) A robust internal audit and review system

The adequacy and effectiveness of the internal control across various activities, as well as compliance with laid down systems and policies are comprehensively and frequently monitored by your Company’s management at all levels of the organization.

g) Human Resources and Industrial Relations:

Pacific is a professionally managed organization with a flat hierarchy, which empowers people and fosters a culture of innovation. The organization believes that great people deliver great results and lays emphasis on hiring right and retaining key talent. The Company maintains a strong business linkage to all human resources processes and initiatives.

Your Company continues to lay emphasis on qualitative growth of its human resources by providing congenial and constructive work environment, in consonance with its belief that the real strength of its organization lies in its employees.

Industrial relations were cordial and satisfactory throughout the financial year.

h) Pricing Power:

The equity of a brand generally allows the organization to pass on the impact of any increase in cost structure to the consumers. However, considering the uncertainty in the environment, rising competitive pressures as well as the long term objective of expanding consumer franchise, part of the increased cost may be absorbed by the organizations.

Forward Looking Statements

Statements in this report on Management’s Discussion and Analysis describing the Company’s objectives, projections, estimates, expectations or predictions may be forward looking statements within the meaning of applicable security laws or regulations. Forward-looking statements are based on certain assumptions and expectations of future events and the Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The important factors that could make difference to the Company’s operations includes the economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, change in Government regulations, tax laws and other statutory and numerous incidental factors. The Company assumes no responsibility to publicly amend or revise the forward-looking statements or any loss to the investors in the shares of the Company making investments relying on such forward-looking statements. All forward looking statements are subject to risks, uncertainties and assumptions about us that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement.

i) Financial highlights:

i) Sales

Sales (net of Excise) and other income during the financial year 2012-13 was Rs.459.96 Lacs against Rs. 460.48 Lacs against previous year ended March 31, 2012.

ii) Profit/Loss

The net sales and other income of the Company for thefinancialyear 2012-13 stood at Rs. 459.96 Lacs as against previous year ended March 31, 2012 Rs. 460.48 Lacs. The Loss before tax is Rs.859.64 Lacs as against Loss before tax of Rs.157.22 Lacs of last previous year ended 2011-12. The Loss after tax stood at Rs.859.64 Lacs as against Loss after tax of Rs. 157.22 Lacs of corresponding previous year 2011-12.