Medinova Diagnostic Services Ltd Management Discussions.

Industry structure and developments

The outbreak of Coronavirus (COVID-19) pandemic globally and in India is causing a significant disruption and slowdown of economic activity. Measures taken to contain the spread of the virus, including travel bans, quarantines, social distancing and closures of non-essential services and the uncertainty associated with the lifting or re-imposition of these restrictions, have further aggravated the business environment.

The Governments expenditure on healthcare has grown to 1.6% of the nations GDP as per the F.Y. 20 budget up from 1.5% in the previous budget.

In the history of mankind this is probably the first time when diagnostics industry has been in the absolute spotlight. The world has recognized the need for early warning systems in the healthcare segment currently for Covid-19, but this trend is going to continue for all forms of diagnostics in the time to come. There is expectation of phenomenal growth for the diagnostics industry.

Opportunities and Threats

According to a recent Research and Markets report "Indian Diagnostic Services Market Outlook 2020", the industry is expected to grow at 27.5 per cent for the next five years. This can be achieved by improving healthcare facilities, pathological and medical diagnostic laboratories and public-private projects along with the health insurance sector.

E-commerce based offerings have also started to slowly creep into the industry and have initiated the onset of digitization of services, as they have in almost every other industry. With this increasing competition, margins are likely to remain stable and growth would be led by volumes and not pricing.

Outlook

The Indian healthcare market is poised to expand to US$ 372 billion by 2022 on the back of greater health awareness among people, prevalence of lifestyle diseases, better access to insurance, increasing incomes and greater investment by both public and private players. The COVID-19 pandemic outbreak has further sensitized Governments and citizens across the world to the importance of healthcare infrastructure and the role the diagnostic industry will play in earlier detection, prevention and management of diseases.

India is one of the biggest markets for healthcare services consumption. Our population coupled with our industry capabilities is likely to ensure a more robust ‘make in India initiative in the years to come. Healthcare being a necessity and not a luxury, this segment is likely to grow at a much better tangent as compared to most of the other industry, and will not only drive the economic output for the healthcare industry along but for the overall Indian economy, especially from a global perspective.

Your Company keeps pace with the ever changing medical technology by upgrading its existing and also installing new equipment.

Risk and concerns:

Risks are inherent to any business. They are managed by your Company through a risk management process of risk identification and risk mitigation, through risk reduction strategies & plans and continuous monitoring of the effectiveness of the risk mitigation measures to control them.

Although largely operating through un-organized laboratories, the diagnostics industry is subject to intervention from the state or central governments in order to enhance testing. During seasonal epidemics, typical guidelines will fix certain pricing for a particular test/ panel on a temporary basis. The Company is totally compliant with such requirements.

The intensity of competition in the diagnostics industry has abated in the past years however structurally the sector lends itself to regular outreach initiatives from the established players both in the unorganized and organized space.

Companys Performance:

During the year under review, your Company achieved standalone revenue of Rs. 549.30 lakhs as against Rs. 674.33 lakhs in the previous year. The operations resulted in a net loss of Rs. (29.57) lakhs as against net profit of Rs. 76.80 lakhs in the previous year.

The Company achieved consolidated revenue of Rs. 744.70 lakhs as against Rs. 897.26 lakhs in the previous year. The operations resulted in consolidated net loss of Rs. (22.77) lakhs as against net profit of Rs. 82.29 lakhs in the previous year.

The Companys operations predominantly related to providing Medical Diagnostic Services and related business services. During the year ended March 31, 2020, there are no other reportable business segments as per AS 17 "Segment reporting".

Despite the severe competition in this sector, your company has always been able to keep its place as one of the front runners in terms of its service and quality. It is also taking necessary steps and measures to further uplift its image and improve the foot falls.

Internal Control System and their adequacy

The Company has adequate internal control systems and procedures designed to effectively control the operations at its Corporate Office and Branch. The internal control systems are designed to ensure that the financial and other records are reliable for the preparation of financial statements and for maintaining assets. The Company has well designed Standard Operating Procedures considering the essential components of internal control as stated in the Guidance Note on Audit of Internal Controls over Financial Reporting issued by the Institute of Chartered Accountants of India. Internal Auditor conduct audit covering a wide range of operational matters and ensure compliance with specified standards. Planned periodic reviews are carried out by Internal Audit. The findings of Internal Audit are reviewed by the top management and by the Audit Committee of the Board of Directors.

The Audit Committee periodically reviews the findings and recommendations of the Auditors and takes corrective action as deemed necessary.

Human Resource

‘Human Resources are recognized as a key pillar of any successful organization and so is for Medinova. The company puts constant efforts in recruiting and training the employees and ensures to bring out the best of them. The company adopts a HR policy and ensures that all the employees are aware of personnel policies. The needs of the employees are addressed with high importance and efforts are made to provide a highly challenging and healthy environment. Besides all these, the company places high emphasis on professional etiquette required of every employee. As on 31.03.2020 numbers of employees employed are 71.

Disclosure of Accounting Treatment

During the year, there was no treatment of any transaction different from that as prescribed in the Accounting Standards as required under Section 133 of the Companies Act, 2013.