Medinova Diagnostic Services Ltd Management Discussions.

Your Company with its qualitative services for more than two decades and with innovative marketing efforts has created a brand name for itself and is the pioneer in Medical Diagnostics in the Country. Medinova has one centre offering services at Kolkatta. Also there are 3 Franchise Centers. The Company registered office is located in Hyderabad, Telangana.

Industry structure and developments:

The Indian diagnostic industry is highly fragmented and dominated by un-organized players. Standalone labs constitute 48% of the market and hospital-based labs make up for 37%, thereby amounting to a combined cover of 85% of the entire diagnostic market. Diagnostic chains cover close to 15% of the overall diagnostic market, of which, PAN-India chains cover 35-40%, with the balance 60-65% managed by regional chains. This low regional penetration in the Indian market provides ample scope for growth for large organized players.

Clinical diagnostics is a large market in India that continues to grow in lower double digits, with the growth in economy and publics increasing health care awareness and access to healthcare infrastructure. Sophisticated technologies are constantly brought into the market by global vendors. Competition is very high and local, further this is a very price sensitive one. The service providers in this business are highly fragmented and of varying sizes offering either routine or specialized or combination services.

The addressable market for diagnostic services is expected to grow at a healthy 10% CAGR (source: Indian Healthcare Report by Goldman Sachs, June 2018) until FY23, while the market share growth for top PAN-India chains is expected to grow at 10% - 14% revenue CAGR.

Opportunities and Threats

Given the scope of requirement for diagnostic services in an underserved country, the natural opportunity for business growth is encouraging. However, the industry being largely fragmented has potential for aggregation of smaller, uneconomical outlets under national brands. Regional brands are also graduating to national scale and will be competing with the Company. Also, like in many other consumer facing industries, e-commerce based offerings are also getting established. These aggregators primarily focus on building a digital platform and engaging with patients. These developments could impact the Company in terms of the pricing flexibility and could potentially impact margins in the short term.

Outlook

Your Company keeps pace with the ever changing medical technology by upgrading its existing and also installing equipment/ new equipment. Also, the Company is expanding itself by setting up more Franchise Centers. The Company also has plans to expand its reach overseas and give consultancy and undertake turnkey projects. Apart from Diagnostic Services, the Company plans to enter into other related Health Care lines and expand its brand name.

Risk and concerns:

The Company has adequate internal control systems and procedures to combat the risk. The Risk Management procedure will be reviewed periodically by the Audit Committee and the Board.

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.

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. From time to time, both the Central and State Governments mandate capped pricing for specified test/panels.

The Company gives emphasis on providing quality services and is equipped with the latest state of the art diagnostic equipment procured from World renowned suppliers like GE, Marquette, Siemens, Hitachi etc. The quality of the tests done by Centres of the Company meets international standards. The Company has upgraded its equipment to make best use of latest technology.

Companys Performance:

During the year under review, your Company achieved revenue of Rs. 674.33 lakhs as against Rs. 668.43 lakhs in the previous year. Your Company has earned a gross profit of Rs. 47.42 Lakhs before interest, depreciation and tax as against a loss of Rs. 26.54 lakhs in the previous year. The operations resulted in a net profit of Rs. 76.80 lakhs as against Rs. 2.84 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, 2019, 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 31.03.2019 numbers of employees employed are 88.

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.