Forecasting and Valuation

THE CLIENT AND THE ASK:

  • The Company is a technology company with a business proposition to provide diagnostic services to rural India and reduce the turnaround time of getting the report from 24 hours to 1 hour.
  • The Company was operating using multiple business models such as leasing to family physicians, collaboration with pharmaceutical companies and outright sale of device. The Company planned to have presence across India and some strategic international locations.
  • The Company hired Knowcraft to develop forecasts for the next 7-10 years to provide a valuation estimate with a purpose to seek a strategic or a financial partner.

THE CHALLENGE:

  • The Company had a unique service delivery model, unlike any of the major diagnostics companies operating in India.
  • The Company was set-up less than a year before and had a limited operating history.
  • There were very few comparable publicly traded companies and even fewer M&A transactions or equity financing in the diagnostics space in India.

OUR SOLUTION:

  • We analyzed the Company’s business plan and had multiple discussions with the client to understand the company’s business model, revenue stream and future plans.
  • We also conducted extensive market research and performed a comprehensive analysis of the Indian diagnostics market, healthcare infrastructure and demographics to develop forecasts for the Company.
  • Based on our analysis and research, we developed a dynamic model that captured multiple business models, various complex scenarios, and multiple assumptions.
  • We had discussions with doctors and mid to large size pharma companies to understand their perspective on viability of the business model and assumptions.
  • The financial model was developed for the next 10 years and had detailed estimates for number of diagnostic centres, sales, operating expenses, capital expenditure, and working capital requirements.
  • We developed a valuation estimate for the Company and prepared a detailed investment and valuation report for presentation to the Company’s potential business partners.
  • We also served as the adviser to the client in their meetings with the potential investors and business partners.

SUMMARY OF OUR SOLUTION AND CLIENT DELIVERABLES

  • We projected the annual number of diagnostic centres and tests volume for the forecast period, based on the client’s strategic focus, analysis of Indian demographics, forecasted population growth, and Indian healthcare landscape and infrastructure.
  • Based on this, we estimated the annual direct and indirect costs, initial and recurring capital expenditures and annual working capital requirements for the Company.
  • We forecasted the Company’s income statement and cash flows for the next 10 years, considering multiple service delivery and distribution models through which the Company was offering their services.
  • We developed multiple forecast and valuation scenarios – Base Case (most likely scenario), Best Case and Worst Case, wherein the user could see the summary of forecasts and valuation for any of these scenarios on a click of a button.
  • We also made the financial model scalable and dynamic to incorporate changes in assumptions and business model, like introduction of new service offerings, change in the revenue structure, and other expected changes to the operations in the future.