Case 088Company analysis and valuationCore

Write the investment memo on a hospital chain with 1,200 beds that is building a new 300-bed hospital. What goes in the first line, and what numbers support it?

Fidelity InvestmentsToronto · 2026

The situation

Parijatak Hospitals runs 1,200 beds across six cities at 68% occupancy. Revenue per occupied bed is Rs 52,000 a day and the EBITDA margin is 22%. The company's enterprise value is Rs 7,500 crore.

It is building a 300-bed hospital in a new city for Rs 450 crore, expected to reach 60% occupancy in three years. Management guides to Rs 48,000 a day per occupied bed there, variable costs of 35% of revenue and fixed costs of Rs 140 crore a year once open. Use a 20-year life for depreciation and 25% tax.

Your task

Write the memo: the view in the first line, then the unit economics, the effect of the new hospital, and what would change your mind.

Quick check

What should the first line of an investment memo contain?

Worked solution

Try it on paper, then open one step at a time.

30-second answerThe answer to give first

View: a good hospital business, fully priced at 22 times EBITDA, and not attractive until the new hospital proves its ramp. The existing beds earn Rs 28.4 lakh of EBITDA each a year. The new hospital loses Rs 37.5 crore in year 1, cutting group EBITDA 11%, and earns only 7.1% on its capital in year 3. The price, Rs 6.25 crore a bed, already assumes the ramp works.

Step 1Why does the view go first?

A doctor's referral note starts with the diagnosis, not the patient's life story; the specialist reading it may have thirty seconds. An investment memo is read the same way, so the first line carries the view and its reason, and everything below is evidence for a claim already made. Candidates who build up to the conclusion bury it on page two, where a busy committee member never arrives. Barbara Minto's pyramid principle, answer first, is the standard frame.

An investment memo puts the view in the first line and the evidence under itMEMO | Parijatak Hospitals | Investment committeeView: good business, fully priced. Not at 22x EBITDAuntil the new hospital shows its ramp. Revisit after year 1.Unit economics1,200 beds x 68% x 365 x Rs 52,000= revenue Rs 1,549 crore; EBITDA 22% = Rs 341 croreEBITDA per bed Rs 28.4 lakh; a new bed costs Rs 150 lakhThe new hospitalYear 1 at 30%: EBITDA Rs -37.5 crore, group EBITDA -11%Year 3 at 60%: EBITDA Rs 65.0 crore, return on capital 7.1%Year 5 at 70%: return on capital 12.8%Price: EV Rs 7,500 crore = Rs 6.25 crore a bed, 4.2x build cost1View first, in one line2Evidence the reader can check3The number that decides it4What would change the view
The Parijatak memo opens with the view, good business but fully priced at 22 times EBITDA, then shows the unit economics, the new hospital's year 1 loss and 7.1% year 3 return, and the price of Rs 6.25 crore a bed against a Rs 1.5 crore build cost.
Step 2What do the unit economics say?

Build revenue from beds, not from a growth rate. 1,200 beds x 68% x 365 days x Rs 52,000 gives Rs 1,549 crore of revenue and Rs 341 crore of EBITDA, Rs 28.4 lakh per bed a year. A new bed costs Rs 150 lakh to build, so a mature bed earns about 19% of its cost in EBITDA each year. That is a good business, and it is the number every hospital ARPOBAverage revenue per occupied bed per day, the hospital sector measure of pricing and case mix. discussion comes back to.

Step 3What does the new hospital do to the numbers?

New hospitals carry a full fixed cost base from the day they open and fill slowly. At 30% occupancy in year 1, the new hospital's EBITDA is Rs -37.5 crore, which cuts group EBITDA from Rs 341 crore to Rs 303 crore, -11%. By year 3 at 60% it earns Rs 65.0 crore, but after depreciation of Rs 22.5 crore and tax that is only 7.1% on Rs 450 crore. It crosses a 12% return only in year 5, at 70% occupancy.

The new hospital loses money first and earns its keep only at maturity, Rs crore-37.5Year 1, 30%return -10.0%+13.7Year 2, 45%return -1.5%+65.0Year 3, 60%return 7.1%+82.1Year 4, 65%return 9.9%+99.1Year 5, 70%return 12.8%EBITDA = revenue x 65% - Rs 140 crore fixed; return on capital after depreciation and 25% tax
Parijatak's new hospital loses Rs 37.5 crore of EBITDA in year 1, earns Rs 65.0 crore in year 3 for a 7.1% return on capital, and clears 12% only in year 5 at 70% occupancy.
Step 4Where does the price leave you, and what would change the view?

At Rs 7,500 crore the market pays Rs 6.25 crore for each existing bed, 4.2 times what a new bed costs to build. That premium is fair for mature beds in established cities, but it leaves no margin for a slow ramp in a new one. The view changes on evidence: occupancy above 40% by the end of year 1, revenue per bed near guidance, or a price closer to 18 times EBITDA. Name those in the memo's last line so the committee knows what to watch. Say the limit: the model holds existing hospitals flat, and growth there would soften the year 1 dip.

Where candidates lose it

The common loss is writing the memo as a story, company history, then industry, then numbers, with the view arriving at the end. The reader who stops early never learns what you think.

The second is valuing the expansion on its mature numbers. A hospital that loses money for a year and earns under its cost of capital for three is a drag first and a gain later, and a memo that skips the ramp overstates near-term earnings.

What the interviewer asks next

  • What occupancy does the new hospital need to break even at the EBITDA line?
  • How would you value Parijatak on EV per bed against peers, and what does that miss?
  • Which single disclosure would you ask management for before the next committee?

Asked at Fidelity Investments, Equity Research Intern Interview, Toronto, 2026 (Wall Street Oasis): First round was submitting an investment memo. Second Round 1 on 1 with Director.

Company names and figures are illustrative.