A very warm welcome to the H1 FY 2024 result conference call of Krsnaa Diagnostics Limited. Before we begin, I would like to remind all participants that today's call may contain statement that are forward-looking statement, including but without limitation, statement related to the implementation of strategic initiatives and other statement relating to Krsnaa Diagnostics' future business development and economic performance. While this forward-looking statement indicate our assessment and future expectation concerning the development of our business, a number of risks, uncertainties and other unknown factor could cause actual development and result to differ materially from our expectation. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone.
Please note that the conference is being recorded. I now hand the conference over to Mr. Jainil Shah from JM Financial. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone, and welcome to the H1 FY 2024 results conference call of Krsnaa Diagnostics Limited. Joining us today on the call are Mr. Rajendra Mutha, Chairman and Whole Time Director; Ms. Pallavi Bhatevara, Managing Director; Mr. Yash Mutha, Whole Time Director; Mr. Pawan Daga, Chief Financial Officer; Mr. Vivek Jain, Head, Investor Relations. I would like to now hand over to Ms. Pallavi Bhatevara for her opening remark. Thank you, and over to you, ma'am.
Ladies and gentlemen, good afternoon, and thank you for joining us today for Krsnaa Diagnostics H1 FY24 earnings call. I want to express my gratitude to each of you for being a part of this call. Our investor presentation has already been shared and is accessible on our website as well as on the stock exchanges website. I hope you all have had a chance to review the presentation. I'd like to kick off our discussion by focusing on the comprehensive healthcare initiative undertaken by the Indian government, the current state of the diagnostic service industry, and shedding light on Krsnaa Diagnostics' position within this ever-evolving landscape. Let's start with Ayushman Bharat, recognized as the world's largest government-funded healthcare program. Ayushman Bharat or Pradhan Mantri Jan Arogya Yojana extends free health insurance coverage to over 500 million individuals from underprivileged households.
Another crucial enabler in the National Health Mission, which concentrates on enhancing healthcare accessibility in rural areas with a focus on primary healthcare services, maternal and child healthcare, immunization, and communicable disease control. Multiple other programs like Pradhan Mantri Surakshit Matritva Abhiyan, Janani Shishu Suraksha Karyakram, Rashtriya Bal Swasthya Karyakram, Rashtriya Kishor Swasthya Karyakram, and many more. Diagnostic services are a cornerstone of the healthcare sector, crucial for diagnosis, treatment, and disease prevention. The Indian diagnostic market is anticipated to reach approximately INR 1,200 billion by fiscal year 2028, with a remarkable CAGR of 8%-10% expected in the coming years. Several interesting factors are driving the diagnostic industry forward, including India's sizable population, aging demographic, increased non-communicable and chronic illnesses, rising individual income, greater insurance coverage, government initiatives in teleradiology, telemedicine, heightened health awareness, and the expanding adoption of point-of-care testing and home collection.
Krsnaa Diagnostics, a frontrunner in the field of PPP diagnostics, is expanding its presence across India, ensuring advanced diagnostic services that are not only accessible, but also economically viable even in the remotest areas. On a positive note, I am pleased to share updates regarding our growth trajectory. Krsnaa Diagnostics had been recently awarded the National Diagnostic Chain of the Year by ET Healthcare Awards. We have successfully operationalized our projects in Odisha in Q2 FY 2024, with 6 laboratories and 386 collection centers. We received accreditation from NABH and NABL for our centers. Currently, we have 17 centers accredited by NABH and NABL. We have started our first private state-of-the-art pathology laboratory in Mumbai, which has the capacity to serve not only the Mumbai region, but will also act as a processing laboratory and central lab for the western region.
Over the last three months, we have successfully established 7 new pathology labs and established 93 pathology collection centers and 5 new tele reporting centers. These endeavors have been meticulously aligned with our expansion strategy. Looking ahead, we continue to leverage and build upon our existing presence across Tier 2 and Tier 3 cities, providing high-quality diagnostic services at competitive prices. Our recent center installations, successful tender wins, and ongoing evaluation of pipeline projects all point to a promising future of growth... I would now hand over the call to Mr. Yash Mutha, our Executive Director, to discuss Krsnaa's strategic plans and future growth prospects. Thank you, and have a wonderful evening.
Thank you, Ms. Pallavi. Ladies and gentlemen, good afternoon. I am pleased to present the impressive performance of Krsnaa Diagnostics during the second quarter and the first half of fiscal year 2024. As you all are aware, Krsnaa is currently implementing pathology operations across various geographies, including Mumbai, Odisha, Himachal Pradesh, Assam, Maharashtra, Karnataka, etc. As a strategy, we are establishing 40 labs across these locations in private premises, taken on lease rentals, with each lab spread around 4,000-15,000 sq ft, in accordance with the business requirement, wherein eventually these labs will allow us to leverage the government business as well as the B2C business. As of date, we have established 22 out of 40 labs, and the implementation for these labs require us in deploying equipments, interiors, human resources, and logistics, along with other costs.
These labs allow us to augment revenues not only from PPP, but incremental revenues from the B2C and B2B segments, and therefore allow us to leverage the infrastructure that we are creating beyond the existing long-term contract periods. These labs will further allow us to grow our network of collection centers, franchisees, et cetera, in these geographies. Our total revenues in H1 FY 2024 have experienced a significant surge. Our total revenue stands at INR 295 crore, demonstrating a strong 25% year-on-year growth. In terms of Q2 FY 2023, our top line grew by 27% year-on-year and 11% quarter-on-quarter. Our growth can be attributed to projects won in the earlier quarters, which are maturing, and with our focus on increasing the brand awareness of Krsnaa Diagnostics. As mentioned previously, the implementation costs have a bearing on our existing margins.
Accordingly, the sequential gross margins were impacted because of the newer pathology projects, wherein the consumption being higher in the initial period, as well as with a higher consumption due to increasing pathology business, wherein our rates for pathology tests are highly competitive when benchmarked to the CGHS rates. As the pathology businesses of these projects mature, consumption is also expected to normalize. Our normalized EBITDA has seen a substantial increase, reaching to INR 39 crore, showcasing a remarkable growth of 27% year-on-year, with a substantial margin of 25%. Equally noteworthy is our normalized net profit, which stands at INR 18 crore, representing a 17% year-on-year growth, along with a corresponding margin of 12%. Additionally, our regular EBITDA has reached INR 32 crore, reflecting a 4% year-on-year growth, accompanied by a margin of 21%.
Our regular net profit has also displayed growth, reaching to INR 10.5 crores with a margin of 7%. Additionally, in Q2 FY24, there was an additional impact of Ind AS amounting to INR 2.5 crores, which arose largely due to the re-rentals as per our strategy discussed earlier. It is worth noting that our profit margins have experienced some fluctuations deviating from the previous quarter's performance. This change is largely attributable to our ongoing expansion efforts, encompassing various projects incurring high expenses that are yet to contribute proportionately to the revenue. Nonetheless, we maintain an optimistic outlook for positive margin shifts as these projects mature in the upcoming quarters. Let me provide some highlights of our existing projects.
We are pleased to inform you that a project in Odisha, which commenced its operations in the second quarter of fiscal 2024, have been receiving a positive response and is poised for substantial revenue growth starting from the fourth quarter of fiscal 2024. In the state of Maharashtra, we have finalized our plans for the installation of 39 CT scan units across the 20 locations. The implementation of this project is scheduled to commence in a phased manner during this current quarter, with revenue projections expected to materialize in the first quarter of fiscal 2025. Our ongoing DMER project, which encompasses the establishment of 600 collection centers, has already seen 462 of these centers becoming operational. The remaining centers are on track of operationalization, which provide us with a high degree of revenue visibility.
Our project in Rajasthan, which is of 150 labs and 1,295 collection centers, wherein after the intervention of the High Court, we have already submitted the bank guarantee aggregating to INR 86 crore in total, and subsequent to which the High Court had asked both the government authorities as well as Krsnaa to complete the due process. However, as we've been given to understand, that subsequently, due to the elections being announced across the state and with the model code of conduct being implemented, the response to execute this agreement has been delayed. We have nevertheless filed a contempt plea in the High Court and are expected to have a hearing on this soon, very soon. In the interim, we have focused our priorities on the projects of Assam, Odisha and Maharashtra.
Despite these delays, the company continued its growth momentum and will continue to see the same in future as well. The large project of Assam, which we secured during the first quarter of this year, encompasses the establishment of 10 laboratories, 44 collection centers, operational 24/7, and 1,212 collection centers. Anticipated revenues from this project is expected to become visible in the fourth quarter of fiscal 2024. As we said earlier, the implementation of Assam and other labs earlier might have an impact on the margins for Q3, with such large-scale implementation going on. However, we are confident that from Q4 onwards, contribution both to the revenue and margin will improve, helping us improve the overall revenue and margins for the company.
To further fuel our growth and bolster our presence, we are deeply engaged in a comprehensive pipeline of various public-private partnership projects, including the development of labs, collection centers, addition to the CT and MRI facilities across various states. This strategic approach empowers us to explore new opportunities and strengthen our operations within our existing geographical footprint. Our unwavering commitment to serving the B2C segment remains central to our efforts, with the introduction of cost-effective wellness packages designed to cater to the diverse needs of our valued customers. As we persist in our ongoing initiatives, execute the existing projects, and build upon recent achievements, our outlook for the future remains robust and resilient. We have unwavering confidence in our ability to harness the substantial opportunities that lie ahead, poised to drive sustained growth and create value that resonates deeply with all our stakeholders.
I would now like to hand over the call to Mr. Pawan Daga, our Chief Financial Officer, who will provide further insight into our financial performance. Thank you.
Thank you, Yash. Good afternoon, everyone. I will now present the financial highlights for the quarter ending in September 2023. In the second quarter of FY 2024, our total revenue from operations experienced a notable upsurge, reaching INR 155 crore, making an impressive 27% year-on-year growth. Our Q2 FY 2024 regular EBITDA reached INR 32 crore, signifying a comfortable 4%, commendable 4% year-on-year growth, and we maintain a healthy margin of 21%. Additionally, our net profit amounting to INR 10.5 crore, which a corresponding margin of 7%. In H1 FY 2024, our normalized EBITDA has exhibited a significant increase, reaching to INR 74 crore, demonstrating an outstanding 25% year-on-year growth, along with a substantial margin of 25%.
Equally remarkable in our normalized net profit, standing at INR 35 crore, reflecting an 18% year-on-year growth, margin of 12%. Furthermore, our regular EBITDA has reached INR 64 crore, showing a notable 8% year-on-year growth with a margin of 22%. Our regular net profit has also displayed a growth, reaching INR 25 crore with a margin of 9%. Taking a closer look at our balance sheet, we currently hold a gross debt of INR 109 crore, while maintaining a cash and cash equivalents worth INR 236 crore as of September 30, 2023. It is worth noting that our company continues to uphold a net debt-free status, a noteworthy accomplishment. Our receivables days maintain a figure of 97 days in Q2 FY 2023. We can now open the floor for the question and answer session. Thank you.
Thank you. We'll now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles... The first question is from the line of Bala Murali Krishna from Oman Investment Advisor. Please go ahead.
Hi, good evening. So, congratulations on the great set of numbers. So I want to know about this Punjab status. So I think still we are what we thought that maybe I think we thought we have good visibility of revenue, but still we are not up to the mark, I think, in the case of revenue. And margins also, I think still we are still on loss in Punjab. Could you throw some light on that as when we can expect and what is the problems we are encountering on that tender?
So on the Punjab tender, I think we are on track. The entire project has been implemented, and the revenues are also ramping up. You know, whatever, we had challenges in the operations, all have been put aside, and the tenders are now running smoothly with the business growing with every passing day. One of the important things is the entire Punjab business is on cash, unlike other PPP projects, and equally, we've started the home collection services there, so which will also help us in increasing the revenues in the subsequent quarters. I hope that answers your question.
Yes. Regarding this radiology tenders implement this quarter are not implemented in single project also. So, is there any delay from the equipment or any? I hope we'll conclude all these projects by the end of the financial year, except the Rajasthan tender. Is that right?
Could you just repeat the question, please?
In radiology, in case of radiology, we haven't commissioned a single unit also in this quarter. So, I think we by the end of the year, by March 2024, I think we can complete all these prior tenders which we are awarded. Is it right? Or, any tenders can go forward to the next financial year for implementation, other than Rajasthan?
So for the CT scan project of Maharashtra, the entire project, as we, as I mentioned earlier, is under implementation. The machines are getting delivered, ordered, as well as some of the sites are to be received. So it is under implementation, and by end of this fiscal, we expect the project to get completed.
Okay, and on the B2C segment, what are the current revenue contribution and any further visibility on that segment?
So, B2C revenue, like, you know, whether it is the franchises or the home collection, which we started in this fiscal, so it has been, slow and steady start, but the results have been very positive. You know, on a monthly basis, we are seeing the uptick and upsurge in the wellness packages that we started promoting, even inside the government centers or even, you know, in our private labs. So while the contribution is not so significant, however, you know, we are positive that with the Krsnaa's kind of, you know, brand awareness being created and we leveraging our network, and similarly with the other states where we're deploying, we should be able to expand the B2C initiatives across these various geographies.
This will, you know, have a slightly better contribution to overall revenues in the next fiscal as well.
Okay, then, sir, just a small follow-up on that. So going forward, maybe down the line, three, four years down the line, what could be the percentage of contribution we are expecting from the B2C?
Well, ideally, we would expect the B2C contribution to be in the range of about 10%.
Okay, that's fine. And, lastly, on the pipeline tender, so I think in the last, in the last call, you told that there is one for the Radiology tender, I think that is from Andhra Pradesh. So could you please throw some light whether it is a radiology or pathology and what could be the area it's covering, the entire state or limited to some particular hospitals like that?
So the Andhra Pradesh tender was primarily on radiology, and that is currently, you know, under different stages of the evaluation. Apart from this, there are other states also which we are participating both in radiology and pathology.
Okay, that's fine. Thank you. Thanks a lot. That's all from my side.
Thank you. The next question is from the line of Kishan Toshniwal from Polar Ventures. Please go ahead.
Yeah. Good afternoon. I have three questions, basically. First, first question that I want to understand, is there any seasonality in our business? Because, what I understand is that some quarters would be high, some quarters would be low. Is it because of the seasonality?
Yes. So normally in our industry, if you see across, typically for us, Q3 is normally where there is an element of seasonality. The reason being, you know, normally winters are a healthy season. Also there are holidays. So typically, Q3 is where we would expect a slightly overall business. Otherwise, you know, there are not such severe impact of the seasonality. There are typically and, you know, the diagnostic business is not something which, you know, you can just go and ask people to order. These are again, tests which are required based on, you know, either there are certain seasons like monsoon or, you know, otherwise. But typically Q3 is the lowest indicator that happens.
My second question is, in the last quarter you had mentioned that you people will be growing even at even without Rajasthan at 50% on the top line. And and also also in long term, maybe two, two, three years down the line, what is the sustainable margin that you see at Krsnaa as a diagnostic company?
Yeah. I'd just like to correct, we've mentioned that we will be growing, you know, with our existing CAGR growth rate, which is about 30%, and that is excluding Rajasthan. So that visibility we still have in the subsequent years as well, whether Rajasthan happens or not, considering the existing projects in hand, the existing revenue run rate. And what we've achieved, it gives us the confidence that we will continue to maintain that growth rate. In terms of the margins, as we've been saying earlier as well, for us, 26%-20% is what the EBITDA margins we expect to be sustainable. Of course, our aspirations are to, you know, improve it.
But with the kind of current projects that we have in hand, we believe 26-20 will be sustainable margins going forward as well. And of course, they will be improving as the business matures.
My, my third question is, as and when we win the tender and we are supposed to, what do you say, radiology centers has to be put on or the pathology labs have to be put on, we'll always see this, that, whenever there's a tender that has been won and you have to front load the expenses. So in that quarter, in whichever quarter you do that front load, the margins will be different than the actual margins which it should have.
Yes, this is the typical nature of our model in the business. What happens is, if you consider in a government setup, normally when we establish CT scans or pathology labs in the collection centers, there's a requirement to deploy the equipment, the manpower, the interiors, the infrastructure, the logistics first, and the revenue might come in a trickle initially, and then it keeps on ramping up. So while this is a feature of the model, but the advantage is, after the center matures, and as we've seen, and we've demonstrated in the past as well, for a mature center, the revenue and the corresponding EBITDA, in spite of our prices being 40, 20% or 50% lower than the market rate, these are really good EBITDA and margins that we can generate from these kind of projects.
So it is typically where in the initial project period ramps up, there is an impact. But once the project matures, then the revenues and, margins also start, contributing and increasing as the years go by.
When you consider it as a matured center?
So it differs between radiology and pathology, but typically for mature centers are those which have completed at least two years of their operations. So two to three years is when they start, you know, coming at a mature state.
Okay. Thank you. Thank you.
Thank you. The next question is from the line of Deepak Poddar from Sapphire Capital. Please go ahead.
Hello. Sir, am I audible?
Yes, yes. Please go ahead.
Yeah. Thank you very much for the opportunity. So, first up, I just wanted to understand a little more on the margin front. I mean, since we are on the expansion mode, these expenses will keep on happening, right? I mean, the INR 7 crore, the expenditure that we have incurred. So something or else will come every quarter, right? So ideally, what I wanted to understand is that the EBITDA margin that we are talking about or we have guided in the past as well, so, so why adjust for it? I mean, so just wanted to understand, is this the margin that you're seeing after adjusting for this, this operational expenses of, let's say, INR 7 crore? So how do we look at it?
Yes. So if you see, had we not had these kind of expenses, or the implementation of the project, our margins would have looked different, right? So correctly, as a company, if you consider our, entire past, you know, the years of existence and operations, we've always been invested in creating capacities and capabilities.
Mm-hmm.
Now, the benefit of this will of course come in the subsequent years and as it has been seen, for example, whether it is Punjab, whether it is, you know, our Karnataka projects which are now mature and are contributing significantly to the overall business. So the initial years, like any, any business, when you start a new business, it requires initial investments in terms of expenses. The benefit will definitely come in, and as today, Punjab, Himachal projects are maturing, they will start in, you know, also contributing to better margins, in the subsequent quarters.
Yeah, yeah.
In terms of sustainable, we believe 26%-28% is a sustainable EBITDA, excluding these kind of implementation costs on a sustainable.
So you have to adjust these costs, right? Because where I'm coming from, currently Assam, UP or Maharashtra, then again Rajasthan will come. So what I understand is that these kind of costs will keep on coming. I mean, if you have to look at next two years, these kind of costs will keep on coming, right? So ideally, this 26%-28%, if we adjust for these expenses, will become what? 20%-21% kind of a range. I mean, currently what we did this quarter.
No, see, this EBITDA is also expected to improve with...
Mm-hmm.
For example, when in the next two quarters or from the next fiscal when Assam and Odisha, they start contributing.
Mm-hmm.
So the reported EBITDA is also expected to increase with all these contributions coming up from all the centers that are going to ramp up. It is not going to be a permanent feature. Of course, it depends on what projects we have on hand and, you know, what is the state of implementation.
Okay. So at the start of the year, I think when we guided for 25% EBITDA margin for FY 2024 on an annualized basis. So how do we look at it? So should we subtract the... I mean, this 25% margin, is it on a reported basis or on an adjusted basis?
Could you repeat the question?
So at the start of the year, we guided for around 25% of our EBITDA margin for FY 2024. So how do we look at it then? I mean, is it the reported margin we are talking about, is it 25% is the reported margin without adjusting for this operational expenses, or after adjusting for this operational expense, we would be kind of at 25% EBITDA margin?
So we are looking to have these numbers without the adjustment, considering, you know, our all the ramp up.
Okay. So FY 2024, 25% EBITDA margin excludes the adjustment, right? So it is on a reported basis.
Right. Right.
That excludes other income also, right?
Yes.
Okay, okay, okay. And this is what we are targeting this, but how will you achieve that? Because ideally, this ramp up will happen only towards the fourth quarter, right? So ideally a March.
Typically, for us, Q4 normally is good business. As I said, there are certain strategic initiatives being undertaken for ramping up the revenues across the various. So once the fixed costs and all the overheads are absorbed, every additional revenue will start contributing to the bottom line, so the EBITDA margins straight away. That is what we expect Q4 and Q3 gradually to help us deliver and achieve those numbers.
Okay, I understand. On the Rajasthan front, I mean, now, because of this delay, we don't expect any kind of revenue in this fiscal year, right?
We had, nevertheless, did not expect any fiscal in the quarter for the last quarter.
Yeah.
In which way, in spite of Rajasthan, we continue on this growth momentum.
The 30% growth that you have been guiding on a CAGR front?
Yes. Yes. Yes. So, this year also we expect and also the next year.
Okay. And this INR 2.5 crore in Ind AS impact that has come from lease rentals, how do we see it going forward? I mean, it will keep happening every quarter?
I think that's maybe, Pawan.
Yeah. So this is for this quarter only. Going forward, the impact is already taken care in this regular business and this part. So this is an exceptional where we have started private labs where the long-term association of a rental premises has taken into the consideration from a year, a period of 3 years to 8 years or maybe more. In that, this is the impact of Ind AS, basically.
Okay, so it will not reoccur, right, in coming quarter?
Yes.
Hello?
It will not.
It will not.
Yes.
Where is it sitting? It's sitting in depreciation, right? This INR 2.5 crore.
It's in the finance cost.
Come again, your voice is not audible.
Depreciation and the finance cost.
Depreciation. So this INR 2.5 crore is sitting in depreciation and interest cost, and it will not reoccur, right?
Yes.
Okay, okay. I got it. I think, yeah, that's it from my side. All the very best to you. Thank you so much.
Thank you. Next question is from the line of Pranay Khandelwal from Alpha Invesco. Please go ahead.
Hi, thanks for the opportunity. I had the question that, this, so our relationships with private hospitals and the Krsnaa Business Associates have been going up. I just wanted to understand what is the structure of the contracts we have with them? You know, like, is there a specific time period or do we pay rent? How does it work? Because I believe it must be different as compared to the PPP projects that we do.
So, on the private hospital partnerships that we have, typically, the structure broadly remains the same. These are long-term contracts that we enter into. The only difference being is in the private hospital partnerships, we pay them a revenue share because we are operating out of their premises, and that's the only difference. The prices could be slightly higher compared to the PPP projects to accommodate the revenue share that we pay to the, private, hospitals.
Okay. So, and I believe this revenue share, this must be in, this must be the fees to hospitals that we show on our, PNL. So I see that, that amount had also been coming down recently. So any reason why, is there low volumes over there, or is there a change in contracts or revenue share percentages?
No, no, no. The fees to hospital, there are two components. One is, of course, the revenue share that we discussed. The other component is also, you know, where we pay fees to certain business partners that we take in these remote locations, where we pay them on a revenue sharing basis. So as and when the centers or the projects mature, we absorb those employees and, you know, the revenue shares is not required to be paid. So that is where... and this is a strategy which we've been maintaining, and we've also mentioned previously, that we want to ensure that over a period of years, the, the fees to hospital or the revenue share that we pay to these business partners, reduces, and we basically are able to manage the entire project by ourselves.
Okay, so there would be projects where the employees are not on our payroll, and we acquire them. That's what happens. That's why the-
If I, if I have to, you know, look at some of the projects which are in partner location, not only the employees, there are certain processes. It could be the logistics, it could be some other activities which are, you know, work along with these business partners whom we take. This allows us to enter into such, you know, remote areas or states, where we might not have a presence, and allows us to build with their existing strength that they have in those particular geographies. And once the project matures, then we take over the entire, you know, activities that we would have used their support.
Okay. And, just a last question on the Rajasthan contract. Last quarter, we had said that, our revenue, assumption, like the peak revenue that we can realize from this, project, has went up from INR 150 crores to INR 300 crores, I believe. And, it was referred to as that, that's because, the districts were increased from 33 to 50. But, as I see, the labs and the collection centers remain the same. So I just wanted to understand how, how did that, that assumption got changed?
So, with the increased number of districts, the coverage also increases, you know, wherein we are asked to cater to more population residing in those, and that's how our estimations have also changed.
Okay, but the labs and the collection centers remain the same, so that hasn't, that has not changed, right?
Yeah. So there are basically, you know, additional primary centers that we are required to cover under these locations, which allow us to go much deeper into the particular, you know, districts and, you know, hence, reach out to more people. So the network of labs might remain the same, but the addition of primary centers in these districts, you know, gives us the visibility to go and approach more and more, you know, centers and thereby, you know, better volume that we can expect.
Okay. All right. Thank you for your question.
Thank you. The next question is from the line of Bharat Sheth from Equirus. Please go ahead.
Yeah, hi. Yeah, hi. Thanks for the opportunity. So just wanted to understand on Rajasthan. So, considering that, there have been a new event, in that case, when we can expect Rajasthan to be commercialized now, and whether we have already started putting up laboratory, but that is also put on hold?
Bharat, if you could repeat the last part of the question, please?
In considering the election, are we already working on putting up the laboratory, or that is also put on hold?
So, Bharat, to answer the first part of the question, Rajasthan, you know, while we are also working to ensure that the outcome is received as soon as possible, but I believe with the current election scenario, this might get delayed, and we expect this to see hopefully in the next quarter or Q4. In terms of implementation, our ground teams are still working on with some little bit of, you know, whatever activities we need to do, so that, considering that we are confident that the outcome will be in our favor, we don't want to have too much of delay. So whatever is necessary and with limited whatever resources we can, the activities are ongoing.
In that case, when can we expect the revenues to start for Rajasthan in the worst case?
Rajasthan, as you said, Rajasthan, while we were hoping it all goes well in Q4 of this year, however, we expect it to come in next fiscal. But as I said earlier, that doesn't take away, you know, the 30% growth that we are thinking without Rajasthan.
Yes, actually, just wanted to understand on that part as well. So, we were expecting our revenues to almost double over the next 2 years now. So, when we look at Rajasthan was a chunky part, where we were expecting around INR 300 crore sort of revenues to come through that. So except that, how do you see the step up? Because, as far as we remember, you already gave the INR 430 crore number, including Rajasthan, at that time, we used to estimate Rajasthan to be around INR 150 crore. So except Rajasthan, how that step up will be happening? So if you could run us through what sort of revenues will be coming from each tender, if you could give any hint around that.
Yeah. So, if you see today, we have various projects which are currently under implementation, which includes, you know, Himachal Pradesh, Odisha, Assam, the Mumbai project, then there is the Maharashtra city project. If we consider revenue streams on an annual basis for all these, there is a significant chunk that is coming out, which will allow us to grow and achieve that 30% growth that we expect in FY 2025 as well. But this, over and above, with our existing base that we are already running, which has been growing year-on-year. So if you take a combination of both these, the existing projects and the new projects that are in, under implementation, both these will allow us to achieve that 30% growth trajectory that we expect to achieve in FY 2025 as well.
What sort of revenues we are expecting from all these new tenders extra of Rajasthan? On an annual basis.
All these tenders expected in the next fiscal should give us about INR 140 crore of top line additional.
That is the max revenues, or you are referring to FY 25 or FY 25 this?
For FY 25. Of course, then FY 26 onwards, you know, as the tenders are closed, they, they will of course keep on increasing the contribution.
Right. From the max potential perspective, what sort of revenues these can add?
Sorry, could you repeat the question?
From the maximum potential perspective, what sort of revenues it can add?
It could go up to almost INR 200 crore.
INR 200 crore. Okay. And in that case, are we expecting our base business to grow at 15%-20%, considering that this is almost at 50%, so probably for the next 2 years, are we expecting our base business to grow at 20% sort of number in that case?
Base business, sorry?
Yeah, I'm so sorry. Are we expecting our base business to grow at 20% cadence? Considering that-
No.
We are guiding for 30%.
Our base business, see, there are certain businesses which are base business are also increasing are growing at a rate of almost 20%-30%. Some of the mature businesses will be growing at about 8%-10%. With this new business combination, we expect all of this put together, if you put it in a bucket, that will come to about 30% year-on-year growth.
Okay. In case if there something goes wrong as per as our expectation in Rajasthan, is there a possibility that the whole tender can go for re-bidding?
Well, as of now, considering the High Court order that has come in our favor, we don't expect anything to go wrong. In terms of the possibility that has to... if it were to see. As a logical process, if something goes wrong, of course, there might be re-tendering, but whatever, we have been, you know, discussing and with the High Court intervention, I don't see anything going wrong, at least as of now.
Yes, still I am unable to understand. We have submitted our bank guarantee, we have done what is required from the government, and so why government is stopping us? Why, why there is a delay, right here? Because if we have done our bit, why government is pushing it to the later date, especially when it is, the requirement from the public side, and, being it a election year, even the government would be needing it to be, on time from the populist perspective. So why there is a push to the later stage?
Honestly, the, you know, authorities would be the best person to answer this. But if I can just guess on this, it could probably with the elections being around the corner, and typically, you know, everyone would want to defer the decisions which, you know, because there could be a change of government or whatever. Having said that, given the High Court order and since, you know, the High Court has made it very clear, we believe that, you know, whosoever government or whichever the authorities, we have to enforce the orders of the, uh, High Court, otherwise it becomes a contempt of the court, for which, you know, we've anyways filed those required things.
I think it's a matter of time, and for us also it allows us to focus as we discuss. It allows us to focus on other priorities and continue to expand on those, you know, geographies or projects.
Okay, sure. Thanks for the opportunity.
Thank you. The next question is from the line of Rakesh Pareek from Rockstud Capital. Please go ahead.
Yes, thanks for the opportunity. Just wanted to understand on the Punjab contract side, I mean, if I look at the subsidiary, between Holdco and standalone considered number, top line seems to be just INR 8 crore. So, am I missing something over there?
Yeah, I think I'll have Pawan answer this question.
This is where we have a transfer pricing arrangement, arm's length price arrangement between the subsidiaries and the holding company. If you look at or calculating by subtracting consolidated to subsidiary number standalone number, so it is not right approach to calculate, because we have an internal basically internal basically the pricing mechanism, which we already calculated based on the arm's length price, and which is already vetted by the statutory auditors.
Yeah, no, means it is just INR 8 crore of the revenue, so it is just a profit number what we show over there, or it is, arm's length pricing? That I understand.
There is a revenue sharing arrangement between the subsidiaries and the whole.
Okay.
That is not showing the correct number there, because the sharing income is shown in the Holdco company's revenue. So it may not-
Okay.
Be the correct revenue number of Punjab?
Thanks. Second is, on our BMC contract, where we are expanding, quite rapidly. So has the operation been stabilized, and what is the peak run rate, over there?
So in terms of BMC, we have operationalized all the centers, you know, inside the kind of volume that we were expected to complete in 4 years, we've delivered that in the last 6-9 months. And hence, you know, we've also invested in the Mumbai lab that we are currently expanding. And the revenue is of course expected to, you know, increase, as the months move on. On the current run rate, Pawan may be-
Yeah, yeah. So also I'm just adding, BMC has given us further mandate to start with home collection services across the Mumbai region. For that, we can charge an additional basically the convenience fee to the patient or citizen for collecting home samples from their home residence or any other location. So monthly run rate which is in the range of INR 2-2.5 crore of a monthly run rate, which will further move up to INR 4-5 crore of the revenue.
Last thing, it is Rajasthan contract. We had estimated some revenue fall in the fourth quarter, so it seems that will be falling into the next year only. So, which means from where exactly we'll be making up for the 30% of revenue?
So as I said, Rajasthan, instead of Rajasthan, we have Assam, Odisha, the Mumbai City, then Punjab, Himachal also, some of the additions that have been done there, and the Maharashtra cities. We believe all of this, you know, will help us achieve that or bridge the gap for which Rajasthan has contributed in Q4. So, our focus is now to ramp up the operations of Assam, Odisha, so that, you know, they will allow us to ramp up faster and, you know, bridge that gap.
But anyways, we forecasted, like without Rajasthan only, we will continue to maintain our CAGR growth of 30%, without Rajasthan.
Last one from my side, this Andhra tender, by when it is likely to be finalized, and what is the size of the tender?
Could you repeat the question?
Andhra Pradesh tender for radiology. So what is the size of the tender, and by when it is likely to be finalized?
As I mentioned earlier, this is currently under the evaluation phases, so as and when we get some more information, we'll be able to update this.
Okay, thank you. That's it from me, sir.
Thank you. The next question is from the line of Ankit Pandya from InCred Asset Management. Please go ahead.
Yeah. Hi, good afternoon, and thank you for the opportunity. So it's just two questions. So, firstly, on the margin front, where you said that for full year 2024, we expect around 55% EBITDA margin. So, do you expect that in the sequentially, we'll see improvement in margins and almost a 25%+ EBITDA margin in 2024?
Yes. So for FY 2024, we are expecting those kind of margins. For FY 2025, with all the projects getting up, we are also hoping that the margins will continue to improve then.
So, sir, but we were asking because how much more the cost that will be incurring in the coming for the next 2 quarters? Like, almost in the first quarter, there was around INR 3 crore of cost that were for because of the new lab centers being implemented and this quarter around INR 7 crore. So in the next 2 quarters, how much of those costs where the centers are not yet implemented those costs can we expect?
So, I believe the majority of the implementation would be done except for Q3, where, you know, the balance of the implementation is going on. That is where we expect and, you know, where there might be impact on the margins. Q4 onwards, the centers are expected to contribute to the revenues, and hence, in Q4 onwards, we don't believe a significant impact for the ongoing projects that are being implemented.
So like, Q4 will be the exit margins will be significantly higher compared to the previous three quarters?
Yes. Yes, yes.
And lastly, on the receivable days, there's been a jump in the receivable days during this quarter. So, any particular reason and, or, and should we expect to normalize by end of FY 2024?
Yes. So if you see year-on-year, September quarter or, you know, the quarter, typically the receivables are within the, say, 90 days. The only reason this time it has been slightly delayed further is because of certain exceptional matters. For example, in Himachal Pradesh, there were flood situation. Meghalaya, Manipur, there have been, you know, these riots and whatever. So they have further impacted some of the receivables. But we see this, you know, something which is seasonal, and typically, we value the receivables mostly at the year-end, the financial year-end, because even from an authority's, government's perspective, they are supposed to ensure that all the money that has been out, earmarked, for the budget are paid.
We don't see any stress on the receivables, and we're confident, you know, that we will be able to recover all the dues.
So, but, even with Assam, Maharashtra, the BMC contract and Odisha, we shouldn't expect any major jump in or any challenges in the receivable days?
No, absolutely.
Okay. That's it from my side. Thank you.
Thank you.
Thank you. The next question is from the line of Mayur Parkaria from Wealth Managers. Please go ahead.
Good afternoon, and thank you for taking my questions. I have actually only one question, and I don't know if that has been answered. So what has... Is there any upfront, how much is upfront expenditure we have made on Rajasthan? And is it capitalized on balance sheet, or is it already expensed out?
We have not made any significant capitalization for Rajasthan. There have been some, you know, operational expenses and some of basic work that we need to start setting up labs. Only to that extent, otherwise, there has not been any major investments in the Rajasthan project.
Whatever we have made is all expensed out till now, or is there anything sitting on the balance sheet?
No, it has been expensed out.
Yes, ma'am. Okay. Thank you so much. Thank you.
Thank you.
Thank you.
Ladies and gentlemen, you may press star and one to ask a question. A reminder to all the participants, you may press star and one to ask a question. Ladies and gentlemen, you can press star and one to ask a question.
There are more than 20 parties in the conference.
The next question is from the line of Soumitra Joshi from Individual Investor. Please go ahead.
Hello? Hello. Yeah, so, firstly, good afternoon. So I basically have two concerns here. One is, from a margin perspective, I'm still not able to fathom the fact that we are talking about EBITDA margins of 25%, normalized, not adjusted, for the year of FY 2024. So if we just look at being in the first quarter and the second quarter, are we saying, considering that there would be some costs that we would go bear in Q3 also, are we saying that we are going to do margins of around 29%-30% in the coming two quarters? So that if adjusted also, the overall EBITDA margins for the year come out to be 25%. That this, I, I don't know this, how this calculation falls in of ending up at 25%, I am doubting that.
So, if there is something that you can help me?
Yeah. So, see, there are couple of, you know, strategies we have implemented in terms of certain costs that could also be reduced in the coming quarter. These are basically on the consumption side, some of the purchasing costs, operational costs. That put together, along with the incremental revenue that we see in Q4, where by then Assam, Odisha would have been fully, you know, or at least help us with the initial contribution, we expect some good run rate. So, and some of these projects having a better margin profile compared to the other existing projects. With a combination of these initiatives, we believe that we should be able to achieve that kind of, you know, EBITDA margin run rate.
Again, I'm saying that this would mean around 29%-30% of actualized margins for the quarter. This is, like, huge! Okay, so, it is unbelievable, one. Second, okay, I think that this will be a very tough task to achieve. I don't think so that these kind of margins can be achieved for Q3 and Q4. Second thing is, being in the licensing business for some time while I was working and interacting with the government, there are a few things that is bothering me about the Rajasthan tender. One, is assuming the elections don't go the way for this particular government, can the new government completely start the project from scratch?
Second, even if it is this government, considering the number of event flows that we've had with the courts, and with whatever little experience that I have of licensing over a period of time for multiple companies, it doesn't augur well in terms of relationships and word of mouth for the company in other areas. So how are... Have you spoken to government officials, et cetera?
I mean, yeah. So we have seen in various PPP projects, governments come and go. We have, so Punjab is a very classic example, where we started off with different government and then our government came in.
Mm-hmm.
So first time with governments coming, even Himachal, where we are currently, you know, there were different governments. See, governments coming and going does not really impact the PPP process. The reason being is these are process which have gone through the tendering process. They have, you know, been validated at different stages, and thereby, the question of enforceability or entering the agreement is only the final leg of the process. Whichever government comes in, like even during Punjab, the AP government, which was, you know, new to this PPP project that we had won in the earlier government, they took time to understand. But after they realized the benefit, in fact, they have been supportive us, including the recent home collection, which was blessed by the health minister. So we don't see any impact here.
Whichever government comes, even if it be new government or an old government, given that, as I said earlier, the entire process has been completed except for the agreement, we don't see any impact in either of our relationships, because we have not, you know, there have been no issue of our relationships. It is only on the technical disagreements we had in terms of the bank guarantee, which was anyway subsequently resolved, and which the company has paid as well. So I don't see there are any disagreements which either it's a new or old government comes, and they'll have to play those out as well.
Okay. My experience working with governments have been slightly different, especially in terms of cases going to the courts and then subsequently working with them, it becomes very difficult. But I'm assuming that you've done your background check and you're coming with that.
Yes, yes. So, see, we have been in this business for last 10 years, and as I said, across 14 states, across various governments, we have worked this, we've seen government-
How many such cases have gone to for legal tendering through the courts? Ultimately-
Yeah. As I said, Rajasthan has been one of the aberrations, one of the exceptions, and we've not seen this. In fact, both the sides are equally-
Yeah, so I am talking about this aberration itself. I'm not talking about the others. So I'm saying when-
Yeah.
So that is why, hence the question. That is why I was looking at the past also, so hence the question. So considering that this is an aberration and this has happened for the first time, I am saying from my little experience that I have working as officer, really, these things have an impact. So I just wanted to understand, what is the background check that you've done to ensure, because this is an exception, and it's not the norm, and it will also probably concern that in such a situation, how have you ensured that there would be no gap in the working relationship? Because I have always seen a gap. That's what I'm asking.
Yeah. No, I think I wouldn't be able to comment on your experiences, but you know, being part of this business for the last 10 years, and more importantly, with the High Court order coming in our favor, which was also very well appreciated, you know, during the conversations with the government authorities as well, we don't see any issue there. I think, as I said, with the elections around the corner, there could just be a bit of dealing happening. But even during the, you know, discussions with the High Court, as well as our submission of the guarantees, we did not see any pushback or issues from the government. And as of now, all we can hope is hope for the best and look out how this evolves.
So this was an anomaly with no prior experiences of cases going to the High Court, right? That is what I wanted to know. This was a probably an aberration or an anomaly that happened in Rajasthan, correct?
Yes. It is.
Yeah. So you don't have that experience of post this what happened. Fair enough. Okay, fair enough. Okay, so those are my questions. Thank you so much.
Sure. Thank you.
Thank you. The next question is from the line of Manoj from Geometric. Please go ahead.
Hello? Sorry for the interruption. The current participant line get disconnected.
Okay.
Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Ashish Chabra, an individual investor. Please go ahead.
Oh, am I on? Hello?
Yes, sir, please go ahead.
Yeah. So I just wanted to ask, like, how roughly can we expect this Rajasthan tender to go through, like 1 quarter, 2 quarter? And since you just said that, like in the past also in 2-3 states like Punjab, there has been a change of government, but we still went through it. So I think it's just a matter of time, right? The entire process won't repeat, right? Hello?
Management team.
In terms of the Rajasthan, what we expect is the process to follow its natural course of justice, which is the contracts have been executed and the government, the high court has ordered to complete the process. For us, Rajasthan is like one of our many PPP projects. You know, it doesn't really impact the company's vision or the company's plans for the future. Of course, if it comes, it as we mentioned, it's a buffer for us. But considering our revenue run rate, our existing projects, the other PPP projects also, which are in our hands, we don't expect Rajasthan to impact us so significantly. And we believe that, you know, the process will follow its normal course and the agreements will be executed in the short term.
Okay. And, plus, I just wanted to ask, like, which are the states that are in the pipeline right now, like you said, Andhra Pradesh, and are there any more states like, where we have visited recently?
Well, there are a couple of states, but I think this will be too early for us to discuss at this stage in time. As and when the, you know, projects come up and we have information to share, we'll certainly share with the group.
Okay. And thirdly, like, you said like, in FY 2025 also, we expect 30% growth rate to continue. So like, presently, we should do like INR 600 crore by FY 2024. So like, what will be the main contributors for FY 2025? If you can just share a bit.
For FY 25, as I said, we have various projects of Odisha, Assam, the BMC project, then we have Maharashtra CT coming up, and the Himachal is also ramping up. So all these projects are expected to contribute to achieve that 30% growth, you know, trajectory that we have set out ourselves.
So that is safe to say, right, we can do INR 180 crore-INR 200 crore per quarter in FY 2025?
Yes.
Roughly estimate.
Yes, yes.
Okay. Thank you.
Thank you. Thank you. The next question is from the line of Pranay Khandelwal from Alpha Invesco. Please go ahead.
Hi, thanks for the follow-up. I asked a question regarding those private tie-ups that we have. You said those are long-term contracts, contracts, but can you just give me a range of what might be the range of these contracts?
Typically, these private hospital partnerships that we enter into, they are for 10 years, mostly. You know, considering the investment that we have to do into the kind of hospital setup, so these are 10-year plus contracts, and most of the time, they, we've also seen that they get extended over a bit of time.
Okay, so it does not matter if it's radiology or pathology, it's 10, 10 years plus?
Yes.
Okay. And another thing, I was just looking on this Rajasthan contract. Also, I asked this question about the assumption change in the revenue potential from Rajasthan was INR 300 crore. That was changed in the district in the beginning. So as far as I can understand that Rajasthan recently added 17 more districts and broke up the existing 33 into 50. And apart from that, there is no change in the contract that we have got. So again, I still don't understand how that they have changed their guidance from INR 150 crore to INR 300 crore. Because our bid and tender is still the same, it's just that 33 districts have internally changed to 50. It's not like they're over 50 and even only within 33, right?
Basically, when we had initially estimated, considering, you know, that we were in the early stage of estimating and getting the ground inputs, that is why we had given a conservative. When we started, you know, after getting into winning the contract, getting more of the details or the colors and like we discussed about the primary health centers being also added into the city, those wrong inputs, we need process that gives us the kind of, you know, estimation that we had quoted, and we believe that is still something is achievable, of course, after the agreement get executed.
Okay. Okay. All right. Thank you. Thank you.
Thank you. Ladies and gentlemen, you may press Star and One to ask a question. A reminder to all the participants, you may press Star and One to ask a question. As there are no further questions from the participants, I now hand the conference over to management for closing comments.
Thank you everyone for joining our Q2 FY24 earnings call. I extend lots of wishes for the upcoming festival of lights, Diwali, on behalf of the entire Krsnaa Diagnostics family, and I wish everyone a very, very happy and prosperous Diwali and New Year. Hopefully, we have answered all your questions, and if any questions remain unanswered, please feel free to connect with our investor relations team head, Mr. Vivek Jain. Looking forward to interacting with you all in the future quarters. Thank you. Have a great evening ahead.
Thank you. On behalf of JM Financial, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.