Good day and welcome to Dr. Lal PathLabs Q4 FY24 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and 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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Siddharth Rangnekar from CDR India. Thank you, and over to you, sir.
Thank you, Michelle. Good afternoon, everyone, and welcome to Dr Lal PathLabs Q4 FY24 earnings conference call. Today we are joined by senior members of the management team, including Honorary Brigadier Dr. Arvind Lal, Executive Chairman; Dr. Om Prakash Manchanda, Managing Director; Mr. Shankha Banerjee, CEO Designate; and Mr. Ved Prakash Goel, Group CFO. I would like to share that some of the statements made on today's call could be forward-looking in nature, and actual results could vary from these results and forward-looking statements made. A detailed statement in this regard is available in the results presentation, which has been circulated to you and is also available on the stock exchange website. I would now like to invite Dr. Arvind Lal to share his perspectives. Thank you, and over to you, Dr. Lal.
Thank you, Siddharth. Good afternoon and a warm welcome to all participants on the call. We are here to discuss the Q4 FY24 earnings performance of Dr Lal PathLabs. I would like to commence by discussing my insights into the changing market dynamics and the advancements achieved at Dr Lal PathLabs. As we approach our 75th Platinum Anniversary this year, Dr Lal PathLabs continues to be a trusted healthcare partner, renowned for its commitment to quality, accuracy, accessibility, and affordability. Our marketing campaign, Bharat Ka Vishwas, exemplifies this dedication and reinforces our position as a cornerstone of the nation's diagnostic landscape. Our relentless pursuit of excellence in diagnostics has earned us numerous compliments and the confidence of patients and physicians alike.
We remain focused on deepening our presence in underserved Tier 3 and Tier 4 markets while leveraging our robust digital infrastructure to differentiate ourselves and achieve significant milestones in network rollout. The recent introduction of a custom-built logistics solution further enhances our ability to serve our customers better. The integration between Dr Lal PathLabs and Suburban Diagnostics continues to yield promising results in the Western market, where we have established a growing presence. We are making targeted investments on both marketing and process efficiencies to strengthen the brand while elevating the patient experience. Our reference lab in Mumbai has begun to receive increased volumes of various clusters across Maharashtra for both routine and semi-specialized tests. Our collaborative approach is enabling us to combine inherent strengths and provide patients with a wide array of tests across multiple categories with speed and precision.
Looking ahead, our growth trajectory will be fueled by the ongoing shift from unorganized to organized, more aware of accurate diagnosis, as well as focused on wellness portfolio, among others. We remain committed to expanding our network and elevating our service standards through operational excellence and technological advancements. Despite increased competition, we are strategically positioned to deliver sustained growth and further consolidate our market share, driven by our comprehensive test portfolio and competitive pricing strategy. That concludes my initial remarks. Before I hand over, I would like to extend a note of appreciation for Bharath and wish him well in his future endeavors. As you know, we will be having Shankha Banerjee leading the business as CEO going forward, and he is here today. I welcome him into this role. Thank you, and I would now like to hand over the floor to Dr. Om Manchanda. Over to you, Om.
Thank you, Dr. Lal, and welcome all of you to our call today. I shall walk you through the evolving industry scenario and progress on our strategy. I'm happy to announce that we have achieved double-digit top-line growth on a year-on-year basis. This growth has been accompanied by a significant jump in our operating and net margins, primarily driven by efficiencies of scale and productivity initiatives. Our strategic focus continues to remain widening and deepening the brand presence geographically, thereby driving sustainable volume and value growth. There is also a sharp focus on expanding into Tier 3 and Tier 4 towns organically in LPL core markets. In the rest of North India, we have made good headway with this strategy. Additionally, we are also establishing 20 new hub labs under the LPL brand name to broaden our reach.
As the year progresses, we shall undertake to add more such hub labs. We have identified key growth areas aiming to strengthen our presence in Mumbai and in select parts of Maharashtra via Suburban. In order to boost momentum in Suburban Diagnostics itself, we are promoting higher sampling and enhanced branding. Our Swasthfit brand, now a consistent revenue driver comprising 22%-24% of the total revenue, is being extended to many other markets. We are moving towards bundling specialized tests as well. The medical centers of excellence that we have developed are scaling well, rendering better patient engagement and outcomes. Being guided by a strategic focus on sustainable volume growth, these initiatives should attract patients from unorganized labs, encouraging high-end specialized test prescriptions. Our investments in technology and digital infrastructure are yielding tangible results, enhancing our brand visibility and patient interactions.
We continue to push ahead with brand initiatives in select markets while also executing a strategic agenda for network and test menu expansion. We remain vigilant of the market dynamics and evolving regulatory frameworks, adapting our approach to ensure compliance and sustainability. As we press forward, maintaining a robust financial footing is paramount. With a focused approach towards cost optimization and strategic investments, we aim to uphold our financial metrics and cost structure. Now, I hand over to Shankha to delve deeper into our strategic initiatives and operational highlights. Over to you, Shankha.
Thank you, Om. I extend a warm welcome to all participants joining this call today. I will proceed to share the business and operating highlights with you. I'm happy to share that we have closed the year on a strong performance at both top-line and profitability. In Q4 FY24, we achieved a revenue of INR 545 crore, marking an 11.1% growth. This was made possible by serving 6.5 million patients and testing 19.1 million samples, reflecting a sample growth of 8.1% compared to the same period last year. Our Q4 FY24 revenue per patient stands at INR 833, a 3.2% growth over Q3 FY24, primarily driven by favorable mixed management. In order to intensify our efforts in key clusters of Western and Southern India, we are expanding our lab infrastructure. This is being executed in a time-bound manner, and alongside, we are building a robust ecosystem of collection centers and pickup points.
Our flagship bundle program, Swasthfit, continues to gain healthy traction, contributing to approximately 24% of total revenues in Q4. Building on this success, we would continue to expand its reach and develop programs to sustain the growth trajectory. Furthermore, medical centers of excellence such as L-ACE and L-CoRD are solidifying their positions within the medical community and among patients. Leveraging our digital infrastructure, which includes advanced AI and data analytics, continues to drive efficiency and elevate the overall patient experience. Technology lies at the heart of our operations, and we are exerting every effort to maximize the use of our assets to achieve sustainable and profitable growth. To conclude, I would like to say that we are moving in the right direction. Our performance going ahead will be steered by expanding our reach, enhancing our digital capabilities, and focusing on product innovation and value-driven offerings.
Thank you for your continued support and trust in our journey. That concludes my opening thoughts. I would now request Ved to take you all through the financial performance. Over to you, Ved.
Thank you, Shankha. Good afternoon, everyone, and warm welcome. I'm sharing some of the key financial highlights for Q4 and full year FY24. Revenue for Q4 FY24 came in at INR 545 crore against INR 491 crore last year, same quarter, a growth of 11.1%. Revenue for the full year came in at INR 2,227 crore versus INR 2,017 crore in FY23, a growth of 10.4%. Revenue per patient for Q4 is INR 833, and full year is INR 806 versus INR 750 in the previous year, a growth of 7.5%. Sample per patient for Q4 is 2.91 and 2.83 for the year, a growth of 4.7% and 5.3% respectively. EBITDA for Q4 FY24 came in at INR 145 crore versus INR 116 crore in Q4 FY23, registered a growth of 25.1% with a EBITDA margin of 26.5%.
For full year, EBITDA came in at INR 609 crore versus INR 490 crore in FY23, registered a growth of 24.4% with an EBITDA margin of 27.4%. PBT for Q4 FY24 came in at INR 120 crore, registered a growth of 44.1% with a margin of 22%. FY24 PBT is INR 505 crore, registered a growth of 47% with a margin of 22.7%. PAT for Q4 FY24 came in at INR 86 crore versus INR 57 crore last year, same quarter, registered a growth of 50.8% with a margin of 15.7%. Full year, FY24 PAT is INR 362 crore, registered a growth of 50.3% with a margin of 16.3%. EPS in Q4 FY24 is INR 10.1 and INR 43 for the year with a growth of 49%. Cash and cash equivalents as on March 2024 is INR 960 crore. Net of borrowing, it is INR 877 crore. Our receivables and inventory has further improved.
Now, the DSO as on 31st March 2024 is only 25 days of credit sale, and inventory is at 30 days. We still have a negative working capital of 26 days. At last, we are pleased to announce that the Board of Directors has approved a dividend of INR 6 per share. With this, total dividend for the year stood at INR 24 per share. As mentioned by Dr. Om, we are committed to continue our efforts to optimize cost, increase productivity, and enhance efficiency through tech-driven initiatives. With this, I conclude my opening remarks, and I would now request the moderator to open the forum for Q&A.
Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask questions may press star and one on their touch-tone phone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use only the handset while asking a question. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all the participants in the conference, please limit your questions to two or three per participant. For follow-up questions, you can kindly rejoin the queue. Thank you. We will wait for a moment while the question queue assembles now. The first question is from the line of Abhinay Singh from Morgan Stanley. Please go ahead.
Hi, team. Thanks for the opportunity. I had three questions. Firstly, on the industry growth and competitive intensity, any sort of update from what you shared last call, any changes that you see therein? The second question I have is on the suburban side. If you could talk a little bit about the growth you are seeing. Fair to believe that the initiatives you talked about, about sampling, promotion, brand building, these are more recent. What kind of traction do you expect going ahead? Lastly, on just a number of tests that you report in the presentation, we see a sharp drop in the tests under radiology from 1,947 to around 1,400 in this quarter. So any read-through from that? Thanks.
Okay. This is Om here. Let me take the first question, and maybe the other two questions I'll ask Shankha and Ved to address. So coming to industry growth, based on the sort of a trend analysis that I've done for the last three years, I'm beginning to feel that probably COVID was impacting base not just due to COVID alone. I think some of the non-COVID sales in the previous years were also influenced by COVID. So as the COVID has gone away, I think that FY24 base for the entire industry will be completely cleaned up, and you won't have any impact of either COVID or non-COVID sales influenced due to COVID. So my personal view is that industry would see better growth in FY25 than what we have seen in FY23 or even FY24. Second part of your question was on this competitive intensity.
In terms of number of players, I don't see anybody going down or getting out of the business. Whatever had to happen has already happened during COVID times. So now, whosoever has been in the business, my sense is they'll continue. But I think the level playing field is becoming a little better compared to I think some of the players have already taken the price increases. So that deep discounting, or if I were to call predatory pricing, I think that is now not there in the market. So overall, I would say it's positive news as you go forward into FY25.
All right. There was a question on Suburban. So this is Shankha here. So yeah, Suburban growth traction on revenue side definitely looking up. I think our quarter four revenue growth is inching towards the double digits. We are very close to double-digit growth now on Suburban. And a lot of these patient acquisition activities, I think, which Om mentioned, as well as some other improvements that we have done, should ensure that we are able to not only sustain this growth trajectory but maybe also build upon it going forward. You want to take the point on tech?
Sorry. This is double digit as in early double digit or high double digit growth?
No, no. So this is just reaching double digits. It's just sub-double-digit level. Yeah.
And what about the market share?
Abhinay, this is Ved. On the third question.
Sorry. You were saying something?
Anything on market share of Suburban in Mumbai?
So market share is obviously a very difficult number, I think, in terms of assessing what the overall market potential itself is. We don't have any official data on that. But one thing which we know is that Suburban as a brand will be the third largest brand in Mumbai as a city.
Right, right, right. Thanks for that.
Right. Abhinay, on the number of tests, we have rationalized some of the tests which were not in use. So that's why we have taken away from the list.
Duplication.
Duplication.
It's the same thing that we discussed the other day. Yeah, I think this rationalization is primarily done because there are a lot of medical terms which are actually very overlapping in nature. So some of this cleanup you've done, it's not that our portfolio has shrunk, but it's just that cleanup in our nomenclature.
Great, great. Thanks, team. This is Bhinay from Morgan Stanley. So I think maybe they've got the name wrong. But also, congratulations on almost completing 75 years. Big milestone. Congrats on that.
Thank you.
Thank you. The next question is from the line of Amey C. from JM Financial. Please go ahead.
Yeah. Thank you for giving me the opportunity, and congrats on good set of numbers to the management. The first question I have is, is it possible for us to give volume growth for Delhi and the rest of the North India region? And second, in Delhi, we are seeing a lot of hospital chains coming up with their own lab business. That is a captive business as well, but they are also venturing into the outside market. So are you seeing any impact of this activity on your business?
Do we have separate volume growth for that? Okay. I think on overall Delhi NCR business, we have seen a lot of positive traction this year. In fact, if at all, there is one part of the business which has done well for us is Delhi NCR in FY24. I think your point is valid. Some hospital lab chains have come into this business. My reading is that whatever gains they had to make, they probably have already made because of their own customer base. While they'll continue to remain in the business, but to my mind, we are seeing a much higher growth than what we have experienced in the previous three, four, five years. So overall, I would say that we are well positioned in Delhi NCR, especially given that Swasthfit business is doing pretty, pretty well in this place.
Sure. And the second question I have is on the Tier 3 contribution, which is around 34%. Is it possible for us to give an example of the cities what you consider as a Tier 3? And the second thing is, we see the labs as a proportion of total labs around 30%, but the PUP number seems to be on the higher side. The collection center number seems to be on a higher side. So is the business model a bit different? You need to invest much more on the collection center side when you go for the Tier 3? Thank you.
So the tier, there is a list of cities which is their Tier 3+ . If you remove the top 108-odd cities of the country, the rest of them are then classified as Tier 3 and Tier 4. So that classification is something which you have taken from whatever the government of India does the classification on. It's publicly available data. The second question, which is on the model, so the collection network primarily, which is linked to all the lab infrastructure, is franchisee-driven. So to that extent, there isn't a heavy company investment in terms of building the network. But what it definitely does is that in the Tier 3 cities and below, we have a much larger geographic footprint from which the lab actually collects samples.
And therefore, we see a larger number of collection or larger collection network associated with the labs which are operating in Tier 3- .
Sure. So is it because of the scale, the margins of the business would be similar to our company average, or how that would be?
I think we have seen that, and you would have seen that over the last three to four years, the contribution of the Tier 3/4 markets has increased, improved in our overall mix. However, we've been able to sustain our EBITDA profile. We have obviously worked out modalities in which the overall company margins are not going to be impacted adversely.
Just to add to what Shankha is saying, I think the trick lies in the way you model your business and manage the logistics of it. The idea is that how you really align these Tier 3, Tier 4 cities to the nearest lab is how we are confident of managing the margins.
Sure. Thank you so much, sir. I will join back.
Thank you. The next question is from the line of Kunal Randeria from Axis Capital. Please go ahead.
Yeah. Good afternoon, sir. So I'm just going through some of the operating parameters, like the number of labs, the pickup points, and so on. So at a consolidated level, you've added, let's say, 3 labs in the last 2 years and around 1,000-odd pickup points, right? But if I were to look at Tier 3 centers, there you've added maybe 15 labs and maybe 1,600 or 1,500 pickup points. So it basically means that you're scaling back in your Tier 1, 2 cities. So while I understand you're doubling down on Tier 3, but scaling back is something which I don't completely understand. Is it competition, or is it maybe some inefficiencies which have crept in, and you are just trying to sort of rationalize it going forward?
No, I think the way you should look at it is the following because having more labs technically is not a demand generation activity. It's the ability to service the demand. So most Tier 1 cities, we already have labs. In some places, we will have multiple labs also. In some places, we'll have HLMs as well. It's the only Tier 3 and below where there's a huge gap. We don't even have labs at all. That's why, in terms of expansion of our lab infra, you will always see that more labs are coming in Tier 3 by default itself because, as per the government definition, I think Tier 1 has about eight, nine cities, and then Tier 2 have.
99.
Around 98 cities. All other towns are falling in Tier 3 and below. Those are the places where we don't have too many labs. That's why you will see expansion coming only in Tier 3. It's not about scaling back in Tier 1, but it's more about the gaps that exist in only Tier 3 and below, right?
I think specifically on this point of net add of 3, whereas you see an add of 15 in Tier 3, yes, there has been a bit of an overlap rationalization that has been done. But it's kind of one-time. It's more of a one-time rationalization to see that the overlaps are reduced.
Sure. The same kind of logic applies on the pickup points also because there also it seems the number of pickup points seems to have gone down in Tier 1s and 2s.
So pickup points, again, we've got a dynamic way of looking at it because sometimes if a pickup point is not giving us a regular sample for a period of time, we kind of deactivate them in our system. So there is no scaling back, so to say. I think these numbers will our pickup point acquisition activities in Tier 1 and Tier 2 continue to be operational.
I think that broadly, this chart of Tier 3+1 should read as if, like, we are deepening our presence in the market. That's the way one should look at it. Now, the play between CC pickup points and labs, it's a very dynamic process mainly because sometimes our intention is always to maximize throughput per lab. Once the throughput per lab is maximized, then it's a huge positive on all sides. You expand your test menu. You can operate 24/7. You can provide courier pickups 24/7. You connect many roads. It's like if you get higher throughput per lab, a lot of other parameters just fall in place. I think that number is more always constantly optimizing operations. The reason why we probably are giving these charts of Tier 3+ is just to say that we are not just a few city-dependent company.
We are widening and deepening our presence across the country.
Sure, sir. Just carrying forward on that, any particular region or Tier 3 in any particular region you would like to call out which has surpassed expectations, and where would you look to expand further?
It's mainly the northern part of India. I would say UP, Bihar because most of the cities in UP, if you look at the population, is just ballooning beyond over 22-23 crore. Now, such a large population base is, I think, if you pick cities, most of these cities are in the category of Tier 3 and below. Maybe just say Lucknow, Kanpur, etc. And that is where our presence is just growing. And this state is a huge state for us, and I think it's showing a good sign of growth. I would call out this particular state.
Got it, sir. And just one more, if I can. So Swasthfit contribution at 24% of revenue is probably the highest, I think. So what's the kind of headroom you see over here?
It's a very interesting sort of. We are currently in the process of identifying because virtually every quarter, we are seeing this contribution inching upwards. We're trying to figure it out as to what is really happening. My hypothesis is there could be two or three factors that are leading to this. One is patients are seeing greater value for money because obviously, it makes sense to go for a bundle package which is we can do more tests at a much lower price. Maybe medical doctors are seeing greater value because then they don't need to ask for a follow-up test in one go. They get multiple tests, and their ability to diagnose what the underlying cause for any illness is there.
Third could also be the way consumer behavior is changing because most of these now, even if they come to the lab or they book online, I have a feeling it's easy to book a bundle test. You just press the button, and it all gets done or repeat the order. All that is probably happening. So there is a sense that I get is that a combined factor of all these three is leading to a higher percentage of contribution from Swasthfit. We also believe, I think I've spoken about this in the earlier calls, is that as the bundling goes up, it is having ramifications of two other parameters. One is the number of tests for patients are going up because bundle packages have more tests.
I am also getting a sense that footfall is also falling because once you get these tests done in one go, then you don't need to come back again because all the tests you've done in one visit itself, which to some extent, commercially, is not a bad idea because our overheads, consumption, servicing the patient is the highest. It's not in the testing that is more, but it's more in the servicing the patient visit. I think we should look at a volume component both together, number of tests per patient as well as number of patients' footfall. I think combined together is where the volume should be looked at. It's an interesting sort of a thing that is emerging. Let's see how it goes, but we are very confident that Swasthfit is going to grow further.
Great, sir. Thank you and all the best.
Thank you. We'll take the next question from the line of Nitin Agarwal from DAM Capital. Please go ahead.
Thanks . Just taking forward your previous comments. This bundled tester obviously is moving up the overall realization per patient. I mean, where do you think this number really ends up? At what stage does it start to, in your assessment, stop growing? Because we've had a consistent quarter-on-quarter growth on this number for the last several quarters now.
There are three distinct segments in the market. One is pure screening, screening where there's no illness, and people are just getting themselves checked to know whether there's a problem or not. If that factor is dominating and driving this number up, that means the market is expanding. The other is a lot of people who are suffering with NCDs, which are chronic diseases like diabetes, high cholesterol, or some other illnesses where they need to go for regular checkups. Those are basically upgrading from an individual test. Even there is also no problem. Let these bundle tests go because many of these NCDs are interconnected also. A third area is which is illness-driven or communicable diseases where things like typhoid, malaria, dengue, these are all seasonal flu, etc. To my mind, these are three distinct segments.
If screening and NCDs are there, then this number, actually, my senses can even go 30%-40% as well, right? So I think it will continue to grow as we go forward. And also, I think as the bundling goes up, it's a greater value for money. I think that we are also hovering around price points of between INR 1,000-INR 2,000, which is just a ticket size which is easy to take out from the pocket. This may just become a new norm in the industry. People will just get to know. I think I mentioned to you earlier also, if you trace the history of the last 20 years, it started with single test. Then it became like a panel test, like LFT, KFT. They are also technically bundle tests for a particular organ.
The next stage has been the bundling of these panels only, the LFT, KFT club together. So this is, to my mind, a new way of life, and I think this will become a norm in the industry. I think your specific question is to what extent it can go. Anybody's imagination. My senses can be 30%-40% of the portfolio as well.
And Om, I guess based upon your comment, probably in the past, you were tracking the patient volume growth number more closely. Given the way the dynamics in the market are playing, probably you're saying sample growth probably is a more apt number to look at as things are. But are we?
Both. Sorry to interrupt you. I would say both.
Okay. Okay. Okay. Secondly, on the cost part of it, we've had a pretty sharp jump up in our gross margins this year. I mean, how much scope do we have further to squeeze out more efficiencies at the gross level, contribution level?
I keep asking this question to Ved as well. So Ved should answer.
So I think it's pretty high. I mean, 80% roughly is the gross margin. I think what we can do is, in my view, we can sustain here. But beyond this, I don't think there is a room to improve further, especially on the gross margin. But I think we can sustain between this 78%-80% kind of margin.
Thank you. Thanks, sir.
Thank you. The next question is from the line of Pranav Chawla from Antique Stock Broking. Please go ahead.
Hi. Good evening, sir. Congratulations for good set of numbers. I just wanted to ask, what is our regional mix for the fiscal? We used to highlight the split between Delhi NCR, South, West, International, East, and North. Can you provide this?
Delhi NCR contribution is about 31% for the quarter.
So for the fiscal?
Say 31%.
For the full year?
Yes. For the full year as well?
Yeah. I'll tell you. 31 Delhi NCR, 31 West of North, 15 is East, 15 is West, South is 6, and others 3. Others would constitute International and CTL.
International as well. Sir, what is our B2B, B2C mix for the fiscal?
That is always estimate, right?
Retail, including home collection, is about 32% for the year, which.
Oh, but that is our own infra.
Our own. On.
There is also a retail component in collection center.
Franchise is about 37%, which is collection center.
For the full year?
For the full year. Yes.
Can come back on that one second. I'll give you a word. So the retail component of direct to consumer, our own infra is very clear. But the retail component of our collection center is generally we take an assumption that 50% of their business would be direct to consumer, and balance 50 would be a pickup business.
Okay.
That exact split, we don't have ever.
We don't have that, but we normally tend to assume that number and add it up.
Okay. Perfect. Sir, can you provide us a color on how the competition has been in a core market of Delhi NCR and how the region of Mumbai is being doing, how suburban is growing? Even if you can share the quarterly revenue number of suburban, that would be great.
So I think firstly, to answer Suburban, I think there are quite a lot of revenue and patient growth activities that one is doing. I think we talked about a lot of sampling activities, patient acquisition, offline, online activities that are happening. Also, we are expanding geographic testing footprint for Suburban to get into newer pockets and tap into those opportunities. Also running a lot of clinician connect programs to get better prescriptions and conversion programs there as well. Also beefing up the sales team, creating some specialized sales team structures to get better extraction from B2B clients as well. So there are multi-pronged activities currently on for driving Suburban revenue growth, and those things are going to be sustained over the next few quarters.
So just to add to what Shankha said, now it's been nearly more than two years. Yeah, more than two years. We mentioned about Suburban, it went through two phases. Phase one was basically to stabilize the ship because it was just changing hands from promoter to us, and then that piece was done. I think now the second piece was actually getting the strategic building block in place. If you recall, a major shift that we've had is the franchising of collection centers. That's the model which LPL follows. And we find that entrepreneurial energy in franchising is extremely high, and we've used that to drive a lot of sampling, a lot of camp activities in various colonies of Mumbai. And I don't know if you guys must have seen in Pune as well.
And I think now with Shankha moving as CEO in LPL, we are now going to integrate this company much more with the parent as well where a lot of backend support operations will be driven from here. So we are very confident that all the building blocks of future growth for Suburban are in place, and we are going to be driving this business from the center. Now, early days, but good sort of numbers are there last quarter. It is definitely reviving a lot of confidence in this. And I'm very, very confident because as a brand, as a single largest brand in one city, there are not too many of them in this country. And the Suburban, 80% of its business comes from just one city of Mumbai. And that's a huge, huge sort of advantage platform for us to expand from here on.
It also has a brand which lends very well to its sort of a direct-to-consumer. It's a brand sort of awareness is fairly high compared to many other small-time pathology labs. So I'm fairly confident that going forward, Suburban would turn out to be a good asset.
Okay. Sir, then can you just give us a broad color on Delhi NCR region? How is the competitive intensity, pricing, realization, etc., as well as just for Delhi NCR?
So the competitive intensity in Delhi NCR hasn't really changed too much versus what I think we spoke about in the last quarter. So I think a base level of competitive intensity is always there. We haven't seen any sharp upmove or downmove in terms of competitive intensity when it comes to Delhi NCR, at least not in this last quarter.
Okay. Perfect. Thank you so much, sir. I'll get back in the queue.
Thank you.
Thank you. A reminder to all the participants to kindly limit their questions to 2-3 per participant. Should you have a follow-up question, please rejoin the queue. Thank you. The next question is from the line of Prakash Kapadia from Spark PMS. Please go ahead.
Yeah. Thanks for the opportunity. I have two questions. If I look at the Swasthfit's contribution, it has been increasing. It has been doing well for us. So is it currently just a few top cities or metro-specific? Is there a scope to take this beyond some of the top cities? That's my first question. And secondly, if I look at where the industry is, given that some of the price increase has happened, competitive intensity has stabilized or decreased. So from here on, if I were to build a scenario of doubling our patient count of 27.5-28 million over the next few years, what are the key variables which will get us there? Is it convenience? Is it accuracy? Is it increased genomics contribution? Is it doctor advocacy? If you could give some direction on those, that will be helpful.
Right. Okay. Thanks for the question. So on Swasthfit, as of now, it is not a metro phenomenon for us. I think over the last few years, we have been consciously expanding and driving Swasthfit into multiple geographies. And that may be one of the underlying reasons why we are seeing consistent growth. And we will continue to do that. So that expanding the footprint for Swasthfit is something which we are actively working on, and it's a continuing process. So that point is there. On the other question, on where and how will the future growth come from? So yeah, there will be, like we said, a patient and a sample. There are two measures of volume that we see. I think both of them are what we are really eagerly looking forward to be driving.
Although there is a price increase taken by competition, and there is this sense or feeling that intensity is low, we believe that competitive intensity, underlying intensity, is still what this industry has been used to or has been seen in the past continues. So we are not really looking toward a price increase-driven growth. We continue to believe in driving our growth through patient and sample volume addition and mix improvements.
Right. I get to the point. Price increase is not the root. But in terms of the patient volume growth, I'm just trying to envisage a scenario. What will that one or two variables be? Because in terms of branding, we are one of the oldest companies. In terms of cost per sample, we are amongst one of the best. So why is that volume growth not really coming through for us? So is it going to be some of the newer tests which will contribute more or some specific convenience factor from a consumer standpoint? I was more trying to understand that. Okay. This is Om Manchanda. I don't think we should really get hung up on just the volume number. Okay. As I mentioned to you, I think there's a lot of interplay between test for patient and the footfall.
The volume number that we are talking about technically is a footfall. It's not a unique patient. I think the question that you asked is a very great question in terms of what is that variable which we probably need to address to look at the entire market? My view is that any category if you pick up, they're always bucketed into three price points: what is the premium end, mass market, and the discount end. Right now, I think Dr Lal PathLabs straddles in all these three segments. As we go forward, we'll have to carefully segment the market and design our proposition in such a way that premium customer gets premium service but at a premium price as well. A discount customer gets discounted service at a discount price. Now, getting it offered under same name sometimes is very, very difficult to achieve that in the same market.
To me, I think we'll have to probably look at that. That is where if somebody used to ask me that Suburban name, are you going to keep it separately? Answer is yes. And you have multi-brand strategy and offer different services and a different price point. I think we are reaching at that stage where market will have to address these things as we go forward. Understood. Thank you.
Thank you. We'll take the next question from the line of Anshul Agarwal from Emkay Global. Please go ahead.
Hi. Thank you for the opportunity.
Your audio is quite low.
Hi. Am I audible now?
Yes. Please proceed.
Thanks. So considering in the last quarter, we've seen some upward price action from online players as well as other national chains, do you believe that our volume growth is a result of this price action since we have not taken any hikes? And follow-up on that would be then, could these be our sustainable volumes considering that we are not looking to take a price hike in the next few quarters?
It's early days, and some of these competition that you're talking about, our friction with these guys is not really head-on, except few cities. The markets where we are present, actually, we don't really compete too much with them. The early sort of sign of increase in volume that we are seeing may be two. A, of course, a base effect because last year, volume growth has not been that much. Second, could also be that which I'm not fully sure, but I still will make that point. I get a sense that last two years, non-COVID volume also was being influenced by COVID. As that has gone away, now we are actually having a clean base, and we are seeing the now original non-COVID volume, so to call it.
I think from here on, we'll have to probably wait it out for another quarter before we start making any sort of view on this. But definitely, directionally, I'm seeing a better volume growth than what we have seen on a year basis.
Got it. Another question on competitive intensity, Dr. Om, if I may. Considering that one of the other listed regional chain is getting very aggressive in Pune, how do we aim to protect or expand our market share or suburban market share in the Pune region? Are there any thoughts around this? Any strategy?
First of all, I think market is very large. So it's not that organized space put together is not even 15% of the total market. So there's a lot to gain for all of us from unorganized space. And if I were to guess the name of this company, which is probably they are more an integrated business of radiology and pathology compared to us, which is just pathology. So right now, our business model is to actually play more in pathology, which is more hub-and-spoke model, low CapEx, high ROC versus, let's say, another integrated model. While both models are well-proven, there's nothing wrong with the other side as well. But I would say the market is large enough for all of us to stay.
Sure. Just one last question from my end. Any sense on what our SSG volume growth would be for the current year and contribution from the new centers?
SSG, same store.
So I think, Anshul, we don't track like this because we have a, like Dr. Om was mentioning, hub-and-spoke. So that geography or a cluster where we have lab is one, but we have collection center, and we have pickup points around that. So as a cluster or geography, we track. But as a same store, we don't look at that way. But granularly, if you see what is Delhi as a political state, probably we are not expanding that much, which is growing, let's suppose, high single digit. That is where you can look at. And the rest is coming from the new infra or expansion or higher growth in the newer market. Got it. Very clear. Just one last question from my end for VG, probably. Just as you mentioned that gross margins would remain range-bound. Any thoughts around EBITDA margins given our expansion plan?
So I think we are staying at a pre-COVID level margins, which is around 26% EBITDA margin. We are confident that we can maintain.
Great. Thank you so much, gentlemen. All the very best. Thank you.
Thank you.
Thank you. The next question is from the line of Jainil Shah from GM Financials. Please go ahead.
Yeah. Hi. Thank you for the opportunity, and congratulations on a good set of results. My first question is on our guidance for next year. So we alluded to our growth being higher in FY25. So I just wanted to understand how much will be volume-driven and how much will be price-driven, and how much growth are we budgeting for Suburban use?
So I think the way we looked at our numbers is that internally, the view is that we should probably not take a price increase as things stand today. If we don't do that, I would say that we will probably better our growth slightly than what we have delivered in FY24 without the price increase. So the next question is, where is it going to come from? It's going to be a combination of both volume as well as a number of tests per patient and maybe a mix also because we are seeing higher-end tests also being prescribed more. So our internal sort of desire is to beat the last year growth without the price increase.
Sure. And would you say that FY24, at least for PU, we would not be having any COVID revenues? So essentially, we've grown at around 14% on a non-COVID base.
14%?
Sorry. What was the question? 14?
So COVID too hasn't happened. That is fine. But what is the other thing? You said 14%.
Yeah. If you just.
For the year, growth is 10.4%.
So I think the best way to look at is the following. We are exiting the year, which is Q4, at 11.1% revenue, okay, which is primarily without any COVID impact either in the base or in current year, right?
More or less. Yeah.
More or less. Now, this 11.1% has an advantage of one month where there was no price increase, has a disadvantage of base of two months, which is February and March. If we continue without the price increase, we are confident that we should be on this number.
Or slightly better.
Or slightly better.
Sure. Just wondered for your revenue and EBITDA for Suburban.
This year?
FY24. Yes.
FY24.
This year, we did INR 164 crore revenue for Suburban.
EBITDA would be? Or we are incurring losses there because of the new lab?
17% EBITDA margins.
No. That's for the quarter.
For.
Full year is 12.
Full year is about 12%-13%. Yeah.
13%. Full year is 13%. Q4 is 17%, 17%.
Yeah.
Okay. Okay. That's helpful. Thank you so much.
Thank you. The next question is from the line of Shaleen Kumar from UBS. Please go ahead.
Yeah. Hi. Hi, sir. And congratulations, a good set of numbers. Just a clarification, right? Most of my questions have been answered. So Ved sir has been saying that our margin should be pre-COVID level, 26%, right, while you have already delivered more than 27%. And I understand, let's say, gross margin remains where they are, but there's definitely going to be operating leverage. Now, two things can happen from here. Either your margin will expand or probably you said you want to invest in growth, which means that growth acceleration should happen, right? So is my understanding right that you have decided to invest in growth, and then the growth uptick will happen while margin may remain where they are? With a lag, that's okay. But that's the idea, right?
Yeah. So I think Ved was explaining about gross margins. There's hardly any scope left now for gross margins to improve. And your point of operating leverage is definitely valid, that if we grow from here organically, you may see expansion of EBITDA margins. But we want to really plow it back into the market, going to Tier 3, Tier 4 towns where maybe pricing may not be exactly the way Tier 1 pricing is, where our cost structure may be very different. But we will try and invest more behind growth rather than expanding our margins.
Which is fine. Because so my question was that will reflect in our growth, maybe with a lag over the medium term, right? That's the way we should look at it, right? And the benefit of that will come.
Yeah. Yeah. Ultimately, because there are so many white spaces in the market, our company has to focus on growth. There is no doubt about it.
Right. Right. No, which is fine with us. I just wanted to have a clarification on that.
Yeah. Yeah. No, no. It's very clear. And that would also include M&A as well. So it's not that we are while it may be a bit of a time since we did last M&A, but that does not mean our eyes are not on inorganic. We also use cash for inorganic. Yeah.
So you actually answered my second question because you're already close to INR 1,000 crore of cash. And I mean, you'll be generating roughly INR 400 crore of cash on average. So is there something which we can expect in near term in terms of the?
I don't know . Let's just see how it goes. Right now, there's nothing that we have that we can share with you. But we will definitely it's part of our stated strategy.
Sure. Sure. That's it from my side, sir.
Yeah. Thank you.
Thank you. The next question is from the line of Dheeresh from Vito Capital. Please go ahead. Mr. Dheeresh, I have unmuted your line. Kindly proceed. As the current participant is not answering, we'll move on to the next question, which is from the line of Pranav Chavla from Antique Stock Broking. Please go ahead.
Hi, sir. I think we highlighted we plan to add around 20 hubs going forward. So can you tell us this is over what timeline and what CapEx spend are we looking at and what regions these will be in?
Yeah. Our average CapEx for the year normally is about INR 50-60 crore, which is a combination of investments in IT, investments in instruments, investment in labs. So I would say that will continue about INR 60-odd crores of normal CapEx. Most of these expansions on opening labs, primarily would be in northern part of India and west of north, essentially where our brand is strong. That is where we are seeing better traction for the business for our labs. I think that's where we will go.
Good. Perfect. And sir, what markets will be looking for inorganic expansion? Because I think Kolkata, we've been kind of east, we've been trying to grow, and still, organically, and still, the size of the business is pretty small. Same is the case with, I think, west is also now at 15%. So what target markets will we be looking at?
I think the answer is in these numbers only. So just 31 Delhi and NCR, 31 west and north, 15 east, 15 west. South is only 6. So these numbers are telling me where I should go. So obviously, south is definitely number one priority. It's not that we can't do M&A in other markets as well, but sometimes it becomes very challenging because the same service, a lot of friction that happens on the ground in terms of teams, in terms of brands, in terms of so it's always better to go in those markets where brand presence for Dr Lal PathLabs is weaker. And in any case, we are not doing these M&As to ramp up our top line. We are doing it more as a market entry strategy.
So it is natural for us to look at in those places where our presence is weak, which, to my mind, right now, it looks like south is a place.
Sir, any large players or large competition in these markets that we may explore? Like number two, number three players that maybe.
No. I think we are indifferent to size. My sense is we look at even not just region. We also look at just city-level entry as well. So we are open to even smaller-sized acquisitions as well. So there's nothing that holds us back. In fact, our PUP, we haven't talked about it much, but places like Indore, places like.
Baroda.
Baroda. We've actually bought individual labs, which is just about 8-10 centers as well. Now, since the number is small, they don't come up on the radar for discussion. But we are open to doing those tuck-in acquisitions as well.
Okay. Perfect. Thank you so much, sir. That would be all from me.
Thank you. The next question is from the line of Dheeresh from Vito Capital. Please go ahead.
Yeah. Hi. Am I audible?
Yes. Yes.
Yes, sir. You're audible.
Hi. So I'm sorry if you already answered this, sir, but for the full year and for the quarter, if you can just give how much growth came from your realization increase, like-to-like realization increase, not the effect of mix.
Taking out the mix impact. You mean due to price?
Hi. Just from price increase, not coming from any mix effect or anything. Just pure price increase, how much growth came from?
Yeah. Just pure price. We got a realization benefit of 3.5%.
On the year basis?
For the full year. Full year. But it's lesser in Q4. In Q4, it is lesser. But on a full year basis, 3.5% is pure price increase driven, which is for full year.
This is analyzed in which year? Huh. This got analyzed in Q4 now, right?
Yeah. So the Q4 contribution of price increase is only about 1%, 1.1% or something. Yeah.
1%. Okay. And so why did if you don't take any price increase further, then this will be almost negligible in the coming quarter, right?
Impact of price. Yeah. That's what we are saying, that we want to beat the last year growth without the price increase this year.
Understood, sir. Thank you. Thank you.
Thank you. This will be the last question for today, which is from the line of Sumit Gupta from Centrum Broking. Please go ahead.
Sure. Thank you for the opportunity. So just want to understand about the pricing scenarios overall test menu. So just can you highlight how much is the specialized test menu? What kind of price increase are you taking in the specialized menu versus, obviously, the routine test?
No. As of now, we don't plan to take any price increase, neither on specialized nor on routine.
Okay. And how much is the specialized test menu as the overall test menu, as percentage of overall test menu?
The specialized portfolio today in Q4 has contributed to about 20% of our overall revenue. By the way, they are not comparable because each company may have its own definition of specialized. Just keep that in mind as well. It's not that somebody tells you that their specialized menu is 30%. You start assuming that we are lower. Everybody has its own way of defining these tests.
Okay, sir. Thank you.
Thank you.
Thank you. Ladies and gentlemen, we'll take one more question, which is from the line of Shaleen Kumar from UBS Group. Please go ahead.
So just thank you for taking the question again. So when you said that you will be delivering better performance compared to FY24, and there will not be any price increase there, right? So assuming that our sample per patient growth would be similar to what we have in FY24, so we are looking at roughly high single digit of volume patient growth. Is that the right thing? At least it's not high, but it says something like 7%-odd kind of a growth, possibly.
No, no. How many? 10%?
No, no. 6%-7%, I'm saying. Not 10%. 6%-7%.
Oh, okay. So it's a bit early. Yeah. I think that's the sort of target we are keeping in our mind, that it must definitely move beyond 5.6% because I think for a year basis, right now, this year is about 3.2%. We want to see definitely this number moving up and should be 6.6%, what will give us a better number. Yeah. You're right.
Yeah. So basically, even at 12% of revenue growth we're looking at, 5% coming from higher tests, then rest can come from.
Sorry, your audio is not clear.
Yeah. No, no. I can hear Shaleen. So Shaleen, I think that depends on how ramp-up on Swasthfit happens because that will give us a higher number of tests per patient. But you're right. We are looking at definitely if you look at this quarter exit, which is 11.1%, has some advantage of base due to pricing. But we want to really better this, and it will be a combination of volume as well as number of tests per patient. But tests per patient, in any case, is baked in. So most of the growth will come for higher volume growth.
You're right. That's right. Right. That's good to know. That's good to know.
Got it.
Thank you, sir.
Thank you.
Thanks, Shaleen.
Thank you, sir. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments, over to you.
Thank you, everyone, for being with us on this call today. We express our gratitude for your continuous trust and support. I hope we are able to answer all your queries satisfactorily. Please feel free to reach out to us in case you have any further questions or queries. Thank you once again.
Thank you, members of the management. On behalf of Dr Lal PathLabs, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.