Q2 20/21

Nov 6, 2020

Ladies and gentlemen, good day, and welcome to the Doctor. Lalpath Labs Q2 FY 'twenty one 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. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Sudhakar from CDR India. Thank you, and over to you, sir. Thank you. Good afternoon, everyone, and welcome to Doctor. Lal Path Labs Limited Quarter 2 and H1 FY 'twenty one Earnings Conference Call. We are joined today by senior management members, including Honorary Big Area Doctor. Arvind Lal, Executive Chairman Doctor. Om Prakash Manchanda, Managing Director Mr. Bharat Suppal Iyappan, CEO Mr. Great Prakash Goyal, CFO and Mr. Rajat Kala, Company Secretary and Head, Investor Relations. I would like to share our disclaimer here. Some of the statements made on today's call could be forward looking in nature, and actual results could vary from these forward looking statements. A more detailed statement in this regard is available in the results presentation, which has been circulated to you earlier and is also available on the Stock Exchange website. I would now like to request Doctor. Arvind Lal to share his perspectives with you. Thank you, and over to you, sir. Thank you, Rudas. Good afternoon, ladies and gentlemen, and thank you all for joining us on Doctor. Lal Paslav's Q2 and H1 FY 'twenty one earnings conference call. I hope all of you are safe and in good health. I will commence by sharing my views on the emerging trends, initiatives undertaken by us and some color on our performance. The COVID-nineteen pandemic has been fairly prolonged, not only affecting the daily lives of people, but also impacting the businesses and economies across the globe. Q2 saw the lockdown being lifted in a phased manner, and accordingly, we witnessed substantial recovery where our business growth almost returned back to pre COVID levels. While patients are still hesitant to access medical facilities, sales have started recovering as the number of walk in patients have been increasing gradually. Being the leader in the India diagnostics industry, we have given utmost importance and taken numerous initiatives to strengthen our digital infrastructure to ensure that we provide best in class quality and customer service to all our patients. We have made significant improvements in simplifying our processes through use of technology and bringing in innovation to patient care. All these efforts have paid off and have given us an edge over our competition. As I've stated previous team calls, the pandemic has made people more vigilant towards their health and well-being, and this would boost spending on preventive health care checkups. The company remains well placed to capture this opportunity and gain market share. All in all, we stay focused on our core values and remain an undisputed market leader for providing accessible, affordable, timely and quality health care diagnostics, applying insights and cutting edge technology to create value for all our stakeholders. With that, I would like to hand over the call to Doctor. Omenchandra to share his thoughts. Thank you very much. Thank you, Doctor. Lal, and good afternoon, everyone. Today, I'll share with you some macro observations about the operations and goal of strategic initiatives we have taken to enroll our customers from this pandemic. Health care services across the board are normalizing with nearly the entire country having opened up, and that will anchor the pattern in diagnostics in the coming months. Having said that, we feel COVID-nineteen related testing will continue to contribute to our revenue for at least couple of quarters, depending on how pandemic pans out. RT PCR is the gold standard test in the diagnosis of COVID-nineteen. And in line with nationwide scale up in number of tests conducted, we've also augmented the number of labs that offer this test. We are currently doing COVID-nineteen tests at 9 labs. This is part of our long term investment in infrastructure, which later can be used for other specialized testing as the COVID-nineteen testing volume dries up. As we mentioned on the previous call, we have taken steps towards minimizing the time spent in contact with the patients during walk ins. While the walk in volumes are gradually increasing in most of our regions, some still remain slow in this aspect, especially Delhi NCR. This is primarily because people are still skeptical about visiting medical facilities, especially labs due to the fear of contracting COVID-nineteen. In terms of relative performance, the patient service centers and the pillar points are doing much better. As Doctor. Lal mentioned earlier, we've been working towards further leveraging technology to provide a more seamless and quality experience to patients. I'm pleased to share with you that we have deployed artificial intelligence based algorithms in our histopathology department. We remain strongly committed to enhancing our patient journey, keeping high service parameters as a key differentiator. Our expansion strategy remains on track as we gain traction in key regions of West and South of India by acquiring stand alone labs in a calibrated manner. We only acquire labs which are of superior quality, and this is an important aspect of our aim to expand and solidify our presence outside Delhi NCR region. Higher growth in rest of India has helped us to reduce our dependency further on Delhi NCR. With that, I conclude my opening remarks and would now request Bharat to take you through the operating performance of the company. Thank you, Doctor. Wom. Very good afternoon to everyone present on the call today. Revenues of Q2 FY 'twenty one came in at INR 4.31.9 crores, recording a robust growth of 18.2% over Q2 last year. Our non COVID business in Q2 FY 'twenty one has reached 98% compared to last year levels, and 17% of this quarter's total revenue was contributed by COVID-nineteen test. We served 5,400,000 patients during Q2 and 8,900,000 patients in the first half of FY 'twenty one. To provide focused attention to both COVID and non COVID businesses, we have internally formed separate operating teams and processes to drive both the businesses, and they have been working tirelessly. As a result of which the Global Path Labs has seen sharp recovery in the non COVID business, including our Super Specialty and Swastfit portfolio. We have been scaling up the COVID-nineteen testing at our 3 major labs at Delhi, Kolkata and Indore. Further, we have ramped up capacity for these tests by adding 6 more labs at Pune, Bangalore, Patna, Mumbai, Guwahati and Bangladesh. Overall, we performed 3.08 lakh COVID-nineteen RT PCR test in Q2, which is significantly higher than the 1.97 lakh test in Q1. Better offerings within COVID-nineteen portfolio coupled with the commencement of on demand testing supported the performance momentum in the COVID business. During the quarter, we also continued to progress well on our key priorities to drive future growth and capabilities. To conclude, I would like to add that we remain committed to our vision and core values and serve the diagnostic needs of the country in the most efficient way possible. I would like to hand over to Ved to give an update on the financial performance. Thank you, Bharat. Good afternoon, everyone, and thank you for being on this call today. I will now share with you some of the key financial highlights. Revenue for Q2 FY 2021 is at INR 431.9 crores as compared to INR 365.6 crores in last year same quarter, a growth of 18.2%. This includes revenue of INR74 crores from COVID RT PCR and antibody testing in Q2 FY 2021. Revenue realization per patient for Q2 FY2021 is higher at INR803 as against INR687 for Q2 FY20. The higher revenue realization was aided by the COVID testing. Normalized revenue after eliminating the impact of stock based compensation, CSR expense in Q2 FY 2021 stood at INR 134.7 crores as compared to INR113.5 crores reported in Q2 FY 2020, a growth of 18.7%. PBT for Q2 FY 2021 is at INR 116.6 crores as against INR 102.3 crores in Q2 FY 2020, a growth of 14%. PAD for Q2 FY 2021 is at INR 87.1 crores as against INR 81 crore in Q2 FY 2020, a growth of 7.5%. The growth of Pet is lower due to higher base of Q2 FY 2020, which had a benefit of reduction in income tax rates for Q1 FY 2020 as well. Basic EPS for Q2 FY2021 is INR10.34 per share versus INR9.77 in the same quarter last year. Cash, FD and investment in mutual funds as at the end of Q2 FY21 is at INR 894.1 crore. Sales receivable at the end of Q2 FY21 is at INR 63.3 crores. Let me take a pause and spend a minute here. In this difficult environment, we are able to keep our DSO under control. In spite of government outstanding on account of COVID testing, which is approx INR 9 crores today, our DSO on credit sale has reduced from 34 days to 31 days. So we are able to collect our money on time and we are happy to share that we are well within our control of receivables. I am happy to share that the Board of Directors of the company have approved an interim dividend of INR 6 per equity shares of INR 10 each. Further, the company's wholly owned subsidiary, Pathlab Uniface Private Limited has entered into a binding term sheet of to acquire 100% business in Binduis Diagnostics Laboratory in Jamnagar and 70% stake in Chenrez Diagnostics Services Private Limited in Bangalore. That brings me to the conclusion of my opening remarks, and I would now request the moderator to open the forum for Q and A. Thank you. Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. The first question is from the line of Chandra Molli from Goldman Sachs. Please go ahead. Hi, good evening. Thank you for taking my questions. My first question is on the non COVID testing trend. So assuming our total COVID revenue is hard to get cut. It seems to indicate that average realization for non COVID patient is around INR 700 or near about. So compared to the pre COVID run rate of about INR 680, so if you could give us some color on what is driving this improvement in the non COVID realization and how sustainable some of these factors could be? Yes. Thanks. This is a good question. We also went deeper into this analysis. And our analysis is suggesting 2 reasons. Number 1, relative contribution of high end tests has gone up. And there are certain COVID associated high end tests also we are seeing a higher contribution, which has a slightly higher realization that has contributed to overall increase in realization population on non COVID. And second minor factor is that relative contribution of home collection has gone up. And we have seen in general, even in the past also, realization per patient for home visits is higher than any other streams of revenue. Got it. Got it. That's helpful. Second question is again on the COVID testing that you mentioned. So if you could just share with us a split of what the antibody revenue is lower and what the RT PCR revenues are? So we have INR74 crores of total revenue in this quarter, out of which around INR11.5 crores is from antibody and rest Sorry. Sorry, Suraj. No, it's a INR 6.2 crores of revenue from antibody. Yes, INR 6.2 is from antibodies and balances from RT PCR. And while we are on the subject, I want to tell you that we look at antibody test more as a sero surveillance test. From a medical point of view, it does not have a diagnostic value. Got it. Got it. That's helpful. I guess my last question is on the volume trend. So the non COVID seems to be down only 2% y o y for the quarter. So it's pretty good recovery there. So what are the trends you are seeing on non core volumes maybe in the month of September? And is that when sustaining into October itself? See, volume recovery is slightly on the lower side compared to value recovery as because we have seen some higher revenue per patient. But directionally, I can say that we are now fairly in the trajectory where we don't have to really worry about whether it's below last year. And we are hoping that this quarter will turn out to be even better than the previous quarter as far as the long COVID is concerned. Right now, because we are not in a position to judge because we are in the middle of festive season, and we do believe that some fluctuations happen. But I think if I take a slight longer term view, my sense is that we are that whole impact of COVID or non COVID business is behind us. Got it. Thank you very much, Alain. Thank you. The next question is from the line of Prakash Kapadia from Animate Portfolio. Please go ahead. Yes. Thanks for the opportunity. I have two questions. On the acquisition front, do we think this spring of fall acquisition strategy will continue near term? Or now we are ready for some larger acquisition, especially in West and South, where there is ample of room for us to grow market share? That's the first question. And secondly, post COVID, are we seeing national and regional peers growing at a much faster pace than what the industry is growing? And how are the trends? This is a comment on that. That will be helpful. Yes. Thanks, Mukesh. So to your first question, in order of priority, larger M and A will always be number 1 priority. So we would definitely want to grow after regional players of some size and scale. So we do know that smaller acquisitions have its own limitations. So number one preference will be to go after the larger ones. These smaller ones, right now, we are seen a role of entry into some new markets, new clusters. And if you study the pattern of our M and As, we have tried to create clusters and then grow in those areas. As we've always been stating that South and West is our number one priority, so we are looking at opportunities which will give us some entry into these markets. That's the reason behind that. 2nd is in terms of growth rates for regional players versus national player. I think your question is very valid. My reading is that regional players' growth rates, especially for those people who are doing RT PCR testing, would be much higher, not because they are doing much higher turnover than us, but just because their base is so low. If somebody is doing, let's say, INR 10 crores a month, then that guy may see INR 10 crores of RT PCR testing in that month. Suddenly, you will see the growth being 100%. So I have a sense that some of these large city based players might have seen a higher percentage growth in the last 4, 5 months. And that actually could be a reason for some of these guys to hold on for any kind of conversation on inorganic growth. Thank you. The next question is from the line of Shailene Kumar from UBS. Congratulations to the management for a very good set of numbers. So just doing a broad math, so if my calculations are right, your RTBS teacher average would be around 2,900 given you want as you guys love maths for the 800 something like that. Realization? Yes, yes. So 6% was the Technicolor assuming so antibodies, how much are you charging, 1,000 rupees or what? On the quarter. For the quarter, I'm sorry. See, we have 2 kinds of antibodies. 1 is IGTV, where our MRP is about 40,000,000,000, right? About 40,000,000. Yes. But I can give you because sometimes this weighted average of various states might be below our average realization on COVID RT PCR for last quarter is 2 to 16. And COVID antibody is 936. Okay. So but, Doctor. Wong, this obviously there is a drop in the realization, the price restriction hasn't happened. So how do you see the volume and revenue contribution from this COVID-nineteen? Is it going to go down same level in any sense, let's say? Okay. Let's talk about volume. So I think if anybody's guess as to how it will pan out over a period of time, it's I think it's very, very difficult to judge. But as far as the pricing is concerned, all of us know that pricing is only going one way. But I think the good news is that so is the cost as well. So even costs also have come down very sharply. I think the way we are managing this whole transition of falling prices is to manage our portfolio better. It's not that price is uniform across all states. So we are trying to look at the states where realization is higher. We're trying to balance our portfolio. We also feel that in some cases where if we can centralize the connection at some physical connection point rather than home visits, so that's another way of balancing it. And third is, of course, doing a sort of repertoire testing where we look at other tests being ordered along with RT PCR. So in some ways, we are trying to manage the situation because we have to balance all stakeholders, right, public, government, investors, our own sort of P and L. I think so far, we've been able to manage it reasonably well. Broadly, what will be your weighted average price given the prices right now? Broadly. Unfortunately, it's chasing mostly every week. That's all I can suggest. I think in some states now, I think it's hovering around 1500. Correct, 1500. Yes, I think that's a weighted average sort of a thing. In some states, the prices have gone down even to low carbon also. Yes. Okay. And obviously, this is 3 lakhs in a quarter, but any sense on monthly numbers? Like is there a increasing trajectory from July to September and obviously and further in October? So I think if we look at pattern in terms of trajectory, April, May, June saw very high sort of orders coming from government. Then we saw a sharp dip from the government because they also had opened up a lot of capacity themselves. And then the business moved to private side. And within private also, we saw 2 trajectories. 1, when they opened up, what do you call that, on demand testing. So we saw that also moving up. And then now it varies depending on how this whole thing is moving up and down. So relatively, if you ask me, today there is no constraint on testing per se. Anybody can ask for a test. So at least that constraint is removed. Pricing is, I think from a patient point of view, it's quite favorable. So I don't think one can call this is an unaffordable price range. So I think that constraint is removed. So now the only variable which is left which can influence the demand is how the full pandemic takes shape depending on 3rd wave, 2nd wave, whatever that is happening, and which is very difficult for us to predict. Everybody knows what's really going on. But we do believe that at least current quarter and for a few months, a few more months, this will continue. Understood. Thank you. I want to pick your mind on the acquisitions you have done because I clearly understand what you said, larger Dabdars and Tandeep. And they should be seen as entry point or something like that. But when we acquire, like the acquisitions you have done, so what do you like about it? And any qualitative comments are really helpful. So what I like about this is the following. If you go back 5 years back when we went public and we said that there are 2 focus cities we are identifying to create some kind of hubs in South and West. 1 was Pune and other was Bangalore. And our intent has been to really see if you can create a sweet spot in terms of minimum size of turnover in these two cities. And we are nearing that sweet spot. We did if you look at earlier acquisition, we did something in South what is it, West Maharashtra? West Maharashtra. South and West Maharashtra. And that really gave us good dividends. So this Bangalore acquisition is keeping in that keeping that in mind. And this particular lab that we have acquired, actually, if you're familiar with Bangalore, there are 2 Bangalores in one city. 1 is the old traditional part of it, other is the new whitefield site. Our current business is more gifted towards whitefield and this side of the town where a lot of North Indian population, cosmopolitan sort of profile, where the brand awareness is fairly good. Traditional part is where we would be, we would just assume that we have better strength. Understood. And same with you with Amit. Vikumar, I'm so sorry to interrupt. May I please request you to rejoin the question queue for your follow-up? Sure. Thank you. The next question is from the line of Nikhil Mathur from Ambit Capital. Please go ahead. Yes. Hi. Good afternoon, everyone. So, sir, my question is on the home connection part of the business. Can you share some numbers as to what was the proportion of sales that were limited from home collection prior to COVID? And what would it be today? Correct. Home collection numbers from April have moved up close to 16x the way we look at it from April because in April, May what we are doing was predominantly government business. So now what we do is in terms of private business and hospital pickup, etcetera. So our business is pivoted about 16x on the home collection side for COVID in particular. Okay. So a question following up on this would be, with home collection rising so rapidly, do you have to pivot your business model structurally in the coming 2, 3 years? Because I think at least for the next few months, at least it's not going to go 1 to 2 years, patients might still be susceptible in going to a patient service center or walking into a lab. So do you think this is a structural trend that will emerge from a more longer term perspective? I think so. I think it's fairly clear that COVID has disrupted many businesses where those step services have become the new norm. I think your reading is right that home collection as a component of this total business will keep growing. And we'll have to obviously make changes accordingly. Okay. So the changes, I must mention that the changes that would probably have to be made with possibly hiring more filgotinib to then do home collection services and all. Would that be a dampener to a better margin in the more near to medium term? I mean, you might have to shut down certain patient service centers that are not contributing positively to your EBITDA, and then you have to ramp up at the same time the home collection and services that you want to have. So would that include a good amount of drag on your margins? So I think it's an interesting conversation to have. So I'm not sure about while margins is one side of it, it's also going to be very challenging operationally for the companies to manage this part of the business because you're technically adding one more leg to logistics. You're also a home collection is less controlled because ultimately that's a brand experience. Otherwise, the patient has no idea what's really going on in the lab. The real experience is when you collect the blood sample. So I think there are many aspects that will undergo a change. On the sort of margin side, I'm not unduly worried about that. I think that's still manageable because we are a growing company and we can figure that out. But I think operational challenges are going to be much, much more than financial challenges is what I foresee. So in that challenge lies in opportunity also if somebody does a better job going out. Okay. Sure. Thanks a lot. Thank you. The next question is from the line of Sabisachi Mukherjee from Centrum PMS. Please go ahead. Sabisachi Mukherjee, may please go ahead with your question. As there's no response from the current participant, we take the next question from the line of Rahul Agarwal from Incorrect Capital. Please go ahead. Yes. Hi, good evening and congratulations for actually in recovering the non COVID business as well as on the acquisitions. Two couple of questions. One is on the COVID side, essentially, you mentioned that antibody is 0 prevalent and has more diagnostic value. In general, I would imagine the expectation was higher number of tests and revenue you would have done for antibody this quarter. And so is that assumption correct that intentionally we are doing lower antibody tests? Because what we are seeing in the competition side is essentially people are investing into a lot of corporate business on antibody wins and it's typically adding on the top line as well on EBITDA. So any thoughts on antibody facilities? See, I'm not sure about this corporate side of it. I know I've also heard this narrative. But my reading is when antibody tests were launched, a lot of people thought that this antibody test is actually going to be a magic bullet in terms of where to start a workplace or not. But when we went into some kind of algorithm, we found that virtually it is not giving any value to even corporates also to when to start and what to start. So I don't think it's actually that kind of sort of a hype around this test, what it was when it was launched sometime in July, August. It's not that we are actually trying to contain it, but we are definitely not trying to mislead the market. So we are actually just going to the flow. If it's ordered by the patient or a doctor, we are doing it. It's not that we are containing it. But we don't want to aggressively promote it because we believe it's not a diagnostic test. Got it. Got it. And second observation on the cost side, essentially, the customer expenditure has actually been completely flat versus obviously the top line has gone up because of COVID as well as 1 COVID recovery. Any specific thoughts? Are we going to see the run rate being similar going forward? I mean, is there a particular step taken? Or is it one off into in the first half of the year and it might recover in second half? Any thoughts, please? You're talking about cost side of business? Yes, cost side. On the OpEx side, essentially, it's been completely flat. Yes. I think it's a good point. See, when this whole thing had hit us in the month of April, we realized that it's important for our non COVID business to come back. That time itself, we had anticipated that pricing is not going to be under our control, and it's going to go only one way down. And we started focusing on non COVID. And that's why you were seeing that our recovery is definitely in line with what we expected, and we formed 2 teams that time. And there are certain natural savings that have flown into our cleaner because travel is virtually 0 now. And there are rental renegotiations that have been done. Printing and stationery. Printing and stationery has come down because a lot of now, all it is digital. So there are some savings that are really one off, I would say, but some savings have become part of a new normal as well. And that's one of the reasons why we have been able to manage it. But going despite all that, actually, I'm really looking at this particular event of COVID-nineteen. Given the market size is very large, it's a fragmented industry, our market shares are low, Is there any opportunity for us to grow and expand our footprint? I think right now, we are focused quite a bit on that. And as Bharat mentioned, there are a number of testing centers from COVID, what it was 3 earlier, it's come to now 9. And there are a couple of more growth in pipeline. We can't really tell right now till it happens. But we look at this is going to help us in building those cluster heads or the hubs that we're talking about. So right now, we are focused to see how we increase our market share in non COVID business on back of this COVID. Perfect. Got it. And one follow-up one, if I knew, clearly looking from your balance sheet, you're adding much more cash every quarter versus what you're spending even on OpEx or acquisitions. Any thoughts of utilization of the INR900 crores? Because it looks like based on your commentary, even the larger regional guys will obviously got a near term back because of COVID and hence they won't sell. So what really happened with this money? That's my last question. Thank you so much. So I think as I mentioned to you that South and West will continue to remain our priority. Given the current state of market, we will look at combination of both. Can we step up our organic efforts plus these tuck ins that we have done these acquisitions, we'll try and build these clusters as we go along. We'll definitely look at that those funds to see how we can accelerate the growth further. Thank you. The next question is from the line of Gaurav Kumar from Kotak Securities. Please go ahead. Yes. Hi. Thanks for taking my question. So on the non COVID business, you mentioned that there are certain COVID biomarker tests such as IL-six VDIMA, which will also have come. So can you give us a sense on the non COVID recovery, excluding these, in the Q2? And on these lines, just as the positivity declines even as testing might remain high, so how do you see these tests moving forward? So I think that's a good point. And we actually wanted to highlight this as well because there are COVID associated tests which are part of non COVID, and we were a little unsure should we club it with COVID test because those tests also ordered for some other conditions as well. I think roughly about if we remove those tests, our non COVID would be about 95% compared to 98% in what we just mentioned. Thank you. But just remember that this delta that I'm talking about may not be entirely because of COVID because these tests normally get ordered for something else as well. But materially, they are getting ordered because of COVID. Thanks, Sadu. The second question is on the regional labs. So before COVID, there were some regional labs which I think were up for acquisition. Now with them also participating in RT PCR testing, do you think this event has given them a new lifeline and they might not come up for acquisition now and this whole space is gone for as in terms of acquisition target for some time? If you are owner of one of those labs, how will you what will be your reaction? Yes. Obviously, we benefit from the recent wave of COVID. Yes. So that is what is happening. So I guess it will be a pause till that settles down. Or else the demand is very high. So let's just see how it goes. But you're right. So overall, some of these city based players have seen huge surge in their top line. Initially, there was a bit of panic. Now there's excitement. So let's just see how it goes. I think overall, things should settle down because they would soon realize that this is not a sustainable opportunity, right? It's just a short term. Soft up. The next question is from the line of Vishal Bhatia from Kaleeva Insurance. So my question is on the specialized and the highest test that we conduct. So what will be the contribution of these tests? And how would be the I mean how the scale will be the margin for these things, like these oncopathology, genomics and something like this also? And internally, how do you look at I mean, when you look at non COVID, how do you distinguish between internally as to the first line high end test and the non the regular test, some perspectives would be helpful? Yes. I think the answer to the first question I may not be in a position to give, a, because we normally don't disclose that share. And secondly, it's also not that easy to pinpoint a number because various players have different kind of definition of what is high end, what is not high end. Second question on margins, I think I can comment on that. In general, we have seen that most high end tests have lower gross margins compared to routine tests. As these high end tests tend to come from health care institutions like hospitals or smaller labs, one has noticed that the fixed cost component incurred towards high end tests is much lower than routine. So on gross margin level, many of these tests have lower margin compared to routine. But when we go down to operating margin or EBITDA level, they tend to mimic the routine testing. Your third question was how do you define high end or what is not high end? So I think in the past, our definition of high end test has been a sample that travels to Delhi for our big reference lab for testing. Normally, we classify that as a high end test. But what is happening is that even high end tests are also traveling closer to the market now. As we open up lab in Kolkata, we are also further widening our test menu now. For example, this RT PCR test is technically a high end test because it was being done only in the central lab. But as we are talking today, we are now doing it in 9 labs. So it's actually become more decentralized test than one centralized test. So entire molecular in the country is becoming more like a routine department now. If I look at all the labs close to, I think, 2000, 3000 labs are doing these tests, with time, I have a sense that infectious diseases testing is becoming more routine in nature than what it is what it was about a year back. So overall, I think that's a sense we get that high end tests are also going closer to the market now with the widening of test menu. Thank you very much for this. The next question is from the line of Haritja from Salar Asset Management. I just wanted to ask your non core realizations have actually gone higher. If I just calculate. So I think it will be higher by 10% year over year quarter on quarter. So is that a figure which you think is sustainable? I don't think it's 10% higher. I think this question was asked, Raveer, also, but let me repeat this. There are two reasons behind this. There are certain COVID associated tests, IL-six and D dimer, have contributed to a higher realization for overall portfolio. That's number 1. Number 2 is that as the contribution of home collection has gone up in the annual scheme of things, we have seen home collection realization per patient is the highest amongst all revenue streams compared to walk ins, compared to pickup points and collection centers. So these are two reasons why it has gone up. And home collection normally tends to have a higher component of preventive health checkup also, which is when you go to somebody's house, people say, okay, fine, why don't I get my entire health checkup done. So we have seen Swarth has started contributing slightly higher than what it contributed last quarter. And what can we just share of home collections of the total tests? Actually, the problem is the base actually is changing very sharply. So I don't know whether that's the right sort of representative figure. So I'm really cautious in putting a number because that should not get embedded in everyone's mind that that's our home collection number. But if I were to take a sort of average figure roundabout, it's about 9 odd percent of our revenue in home collection. And that used to be about 4% or 5%, I think, right? Around 5%, 6% as well up to 9%, 10% of the revenue. Thank you. The next question is from the line of Sameet Paisiwala from Morgan Stanley. Please go ahead. Thank you so much and good evening everyone. So a quick question is on how is the business recovered NCI versus ROI? I thought this question would come first. So the news that I have that's split between ROI and Delhi NCR, our Delhi NCR recovery is slower compared to rest of India. In fact, rest of India growth is very high, and that is that's in line with our strategy also because we have been wanting to widen our footprint. So Delhi NCR is recovering slower than and one of the reasons for that is because our walk in is adversely impacted due to COVID and walk in contribution in Delhi NCR is higher compared to West of India. That also is the reason for this. So would you say the ROI is more than 100% YOY and Delhi is under like 85% or so? In ROI, I think we will we are seeing some growth actually. Yes, we have seen growth over last year. If I were to just look at quarter on quarter sorry, year on year basis, there's a growth in rest of it. Okay, great. So second question is on your network expansion, which is both clinical lab and TSE. So how are you seeing now fiscal 2021? I mean, normally, you'd grow by 8% to 10%. This is a break here? Or how are you thinking about it? So on the infra, right, please. Yes, yes, earlier also I mentioned that I don't want to focus on number of centers going forward because one of the changes that I'm seeing in this in our business is our collection side of business is getting further fragmented. You understand what I mean? Because if I were to do home collection and let's say our franchisees also were to do home collection, So you are further fragmenting it. And I think somebody just asked that if the home collection business is going to grow, so will your cost structure be impacted adversely as well. So one of the things and I know very clearly in my mind is that if we want to do home collections directly, that is not going to be a scalable idea. So we have to work through our franchisees to cater to home collection. So we will have to figure out how do we really look at economics of our franchisee as well. So in that, my reading is that we also will have to think of how do we create leverage at his point if one franchisee, one collection center may not be just a viable idea. So we'll have to probably look at how do we create a multiunit franchising. And in that case, I really don't want to get stuck with the number of franchisees. I may want to actually look at number of franchisee, but not franchisee units because that could be as many as others that can afford it. But I would want to actually look at number of franchisee per se rather than franchisee units. But having said that, to answer your question, we have seen growth in big numbers. Bharat, Bharat, can you We don't share it in this. Okay. So quarterly numbers, we don't share. We normally share it at the end of the year. But directionally, there has been growth in our infrastructure. Okay, great. Thanks. Very helpful. And one final question is for the 2 acquisitions, I know they are small ones. What's the valuation? I mean, is it more or less in line with what you've been doing, 3x to 5x sales or different from that? It's less than 9x. It's about 2x. Yes. I think about 2x of sales. Okay, got it. Thank you. Thank you. The next question is from the line of Alok Talal from CLSA. Please go ahead. Yes, good evening. Just to carry forward Sameer's question. Can you split the fees between rest of India and Delhi NCR for the quarter? So our Delhi NCR contribution is about 35% and West of India 65%. 35%, 65%. And when you mentioned the slot request contribution has increased, So how much is that now? It used to hover around 15 odd percent of our portfolio. 15% I'm taking COVID out of this calculation, okay, because that will stop the ratio. So if I take out COVID and our non COVID business, it used to hover around 15%. This quarter, we've done 17%. 17, 17. Yes. Okay. And second question is, I'm referring to your Slide 21 and 22. Please refer to genomics and risk of technology test. So how are you guys planning to go about this? How does this play out, let's say, over 2, 3 year cycle? So I think it's since you all cover pharma as well, there comes a time in the business when you start looking at segmentation. I think we usually use the term high end test, right? But we strongly believe now the time has come for us to look at high end also into multiple segments. And clearly, given high end and also look at from a disease state perspective, as you look at therapy from pharma side, so let's say, oncopathology is one such segment. We also looked at from the supply side as well because there's genetics part, there's gene sequencing, etcetera. So we are trying to segment this business from a both demand side, like oncopathology, and also from a supply side, let's say, with genomics as a platform. So I think the broad idea is to see if we can look at segmentation and drive focus. And because many of these tests are also they are not direct to consumer. They are basically through doctors and specialists, physicians, etcetera. So there are teams that we are putting around these clusters so that we can give higher focus to try these tests. And on the histopathology side, I think there's so much of discussion going around on AI and machine learning and things like that. This whole telepathology is one such area where we have invested. And we are trying to create some kind of where the slides images can be deemed to our central lab. And we can create a network of our histopathology centers across the country. Okay. That's it from my side. Thank you for taking my questions. Thank you, Alok. Thank you. The next question is from the line of Kunal Randhiria from EDWise. Please go ahead. Hello. Good afternoon. So just continuing on the recovery in the non COVID business. So has the recovery been broad based? I mean, B2C and B2B performed recover in sync? No, it's not broad based. Actually, recovery is not that high in our walk in business. Actually, it's the slowest. It's much higher in our pickup as well as collection centers. And our hypothesis is that we probably have recovered both, not only recovery of our own customers, we probably may have gained some shares as well in some markets. So it's so short answer is not broad based. Walk in is the least, everywhere else is higher. Right. And have these trends continued, October also? I do comment on month on month. Directionally, let's say, if I were to pan out for the next 3, 4 quarters, I think clearly one message that I'm getting is that home collection is here to stay. And we'll have to look at our whole operating model, financial model around home collection, number 1. Number 2 is the service side of business has to be now with partners, so we'll have to look at our franchisee relations, etcetera, how it goes. And as the prices or margins come under pressure for smaller labs, I don't have much data in terms of what's really happening on smaller labs because I think we talked about some of the city based larger players, only those guys who are doing RT PCR tests. I don't know what's really happening, what are the pains for smaller labs which are not doing RT PCR because if our non COVID recovery is, of course, we manage it better. But my sense is general industry non COVID recovery is not that high. It's maybe around 60%, 65%. So we'll have to probably look at what are the pressure points for the smaller labs. Assuming there are pressure points for them on the profitability terms, I have a feeling that they may end up doing a higher level of outsourcing than what they were doing in the past. So that's a new opposite which will present itself in times to come. So I think those are the broad changes that I see in the industry post COVID. That's helpful, sir. My second question is slightly longer than the nature. So you clearly outlined that South and West are a focus growth area going forward. I think perhaps maybe these regions are slightly lower realizations or maybe franchisee revenue share might be a bit higher. So you think this could maybe impact your margin in the next couple of years? Years? See, when I say South and West focus area, it's not that simple that overnight my contribution from South and West will go up. If it was that simple, we would have done it by now. So I think it's a bit of a pipeline. As you look at product pipeline, I think these are all geographical pipeline. I think our main growth engines will still continue to do the rest of North and East region. These are all clusters with sort of a few islands that are we are creating in South. To my mind, it's not going to be a 1 quarter, 1 quarter or 2 quarter. It will be a sort of 3 to 5 year plan, which is that's the way I look at it. So overnight, I'm not seeing any impact on the margin structure as one would see it. I think it's a broad direction. It has taken almost 4 to 5 years for us to really stabilize ourselves in the East of India. If you recall in 2015, 2016 or 2017, we used to talk about reference lab in Kolkata. Now since that is in our pocket and hopefully it will continue to grow for us in next 8 to 10 years, we believe the time has come for us to it's not a South and West was not a focus, just increasing the level of attention. That's all we are doing now. Thank you. The next question is from the line of Neha Manpuria from JPMorgan. Please go ahead. Thank you for taking my question. So I just had one question. If I look at your comment on working slowing and the fact that home health care will probably pick up in some shape and form, and the fact that public patients don't want to travel too far to access a collection center, how do we therefore manage the entire presence of Home Health Care versus expansion of collection centers? So this Home Health, it's not that whole entire business is going to get replaced. Even walk in also, if I would look at month on month, there is an improvement in walk in trends also. People are coming back to labs for giving blood samples. But relatively, this segment has not recovered as fast as one would have liked it to be. This particular segment is still below last year. Some of it has shifted to home health, home testing, and some of it has also shifted to our neighborhood collection centers. So to my mind, home visits or requests for home collection will continue to come directly to the company as well as to our collection centers. I think the way to look at it is the following that we are actually 2 brands in 1. 1 is our medical brand, which is all about testing, accurate report. Come what may you may give sample to anybody, but you want to have a Doctor. Lal's report in your hand because you trust that report. So that's one part of the brand. The other part of the brand is service brand. The service brand we have been trying to cater in multiple ways. We are doing home collections. We are doing our walk in business. We are doing through collection centers. My reading is going forward, a lot of this business will shift towards collection centers. And collection centers are nothing but neighborhood outlets where the crowd is not that much. On an average, 10 to 15 people come every day compared to, let's say, our big labs where there are close to 200, 300 people come every day. So people are now more comfortable in going into neighborhood centers. And at the most, some of them are if they are worried about contracting COVID-nineteen, they may request home collection from the same franchisee itself. And going forward, one should see as to how we are looking at our franchisee infrastructure because the entire thing will revolve around that particular center that we have closer to the market. That's the way I would look at it. Sir, if I were to ask you this way, in Delhi NCR, right, which is largely working, I'm assuming we would have seen a shift to the neighborhood collection center or home health care there more specifically. Is the margin profile of that the volume that comes through that should different from what would have actually come through a walk in does that make sense or that's not the way we should be looking at it? Yes. Yes, you're right. The margin profile on, let's say, walk in is very different, let's say, margin profile from our collection center because we do share our revenue also with collection center, right? Fact of the matter is that every year, we expand our walk in capacity. So we stop investing behind that area. We redeploy our staff to other segments where the traction is more. So all that what we have done in the last 6 months, So that's how actually it's all about managing the entire commercials around each segment. But really as you rightly said, the margin profile of walk in is definitely higher compared to other segments. But I think we've managed it reasonably well so far. We do recognize that, that is one area which needs to be carefully looked at. Thank you. The next question is from the line of Harit Arapad from Spark Capital. Please go ahead. Hi. Thanks for taking my questions. Looking at the gross profit for the quarter of around 75% and then by calculating the gross margin for COVID testing and that comes to around 60%. Has these margins surprised positively? I'm referring to the gross margins on the COVID testing front because previously you had guided you had given a fairly conservative commentary on COVID testing and margins from that business. And then could you give some outlook on the margins from COVID testing given realizations have been coming down throughout states, but at the same time, consumable costs have also come down? How did you get this margin of holding the So I think relatively, when we started COVID, nobody had an idea as to what the real costs are because this is a new test. We were all doing it on standard costing. And then we continuously saw a fall in our earlier, we were using 1 PPE kit for every patient, and we were over cautious. We were also our home collection schedules were not willing to go and collect samples. We were paying them incentives and all that we've been through, right? So as the prices started coming down, we started looking at how to reduce costs. And I think even government also has helped because some custom duties went down, some other kit prices went down. So I think relatively, if I were to say now that and then and since our non COVID business had fallen, then we had a huge sort of a fixed cost structure on our back, we were loading that as well. In fact, that time itself, we realized that we will be better off if we can quickly recover on non COVID. At least we don't have pressure of loading our fixed component of cost onto COVID. So now we are looking at COVID as, let's say, as a contribution margin and maybe a few additional costs on the overhead side. So we probably and I'm not looking at on quarter to quarter basis. We are looking at an exit rate basis. Right now, our realization on COVID has been hovering around 1400, 1500. I don't know how it's going to go forward because if one state drops the price, then this can fall further as well. And I think the good news is that we are not losing money on this. That's all I can say. We are able to manage on the contribution side fairly reasonably well. As I mentioned, couple of initiatives like portfolio margins, portfolio management, state wise prices are different. So we're trying to put more focus where the realized is a little higher. So I think overall, I don't have a negative commentary on that it's we are bleeding or it's affecting our listing, but we are just fairly trying to balance with all stakeholders in this. And the current contribution you said is around RUB14 100? Realization. Realization. Realization. Realization. Realization, yes. Thank you. The next question is from the line of Tushar from Motilal Oswal AMC. Please go ahead. For us, it's primarily RT PCR test, yes. So yes, so treated test, so for example, the CRP test and the DYNAR test, let me come into your non COVID level. Yes, that's we have actually clubbed that in non COVID because some of those tests also get prescribed for other disease state as well. And we didn't want to we just want for the sake of comparison, we have taken COVID RT PCR and antibody. On IL-six D dimer dose test, we have clubbed it in non COVID. Just for the sake of clarity, our non COVID business is 98% of last year. If I pick out take out these associated tests and our non COVID is 95% in last year. Got it. Yes, that's good, ladies. Thank you, lot. Thank you. The next question is from the line of Nikhil Chaudhary from Chris BMS. Please go ahead. Yes, sir. Thank you for the opportunity and congratulations on a decent set of numbers. Sir, I joined the call a bit late, so apologies if this is a repeat. If my understanding is correct, the realization has shot up probably due to the COVID testing, am I correct? Overall, at full test company level, yes. Okay. And my second question was with respect to the acquisitions that we make. Generally, is there a threshold limit that we look at, like probably a top line that we look at, we would not want to go below that top line and we make an acquisition from an economic standpoint of view? So I think we look at role that acquisition is going to play. First is it should help us in entry into new market. Number 2, it should further help us to build a critical mass in that city. And it has to fit in overall scheme of things. We are not looking at purely from a turnover perspective. We also look at profile of promoter. We also look at profile of business with Jamnagar, I think, that we have done. It's a small acquisition. It's a market where Gujarat, our presence is very, very low, but it's a very nice high walk in kind of lab. So we thought it's a good sort of entry strategy into that part of the state. So there are multiple factors on which we consider this. But underlying principle is higher the turnover, better it is because it's much easier than to integrate. Okay. Okay. And lastly, on the competitive intensity side, understanding that the smaller players have also probably been like or got a lifetime due to the COVID testing. Other than that, on the non COVID testing, is there a pricing pressure visible? Like probably they would want to undercut and gain some share? Like just trying to get a sense on that. Actually, I would say all smaller players are not doing COVID testing. COVID testing is done by, let's say, 1500 labs. These are midsized city based labs. I think they have got sort of a lifeline. But many smaller labs which are not doing RT PCR testing, they, I have a feeling, must be under below pressure. And that's a very large number. And that's one area for us to really see as to how we can partner with you guys. Thank you. The next question is from the line of Saviye Sachi Mukherjee from Centrum PMS. Please go ahead. Yes. Hi. Thanks for the opportunity. Most of my questions have been answered. I have just one question. You mentioned that you have been investing on artificial intelligence and we have seen Doctor. Lal investing in IT infrastructure and all. There was a recent article on the newspaper a few weeks ago about a data breach on patient COVID patients left unsecured on cloud server. Your thoughts and what clearly actually happened and how do you ensure such things don't happen in the future? So this was actually not related to COVID. It was actually one of our applications on home collection. It was not a medical data. It was only a sort of booking data. And there was a sort of misconfiguration from our end. I think that slip was there, and we immediately corrected it. Okay. Thank you. Thank you. The next question is from the line of shanti Patel from shanti Patel Investment. Please go ahead. Good evening, sir. My question is, as far as the market share in organized sector is concerned, where we stand today? And who is our main competitor, if you can tell? So from an organized perspective, roughly because there's no sort of ongoing data track that is available on a monthly basis or a quarterly basis, but one estimate suggests that organized market is worth 15 odd percent and of a market, let's say, worth total market is estimated to be about 60,000 crore, half of it is radiology, so pathology is about 30,000 crore, 15% of that would be 4,500 crores. We are within the organized sector, let's say, if I were to look at ballpark figure of INR 1500 crores, so close to 30% of our organized shares would be with us. But if I look at larger market of INR 30,000 crores in pathology, we are not we are just about 4% to 5%. So there are 2 data points. And what is your main competitor, if you can? I think I really won't call it a competitive. I think what the emergence of organized player has come out of unorganized sector. And these 100,000 labs which are there in the market, which are which we call unorganized, we have to find ways and means of seeing that how can we coexist. These guys can play a very important role of collection side of business. We guys can play a big role of on the testing side of business. I think that's the way this whole ecosystem has to evolve because for 1 company to do entire collection across the country is not feasible. So we'll have to probably figure a way out as to how do we work with unorganized space to cater to the market. Thank you. The next question is from the line of Sriram Rathi from ICC Securities. Please go ahead. Yes. Thanks a lot, Balita. So just one question on the COVID testing, Sorry, I don't think I heard it correctly, but I think what you're saying, what is the proportion of government business in our sales, right? Yes, right. So it's a very small number now in Q2, which is just about 9%, 10%. In Q1, it was significantly higher. I think it was about 52%, 55%, which has come down to 9% or 10%. 9% or 10%. And so how do the total tests which are happening? And the tests per day. How much would be the government might be the reason by government and what how much of that will be with the criteria? Actually, I have not kept track of that number. Sorry, I don't have any color on that right now. Okay. No problem. Thank you. I'll try and check that and come back to you if I get some read on this. Sure, Pankaj. That will be helpful. Thank you. The next question is from the line of Nitin Agarwal from IDSE Securities. Please go ahead. Hi. So just following on an earlier question, which was there. So when you sort of back calculate the test, the revenue per non COVID test, has the minimum gone up beyond INR 700 this quarter? Is there anything that is driving it for patients rather, INR 700 per patient? Yes. I think this question has been asked multiple times. This non COVID revenue per patient has gone up for two reasons. One is our home collection revenue. Or home visits revenue is relatively higher than any other segment revenue. And since home collection contribution has gone up, that has helped us our revenue go up. Number 2 is there are certain increase in high end tests, primarily on account of COVID-nineteen related tests like D dimer, IL-six, etcetera. That also has contributed to a non COVID patient revenue coefficient going up. But overall, as a company, revenue coefficient has gone up because of COVID testing being so high, RDPCR. So this ex COVID piece of 700 thereabouts per patient should be sort of given there the dynamics are that home stay is going to be more and more relevant part of our offering, Should it stay on these levels? Is that a fair assumption to make? I think it's too early for us to comment on this. But I think directionally, my reading is that home collection as a percentage of revenue will be higher than what we have had in the past. And if we are able to sustain this revenue per patient, what you're saying is right. It should stay there. Thank you. Well, ladies and gentlemen, Thank you. Well, ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to the management for their closing comments. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Thank you, everyone, for being with us on this call today. Wish you all a very happy Diwali in advance. Please stay safe and take care. I now would like to request the moderator to close this call. Thank you very much. Thank you. Ladies and gentlemen, on behalf of Doctor. Lalpad Labs, that concludes this conference. Thank you all for joining. You may now disconnect your lines.