Ladies and gentlemen, good day and welcome to Dr. Lal PathLabs Q4 and FY 2025 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. Good afternoon, everyone, and welcome to Dr. Lal PathLabs quarter four FY 2025 earnings conference call. Today, we are joined by senior members of the management team, including Honorary Brigadier Dr. Arvind Lal, Executive Chairman; Mr. Shankha Banerjee, CEO; Mr. Ved Prakash Goel, Group CFO and CEO, International Business. I would like to share our standard disclaimer that some of the statements made on today's call could be forward-looking, and actual results could vary from these statements. A detailed note is available in the results presentation on this, and the presentation has been circulated to you and is also available on the stock exchange website. I would now like to invite Honorary Brigadier Dr. Arvind Lal to share his perspective. Thank you, and over to you, sir.
Thank you, Siddharth. Good evening, everyone, and thank you for joining us today on our annual earnings call. I will share perspectives on the diagnostics as an industry and the opportunity that it presents for Dr. Lal PathLabs. As we reflect on the strides made in India's healthcare sector during FY 2025, it is evident that both government and private entities have intensified their commitment to enhancing health infrastructure and services. The Union Budget for 2025 and 2026 has increased healthcare allocation by nearly 11% to nearly INR 1 lakh crore. Flagship schemes like Ayushman Bharat PMJAY received increased funding. Concurrently, private equity investments in healthcare have reached $5 billion-$6 billion in 2024, nearly doubling pre-pandemic levels and expected to maintain at these levels concurrently. Both trends point towards the breadth and depth of opportunity in this space. Demographically, India stands at a pivotal juncture.
The working-age population that is 15 - 59 years of age is projected to constitute 65.2% of the total population in 2031, offering a substantial demographic dividend. The population of seniors in the same period is expected to stand at 13.1%. Some estimates project that India shall have 34 crore seniors by 2050, accounting for approximately 17% of the world's elderly population. This dual demographic trend underscores the pressing need for a healthcare system adept at addressing both preventive and geriatric care. In this evolving landscape, the diagnostics industry plays a crucial role. The diagnostics sector, growing in double digits annually, is witnessing steady expansion. However, it's noteworthy that the organized segment accounts for only a fraction of this, highlighting significant opportunities for consolidation and standardization. I would like to share two important trends with you at this moment.
Given how the growth in testing shaping up, Tier 2 and Tier 3 towns and beyond are expected to account for a larger share of the diagnostic demand in the coming years. Secondly, the burden of non-communicable diseases, or NCDs, or lifestyle diseases has significantly increased with cardiovascular conditions, diabetes, and cancer estimated to impact about 23 crore people by 2030. At Dr. Lal PathLabs, we are committed to serving this requirement for higher testing by leveraging technology, expanding our reach, and ensuring that quality diagnostics are accessible across the country. Our brand has introduced new tests and overseen the establishment of new laboratories with a view to enhancing accessibility. Investments have continued in digital technologies in order to streamline operations and improve patient experiences. This includes the implementation of advanced laboratory information systems and usage of AI to enhance diagnostic accuracy.
As we navigate these transformative times, our focus remains steadfast on innovation and excellence. Together, we can shape a healthcare ecosystem that not only meets the current demands but is resilient and responsive to future challenges. Thank you for your continued trust and partnership. I now hand over to Shankha. Over to you, Shankha.
Thank you, Dr. Lal. A warm welcome to everybody on our Q4 and FY 2025 earnings call. On the operational front, we sustained a strong growth trajectory in Q4, driven by volume growth and mix improvement without taking any price hikes. Sample volumes grew by 9.5% to 20.9 million, while patient volumes increased by 3.8% to 6.8 million. Our bundled test program, Swasthfit, also delivered robust growth of 22%, contributing meaningfully to the overall performance. During the year, we added 18 new labs, expanding our presence in Tier 3 and Tier 4 markets while strengthening our network in Metro and Tier 1 cities. On the systems side, we have successfully implemented Microsoft D365, STARLIMS, and the full IT stack in Suburban, creating a unified digital infrastructure across both brands. I also want to take this opportunity to share my perspective on the overall direction for Dr. Lal PathLabs.
India remains vastly unorganized in terms of diagnostic testing. Thus, it is our primary objective to develop the market, expand our reach, and enhance our impact across the healthcare landscape of India. We are strengthening our network in Metro and Tier 1 cities, ensuring we remain the trusted partner for diagnostics in places where we are already well regarded. We also continue to develop our systems across Tier 3 and Tier 4 cities, primarily in North and East. We have built a strong brand preference in the North and East, but we continue to work on building brand reach and strength in West and South. Our vision also includes a relentless focus on expanding our test portfolio. We are strategically growing our capabilities in specialized verticals such as genomics, reproductive diagnostics, autoimmune disorders, and other advanced tests. In line with this, we recently launched advanced amyloid typing tests.
We are proud to be the first diagnostic chain in South Asia to offer this highly specialized test under the guidance of National Amyloidosis Centre, London, U.K. Our bundled test program, Swasthfit, is a potent instrument to gain scale while providing value to patients. We are extending the bundled test philosophy into the illness segment, ensuring we provide comprehensive and cost-effective diagnostic solutions across the healthcare spectrum. As we progress strongly into the hinterland, year two, we are strengthening Swasthfit. Integral to our future success is digital transformation. We are leveraging technology across our value chain from enhancing the patient experience through user-friendly digital platforms to streamlining our operational efficiency through sophisticated logistics and data management systems. This digital backbone is a strategic tool for scalability, security, and for delivering innovative services.
We believe that this clear strategic roadmap, coupled with focused execution, will lay a strong foundation for sustainable and scalable growth in the years to come. We are cognizant about the opportunities and challenges ahead and remain dedicated to our mission of providing high-quality, accessible diagnostics to all. With that, I now hand over the call to Ved.
Thank you, Shankha. Good evening, everyone, and a warm welcome. I will now proceed to share the financial performance for the quarter and the full year 2025. Revenue for Q4 FY 2025 came in at INR 603 crore, compared to INR 545 crore in the same quarter last year, reflecting a growth of 10.5%. Revenue for the full year stands at INR 2,461 crore, against INR 2,227 crore in FY 2024, a growth of 10.5%. Revenue per patient for Q4 FY 2025 is INR 887, up by 6.4% compared to INR 833 in Q4 FY 2024. This is mainly due to improvement in test and geographic mix. Test per patient for Q4 FY 2025 stood at 3.07, compared to 2.91 in Q4 last year and 2.97 for the full year FY 2025, against 2.83 in FY 2024. EBITDA for Q4 FY 2025 came in at INR 169 crore, compared to INR 145 crore in Q4 FY 2024, registering a growth of 16.9% with an EBITDA margin of 28.1%.
For the full year, EBITDA stands at INR 696 crore, compared to INR 609 crore in FY 2024, registering a growth of 14.2% with a margin of 28.3%. PBT for Q4 FY 2024 came in at INR 154 crore, compared to INR 120 crore in the same period last year, registering a growth of 28.1% with a margin of 25.5%. Full year PBT stands at INR 625 crore, against INR 505 crore in FY 2024, registering a growth of 23.6% with a margin of 25.4%. PAT for Q4 FY 2024 came in at INR 156 crore, compared to INR 86 crore in Q4 FY 2024, registering a growth of 81.4% with a PAT margin of 25.8%. Please note that in Q4 FY 2024, we have a one-time deferred tax benefit of INR 40.8 crore on account of voluntary liquidation of Suburban Diagnostics.
For the full year, PAT stands at INR 492 crore, against INR 362 crore in FY 2024, registering a growth of 35.9% with a margin of 20%. EPS for Q4 FY 2025 is INR 18.6, compared to INR 10.1 in Q4 FY 2024. For the full year, EPS stands at INR 58.5, compared to INR 43 last year, registering a growth of 35.9%. This EPS has a one-time deferred tax benefit, as explained earlier. Excluding this one-time benefit, normalized EPS for Q4 FY 2025 is INR 13.6, and for the full year, normalized EPS stands at INR 53.5. Net cash and equivalents as of 31 March 2025 is INR 1,229 crore. Further, I am pleased to share that the Board of Directors of the company have approved a final dividend of 60%, that is INR 6 per share, taking the total dividend for the year to 240%, that is INR 24 per share. I would also like to update that pursuant to the approval of the approved scheme of liquidation of Suburban , the entire business undertaking of Suburban has been transferred to Dr. Lal PathLabs Ltd on a going concern basis in Q4 FY 2025. With this, I conclude my opening remarks, and I would now request the moderator to open the forum for question and answer. Thank you.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue ascends. The first question is from the line of Prakash Kapadia from Spark PMS. Please go ahead.
Yeah. Thanks. A couple of questions from my end. At the time, when you have put the estimates for diagnostics.
I'm sorry to interrupt you, Mr. Prakash, but you're not audible.
Yeah. One second. Now am I audible?
Yeah, better.
Okay. Please go ahead.
Yeah. Yeah. At the time when most estimates for the diagnostic industry are showing an 8%-9% growth, our growth has been 10%. I just wanted to understand what will it take at our end to grow faster than the current rate. Because we've been expanding and de-risking from North, we've expanded to East, West is now almost 14%-15% of contribution. I guess with scale, the low cost and the quality assurance and branding should ensure slightly better growth than this. This is obviously better than industry, but what will it take for us to grow still higher than the current growth rate? Is it going to be specialized tests? Is it going to be some specific region contribution where we are very low or weaker? Some cards on that will help.
All right. Thanks, Prakash, for the question. This is Shankha here. Yeah, industry growth rate is obviously an estimate. As of now, you're right. It could be anything between 8%-10%. I think this year or a year that has gone by, we have started the year saying that we would like to do slightly better than the previous year without having to take a price increase. I think we've been able to do that. Effectively, it's a 3% better performance than last year because there is no price increase in FY 2025 versus there was a price increase in FY 2024. Directionally, I think we are moving in the right direction.
Some of the initiatives, it's unlikely to be any specific geography because as you've said, there are at least now three geographies which are reasonable size, which is Delhi NCR, North, East, as well as West. It's unlikely to be any specific geography driven. I think our investments in terms of new infrastructure, the whole expansion of our collection network that we have done a bit of aggression on that in the last 12 to 18 months should start seeing benefits of access that we get to newer markets. Also, we are looking at increasing our focus on the rather the Swasthfit portfolio, like we said, is something which we are moving into the Tier 3 and Tier 4 towns as well. There is still juice left in that strategy, and that's something which we will continue to push for.
Even in our North and East markets, the Tier 3, Tier 4 growth is still continuing. I think a mix of all of these is what we are aiming towards to see how we can maybe grow faster than what we did in FY 2025.
Okay. Okay. Anything you would want to call out on the contribution of specialized tests? Is that a focus area given our legacy and experience in the industry? Can that be a big contribution going forward?
I think we had mentioned in one of our previous calls, the specialized portfolio is something which each company would be defining differently. The way we define our specialized portfolio, it is about 1/5 of our portfolio comes from the specialized tests. Like I said, specialized tests is something, yes, we will focus on. What we realize is that any given geography, when we go, we have to look at the whole range, right from routine, specialized, super specialized, bundled tests. All of that put together is how the ecosystem moves forward and the growth trajectory builds up. It may not be right on my part to call out just one element, but yes, there is focus on the specialized part of the portfolio as well.
Okay. Okay. Understood. One question for Ved. Given that Suburban is now part of Dr. Lal on an ongoing basis, how does it impact the amortization and the balance sheet? Because we were writing part of the acquisition cost through amortizing it through P&L. What is left? How does it change the P&L and balance sheet impact?
Prakash, there is on consolidated basis, I don't think there is any change because earlier also in consolidated financials, we were carrying intangibles, and the same will continue. It is just that it is coming in standalone now instead of consolidated.
Okay. Would you have the figure of amortization for this year and what would be pending?
As I mentioned earlier, also about INR 50 crore kind of an appreciation which is coming every year on account of intangibles.
Sorry to interrupt you. Mr. Kapadia may we request to please re join the queue as we do have other participants waiting in for the door. Ladies and gentlemen, we request you to please limit your questions to two per participant in order to give the other speakers the opportunity to ask their questions. The next question is from the line of Karthik C hellappa from Indus Capital Advisors. Please go ahead.
Yeah. Thank you very much for the opportunity, sir. Congrats on the quarter. Am I audible?
Yes.
Okay. Great. Two questions from my side. First, if we were to look at the sample volume growth, could you give us some color on how did NCR North and, let's say, the West and East bid individually?
Karthik, hi. This is Ved . I think we are not splitting sample patient volume geographically. Right now, we have given the split in terms of revenue. Maybe volume geographically, we have not mentioned here.
Okay. Let me ask this question qualitatively. I think your endeavor was to improve your volume growth in NCR, which is your biggest market, and that was probably growing lower than your overall volume growth. Are you starting to see traction there? In FY 2026, can we expect to see NCR volume growth at least better, at least in qualitative terms? Would you be able to comment on that?
Yeah. I think what we were saying in maybe one quarter back that we are mostly talking about NCR revenue growth. Since we are not taking any price increase, obviously, it is driven by sample volume and mix. We would like to we've done about a double-digit revenue growth this year for Delhi NCR. Going forward, we would like to maintain that trajectory.
Okay. Great. My second question, sir, is if I were to look at our patient service centers, this year, we have probably added more than what we added in the last two years, around 845-ish or so, which is also a healthy 14%-15% growth year on year. Is this a prelude that we can see to a better volume print, given that you have actually ramped up your infrastructure? I know there is a lead and lag for sure, but just given the investments that you have made in the PSC count, is this a sign that we should start to see better volume growth?
The whole reason for ramping up the infrastructure numbers is to ensure that we get access to newer micro markets and even newer geographies. In some of those geographies, and depending upon the geography that the access we are getting, the kind of time horizon on which the infrastructure, the collection network really matures will be different. It could be anything between 18-36 months that it will take for the collection network or a new collection center and a lab network to really start maturing and contributing significantly to the volume and the revenue numbers. Directionally, yes, ramping up of infrastructure should show better volume, patient volume, and revenue in the future.
Excellent. Just one moment then, sir, and then I'll get back into the queue. This quarter, you have disclosed that West is 14% of revenue. If I remember right, last quarter, it was kind of 15%-ish percent. Any?
Can you hear me? Hello?
Yeah. We can hear you now.
Excellent. Yes. We'll move to the next question, which is from the line of Anshul Agrawal from Emkay. Please go ahead.
Hi. Thank you for the opportunity. Am I audible?
Yes.
Great. My question is on network expansion. Are we looking to aggressively add labs in the next one or two years, or do we think that the current lab network should suffice our growth plans in this period?
We have added 18 new testing labs last financial year. For this financial year and maybe one more, we definitely would like to keep up the tempo at this stage. We have been adding actually close to about 14-15 labs pre-COVID. Post-COVID, there was a period when the lab addition was slightly slower. We need to maybe catch up in these few years. After that, we will come back to our normal lab addition trajectory. There is still a lot of geography space which is available for testing infrastructure. Therefore, that lab addition will continue. Not only that, even existing infrastructure of labs, there are improvements and upgradation of instrumentation, etc., that we keep doing. That is also a part of the normal annual operating cycle.
Clear. Just to follow up on this, sir, would we see an increase in our PSCs as well commensurate to what we have seen in the current year? The reason why I asked you is this: our lab utilization surely seemed to be going up. Would that continue in your view?
Collection center, so lab and collection centers or PSCs, as we call them, go hand in hand. It's the whole hub and spoke and the whole network approach that we have in every geography. It's not either/or. It will happen simultaneously. As I was mentioning to a previous question, it is that ecosystem of lab and collection center network which, once added, takes a bit of time to really mature and build up. Yes, you will see addition of collection center PSC network as well.
Sir, my second question is on the West region. Assessing by the split that you have given geography-wise, our West region portfolio seems to have just grown about 5% in FY 2025. Could you give us an update on how Suburban has panned out in the last quarter?
We did the whole IT stack changeover in Suburban in Q4. Also, the voluntary liquidation process was carried out in Q4. Because of that, there has been a bit of an impact in terms of the revenue for Suburban in Q4. We've already started recovering, and we believe that we should be able to recover quickly in the next one or two quarters.
Okay. So it's been mid-single digits? Would that be a right deduction?
Yeah. It will be mid-single digits.
Great. I'll fall back in queue while I have more questions. Thank you.
Thank you. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.
Thank you. I got dropped off last time when Shankha asked the call, so apologies for that. Just the first question on the fiscal 2026, what are we sharing in terms of our revenue guidance? Maybe I can start there.
Yeah. Shyam, this year, we've ended at 10.5% in terms of revenue growth. Next year, I think we should be better than that, maybe between 11%-12%.
Okay. Is there just another point here, as you mentioned, not taken price increase a couple of times in the fiscal 2025 point? Is there a contemplation of that in the near term or in the medium term?
Price increase is something which, for us, will be a very strategic decision. I think in some previous call, also, we had discussed that if there is, if we see the need, whether it is in terms of cost or whether it is in terms of the whole pricing table in the industry moving in a certain direction where we are left behind, if any of those things happen, then we may consider. It is not something which we will do for any tactical reason right now because maintaining the price table also has its advantages in terms of overall growth that we are trying to achieve.
Got it. Shankha, just the 10.5% going to 11%, let's assume, are we expecting improvement in volume growth, or is it still the Swasthfit contribution that keeps going up 26%, 28%, 30%? I'm just making it up. What is driving higher growth?
I think it will be both. You see, the RPP growth that we did this year was about 6%, right, and patient volume and then sample volume at 9.5%. The uptake, we definitely are trying to do the increase incremental growth over last year, driven primarily through volume, and try and maintain the RPP growth.
Got it. Last question, just again, guidance on margins. We have reached 28.3%, so very healthy numbers. Just want to understand how we should look at margin for fiscal 2026. Thank you.
Shyam, margins, I think we have close 28.3%. Going forward, I think since we have to make a sort of investment in newer geography, newer talent, and some digital initiatives, and so on and so forth, around 27% kind of margins we are looking or we are confident to maintain.
Sorry, wait. 100 basis points lower, you're saying?
Yeah.
Okay. The INR 1,229 crore of cash, any thought process on how that will be allocated? Thank you.
As stated, strategy, we are keeping this cash with us for any opportunity which will emerge. As earlier mentioned, I mean, obviously, we are growing organically, and we have started our own efforts in South, particularly South and West. If there is any opportunity there, definitely, we will be keen to do that opportunity. That is why we are keeping this cash. In addition, obviously, we are paying dividend as well.
Thank you. Thank you, Ved. Thank you, Shankha. Thank you.
Thank you.
Thank you. The next question is from the line of Bharath Celly from Equirus Securities. Please go ahead.
Thanks for the opportunity. We have been actually seeing volume growth at around mid-single digits since the last almost seven to eight quarters. Even despite the fact that we are moving to the hinterlands of India, when will we see these numbers inching up to the high single digit?
Like I was answering in one of the previous conversations, the infrastructure expansion push that we've taken in the last 12 to 18 months over the new labs and collection networks and incremental areas around that, those will obviously start maturing. It takes anything between 18 to 36 months for these networks to mature. We believe that they will help us improve our patient volume number. Overall, like we've been saying earlier, for volume, look at sample volume and patient volume both as indicators of volume, not only the patient.
When we will start seeing those hinterland starting to be picking up, probably Tier 2, Tier 3 towns, will it be a case where our volume growth, patient volume growth will look higher, but the realization will start taking a hit considering the prices there will be relatively lower?
Our pricing approach in Tier 3, Tier 4 is not really different compared to whatever other country gives us Tier 2 or Tier 1 market. Our pricing is similar. It is not essentially lower pricing on an MRP basis. The revenue per patient and those angles, we obviously will look at that, how it develops and emerges. As of now, we are not seeing any significant difference between the Tier 3, Tier 4 realization versus what we are seeing in maybe a Tier 2 or a Tier 1 town.
According to you, how the pricing for the competitors will be in these markets?
The competition in these markets are primarily unorganized local labs. I mean, that's the main competition in the Tier 3 and Tier 4 market. Pricing there is not very different. I mean, it could be slightly lower, but it isn't as if it's very different from the kind of pricing we are able to work on in these markets.
That's great. Okay. I will get back in the queue. Thank you.
Thank you.
Thank you. The next question is from the line of Raman Sivi from Sequent Investments. Please go ahead.
Hi, am I audible , can you hear me?
Yes, please. Go ahead.
I just have two questions. One is I want to understand the competition in the industry because from what I'm hearing and what I have seen, there is competition from pharma players also, like pharma players entering the diagnostic industry. For example, recently, Lupin announced its foray into the diagnostic sector. Is the competition going to intensify in coming quarters or years?
On the competition front, I think this industry has always been quite competitive. There have been phases when newer kind of players have entered the industry. I think as long as more and more organized players come into the industry, it is good because the overall industry benefits from more organized players. It becomes a more level playing field. From that point of view, this competition with more organized players is not something which is very new and is likely to maybe benefit the industry at an overall level as well.
Okay, sir.
I think this market has space for everyone. I mean, it's not that we are the only player; there will be many here.
Okay, sir. My second question is with respect to the CapEx. How much CapEx are we planning for FY 2026?
Normally, our maintenance CapEx is about INR 60 crore- INR 70 crore a year. I believe when going next year, FY 2026, I think similar kind of CapEx will be there.
You're saying the CapEx will be around INR 70 crore, and as of now, there is no plan of adding additional acquisition?
That is something different. That's why I'm saying maintenance CapEx includes normal expenses where we are opening 15-20 labs every year and some maintenance CapEx on account of, let's suppose, investment in IT or software and all that stuff. If there is any opportunity, obviously, that will be different.
With respect to follow-up questions with respect to CapEx and stuff, how much usually is the, if I have to set up a lab, pathology lab, or a radiology lab, how much usually is the initial investment to set up a new lab or pathology center?
It depends. I mean, we have different kinds of setup, reference labs. Then we have hub labs, and then we have set labs. Smallest is set labs generally require INR 8 0 lakhs-INR 1 crore kind of CapEx is required. If you go to smaller labs, which is like Tier 3, Tier 4, even lesser amount is required. That is how the CapEx is required in these labs. Obviously, we are not planning any reference lab further in this FY 2026, so that is not required.
Okay. Thank you. One last question. What is the in FY 2026, what is the revenue from pathology, and what is the revenue from radiology?
Our revenue from radiology is actually minuscule. It is very low single digits. I mean, it's all kind of pathology revenue only.
Less than 5%.
4%-5%?
Less than 5%.
Yeah, less than 5%.
Less than 5%. Thank you.
Thank you.
Thank you. The next question is from the line of Divyansh Gupta from Latent Advisors . Please go ahead.
Hi. Am I audible?
Yes, you are.
Hi. A couple of questions. First is on, let's say, weaponization of chemicals by China. They stopped selling off Gadolinium, which is an MRI agent. Today, they stopped exporting of rare earth magnets, right? I understand that a lot of chemicals come from China for the reagent purposes. Two questions in this. How much of it is coming from China as of today? Is there Indian capacity which can service in case China takes some similar steps in this domain? How are you thinking about that?
Yeah, this is Dr. Lal here. The answer to your question is that we hardly get anything from China. Minuscule it is. It would be even less than 1%. This actually does not involve us. Since we are not in radiology, we wouldn't be able to ask you to answer that question, what you were asking, that there's some rare earth chemical goes into a dye which is injected into the patient. We wouldn't know that.
Sorry. I wasn't asking about radiology. I was saying just for the pathology diagnostics, our reagents?
Pathology diagnostics, no reagents in our case come from China. None.
Got it. Got it. That's good to hear. The second one was earlier presentation, you used to share this Tier 3 revenue football numbers. But in the current presentation, I'm not able to find. Would it be possible to share these numbers?
Yeah. We have had good growth Tier 3 revenues even in this year. We had a healthy mid-teen kind of a growth. It is definitely in the similar trajectory as what we would have seen earlier. That trend continues.
Got it. Just last question, on a per patient basis in Tier 3 versus in Tier 1, what is the difference in realization? Surely maybe because of mix or pricing difference or at an overall level?
As I was answering the previous question, we don't have a differential pricing in a Tier 3, Tier 4 town versus the we have a geography approach in terms of pricing. Markets in that vicinity all have similar pricing. There is no differential in terms of pricing. If at all, it would be maybe a bit of number of tests on per prescription or on that basis if there is a mixed differential. That would be the only difference. It is not anything to do with pricing.
What would be that end result because of the mix change? Like 5% on a per footfall basis, we end up making 5% lower, 10% lower, and purely because of mix change?
I think realization is lower than, let's suppose, Tier 1 in Tier 3, Tier 4. That split obviously is very because of many reasons that Shankha mentioned. I don't think we have a good split of that.
Got it. Got it. Got it. Yes, those were my questions. Thank you.
Thank you.
Thank you.
Thank you. The next question is from the line of Amey Chalke from JM Financial. Please go ahead.
Yeah. Thank you for taking my question. Almost most of my questions have been answered. I have one question on the expansion. This year, we have seen something like 18 managing adding a year and close to 1,000 PSC. Is it possible to tell the management how much would be in the core areas of like North and how much would be in other core areas?
We can look at that number and come back to you. In terms of you asking only labs, then.
Mostly in our core geography.
In our core geography.
Okay. Sure. Second question I have, even with changing diagnostic paradigm, going ahead, do you think that the importance of in vitro diagnostics will remain, or do you think that AI-powered, diagnostic tests, digitization, or diagnostic imaging can change a lot of these tests the way they are taken?
Could you please repeat the question? I didn't get your first part. Please repeat it.
I'm saying that the diagnostic paradigm, the way it is done largely is in vitro diagnostics at present, the dependence of it. Going ahead, do you see the importance of in-vitro diagnostics to go down in case of, let's say, AI-powered, image techniques, etc.? A lot of these ventures are using them. Do you expect the in vitro diagnostic testing as an importance to go down going ahead?
No, we don't think so. I think in vitro diagnostics will continue the way they are continuing.
Our view is there is if you look at imaging and pathology, firstly, there is a lot of AI deployment that is happening on the imaging side. In pathology, there is still AI work happening. Either which ways, a lot of it is going to assist the current evaluation and reporting and maybe help enhance that rather than maybe replace it.
Sure. Sure. Thank you so much, sir. I will join it.
Right. Thank you.
Thank you. The next question is from the line of Deven Kulkarni from Marcellus Investment Managers. Please go ahead.
Hi, Shankha. Hi, Ved. This quarter, I see that our fees to collection centers has grown by just 3% YoY , which is far lower than our revenue growth. Can you help me understand what's happened here? Have we cut channel margins, or is it some mix change?
Sorry, what to which ratio? I didn't.
Fees to collection centers.
Fees. Okay. Yeah.
Yeah. Yeah.
There is no change in the margins, Deven. It's purely on the mix.
Okay. So then how to interpret that? That sales from collection centers has grown by just 3% YoY in Q4. And the rest of it has come from our own labs or direct channel, right?
No. No, that would not be the right way to read it. Sales from collection centers has also grown in double digits. It's also, like you said, there is a test and a geography mix. That is what will be impacting. There is no change in terms of the revenue share that we are giving to the channel partners.
Okay. Understood. Secondly, Ved, what was the EBITDA margin in Suburban in this quarter?
As I mentioned, this has been merged in the parent company in this quarter. Now we are looking at overall margins. Maybe it is the company margin. As earlier mentioned, I mean, a couple of quarters back, this was, I think, 15%-16% kind of EBITDA margins. Really now, after merging with this, it's only one which is coming and not separately.
Okay. Fine. Thank you.
Thank you. The next question is from the line of Sumit Gupta from Centrum Broking. Please go ahead.
Hi. Thank you for the opportunity. If you follow through the previous participant questions, just to understand on the competitive scenario in the Mumbai market for Suburban and versus other competitors, how do you see this competition for overall market? How is it shaping up?
If you see Mumbai market, we are not the leader. There are existing players who are the market leader there and a number two strong player. For us, obviously, since we are a challenger brand in that market, for us, that competition has always been there, and it remains similar.
Okay. How do you see Suburban pairing over the next three to four years? What is the plan for Suburban?
The plan for Suburban is focused on the three geographic places: Mumbai, Pune, and Goa. We continue to work on those markets. These are large. Mumbai as well as Pune have become large diagnostic hubs in their own right. We believe both these markets have a huge headroom available for us to play both the brands. Therefore, we will continue with our two-brand, dual-brand strategy in these markets. That is how we want to really move to becoming one of the top two brands in both of these geographies.
Okay. Okay. Thank you.
Thank you.
Thank you. The next question is from the line of Harshal Patil from Mirae Asset Capital. Please go ahead.
Good evening, sir. Thank you for the opportunity. I just have two questions from an understanding perspective. Sir, we did see that for FY 2026, we are kind of expecting some 100 basis points lower of an operating margin. I just wanted to also understand from the perspective that we have expanded our network and lab network and collection networks over the past two to three years. Sir, the benefits of leverage would definitely also accrue going ahead as we centers ramp up. Simultaneously, we are also expecting 100 basis points lower margins. Sir, is it that the initial startup cost for the recently commissioned labs is higher, or are we kind of talking of higher marketing expense?
That's a very good question. I think the initial aggression in terms of opening of labs collection network is about 12 to 18 months old. They are still in the maturing phase. Even in this financial year, we are saying we want to open 15-20 new labs. I also mentioned there will be upgradation in existing labs. It's not only about the newer labs, but upgradation in existing lab infrastructure that we will do. Also, there is more frontline sales teams to work on in the newer geographies that we are going and intensifying our approach in the market that we are already there. Also advertising costs. Therefore, marketing spend. It's a mix of all of that. Basically, as that previous thing matures over a 18-36 month cycle, we should start maybe seeing those benefits. We may have newer areas to invest at that time.
Got it. Got it. Got it. Got it, sir. Thank you for that answer, Shankha. Thank you.
Thank you.
Thank you. The next question is from the line of Kunal Lakhani from CLSA. Please go ahead.
Hey, hi. Good evening. Just to follow up on an earlier remark, you said that regularly revenue mix is less than 5%. Is that a conscious strategy to keep the concentration lower, or it could be a revenue driver for future? What's the thought process here?
You see, for us, currently, we have what we call as basic radiology in some of our core markets, which is X-ray, ultrasound, maybe TMT, and things like that. High-end radiology, which is CT, MRI, is something which we haven't really gone into in a big way. As of now, there is a lot of market opportunity in the pathology area itself. Therefore, being our core strength, we want to focus more energies in that direction where we have an advantage. Having said that, radiology as an option is always on the table, and we continue to evaluate it. As and when we find that to be something viable fitting into our growth strategy, we will get into it.
Sure. I mean, the reason why I was asking that was because we do have plans to expand in South. And some of our Southern peers have a very strong radiology mix, which kind of in a way helps them in terms of branding and sort of a brand recall. Do you think that would not be an issue for us when it comes to expanding South India?
In South India, currently, our footprint is relatively quite weak. We are looking at both organic as well as inorganic opportunity in South. There could be a possibility that if there are inorganic assets which are coming with the radiology business attached to it, then that becomes a part and parcel of our business also going forward. Organically trying to do radiology in South is really not on the agenda right now.
Understood. Understood. Thank you so much. My second question was on the margin outlook again. This year you guided for like 100 basis points lower margin. Would it be more transient, or do you think this 27% margin is something that would go on for, say, mid to long term?
I think, Kunal, this is where we are investing. That does not mean that operating leverage or efficiency is not coming. Whatever improvement or whatever increase in the margin, we are investing that into the business. This is definitely for the FY 2026 we have narrated. Maybe for a longer term, how we will go, maybe it is difficult to tell at this point of time. Definitely for the next year, we have plans to invest in the business.
Sure. Sure. Lastly, on the pricing bit, right? I mean, we have seen a very prolonged period of low price hikes. It's for any industry, right? I mean, price growth is like a litmus test or a metric to measure the health of the industry per se, right? Where do you think we are or how far away do you think we are in terms of pricing power? Coming back to the industry, now I'm not just talking about Dr. Lal PathLabs or any other operator. For the industry per se, pricing power coming back, when do you think that can happen?
I don't think this question of taking a price hike or not is something to do with the pricing power. It is more about a conscious choice and a strategic choice of not taking a price increase. Given some of the strategies that we have deployed for growth, moving into Tier 3, Tier 4 towns, and some of the other ways that we want to look at sample volume growth also being one of the major drivers, looking at how can we improve maybe even patient volume in the future. It is more of a conscious reason. Since we are able to kind of drive efficiency through operating leverage, a lot of technology that we deploy, we are able to eat a lot of the inflation that is otherwise going to be in the system.
In that scenario, it's a conscious choice of not taking a price increase. Like I mentioned to a question in the past, we obviously will keep evaluating if there is a cost pressure or if there is any other reason. Obviously, see the pricing table in the industry moving in a certain direction. We are kind of, there is always a linkage in our industry of price and quality. We do not want to be caught on the wrong end of that. If those opportunities then present to us, we may consider a price increase.
Sure. Sure. Thank you so much .
Thank you.
Thank you. 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.
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 questions. Please feel free to reach out to us in case you have any further queries. Thank you once again.
Thank you. On behalf of Dr. Lal PathLabs, that concludes this conference. Thank you for joining us, and you may now disconnect tonight.